The real issue: Don't think double-taxation cannot touch your income
Hate the rich if you want. It is easy.
And applaud when someone suggests they "pay their fair share." Nothing is guaranteed to get more of a cheering section than that statement.
But if you are going to call for a 30 percent tax on the income of millionaires and billionaires, beware.
The next bell that might toll might be for you.
What many people do not realize is that people like Warren Buffett and Mitt Romney and others who are extremely wealthy are living off investment income, which is not taxed by regular income tax rates.
If they brought home a $1 million paycheck, they would be subjected to a much higher rate.
That's the reason that Buffet's secretary pays more in taxes than he does.
"That's not fair," you might shout.
And it wouldn't be -- except for one little fact.
This is money they have earned, been taxed on, and invested into their savings, retirement or other businesses or interests.
In essence, they have been charged taxes twice.
And that is where we, average Americans, need to be cautious.
There is another way to receive wealth that you did not directly earn -- it is called an inheritance. That is also money that has been taxed and saved -- and it is also subject to a different rate than ordinary income. Inheriting can be costly for a family -- especially if land is involved.
Would you think it was fair to charge an outrageous death tax on property your parents bought and paid taxes on for generations?
And then there is the other factor: Who's next?
Taxation rules could expand to those whose incomes are not exactly at the Buffett level. Call it the slippery slope effect.
Encouraging investment requires creating conditions that are favorable to putting your money into a business or some other venture rather than sticking it into your mattress.
Taxing it to death has the opposite effect. And if investment is not profitable, what do you think will happen to the economy and jobs?
It is definitely something to ponder.
Published in Editorials on January 25, 2012 10:44 AM