Yesterday I was driving along to a Job site when I heard Rick Sanchez on the Radio talking about how Millionaires get away with only paying 10 and 15% in income taxes. So I promptly called up WIOD and explained to him that he was mistaken, when people invest.... oops, he cut me off and hung up on me and proceeded to say "... In the Cayman Islands and other places to hide their money and keep from paying taxes".
Wow, I thought to myself. Is this guy REALLY this misinformed or is he just trying to gain a Populist position to increase his ratings. After all, he did just recently take up the 3PM to 6PM slot on WIOD. I was heartened to hear that many of those calling tried to set him straight on how income earned ANYWHERE in the world, had to be paid by U.S. Citizens. Even if that income was earned outside of this country and we are one of a very few countries that actually does this. As an example, a French or British citizen living and earning money in the U.S. isn't subject to French or British taxes, but the reverse is not true! We REALLY have one of the worst taxing structures in the country. Back to the story though, next thing you know there was a guy that called and agreed with Rick. He proclaimed that he worked for a Private Equity Fund, where the Millionaires did nothing but try to avoid taxation by "hiding" funds in other countries.
I tried calling back but of course they wouldn't take my calls anymore so I guess I'll have to rage against the machine here on MY format.
So here's what I would have said, if I had actually had a chance to talk.
First of all Rick, getting a paycheck is not the same as investing in a Private Equity Fund, Mutual Fund or any other kind of investment. Why? Because just as you didn't walk into WIOD and hand them over a Million dollars to invest in their operation, the average working stiff doesn't INVEST in his employer. He's just there with his hand out at the end of the week asking to get paid for the time he put in. You see Rick, once you get your paycheck and AFTER you've already paid your taxes on that paycheck (which for you probably averages around 30+ Percent) you can now choose to invest that leftover money in some sort of Mutual Fund or other investment that will hopefully create jobs somewhere. Rick, are you telling me that we should tax that money which you are essentially GAMBLING in some sort of investment, at the same levels of taxation as regular income?
Of course not, this is why we have preferential treatment for investments, because otherwise what's the point in taking a gamble, if when you win the Government is going to take half? As for "Hiding" investments in other countries, I think that people are making business decisions based upon the confiscatory nature of our Federal Government. If Norway is charging their companies HALF the taxes that we do, doesn't it make business sense to move some of your manufacturing there? Ask the guys that made the two biggest cruise ships in the world, and they would probably tell you that they wouldn't be able to compete if they made those ships in the U.S. because of the tax and regulatory hurdles. The same goes for almost any manufacturing operation. Just look at what Canada is doing. Even though their dollar has risen by almost 40% in the past 10 years, manufacturing in Canada is up. Why? They've lowered Corporate Rates to around 25% (15% Federal and around 10% Provincial). Here's the kicker. Even with the lowered rates, revenue is up from all the additional economic activity. To top it off, even though we, their biggest trading partner have been mired in a deep recession, they've managed to maintain an unemployment rate of around 2% lower than we have, despite the fact that historically Canada has had an unemployment rate of around 3% HIGHER than we have!
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