peterkim blog

There’s currently a tax bill making its way through Congress that is primarily supported by Democrats. It would increase the bar at which the Alternative Minimum Tax would have to be paid, so that people in the middle class would not be stuck with a tax bill meant for rich people. In order to pay for that loss of tax revenue, the bill would increase the tax rate on a type of interest income that primarily affects hedge fund and private equity managers. Many Republicans and even some Democrats are opposed to this plan because they think it is a tax increase. The truth is that these politicians are pandering to the wealthy campaign donors coming from the hedge fund and private equity sector.

So yes, I’m going against the majority of Republicans here and coming out in support of a Democratic bill. Why? It’s not because I think we should tax the wazoo out of the rich; in principle, I am a staunch supporter of the flat tax. So perhaps it is actually out of that belief that I am in favor of this bill.

There was recently a special on 60 Minutes or one of those other TV news magazines where they talked about how Warren Buffett did an informal survey of people in his office (from the secretaries and junior peons to himself) to ask them what their effective tax rate was on their federal income tax. Surprisingly, he found that his secretary was paying a higher tax rate than he was!

As I said previously, I am not one of those people who believe that we should tax the rich a higher percentage of their income just because they’re rich; that comes across to me as meaning that wealthier people don’t “deserve” as much of the income as they earn. I strongly believe that people have a right to keep most of the fruits of their labor, regardless of how much they earn. However, I am appalled and believe it is a major injustice when the rich actually pay a lower tax rate than people in the middle or upper-middle class.

It’s so obvious to me that the tax system needs reform and our country could save so much money if we:
1) abolished all loopholes, deductions, exemptions, credits, etc. Yes, this includes the precious mortgage interest deduction. Yes, this means taxing all income at the same rate.
2) set a single, flat income tax rate for everyone (or for compromise sake, I would even be in favor of a simple 3 tier progressive system with no group paying more than 30%).

People could file their federal income tax on a simple post card. Many of the rich would no longer be getting away with paying a ridiculously low tax rate.

Unfortunately, this will never happen. Why? Because of special interest groups; not just those representing major corporations, but every little special interest group looking for tax breaks for their particular issue. They have too much power in this political system for real, effective change to occur.

Bleah. This is why I hate politics.