President Obama is back with another of those proposals that are dead on arrival. This time, Obama is going to call for a tax increase by raising the capital gains rates and increasing taxation due upon the death of an individual. The battle about individual taxation was an annual event in Washington over most of the last eight years. The Bush tax rates were expiring and the new tax rates were set by Congress every two years. Each time, Congress and Obama came to some temporary agreement that put off the ultimate decision, until two years ago when a final deal was reached. Obama and the Congress agreed that tax rates on the highest income people would be raised and that rates for income tax and estate tax would be permanently fixed at their present levels. The point was to give some measure of certainty to Americans about their taxes so that certainty would promote economic growth. Now we're back two years later with a new plan by Obama to throw that agreement out and reopen the same old tax mess.
With a Republican majority in both houses of Congress, Obama's tax plan is dead on arrival. It seems unlikely that even just Democrats could muster a majority to vote for the plan. Nevertheless, Obama is still going to throw it out there. Obama wants to use the plan to make it seem that the GOP is on the side of the wealthy. It is purely a political ploy.
It is important, however, that people understand the Obama proposal. He wants to raise capital gains taxes on individuals who make more than $500,000 in a year. That may sound like it is directed only at the super wealthy, but it really is not. Consider three families: the first owns a family farm which was inherited from their parents. This family has lived on the farm for the last 30 years and now wants to retire and move to a warmer climate. Because of the high value of farm land, the price for the farm is $1.4 million which is much more than the $250,000 at which the farm was valued when it was inherited. For tax purposes, this farm family has a capital gain of $1.15 million. Clearly, they are not poor, but they are hardly rich. Obama wants to hit them with much higher capital gains taxes nevertheless. Then there is a second family. They own a diner in a quiet neighborhood in a large city. They opened the restaurant 25 years ago, and it has provided them with a living since then. They are middle income people who own a small business. Suddenly, some one comes into the restaurant and offers them $750,000 for the business. The family decides to sell. Obama wants to tax them at an extra high capital gains tax rate because they are "super rich". Then there's a third family. They live in the suburbs of New York, San Francisco or Los Angeles or some other place where home values have soared. They bought their home 30 years ago for $200,000. Today, that same home is now worth $1.75 million because the values in their town have gone crazy. They decide to move to a small apartment because the kids have gone and they no longer need a full house. The house is sold for $1.7 million and their profit on the sale is one and a half million dollars. Aside from the house sale, their income for the year is $45,000, hardly a level that would make someone super rich. Obama still wants to raise their capital gains taxes in a major way. The truth is that the Obama proposal is one that may sound like it hits the rich, but it really is not. It is a good thing that it is dead on arrival.
With a Republican majority in both houses of Congress, Obama's tax plan is dead on arrival. It seems unlikely that even just Democrats could muster a majority to vote for the plan. Nevertheless, Obama is still going to throw it out there. Obama wants to use the plan to make it seem that the GOP is on the side of the wealthy. It is purely a political ploy.
It is important, however, that people understand the Obama proposal. He wants to raise capital gains taxes on individuals who make more than $500,000 in a year. That may sound like it is directed only at the super wealthy, but it really is not. Consider three families: the first owns a family farm which was inherited from their parents. This family has lived on the farm for the last 30 years and now wants to retire and move to a warmer climate. Because of the high value of farm land, the price for the farm is $1.4 million which is much more than the $250,000 at which the farm was valued when it was inherited. For tax purposes, this farm family has a capital gain of $1.15 million. Clearly, they are not poor, but they are hardly rich. Obama wants to hit them with much higher capital gains taxes nevertheless. Then there is a second family. They own a diner in a quiet neighborhood in a large city. They opened the restaurant 25 years ago, and it has provided them with a living since then. They are middle income people who own a small business. Suddenly, some one comes into the restaurant and offers them $750,000 for the business. The family decides to sell. Obama wants to tax them at an extra high capital gains tax rate because they are "super rich". Then there's a third family. They live in the suburbs of New York, San Francisco or Los Angeles or some other place where home values have soared. They bought their home 30 years ago for $200,000. Today, that same home is now worth $1.75 million because the values in their town have gone crazy. They decide to move to a small apartment because the kids have gone and they no longer need a full house. The house is sold for $1.7 million and their profit on the sale is one and a half million dollars. Aside from the house sale, their income for the year is $45,000, hardly a level that would make someone super rich. Obama still wants to raise their capital gains taxes in a major way. The truth is that the Obama proposal is one that may sound like it hits the rich, but it really is not. It is a good thing that it is dead on arrival.
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