Kilroy Was Here
November 24, 2004
Leave municipal bonds alone!
In today's Daily Howler, Bob Sommersby brings up the tax rate of Teresa Heinz Kerry.
JOHNSTON (10/17/04): Teresa Heinz Kerry reported income of just over $5 million last year, slightly more than half of it from investments in tax-exempt municipal and state bonds, her 2003 income tax return shows, confirming her status as the wealthiest spouse of any major party nominee in United States history...
The two-page document...showed total income of $5,073,554 last year. Her primary source of income was the tax-exempt bonds, investments that generally produce a lower interest rate, but those in the highest tax brackets can often pocket more cash if they choose municipals.
Ms. Heinz Kerry paid a federal tax of $628,401, which is 12.3 percent of her total income and 27.4 percent of her adjusted gross income.
As regular readers will know, I'm a big fan of a progressive tax system, but let's get crazy about municipal, or tax free bonds.
First, tax-free bonds are good things. They finance essential public infrastructure (hospitals, roads, libraries) and allow these institutions access to lower rates of debt.
Second, tax-free bonds are not tax-free. Rather, the investor in tax-free bonds accepts a lower rate of interest in lieu of paying taxes.
Let's take Ms. Heinz Kerry's example.
She earned $2.5 million in interest on an estimated $50 million investment in tax-free bonds. (I'm guessing she's getting 5% tax free on her money.)
If she would have invested that money in taxable corporate bonds, she would have earned $500,000 to $1 million dollars more on her money. (I'm guessing Teresa Heinz Kerry could have gotten 6% to 7% on her money at similar rated corporate bonds.)
That extra $500,000 or $1 million is the 'tax' she paid on that income. If you included that money into her ~$600,000 she paid in taxes, Teresa Heinz Kerry would have an effective federal tax rate of somewhere between 20% and 27%.
More importantly, that forfieted income is, for all intent purposes, the very same thing as a tax. It goes to fund public infrastructure. It's money that would have gone to the investor otherwise. Basically, it's a pretty good thing.
Now, this is a way for Teresa Kerry Heinz to avoid paying the top (38%) tax rate. She pays somewhere in the range of 20-35%, depending on the comparable taxable investments. But that's what the market bears.
That 15% dividend tax rate though. That's just evil! More on that later.
November 07, 2004
The Kilroy Platform: Fair Taxes for All
My dear American friends:
America needs your help. We are at war. Our economy is sputtering. Wages are flat or declining.
Right now, as our children graduate from high school and college, there are not enough new jobs for them. Right now, as our brothers and sisters are being laid off from manufacturing firms, there are not enough new jobs for them. Over the last year, for every 2 jobs our economy has added, our schools have added 3 people looking for work. This cannot continue.
As it was during the Civil War, during the Great Depression, during World War II, our great nation has once again reached a watershed--a crossroads where we need the sacrifice of our citizens in order to prevail.
And our platform is asking you for your help. For those of you who are making more than $200,000 a year, America needs your help. We need you to give more to this country.
If you believe, as we do, that our forefathers, our soldiers, our country has given far more to us than we can ever repay, then join with us to help this country in its time of need.
The Kilroy Platform understands that even the most efficient and effective government needs resources to fund it. It is our sacred duty to do our part in funding our military, our currency, our government.
But we should do so fairly.
Right now, the Republican government punishes work and rewards leisure. Those dollars that are earned by sweat can be taxed as high as 35%. Those dollars that are earned by signing the backs of dividend checks or capital gains are taxed at no higher than 15%.
That is unfair. Why should we punish people for working? Our country was founded on the work ethic: that our national character is stronger when each of us is working to make our lives better.
Why is the dollar that the fireman, the teacher, the policeman, the autoworker, the nurse, the doctor, the lawyer, earn through the practice of their craft taxed higher than the dollar earned by the wealthy endorsing their checks?
A country that rewards work should not have a tax system that punishes work.
Now, the Kilroy Platform understands that investment is needed to create jobs and run the country.
Because of that we do not believe that dollars earned from investing should be taxed higher than dollars earned from working.
They should be taxed the same. All income, whether it's source come from labor, wealth, the lottery, or inheritance, should be taxed at the same rate.
We do not believe that labor is more or less important than investing or inheriting. All sources of income motivate people. As a result, they should all be taxed the same.
The Kilroy Platform is not advocating a flat tax. We still believe a progressive tax system is a fairer system of taxation.
Not all dollars are equal. The dollar that's used to buy milk for your children and pay for your mortgage are more important than the dollars we use to buy yachts and Jaguars. Since we have to fund the government, we would rather fund the government with dollars that might be used to buy yachts rather than dollars used to buy bread. As a result, we feel that a progressive tax system is the fairest way to do this.
But we don't feel that we should change the tax rates just because a dollar comes from labor rather than leisure. We need to reward work, not punish it.
The Kilroy Platform
Well, after the drubbing at the polls last week, I, like many other people, have been thinking about the Democratic party. After reading this open letter to the Democratic Party, I've decided to put my thoughts down on paper.
These are all first draft thoughts, so please forgive me for my lack rhetorical flourish. And to the three people who actually read this, if you see any logical inconsistency or really bad idea let me know in the comments.
Based on the exit polls, there are basically four issues that I'll initially address: the Economy, Terrorism, Iraq, and Values. After that, (if I get that far), I'll try and address other issues.
Overall, the Kilroy Platform focuses on fairness, responsibilty, security, and communty. Ultimately, I feel like these are the core values of the American people, so I'll try and weave these throughout my thoughts.
Thanks in advance for your patience and help.