Monday, October 11, 2004

A Billionaire's Tax Rate

This brief Wall Street Journal OpEd by Stephen Moore is unlikely to be reproduced in the NY Times, the Boston Globe, or most any other major city paper, so please allow me:

A Wild and Crazy Guy

Remember the classic 1970s comic routine from Steve Martin? You can make a million dollars and pay no taxes. First, find a million dollars. Then when the IRS comes knocking on your door demanding to know why you didn't pay your taxes, you just simply tell them you forgot. And then you say: 'Well, excuse me.'

Well, John Kerry has his own version. It goes like this. You can make a billion dollars and pay almost no taxes. First, marry a billionaire. Second, hire a gaggle of tax accountants and lawyers to bring your tax rate down to about half what many middle-income families pay. Except for John Kerry, this is no gag; it's reality. According to the Kerrys' own tax records, and they have not released all of them, the couple had a combined income of $6.8 million in income last year and paid $725,000 in income taxes. That means their effective tax rate was a whopping 12.8%. And it was all (presumably) done legally.

Now don't get me wrong: I'm not against people paying a 12.8% tax rate. Far from it. I just believe that all Americans -- even those who can't afford to hire tax attorneys to set up complicated trusts and find legal ways to stash income in other tax-sheltered investments like municipal bonds -- should have a shot at that kind of non-confiscatory tax rate.

Under the current tax system the middle class pays far more than the Kerry tax rate. In fact, the average federal tax rate -- combined payroll and income tax -- for a middle-class family is closer to 20% or more. George W. and Laura Bush, who had an income one-tenth of the Kerrys', paid a tax rate of 30%.

Of course, there is delicious irony in the Kerry family tax-return data. Here is the man who finds clever ways to reduce his own tax liability while voting for higher taxes on the middle class dozens of times in his Senate career. He even voted against the Bush tax cut that saves each middle-class family about $1,000.

The Kerrys have unwittingly made the case for what George W. Bush says he wants to do: radically simplify and flatten out the tax code. Dick Armey and Steve Forbes have persuasively argued over the years that America should have a flat tax with a rate of 17% to 19%. John Kerry has consistently opposed a flat tax, because he says it would be a tax break for the rich. But the truth is with a 19% flat tax, some rich people with lavish tax shelters, like John Kerry, would pay more taxes. I calculate that the Kerrys would pay another $500,000 of taxes if we had a flat tax.

So before John Kerry is given the opportunity to raise taxes again on American workers, shouldn't he and Teresa at least pay their fair share?

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