Practically Speaking

Kyle and her husband moved to Brookfield in 1986. She became active in local politics and started blogging in 2004. Her focus is primarily on local issues but often includes state and national topics, too. Kyle looks at things from the taxpayers' perspective in a creative, yet down to earth way, addressing them from a practical point of view.

"The Tax Man Cometh" and Some People Cheer

I thought this article fitting for the days just before our nations July 4th birthday. I find it so ironic that our colonists had to fight a revolutionary war to fight against the tyranny of high taxes and for the right to life, liberty and the pursuit of happiness only to have a huge number of Americans either totally apathetic or embracing "Change." That Change of course being a leader promoting the greatest tax hike in American history.

Heritage Foundation

 Benjamin Franklin wrote in 1789, “In this world nothing can be said to be certain, except death and taxes.” But while the outcome is always the same when the grim reaper visits, the punishment the tax man inflicts can vary widely. Since the early 1980s when Americans rejected Jimmy Carter and embraced Ronald Reagan’s tax cuts, the United States has benefited from relatively competitive tax rates. But if Sen. Barack Obama’s tax plan becomes law, the IRS will become one of the most punitive tax men in the world.

Obama’s Plan

Obama’s tax plan has two major components. First, he promises to end the Bush tax cuts, allowing the top two tax rates to return to 36% and 39.6%. Second, he promises to end the Social Security payroll tax cap for incomes above $250,000. Individuals making more than $250,000, therefore, would face a 15.65% tax rate from payroll taxes in addition to a top income tax rate of 39.6% for a combined tax rate over 56%. Individuals living in cities or states with high taxes such as New York City or California would have tax rates approaching 70%, levels not seen since Jimmy Carter was in office.

Tax Avoidance

Back when the top marginal tax rate was near 70% under Jimmy Carter, tax shelters and tax avoidance were common among top income earners. These gimmicks both reduce investment and economic growth in an attempt to avoid punitive taxation. Some individuals will attempt to transfer their compensation from wages to capital gains since capital gains would only be taxed at 25%. Others might waste try to incorporate so they could pay business taxes instead of income taxes. All of these schemes divert resources away from wealth creation and to lawyers and accountants who implement these schemes.

Income Flight

High tax rates also encourage capital and income flight to lower-taxed overseas destinations. Visiting Britain recently, French President Nicols Sarkozy remarked that France’s high taxes had driven so many French to London that it had become the seventh-largest French city. Obama-sized tax rates would drive many creative Americans to Canada and London as well.


Currently only six of the top 30 industrial nations have combined local and national tax rates above 55%. The average unemployment rate for those countries is 7.35%. Under Obama’s plan, the top marginal tax rate would exceed 60%, which means only Hungary would have a more punitive tax rate. Hungary’s 2006 unemployment rate was 7.5%.

 Barack Obama's Tax plan

Presidential hopeful Senator Barack Obama (D–Ill.) has unveiled his economic plan of raising taxes on the successful. His plan would boost the top marginal rate to well over 55 percent—before the inclusion of state and local taxes—resulting in many individuals seeing their marginal tax rate double. The consequences of this policy would be a return to the bad old days of tax avoidance, with taxpayers disguising personal income as business income or capital gains and the migration of capital from the United States to abroad.

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