ARBOR WEALTH: Caymans, Kinks and cubbies on a sunny afternoon

Published: Thursday, May 1, 2014 at 11:11 AM.

The tax man’s taken all my dough …

And left me in my stately home.” — “Sunny Afternoon” by Ray Davies and The Kinks

 

Growing up on Chicago ’s northwest side, April always brought two things: another year of frustration at Wrigley Field, and the specter of tax day. Neither was a pleasant prospect. From the looks of this year’s team, Congress stands a better chance of successfully overhauling the federal tax code than the Cubs do of making the World Series.

Want to really get depressed about taxes? Make a lot of money.

The perception that highly compensated wage earners utilize multiple loopholes to avoid paying their fair share is largely inaccurate, especially this year. Now, sometimes large, profitable U.S. corporations manage to whittle their effective tax liability by moving profits overseas and escaping high U.S. corporate tax rates. And hedge fund managers can sometimes pay lower tax rates on incentive profits to lower their liabilities. And it’s also true that some super wealthy folks, whose main source of income comes from investments, sometimes pay closer to the 15 percent capital gains tax rate than the rate associated with their income level.

But for highly compensated wage earners? Their tax rate just went up, from 35 percent to 39.6 percent. There were also new restrictions on itemized deductions. And even investment income was taxed at a higher rate.



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