http://www.huffingtonpost.com/2012/04/13/buffett-rule-loopholes_n_1423547.html?icid=maing-grid7%7Caim%7Cdl11%7Csec1_lnk3%26pLid%3D152117
This article focuses on the "Buffet Rule," President Obama's attempt to erase loopholes in current tax laws that allow the ultra-wealthy to pay lower rates than they are supposed to. Warren Buffet's statement that these loopholes "allow[ed] him to pay taxes at a lower rate than his secretary" is partially responsible for the reform. Unfortunately, however, Bloomberg has pointed out the fact that the Buffet Rule still needs to be significantly improved - that is, there are still numerous loopholes that will allow those affected to evade this reform. (http://www.bloomberg.com/news/2012-04-13/top-earners-can-find-ways-around-buffett-rule-minimum-tax-rate.html) The act is aimed toward people who earn more than $1 million annually with tax rates below 30 percent. Though their tax rates will be increased, they will still have the opportunity to invest their money in tax-free investments, such as employer-based health insurance. President Obama plans to generate over $40 billion from this increase in taxes, but if these millionaires continue to find loopholes (which they inevitably will), he may need to find other ways to shrink the steadily increasing deficit gap. Furthermore, it may have unexpected negative effects. Although it is a sad fact that some of the extremely wealthy are able to evade taxes in various ways, it is also important that we continue encourage investment and fuel the business cycle. The money for this investment comes from those who can afford to invest even in times of crisis - that is, people who are extremely wealthy. Raising taxes for this bracket, therefore, may not be the most prudent course of action in the first place - before we even take into account that rich people will avoid these reforms anyway.
2 comments:
When you think about it, most people who plan for retirement invest in dividends and other capital gains that are taxed twice - once before they get the dividends and capital gains and once after they do. If the government decides to raise tax rates on these financial tools, investors will just sell everything and invest in other things like tax free municipal bonds. As a result, the government will not receive anything from them.
The phenomenon mentioned in the article is a common problem existed between government and private investors. Government always seek means to erase loopholes of laws and investors whereas make every effort to find out new loopholes of (new) implemented laws. Neither side could win the “game” all the time. Therefore, instead of finding the other side’s shortcomings, a fundamental solution should be a cooperation of the government and private investors. That is, they should exploit a way that will benefit both of them, and therefore create a win-win situation. For example, investment tax credit; the more an investor invests in the market, the more credits he/she will get.
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