Dear Unca Warren

Dear Warren:

I now know I will never be a billionaire.

See, I always thought that, in addition to luck, and drive, and knowledge, a prospective billionaire had to be smart.

I’m sometimes lucky. I’m a Type A so I have drive. I’m a pretty fair researcher so I have knowledge. Unfortunately, I’m pretty smart. I know this because my mom told me so. More important, all of my teachers told me the same thing (usually as part of the sentence, “Dammit, Dick, you’re too smart to have pulled that boneheaded stunt“).

Apparently, I’m also too smart to be a billionaire.

Speaking of boneheaded, I see that you haven’t figured out that we, you and I, already pay a higher income tax rate than your secretary does. See, we own the companies that pay us the dividends so we’ve paid up to 35% of that profit to your friend Barry right off the top.

Sort of an old-style Las Vegas skim.

Since your friend Barry claims many corporations pay zero taxes, let’s pretend that we own a real small business C corporation that really pays real rate of 17.5%, half the official rate for the companies he says pay nothing.


Now your friend Barry wants to raise the dividend tax rate from the current 15% to 39.6%. Next, he has already planned the phase-out of deductions and exemptions; that raises the rate to 41%. Don’t forget to add the 3.8% investment tax surcharge in ObamaCare, and the dividend tax rate next year will be 44.8%.

But wait. There’s more!

Before we get there, I nearly forgot that you and I are almost old enough to be thinking about retirement. Did you know that about three of every four dividend payments go to those who are over 55? Heck, more than half go to the really old peeps. The ones who are older than 65.

We also forgot the 17.5%.

Forgetful we are.

Add the 17.5% corporate tax rate plus 44.8% dividend tax and the the total tax on our corporate earnings passed through as dividends will be … 62.3%.

Your friend Barry gets almost 5/8 of what we make; we get 3/8.

I think we need to jack up your secretary’s tax rate.

That’s the Buffett Rule, right? It’s only fair you know.

Your partner,

P.S. Since I’m a smart feller, I figured the original Buffett Rule was “charge people fairly.” The way to do that, of course, is not to tax income that has already been taxed and then to make sure that everyone, rich and poor, pays the same tax rate.

By the way. I wrote the Flat Tax column when I was still in my 40s and you had just collected your first Social Security check. It was a smart policy then and still is today.

4 thoughts on “Dear Unca Warren

  1. Just because someone is rich doesn’t mean they are also smart — and vice versa. Einstein was a genius, but his friends would not play pinochle with him because when he lost he couldn’t pay the tab.

    Mrs George is smarter than me — not because she has a higher IQ, but because she and I think differently. I am a man, and she is a woman: In other words, I act first and then use my superior IQ to figure out how to deal with the consequences; whereas, she uses her lower IQ to figure out the consequences first, and then she acts to avoid them.

    This means that I spend lots of mental energy figuring out how to escape from trouble, and she spends minimal figuring out how to avoid it. My way is much more fun; and we frequently disagree on that.

    With regard to taxes, I use my huge IQ at the rolltop desk poring over the 1040 — or its variations — and she spends hers during the year, finding ways to avoid paying more than Unca Warren’s secretary.

    Last year I figured our taxes and sent the IRS $2000, and they sent back $2780.

    Eat your heart out, Unca Warren.

    — George

  2. The Income Tax is a psychotic legal system that only continues to get worse.

    Inhabitants and businesses of this country spend billions of dollars a year and then spend billions of hours in attempted tax compliance. This just to figure out what they owe or don’t owe in Income taxes.

    The Income Tax code itself is almost 75,000 pages of arbitrary and contradictory laws and opinions. This plus millions of additional pages of Regulations, Revenue Rulings, Letter Rulings, Memorandums, Publications, plus Tax Court, Appeals Court and Supreme Court Opinions. These are all written in an effort to explain and/or argue about the mind-numbing Income Tax laws.

    Most personal, financial and business decisions all have to take into account this Income Tax system and generally require expensive assistance from tax accountants and lawyers who all have different opinions on how to apply the Income Tax legal code.

    They themselves do not understand many facets of the Income Tax code, the same way most government officials do not understand it (try calling them up and getting a consistent answer to the exact same tax question – good luck on that).

    If you are ever the victim of an Income Tax Audit based on the income and deductions you reported on your personal and/or business Income tax return, it could easily cost you thousands upon thousands of dollars to defend yourself if you hire a tax lawyer or tax accountant to defend you.

    The Income Tax laws are written so that you are automatically guilty and you must prove your innocence. Thus you have to ‘prove your innocence’ against an Income Tax system that is arbitrary, mind numbing and contradicts itself within its own code.

    Every single inhabitant of the country is required by law to keep an accounting of their yearly income and deductions (for the Income Tax) and is required by law to maintain ongoing lifetime balance sheet and net worth calculations (for Estate and Gift taxes)

    This accounting is subject to bureaucratic government scrutiny and must be proveable.

    So the bureaucracy of this Income Tax system is embedded in every single facet of your life, from the government to the courts to tax lawyers to tax accountants to financial advisers to income tax software companies.

    Unless something is done to get rid of this “system”, the current Income Tax scheme is going to continue to wreak financial havoc on the United States economy and its inhabitants.

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