Trump’s Plan Inverts Traditional Tax Planning Makes Carried Interest Moot
Trump’s scheme would seem to make it so everyone will want to be an independent contractor and that ordinary business income will be the most favored type of income. Whatever he thinks, the transition to this system will not be simple. Right now the IRS fights with S corporations that pay meagre or no salaries to avoid employment taxes. Now we will add a 10% income tax spread to the mix. What the policy rationale is for taxing an independent contractor at 60% of the maximum rate for an employee is a mystery to me.
The other question to ask is who will want to defer business income with a 401(k) or the like, since the payout might be taxed at a higher rate than the deduction yields in savings.
A Slick Estate Planning Trick And Intimations Of Mortality
Although they are figured on the same cumulative unified tax table gift taxes are actually lower than estate taxes. Quite a bit lower. Let’s talk large estates where the unified credit is not that significant and likely was used up with gifts in the past. $100 million passing through an estate at the current top marginal rate of 40% leaves $60 million for the heirs. Prior to death that same $100 million could support a gift of over $71 million and the resulting gift tax of nearly $29 million.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.