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December 13, 2012

Horse Hockey and the Fiscal Cliff.

Patricia A. Kelly

One of my closest friends just moved out of Maryland. Actually, he didn’t move. He just changed his residence by extending his stay in his second home to six months and one day each year. That’s the official requirement to end his residency in Maryland.


This will save him close to $30,000 per year in taxes.


He’s wealthy, at least enough to do just what other wealthy Americans will do if President Barack Obama gets his way, and the Bush Era tax reductions are not continued for those making more than $250,000 per year.


Vilifying and taxing the wealthy on their reported wages is such a grand idea. We can have increased polarization, reduced direct income-generating business activity, increased overseas business activity, and more. And those of us who favor this can look good, and even pretend to be helping the less affluent.


The people our president is after are the only Americans, except for the very poor, who have much chance of avoiding taxes.


The wealthy, however you define them, should absolutely pay their fair share of taxes. The trouble is that most people who report income greater than $250,000 per year, report income other than wages. This other income is not subject to the proposed rate increase. The other thing that the wealthy do is take advantage of all the deductions available to them in the present federal tax code.


Republicans, rather than raising tax rates for the wealthy, are proposing tax code reform and removal of some deductions for the wealthy – along with decreased government spending – to alleviate our national deficit and debt. The person we did not elect, Rep. Paul Ryan (R., WI), even proposed that there be no changes in Social Security or Medicare for people over 55, with the idea that people younger than that would have time to make up for future decreases.


President Obama and his team, newly re-elected, are standing firm on this tiny, targeted tax rate increase – their badge of honor or symbol of victory. They stand bravely, insisting on the least effective possible solution, while continuing their misleading diatribe suggesting that tax code reform will affect the middle class and take away the mortgage tax deduction.


They say their specific tax rate increase plan is what the people want, and what they voted for. In reality, if the people are clear that both sides propose raising the contribution of the wealthy, one with rate increases and the other with decreased deductions, they wouldn’t care which was chosen.


The Democrats, trying to look good and grind their opponents’ noses in the dirt, insist that changes in deductions and much needed code simplification will not be enough to help reduce the deficit, and that the middle class will be the ones to suffer.


In reality, tax code simplification would absolutely work, and, if designed correctly, would be a much more effective revenue source for the country. No matter which side wins, the middle class will be paying.


Directly taxing the rich will work as well as the Maryland state tax system is working, with the wealthy bailing out. The wealthy will just juggle their financial lives to avoid this income tax increase as well. We would do well to remember that much of the income of the wealthy is not direct income anyway, but investment income taxed separately.


All this political posturing is the proverbial “tempest in a teapot,” completely failing to truthfully address the issues facing the American economy.


So, ask your representatives and the president to get on with doing the real work, and stop this silliness. This argument is a game, nothing more.


We’re all going to have to pay, one way or the other. The debt is too big, and the true resolve to slow spending is too small. In the end, if we continue to slide down the financial drain, and see what is really happening, the Republicans might end up looking better.


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