Monday, July 24, 2006

Who says the rich got a tax break?

Another urban legend laid to rest.

July 24 (Bloomberg) -- When Jeff Trinca liquidated part of his stock portfolio to satisfy a divorce decree in early 2005, he calculated he would owe 15 percent tax on his capital gain. A year later, he got a nasty surprise: a much higher bill from the Internal Revenue Service.

If anyone should have known what to expect, it's Trinca: He's a Washington tax lobbyist. Still, he lives in one of some 2 million U.S. households that were denied the lower rate on capital gains last year because of a little-noticed quirk in the alternative minimum tax, originally created almost four decades ago to make sure a much smaller number of affluent Americans were paying their fair share.

Instead of paying the 15 percent rate established by President George W. Bush's 2003 tax cut, Trinca, 45, and other taxpayers with incomes between $150,000 and $400,000 are required to pay rates of up to 22 percent on their investment income. If left unchecked, the AMT anomaly may deprive millions more six- figure earners -- 60 percent of whom voted for Bush in 2004, when he won 51 percent of the vote nationwide -- of the low rate.

First off, if these six-figure earners are thinking of jumping ship because taxes under Bush are bad, try electing a Democrat and see what happens. Second, these taxes are being taken out of their investment income not their paychecks, so it's not like they're getting hammered more on their standard paycheck. Still, they make more and they're paying more in taxes because of it.

Makes you wonder where all those "tax cuts for the wealthy" idiots are hiding...