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2004-10-18 Home Front: Politix

Heinz Kerry Paid Lower Tax Rate Than Most Taxpayers

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Posted by CrazyFool 2004-10-18 12:24:50 PM|| || Front Page|| [11133 views since 2007-05-07] Top

#1 Didn't 'Teresa Heinz' (as she's legally known) also categorgize herself as a professional "philanthropist"? Surely philanthropists ought to be entitled to a lot more tax breaks. Hell, if Kerry gets in, she ought to try to have the state match her income, dollar for dollar, so she can engage in ever more of her wonderful career in philanthropy...

Posted by Bulldog 2004-10-18 1:41:25 PM|| 2004-10-18 1:41:25 PM|| Front Page Top

#2 Do the math. If she is really worth $500 million or so, just a 5% return on that would be income of $25 million. Note how she only has "income" of $5.07 million. Either she really isn't that rich, or this is a clear example of how the rich live differently from the rest of us working stiffs, who actually wind up paying our full share of federal taxes.

Note: you can probably say the exact same thing about Bush and his family and many others in Congress.

I take a cynical view when either party tries to claim they understand what it is like for the middle class and poorer people.

Posted by DO 2004-10-18 1:59:37 PM|| 2004-10-18 1:59:37 PM|| Front Page Top

#3 She probably finds ways to funnel the $20 million through her charities: perhaps these pay for the Gulfstream, fund her travels and entertainment etc.

Posted by lex 2004-10-18 2:03:57 PM|| 2004-10-18 2:03:57 PM|| Front Page Top

#4 The Gulfstream's probably funded by her "End Oil Dependence/No Blood for Oil" nonprofit.

Posted by lex 2004-10-18 2:04:56 PM|| 2004-10-18 2:04:56 PM|| Front Page Top

#5 Flying Squirrel Enterprises ownes the the jet, the window Heinz ownes Flying Squirrel. The window Heinz merely leases time on the jet. Flying Squirrel is likely a money losing corp.

Posted by Shipman 2004-10-18 2:11:38 PM|| 2004-10-18 2:11:38 PM|| Front Page Top

#6 IIUC most of her interest income comes from tax-exempt bonds

Posted by Frank G 2004-10-18 2:15:08 PM|| 2004-10-18 2:15:08 PM|| Front Page Top

#7 The real q is Where's the other $20M+? If her fortune's $500M, and if she puts, oh 65% into tax-exempt fixed-income, then she's got another $150M to invest in hedge funds, real estate LPs and other vehicles that can be structured to avoid taxes while generating higher returns. Her real income is likely closer to $15M from the tax-exempts plus another $15M at least from the hedge funds etc, or $30M total.

Posted by lex 2004-10-18 2:39:17 PM|| 2004-10-18 2:39:17 PM|| Front Page Top

#8 gotta be lex....
the willow Heinz must pay up!

Posted by Famous Roosevelt Gravy Train Graber 2004-10-18 6:58:18 PM|| 2004-10-18 6:58:18 PM|| Front Page Top

#9 All of the 'expenses' of paying household servants, etc. are easily funnelled off into dummy holding corporations so that they can take the depreciation, cost of maintenance, payroll & etc. There are thousands of small business owners that pull the same thing (albeit on a smaller scale) every year. If you have an LLC which holds most of the income for you, or you can assign your loss to a dummy corp, then it all just goes away . . .

Posted by Jame Retief 2004-10-18 8:46:38 PM|| 2004-10-18 8:46:38 PM|| Front Page Top

#10 I did this elsewhere on the 'net and it's a bit late in the day but what the heck (note that this entire analysis is grossly oversimplified and done merely to illustrate a point. It ignores legitimate ways of avoiding current taxes such as holding appreciated assets rather than selling them):

Speaking of offshore investments try to reconcile the following: Teresa Heinz Kerry has a net worth of approximately at least $1,000,000,000 (estimates range from $1B to $3.9B) but according to the information she just released she had taxable income of only $2,291,137 and nontaxable income of $2,781,791 (the $4,600,000 in charitable contributions are a red herring since the foundations will file their own taxes and she won't have been able to deduct this amount).

Let's assume that she's playing by the rules and reporting all of her income: that's an annual return on her net worth of just over one half of one percent. Folks, she could more than quadruple her return by merely rolling all of her assets into 1-year CDs.

Or could she? Try to line the above up with the following quote from the SFGate article I linked, "Heinz Kerry's investments, worth an estimated $500 million in 1995, have grown over the last nine years to $1 billion or more, even accounting for large living expenses and charitable contributions, according to an analysis of Securities and Exchange Commission filings, Senate financial disclosure reports, probate documents and other public records." Using a simple annually compounded future value formula that represents an average annual rate of return of around 8%.

Assuming $1,000,000,000 net worth and an 8% ROR (she probably did significantly better since we're in an economic upswing) we'd expect Mrs. Heinz Kerry to report around $80,000,000 in taxable income for this last tax year less the approximately $2.7M in nontaxable interest income she reported for a net taxable income of approximately $77,300,000.

