A part of President Obama's State of the Union (SOTU) address included taxes that will go well beyond punishing the rich. I think they are part of a wider attempt to right the injustices of yesteryear through saving caps and taxes on inheritance that may not have been available to all fifty years ago.
Using hatred and envy of the rich to unleash a torrent of new taxes is not a new ploy; torchbearers beware... taxes are a beast that can turn when unleashed.
Case in point: In 1966, U.S. Secretary of Treasury Joseph Barr, reported that “155” high-income households had paid zero in federal income taxes. This caused an uproar. By 1969, members of Congress received more letters about the "155" high-income households than the Vietnam War. Therefore, a new tax, the Alternative Minimum Tax (AMT) was created.
The AMT tax has been amended in recent years as it once threatened to hit as many as 33 million people; 4.5 million will have to pay and it will largely affect middle-class earners.
Now, President Obama wants to go after Individual Retirement Arrangements (IRAs) because three hundred or so super wealthy families, such as Mitt Romney's have socked away $25 million plus. To make the program fair, the most you will be able to save is $3.4 million, roughly $200,000 annually to live off of. I suppose with any more than that and you are just greedy.
The irony is, back in 1966, those wealthy families earned $200,000, it put them on top, but it would barely keep a family above water in New York City these days.
Another Reason Not to Own a Home
The estate tax is not just rich people's problem anymore. Soon, it is going to be a killer for the rich and the non-rich alike. Let's say your mom leaves you the house, it is worth $250,000, and later you sell it for $300,000. Today, your tax could be based on a $50,000 gain, but not if President Obama gets his way. If your mom and dad paid $50,000 for the house, your tax would be based on a gain of $250,000. It was a good way to soak in more dough and extract justice four years ago when it was harder for some Americans to buy homes.
| Estate Tax New Math | Current Option | SOTU Proposal |
| Mom & Dad Paid | N/A | $50,000 |
| Worth Upon Death | $250,000 | $250,000 |
| Sell | $300,000 | $300,000 |
| Cap Gain Tax on Porperty | $50,000 | $250,000 |
Join the conversation as a VIP Member