My Last Word On SOTU

By now you're probably as tired of hearing about that abomination of Tuesday's State of the Union (SOTU) address as I am. But please indulge me one last time.

We could be politically correct and say that some of obama's SOTU statements were questionable or open to interpretation. But let's call a spade a spade (no racial slur intended). He flat out lied through his teeth from the beginning to the end of that wretched speech.

ABC News, of all things, rediscovered some lost shred of its journalistic responsibility and fact-checked a few of the liar-in-chief's claims. The detailed breakdown can be found here. However, since the centerpiece of obama's SOTU campaign speech revolved around taxing vilifying the rich successful, let's take a closer look at his pride and joy: the so-called Buffett Rule.

Fact Check: The Rich, Their Secretaries and Taxes

Treasury Secretary Geithner yesterday declined to answer a key question about the president’s proposed “Buffett Rule”:  How many millionaires and billionaires pay lower tax rates than middle-income families?

Gee, I wonder why he might decline to answer. Could it be that the rich already pay their fair share and more? Naw...

The answer: not that many.

The nonpartisan Tax Policy Center has crunched the numbers and found that Warren Buffett and his secretary are the exception to the rule.  For the most part, the wealthy pay a significantly higher percentage of their income in taxes than middle-income workers.

The key numbers:  this year those earning over $1 million will pay, on average, 29.1 percent on federal taxes.  Those earning between $50,000 and $75,000 will pay 15 percent.

So obama's much-heralded 30% tax rate for the rich will amount to less than a 1% increase. That'll go a long way towards reducing that pesky deficit

There were 236,883 taxpayers who earned more than $1 million in 2009.  That’s less than two-tenths of one percent of all filers.

The Top 400 tax filers  – the very richest Americans – do pay a lower rate of just 18.11 percent of their total income.  Why?  Many of them are hedge fund managers and people like Buffet — their income is pegged to how much their investment fund grows.  For some reason, this income is counted as so-called “carried interest” (even though it is not interest at all; it’s more like a performance bonus) and is taxed at the lower 15 percent capital gains rate.

It’s a loophole for hedge managers, pure and simple.  But while it may be an outrage that these uber-rich hedge fund managers pay such a low rate compared to the rest of us, there are just not many of them out there.

But the top 400 tax filers represent a tiny sliver – just .00028 percent of all filers. The vast majority of those earning over $1 million a year pay at a higher rate, which is why the average tax rate for this group, according to the Tax Foundation, is 29.1 percent of taxable income.  And, yes, this number includes income taxes, payroll taxes and capital gains taxes.

Oops. There goes the argument for raising the capital gains tax rate.

The Top 400 tax filers  – the very richest Americans – do pay a lower rate of just 18.11 percent of their total income.  Why?  Many of them are hedge fund managers and people like Buffet — their income is pegged how much their investment fund grows.  For some reason, this income is counted as so-called “carried interest” (even though it is not interest at all; it’s more like a performance bonus) and is taxed at the lower 15 percent capital gains rate.

It’s a loophole for hedge managers, pure and simple.  But while it may be an outrage that these uber-rich hedge fund managers pay such a low rate compared to the rest of us, there are just not many of them out there.

So do the right thing and fix the problem - revise/simplify the tax code. Diddling around with tax rates is treating the symptoms while ignoring the festering pus-filled cause of the infection.

But fixing complex problems won't get a politician reelected. From their standpoint it's better to run on a populist platform - Tax the Rich! - then do the job they were elected to do.