The Homa Files

I really don’t understand why Obama and the Congress are having such a hard time resolving the “revenue” issue, i.e. raising taxes.

Make no mistake, I’m opposed to raising taxes and then wasting the money … both of which are eventually going to happen.

That said, here’s what I’d do to break the log jam – a tax plan that protects small businesses (GOP goal) and soaks the rich (Obama’s focus):

1) Separate business income reported on 1040s from all other income … then cap the business income portion at 25% … allow losses to offset ordinary income.

• Note: The system is already to set-up to handle multiple income streams taxed differently – e.g. ordinary income vs. capital gains.
• Note: There will be a rash of LPs started to game the system … but, so what? Shouldn’t amount to that much.

2) Then, since Obama is obsessed with raising rates on “millionaires & billionaires” who make more than $250k, I would add some brackets:

• Bump anything over $250k but less than $500k from 35% to 36%
• Bump anything over $500k by an additional 2 points to 38%
• Bump anything over $1 million by still an additional 2 points to 40%
• Bump anything over $2.5 million by still an additional 2 points to 42%

Bingo … Obama gets his prized punitive rate on millionaires and billionaires making more than $250K without hurting small businesses, and there’s minimal impact on the millionaires (?) making less than $1 million.

It’s as easy as that.

Again, it’s not the way I’d attack the deficit problem, but if Obama’s bound and determined to raise income tax rates, this is how I’d do it.

Note: I must admit that I’m swayed by the inevitability of the GOP losing on this issue … and by an analysis I heard about that said that the vast majority of tax payers would be impacted live in NY, CA, NJ, MD and DC … blue states that overwhelmingly support Obama’s policies … there’s a certain poetic justice to them paying the freight.

Stay tuned for posts re:how I’d really attack the problem.

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This entry was posted on November 14, 2012 at 6:59 am and is filed under Fiscal cliff, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.