Sunday, January 13, 2013
New York Times: Explanations and Advice for Those Hit Hardest by New Tax Increases, by Paul Sullivan:
While the affluent will pay more in taxes this year, that is probably not the case for the very wealthiest — those worth hundreds of millions or more. They may still be paying a lower tax rate than Warren Buffett’s secretary.
Many millionaires are certainly paying at least 30% of their income in taxes, a goal President Obama set out in last year’s State of the Union address. But they’re more likely to be doctors, lawyers and people working in the financial services industry who get the bulk of their earnings in the form of paychecks.
Partners in private equity firms and hedge fund managers, on the other hand, earn much of their money as a share of their funds’ earnings. And that income gets preferential tax treatment as so-called carried interest.
A similar special tax treatment still holds true for Mr. Buffett as long as the bulk of his income comes from his investments and not a paycheck. The long-term capital gains rate for incomes over $400,000 is 23.8%, including the Medicare surcharge. That’s a far cry from the top marginal tax rate on income above that amount of 40.5%, which includes a 0.9% Medicare surcharge on earned income.
How are people going to react to all of this? Here is advice and observations from some experts in wealth management.
- New York Times Bucks Blog: The Tax Code and the Very Rich
(Hat Tip: Mike Talbert.)