Upper-Class Warfare

By Frum, David | Newsweek, October 15, 2012 | Go to article overview
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Upper-Class Warfare


Frum, David, Newsweek


Byline: David Frum

How Romney would screw the ordinary rich.

The Mitt Romney campaign has pledged that its tax plans--mainly cuts to the top income-tax rate combined with the elimination of loopholes and deductions--won't reduce the tax burden on "the rich." But who are the rich? Take a closer look and you see that even if the plan works exactly as advertised, Romney would transfer the tax burden from the plutocrats to the orthodontists.

You see, the top 1 percent has its own top 1 percent--the richest of the rich--and those lucky enough to count themselves within its ranks would be the big winners from a cut in the top rate of income tax to 28 percent--and they'd be even bigger winners from Romney's proposal to extend indefinitely the present 15 percent rate on capital gains and dividends.

Meanwhile the lower 99 percent of the top 1 percent--and the next 2 percent after them--will lose much more from the removal of the tax deductions than they will gain from lower rates.

Just ask Jeff Johnson, a successful businessman in a family-owned company in the D.C. area. He's no Occupy Wall Street type. He's as vexed by the many lower-income Americans who pay no income taxes at all as he is by the ultra-rich few who pay 15 percent rates or less. He agrees with President Obama: somebody has to pay for the roads and bridges that make America successful. But he wants to know why so much of the cost falls on him and people like him: not the fabulously wealthy but the ordinary rich. "Why am I slaving away at W-2 wages?" Johnson wonders. "The ultra-wealthy don't care about W-2 wages. They're working for stock appreciation, distributions, and so on."

"People who are multimillionaires or billionaires have enormous numbers of things at their disposal, within the law" to avoid tax, says Mike L., who works for a mid-size software company that bought the small company he started with some friends. But such techniques for tax avoidance are not practical for people like him.

It's no surprise that President Obama wants to raise the taxes of people like Mike L. and Jeff Johnson.

Here's what you may not know.

Romney adviser Martin Feldstein, one of America's most distinguished tax economists, recently crunched the numbers of the Romney tax plan in The Wall Street Journal.

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