Friday, October 26, 2012

As A Financial Planner This Ad Irritates Me


The Obama campaign has been playing the ad below virtually non-stop in western North Carolina for the past couple of weeks.





CBS News Anchor and 60 Minutes Correspondent Scott Pelley's question is ignorant and the Obama campaign just loves it.

Why do I find the question ignorant?

First, it ignores totally that any capital that Mitt Romney invested has already been taxed once. This is not pre-tax or tax-deferred monies upon which no tax was withheld. Romney has already paid tax on the capital invested and probably at a 35% rate or higher. I say higher because the original investment could very well be from 2002 or earlier. If so, Romney paid anywhere from 38.6% to 39.6% in taxes on this money.

Second, by focusing in on the relative amount of tax paid by Romney, Pelley ignores the absolute amount in dollar terms - $2.8 million. Thanks to the astute investment managers who run his blind trust who generated a $20 million long-term capital gain, Mitt Romney has just paid more in taxes than most people earn in a lifetime.

Third, Mr. Pelley should be asking why Obama supporter Warren Buffett's Berkshire Hathaway (of which I am a shareholder) has never paid a dividend. One answer is that dividends are taxed at a higher rate than capital gains. If Buffett paid himself a dividend, he would have to pay more taxes.

Fourth, it is good public policy to tax long-term capital gains at a lower rate than ordinary income. It provides an incentive for investors to put up the money needed for business growth. If there is no business growth, there are fewer jobs. Fewer jobs also mean lower tax revenues. When capital gains rates have been lowered in the past there was a net increase in revenues even though the rates were lower.

Finally, I hate both the ad and the question for the divisive "us versus them" attitude it takes. This is America where we celebrate risk takers and not some Euro-socialist country that has driven out all the entrepreneurs.

3 comments:

  1. Good points.
    I wish someone would have thrown Pelley out of the plane to find out if he survives like Ahnold did in Eraser.

    ReplyDelete
  2. Thanks for sharing the meaningful blog and information regarding financial planning’s! I was also searching for the financial advisors in Detroit.

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    ReplyDelete
  3. Hi there! I am actually curious about one thing, of course if that's not too much to ask could you be so kind and please share with us the place where you spent your childhood?

    ReplyDelete