No Work For a Year, But a Tax Increase All the Same
Good morning on this fine Tuesday!
There are days when I wonder what the heck I should write about. And there are days where Joe Biden and his ridiculous Democrats throw me a grapefruit right down Broadway.
Today is the latter.
Right when all the consequences of the Great Lockdown are finally playing out, these numbnuts are talking about tax increases.
Let’s dive in.
Government-Imposed Private Sector Shutdowns Aren’t Free.
File that heading under “No Shit, Sherlock.”
When I got very ill after visiting Boracay in February/March 2020, I physically understood how tiring Covid could be.
I never denied its existence or its severity.
But from Day One, I opposed the lockdowns.
The real reason was never to “keep everyone safe.” It was to protect the ideology of socialized medicine. Whether it’s the US health care system, the NHS, or any European socialized models, they all failed.
Every. Single. One. Of. Them.
They simply couldn’t handle the balloon of hospital volume the virus created. And that means failure.
Remember, you’re paying for these systems, like it or not. They’re not voluntary. There are no opt-outs.
So if they failed, naturally payers would question what the point of the whole system is. And politicians couldn’t have that.
But now it’s time to pay the piper.
Funnily enough, Mr. Market, our favorite manic-depressive, is already taking it out of our hides.
Inflation is rampant, not transitory. Supply chain disruptions are daily occurrences. All of these are driving up prices in an unsustainable way.
Houses are out of reach for young families. By almost every historical metric, stocks are overvalued.
On top of all that, the governments who stupidly mandated you stay at home must pay for your mandatory vacations.
Here’s how the U.S. government is planning to do it.
Source: The Wall Street Journal
If I’ve said it once, I’ve said it a thousand times. Companies do not pay corporate taxes.
People, and only people, ever pay any form of tax, no matter what its name is.
Employees, in the form of lower wages, suffer – the correct verb – corporate taxes.
Customers, in the form of higher prices, suffer corporate taxes.
Shareholders, in the form of lower profits, suffer corporate taxes.
So when Joe Biden announces at the top of his lungs that he’s going after those evil corporations, he’s really going after you.
Unfortunately, the Starbucks-guzzling, iPhone-tapping, allegedly socialist masses have no idea they’re the sheep being fleeced and not any of their so-called corporate overlords.
The House Democrats tax plan calls for a 26.19% increase in the corporate tax rate from 21% to 26.5%. (No, that’s not a 5% increase. [26.5 / 21] -1 = 26.19%.)
Biden’s plan is even worse, asking for a 28% corporate tax rate, where it was under Obama.
That’s an enormous increase in the rate. Of course, math isn’t one of America’s strong suits, so it doesn’t look that big to most Yanks.
But it will massively impact the working world and how you spend your money.
Capital Gains Tax
Capital gains tax is yet another immoral tax that all governments should scrap entirely.
Let’s walk this back. You make an income. As adherents to the second plank of the Communist Manifesto, your government charges you income tax. (Google “ten planks of the communist manifesto” if you fancy it.)
What’s left is called your disposable income.
With that disposable income, you invest some in stock. That stock makes a 50% gain. You’re thrilled… until you realize that money will get taxed again.
Your 50% gain is currently taxed at 20%, leaving you with a 40% after-tax gain. (50% * [1 – 20%] = 40%.
The House Democrats propose to tax those gains at 25%, which would leave you with 35% after tax.
Dopey Joe’s plan would tax capital gains as ordinary income (again), which would leave you with (50% * [1 – 39.60%] = 30.20%). That means you get hit at 39.6% on the income and 39.6% on the gains, if you made any at all.
Immoral and just plain stupid, from an economic perspective.
Marginal Tax Rate
This is the one most feel the least bad about, as it only affects the top income earners.
But the “temporarily embarrassed millionaires” of the US ought to feel great shame.
The top marginal tax rate for individuals would rise to 39.6% from 37% starting in 2022. That tax rate would kick in at taxable income of $400,000 for individuals and $450,000 for married couples.
And a 3% surtax would apply to individuals and married couples with adjusted gross income above $5 million. That’s at least an extra $150,000 per year.
Let me ask you a question: how many millionaires who have the means to leave the country will leave the country?
Time to Renounce?
Let’s face it: if we’re getting second passports and investing in crypto and building online businesses while earning far less than $5m per year, what do you think these people will start doing?
The Publication of Individuals Who Have Chosen to Expatriate document for Q2 2021 shows that 734 individuals renounced their US citizenship.
That’s a rise of 200% compared with Q1 2021.
Sure, that’s not a lot of people. But the trickle can turn into a flood, and it’d surely be higher if not for Covid.
Accidental Americans are raising money to get US embassies to process their renunciation requests faster.
International Adviser reports:
In June, the Association of Accidental Americans, who have gained citizenship through a parent or by being born in the US, filed an opposition after the US Department of State put forward a motion to dismiss their lawsuit in April 2021.
They are looking to scrap the $2,350 (£1,670, €1,940) cost associated with giving up American citizenship, which they describe as “unconstitutional.”
If successful, it could see another increase in renunciations.
There’s no doubt Dopey Joe’s policies will push more Americans out the door, especially the more mobile, digital nomad types.
There’s simply no reason to put up with this nonsense unless you’ve got family in the US. I, for one, am thrilled I haven’t had to worry about this for ten years now.
But the US tax system affects us all, one way or another.
Every increase in tax to the government is a dollar leaving the private sector.
It’s time Americans mount a defense against the tyranny of their own government.
All the best,