The bottom line:

Approximate federal tax due @ previous 39.6% rate = $30,600,000
Approximate federal tax due @ Bush's new 35% rate = $27,100,000
Actual federal tax paid by Teresa Heinz Kerry = $798,820
Theoretical (uncollectable) tax revenue loss due to Bush tax cut = $3,500,000
Actual tax revenue lost because the rich can always avoid paying = $26,301,180
Actual tax revenue lost due to Bush tax cut (0.396/0.35 * $798,820 - $798,820) = $104,988

Let's assume that Mrs. Heinz Kerry's behavior is typical of the wealthy (it is) and that we can't significantly increase collections (we can't). There are approximately 313 billionaires like Mrs. Heinz Kerry living in the United States. They control assets valued at approximately $800B. Assuming that they're averaging as a group returns similar to those of Mrs. Heinz Kerry and reporting similar amounts of income for each billion in assets (slam dunks on each) the total tax revenue actually lost to marginal rate cuts favoring billionaires under the Bush tax cut is ($800B * $105k tax / $1B assets) is around $84,000,000. That $84,000,000 represents the amount necessary to fund our federal government for approximately 20 minutes. Think it's really worth arguing about marginal rate reductions for the wealthy or does that now seem to be merely a pointless and unproductive class warfare political ideology?

Food for thought: the federal government operates at an efficiency of approximately 27.2% (number provided by an occasional business partner of mine who's heavily into this stuff and whom I have no reason to doubt). Raising the efficiency of the operation of the federal government by 0.0038% (yes 38 one-thousandths of one percent) would recoup the entire amount of revenue "lost" to marginal rate cuts for billionaires under the Bush tax cut and would have positive economic consequences while avoiding the negative economic consequences of raising the top marginal rate. Which sounds like a better way to address the issue?

Posted by AzCat 2004-10-18 10:37:31 PM|| 2004-10-18 10:37:31 PM|| Front Page Top

#11 Yeah. What he said! Or, as Gus Grissom might've said, "Fuckin' A, Bubba!"

AzCat - are you taking on clients at present?

Posted by .com 2004-10-18 10:53:52 PM|| 2004-10-18 10:53:52 PM|| Front Page Top

#12 .com - at the moment I'm not practicing, just writing songs. :)

Posted by AzCat 2004-10-18 10:58:19 PM|| 2004-10-18 10:58:19 PM|| Front Page Top

#13 With all due respect AzCat, I'd like to see a flat-rate tax. Eliminate all loopholes. Just declare what you had at the beginning of the year and at the end. Tax the difference, if you must tax.

Ultimately I'd rather not have any income tax, but that will have to come after getting rid of the Welfare State, Social Security, and Dept of Education.

Posted by Kalle (kafir forever) 2004-10-19 12:25:19 AM|| [http://radio.weblogs.com/0103811/categories/currentEvents/] 2004-10-19 12:25:19 AM|| Front Page Top

#14 Kalle - A flat income tax is the 2nd best proposal out there (all income taxes are bad because they tax economic productivity). The best is a flat retail sales tax. It would make the US the world's preferred tax haven and we'd be staggered by the rush of capital into our economy (remember that to grow an economy you have to add labor, add capital, or increase productivity). But the critical component is this: the bills that have been in the House & Senate the past couple of years called for a 23% sales tax (and elimination of all other federal taxes except taxes on imported goods) while a couple of Harverd economists have calculated that current the prices of all goods sold in the US economy are inflated approximately 20-22% by the current federal tax burden imposed on producers/sellers. Thus we'd expect a competitive economy to reduce the price of goods by around 20% while we'd pay approximately 23% to the federal government on the reduced basis. At first glance it looks like a wash BUT we'd be paying with untaxed dollars rather than our current taxed dollars so we'd be far ahead as consumers. The sales tax is so superior on so many fronts as to be a no-brainer, the question is whether we can push aside our entrenched special interests and get our politicians to give up the class warfare, intergenerational warfare, & race baiting the current systems allows them to engage in.

Posted by AzCat 2004-10-19 12:43:32 AM|| 2004-10-19 12:43:32 AM|| Front Page Top

#15 AzCat, the problem with sales tax is that it opens the door to government control of all business.

I'd rather leave all corporations alone. Make the income tax flat, and let each individual feel the pain directly. Best recipe to reduce the scope of government, and to eventually abolish the income tax itself.

Posted by Kalle (kafir forever) 2004-10-19 12:51:34 AM|| [http://radio.weblogs.com/0103811/categories/currentEvents/] 2004-10-19 12:51:34 AM|| Front Page Top

#16 Actually the bills introduced last year would have abolished all taxes on business (note the massive gains in competitiveness we'd experience overnight).

But I agree 100% with letting every individual feel the pain and see the true cost of the government services they demand. That *is* the only path that leads anywhere I want to go.

Posted by AzCat 2004-10-19 1:03:22 AM|| 2004-10-19 1:03:22 AM|| Front Page Top

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