The GOP tax plan helps billionaires.
The GOP funding base has changed. Greg Walden and other GOP fundraisers understand who the donor class really is. It is not the person making $2,000 contributions. It is industry PACS, plus billionaires making $10 million contributions. The tax plan reflects this reality.
The GOP tax plan generally reduces tax rates by about 2% at each level as incomes move up. People who file with the standard deduction will generally see lower taxes. But higher income people in Oregon, California, New York, New Jersey, and Minnesota will generally pay more in taxes. This is because well paid professionals--physicians, dentists, lawyers--pay property and state income taxes, and they are counted on to be the funding base of local nonprofit organizations, so they make make charitable contributions.
They must itemize deductions.
A physician or other professional with a successful practice might earn $500,000 a year--an excellent income. The state and local income tax alone would be some $50,000, dwarfing the standard deduction. A plausible scenario would be $50,000 in state income taxes, $7,000 in property taxes for a nice but not extravagant home.
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| By Design. Click for the article |
In the new GOP tax law, that physician's taxes would go up. The cap of $10,000 on tax payments eliminates $47,000 in deductions, raising his federally taxable income by that amount, adding some $17,000 to his tax bill. The lower tax rates of 2% on adjusted taxable income of $460,000 saves him about $9,000. Net result: a tax increase of about $8,000.
This increase is essentially a transfer of money from states like Oregon and California with a high state income tax to red states with low state income taxes. Oregon loses. Texas wins.
Oregon Republican Congressman Greg Walden supports the GOP bill. He knows full well that his most prominent constituents are net losers, but he is part of a GOP team and they predominantly represent red states. This transfer is no accident. It is the spoils of GOP victory. Walden is a leader in the GOP team. He goes with his team.
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| Walden source of funds. opensecrets.org |
The hike in taxes on Walden's prosperous professionals, the 1%, reflect the fact that those people showing up at $1,000/person fundraisers for GOP congressmen are no longer the financial heart of the GOP. That has moved to the 0.1% and the 0.01% and higher. There are some 500 billionaires in America now. Any one of them could write a check amounting to one day's income to a candidate or PAC which would dwarf any grass roots campaign. In most competitive districts a $5 million dollar congressional campaign contribution would be dispositive. Never anger the big elephants.
The support of 50 or 100 political engaged physicians, concerned about health care and hoping to influence the process, together raising $50,000 to $100,000, just doesn't matter--not in the face of a multi-million dollar pledge from the Koch Brothers, or hundreds of thousands of dollars from industry PACs.
The net result: successful GOP incumbents like Greg Walden are willing to disappoint physicians concerned about rural hospitals, plus they can stick them with higher taxes. He can attempt to muddle the story and say that his goal was lower taxes and simplification, but the reality is that Walden is raising his constituents' taxes for the benefit of people in low tax states and for people much richer than they are.
They will know it. They don't matter enough. They can be ignored.
The people he cannot afford to anger are the industry PACS and politically active billionaires like the Koch brothers or the Mercer family, or Sheldon Adelson.
They will know it. They don't matter enough. They can be ignored.
The people he cannot afford to anger are the industry PACS and politically active billionaires like the Koch brothers or the Mercer family, or Sheldon Adelson.
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| Click: CBS news clip |
The tax bill reflects that reality.
I recognize many readers will have little sympathy for the tax plight of the 1%, the businessmen, physicians, dentists, lawyers, and apartment owners who make up a professional class of people with incomes of $300,000 to $600,000. They are considered privileged, not victims.
These people used to be my clients. I know them to be acutely aware of their tax situation, since they are generally taxed at a much higher rate than are the idle-rich inheritor class. GOP congressmen in high income tax states like Oregon are injuring the very constituents who normally populate their own local fundraisers.
They can do it because they aren't afraid of those donors anymore. They are mere millionaires. The dangerous people are the industry PACS and billionaires, and they must be served.
3 comments:
There is some small irony in the .01% ripping off the 1%.
It also dawned on me that the GOP bill was evidence that they have no fear of the middle class voters hurt by their policies. Their Regressive base is largely poor working class, who will be delighted with the illusion that they are getting a handout that sticks it to the elites they hate.
It's just a provision, doesn't really hurt anyone under 11 million in working capital. I have family in both tiers, don't hear any complaints yet.
It's ironic, I even have my mother, who is actually a very good person, who makes the arguement to me on a personal level. She points out I now stand to inherit many more millions upon millions than I otherwise would have.
Perhaps some might look at that and support such a piece of legislation. Yet, even with that, I do not.
I've always known an oligarchy is one of our greatest dangers as a democracy. I believe in a fair distribution of wealth. Even when that belief directly and significantly reduces my personal wealth. How many can say that?
There is a time, we as humanity will have to decide, is it about "us?" Or is it about me.., me.., me....
Thanks, Ron. I was really thinking about the income tax here, not the estate tax. Their taxes on their current earned money will go up.
Re. estate taxes, I don't have a huge sample of experience, and incomes may be lower here than in some other areas of medical practice. But my general observation is that many physicians become quite prosperous, depending on specialty and divorces and problem children, but unless they started out with a big inheritance head, very few people will accumulate a joint account estate that exceeds 22 million dollars by working as a physician. A lucky purchase of Apple or Facebook in a 401k might get them there, but that is driven by the investment, not the savings. People who earn $400,000 a year for a 25 year period will accumulate and save perhaps the 3 to 10 million dollars covered in the current estate tax bill, but none will approach the $22 million, unless there was an unusual circumstance: a lucky stock investment, or having bought or inherited land in an area that developed very expensively, i.e. a 40 acre farm that got swallowed up by Sunnyvale or Atherton.
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