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, Im 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.
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.