Excerpted from WSJ: Taxing the Dolphins, Oct.30, 2008
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Don’t think tax rates matter to business decisions?
In July, the Rooney family’s mused about selling part of the Pittsburgh Steelers to avoid the 45% death tax rate.
H. Wayne Huizenga, the owner of the Miami Dolphins, declared earlier this week that he intends to sell up to half his ownership in the NFL franchise before next year. Why? Because as he told a Florida newspaper, Barack Obama “wants to (almost) double the capital gains tax … I’d rather give (the money) to charity.”Obama is in fact proposing to raise the capital gains tax to 20% from 15% — which would be an increase of 33%, but Mr. Huizenga is close enough for IRS work.
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We saw a similar tax effect in 1992 when Bill Clinton raised tax rates. The Wall Street crowd accelerated income, bonuses and stock sales to pay the 31% rate, not the expected higher rate. One of those who cashed out in 1992 was Robert Rubin, who would soon join the Clinton Administration.
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One economist who observed this tax avoidance was Austan Goolsbee, of the University of Chicago, who is now a top Barack Obama adviser.
In a 1999 paper, “What Happens When You Tax the Rich?,” Mr. Goolsbee wrote that “the higher marginal rates of 1993 led to a significant decline in taxable income.” Many of the superrich were able to change the timing of compensation to avoid paying the higher rates. Mr. Goolsbee concluded this “short term shift” … cost the Treasury revenue it had been anticipating.
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Full article:
http://online.wsj.com/article/SB122533091992582863.html
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Ken’s Take: It may be “noise” in the system or a reflection of the crowd I’m exposed to, but I hear more and more folks talking about taking capital gains this year, deferring tax deductions until next year, and moving money to tax-free accounts — onshore and offshore. This behavior — in aggregate — is going to be a big deal. Watch it.
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The Homa Files 
October 30, 2008 at 1:40 pm |
Shifting the timing on a few hundred billion in capital gains is small potatoes compared to the picture Daniel Henninger paints in his column.
http://online.wsj.com/article/SB122533132337982833.html
I’m amazed people are so willing to turn away from a system that’s provided 26 years of prosperity at levels the world’s never seen before. We’re about to completely change the meaning of the American dream in exchange for promised stability no economic model can ever provide. I can’t believe that supposedly “enlightened” people – voters and politicians – are willing to go down the path of Western Europe just as demographics are starting to blow up those economies.
I think the GOP should run an ad describing the life of a typical 20-something in France – that would rock the vote.