Recently there has been a lot of noise about the top 1%. They certainly have taken a beating.
This was highlighted by the Occupy Wall Street Movement last year.
It has received significant attention during the Election.
There are several different ways to define the top 1%. In the interest of simplicity, we are saying its income over $400,000 per year.
Self-Made
Most of the people we work with are self-made. No trust fund baby’s here. Many of these folks started businesses. Through a lot of hard work and some breaks going their way, they have become very financially successful. We’ve watched (and helped) them grow, hire employees and serve their markets. The key common traits among these folks are:
- Honest
- Hard Working
- Smart
- Entrepreneurial
Many of them are very generous to their favorite charities. Oh, and they pay taxes too by the way.
Having clients like this to work with is really cool.
Target the Top 1%
Why has the top 1% suddenly become a target? I’m not sure. Envy perhaps? Maybe that they supposedly don’t pay their ‘fair share’ (whatever that is). Should they pay a higher capital gains tax rate after everyone reviewed Mitt Romney’s return? Sure. With the passage of the American Taxpayers Relief Act of 2012 the higher income earners face the hat trick of higher taxes.
For married couples filing jointly earning over $450,000 and singles earning over $400,000 they will be hit with (at least) three tax increases. The first is their ordinary income tax rate will increase from 35% to 39.6%. The second is their long-term capital gain tax will increase from 15% to 20%. Finally, their qualified dividends tax will also increase from 15% to 20%.
In addition to the capital gains tax increase and the ordinary income tax increase there are other tax increases scheduled.
The Affordable Care Act instituted a surtax of 3.8% on passive income above $250,000. So for the higher income earners they could be paying 23.8% (20% + 3.8%) on their long-term capital gains and qualified dividends.
I know the government needs the money. The deficits are a simple function of spending more than they are taking in. The government has shown absolutely no restraint when it comes to cutting spending.
It is estimated per IRS statistics that the top 1% declared about 20% of the taxable income and paid 37% of the taxes paid.
Do you work for the top 1%?
If so, what has been your experience?
Photo From Creative Commons
Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
