As Usual Only a Few Truly Pay

November 19, 2009          

            So here comes another study by the Tax Foundation, noting more of the same: government morons continually stacking up the taxes on the fewest number of folks who pay the lion’s share of the freight.

            Noting that a popular defense of the proposed 5.4 percent surtax on high-income earners, in an effort to fund some of the Pelosi health care “reform,” would only impact some 0.3 percent of all tax returns, the Foundation concludes that this small group earns about 14 percent of the nation’s overall adjusted gross income, and would end up paying some 36 percent of the entire federal individual income tax burden in 2011.
            The proposed 5.4 percent surtax would hit joint filers with adjusted gross income of more than $1 million and single filers whose AGI exceeds $500,000.
            And all the while, the Revenooers are out there shaking down high income earners in general, in the form of the proposed formation of a new “Global High Wealth Industry Group” of auditors who think that just because people have money, and choose to invest globally that all they’re doing is cheating Uncle Sam.
            Commissioner Shulman recently pontificated that this new unit will centralize and focus IRS compliance expertise involving high-wealth folks and their related entities, which can often have an international component. Initially, we hear, IRS will be looking at individual taxpayers with “tens of millions of dollars of assets or income.”
            A new unit is necessary according to Shulman, you see, to properly deal with high wealth individuals’ use of sophisticated financial, business and investment arrangements, including trusts, real estate investment entities, royalty and licensing agreements, private foundations, partnerships and other flow-through entities.
            And let not California fall behind in the race to snag a few more bucks from the wallets of the wealthy–recall that for a while, now, the Golden State has levied a 1 percent “mental health surcharge” on individuals with taxable income in excess of $1 million. So now cometh taxpayer Jensen who questioned the propriety of this particular exaction.
            “Wealth is a suspect classification” requiring a strict scrutiny constitutional analysis argued the taxpayers. “The taxpayers argue,” notes the court, “that ‘in arriving at a reasonable system of taxation, a state may not arbitrarily single out a specific group to bear the burden while excusing non-group members.’ They maintain that there must be a rational connection ‘between the group being taxed and the problem being addressed’ by the tax.”
But in upholding the constitutionality of this surtax, the California appellate court found no basis in the notion that wealthy folks form a “suspect” class, deserving of a heightened degree of scrutiny. “An income tax may be rationally based on a taxpayer’s income level and ability to pay, and there is no need to show that a particular taxpayer personally benefits from a tax assessed for the public good” quoth the court.
Translation: if you’ve got the dough, they can take it.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
                   Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He may be reached at 831-7288, and welcomes comments below.

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