It seems that Joe Biden (or whoever is pulling the strings to make his mouth move) keeps spouting the blatant lie that the rich pay a tax rate of only 8.2%. Why would I state so plainly that it is a blatant lie? The answer is that I can PROVE it, with the government’s own data.

Biden has been on a tear for some time now, wanting to impose a “Wealth Tax” on billionaires. This Wealth Tax would take the form of a tax on “Unearned Capital Gains.” Before going into what a disastrous idea that would be, I want to make sure that everyone understands what this means.

Let’s say that you worked for a company that made CD-ROMs for 20 years. Let’s assume that you had a retirement plan, wherein the company would match your investment in the company, to go into some retirement vehicle. Over the years, you watched proudly, as the value of “your” company rose. But you were still years from cashing in that stock. That’s because that stock is going to be your nest egg. However, along comes the government and wants to tax your unearned capital gains. They look at your stock, for which the total dollar amounts of all of the purchases over the years, was $100,000. But they determine that the stock is now worth $250,000 and they expect you to pay tax on the difference between $100,000 and $250,000. That’s an unearned capital gains tax. So, having no choice, you pay it. Then along comes digital streaming and thumb drives. The bottom falls out of the market for your company’s CD-ROMs and the stock that was purchased for $100,000 is now only worth $25,000. Do you think the government is going to return all that unearned capital gains tax that they collected a few years earlier. Absolutely not. You can claim a loss. But most of that money will stay in the U.S. Treasury.

There’s a reason why they call it “unearned”. That’s because until you cash in your stock, it is unearned. The value can fall through the floor tomorrow. This will take you back a little. But that’s what happened to Enron investors. One day, they were flying high and the next day, their stock was very little more than scrap paper. That’s the nature of investing. You hope that you make the right investments. You hope that your investments grow. But nothing is guaranteed.

So, an unearned capital gains tax is intended to tax you on stock and other capital that you own, while the value is high. But if the value drops, don’t expect to get all of that tax back. Sure, you can write off a loss. However, previously paid tax is not considered to be a loss that can be written off. Oops!

Now let’s look at key executives in many companies. They often get stock in the company that employs them. But in most cases, the stock is what is referred to as “restricted stock.” What that means is that the stock may not be sold for a certain number of months or years. The company does this, because that stock doesn’t deprive the company of cash that they need to grow. If the company does well, the executive will make a killing, as his stock was part of his employment package. But if the executive sees the company’s market beginning to dry up, he won’t be able to sell his stock for another three years or so. He can’t even get a loan on that now devalued stock. In this case, the company is not out any cash. It’s only the executive who took part of his pay in company stock. So, if he had been required to pay a capital gains tax on his stock, when the market was up, he would be out most of that money, when the stock value falls and the company possibly files bankruptcy.

Now consider someone who bought a home that, years later, was found to be on contaminated land. If that person had paid unearned capital gains on the value of that home last year, do you think the government is going to return any of that tax, when the homeowner is forced to leave his contaminated home? Once again, the person can write off a loss. But most of that unearned capital gains tax will stay in the U.S. treasury.

So that’s the basics of unearned capital gains.

Now, let’s look at the top 1% of income earners and Biden’s absurd 8% claim. In my upcoming book, “The Tax Deception” [edit: Now available], I talk a lot about the “IRS Collections Data.” It’s a couple of spreadsheets that the IRS publishes every year, a few years after the close of each tax year. That delay is necessary, to allow the IRS to compile all the data from tax year (audits, late payments, etc.).

According the latest IRS Collections Data, for the 2020 tax filing year, the top 1% of taxpayers paid income tax at a rate of 25.99%. That’s according to the IRS. The amount of money that was collected from that top 1% of taxpayers amounted to a whopping 42.31% of all federal personal income tax collected in 2020. You can find links to these spreadsheets on the book website, https://Tax Deception.com/

Not only is Biden blatantly lying, but widely available IRS Collections Data shows just how badly he is lying.

But it gets worse. As demonstrated by his desire to impose an Unearned Capital Gains tax on the wealthy, his dementia is on full display. Let’s look at why.

Back in 2008, the grossly misnamed, “Heroes Earnings Assistance and Relief Tax Act,” was signed into law by President George W. Bush, enacting the first ever U.S. Exit Tax. From Title 3 Sec. 301(a) of that bill, “All property of a covered expatriate shall be treated as sold on the day before the expatriation date for its fair market value.” The bill goes on to say that tax will be due on that amount, before expatriation. So, what does this have to do with Biden’s Wealth Tax.

Well think about it. The purpose of that Exit Tax was to deter the wealthy from leaving the jurisdiction of the IRS. Although many wealthy people saw that Exit Tax as a harbinger of worse things to come and just paid the Exit Tax and left. Many more stayed, since paying that Exit Tax, for some of those billionaires with hard assets all over the world, would have been prohibitive. Today, some of the remaining billionaires are angry at themselves for not leaving before that tax was signed into law.

So, what happens, if Biden imposes a Wealth Tax on rich U.S. citizens? Let’s look at their options and keep in mind that both are unearned capital gains taxes.

1. They can stay and pay the Biden Wealth Tax this year and every year, thereafter.
2. They can leave and pay the Bush Exit Tax once.
   

That’s pretty much a no-brainer.

An unearned capital gains tax would put the wealthy in a position where their is only one possible response and that would be to renounce, take the one-time hit to their bottom line, and preserve what they have left, going forward.

The Bush Exit Tax, as bad as it was and as many wealthy Americans as it drove out of the USA, did manage to dissuade some of the wealthiest taxpayers from leaving. But if Biden imposes that Wealth Tax, he will not only remove the disincentive of the Bush Exit Tax, but since the Wealth Tax will continue to be collected in the future, it will actively drive more wealthy taxpayers to make the decision to renounce their U.S. citizenship and take themselves and their hefty bank accounts to a more wealth-friendly jurisdiction. In that case, the US would benefit one time from that Wealth Tax and then be deprived of an average of more than 25% in income tax from those wealthy taxpayers each and every year, going forward. Such a Wealth Tax represents a tremendous net loss for the USA.

It doesn’t take an economics genius to figure this out. Whether or not you like the wealthy, we need them. It is their investment dollars create most of the jobs. If they leave, their investment dollars will be creating jobs in another country.

[edit:
“The Tax Deception”, with a foreword by Former Congressman John Linder, is now available in print and all major ePub formats. Order your copy now.]