The Obama tax plan has been fodder for much controversy, and tax planning for the rich – those who are making money and stand to get hit with Obama taxes – is the new cottage industry for any CPA whose clients face increased taxes for earning in excess of $250,000.
Obama Taxes Affect Roughly 7% of Residents Making Money
The Wall Street Journal reveals that about 7% of American taxpayers – 3.8 million – fall into the bracket of making money in excess of $200,000. Their tax burden translates into 62% of all federal taxes received. Under the Obama tax plan, a good number of deductions are slated for phase out, while other sources of making money, such as capital gains and also dividend rates, would be taxed at a higher rate.
When Making Money is Penalized, Money-Makers Engage Tax Planners
While the DOW is plunging below 6800, those few who are still making money are not taking the threat of Obama taxes hunkering down. Instead, tax planning for the rich – or those purported to be – is a new cottage industry that has clever CPAs give their clients some startling advice.
ABC News quotes one successful attorney who unabashedly states that at this point the biggest goal is to get the reportable income below $249,999.00. The lawyer’s rationale – why bother working hard to subsidize those who are hardly working – resonates with many who are making money and have not jumped on the Obama Administration bandwagon.
Another well to do business owner, a dentist, has determined that putting in less hours, seeing less patients, and taking off more time will get the reportable income just under the $250,000 mark. Sure, it also means laying off staff, but this is the nature of business. When making money is penalized, a decrease in productivity is tacitly rewarded.
Is the Law of Unintended Consequences at Work?
The Obama tax plan may have sounded reasonable on paper, but when fleshing it out with real life American taxpayers, it would appear that penalizing anyone making money is not going to go as well as was hoped. Perhaps the president forgot that not all of the money makers are actually democrats.
While Oprah and George Clooney might not mind paying extra, the upper middle class and those raking in just barely more than $250,000 – at the expense of long nights, working on weekends, and not seeing the family as much as they want to – may not appreciate having their making money penalized.
Perhaps it is the law of unintended consequences that will find many of these folks cutting back, which in turn not only reduces the hoped for tax revenues, but also contributes to the pool of unemployed, as small business owners are letting employees go.
Sources
http://online.wsj.com/article/SB123561551065378405.html?mod=djemEditorialPage;http://abcnews.go.com/Business/Economy/story?id=6975547&page=1
