Lee Iacocca on America’s current status quo

From Lee Iacocca‘s book Where Have All the Leaders Gone?: “The President of the United States is given a free pass to ignore the Constitution, tap our phones, and lead us to war on a pack of lies. Congress responds to record deficits by passing a huge tax cut for the wealthy (thanks, but I don’t need it). The most famous business leaders are not the innovators but the guys in handcuffs. While we’re fiddling in Iraq, the Middle East is burning and nobody seems to know what to do. And the press is waving pom-poms instead of asking hard questions. That’s not the promise of America my parents and yours traveled across the ocean for. I’ve had enough. How about you?”

[via Kottke]

—April 12, 2007

2 Comments

Randall Bateman

Apr 12, 2007 at 11:58 pm

This quote is annoying because it perpetuates a falsehood that politicians love exploit. In the United States, we do not tax wealth (with the exception of property tax) – we tax income. Many of the wealthiest people in the country pay very little taxes because they do not have a large amount of “income” as defined by the tax code. You do not need a lot of income when everything is already paid for. For example, during the 2004 elections, it was estimated that John Kerry and his wife had a net worth nearly 50 times that of George and Laura Bush – guess who paid more in taxes. The super rich hire teams of lawyers and accountants to structure their assets in complex trusts so they pay very little in taxes. Some of the most outspoken celebrities against tax cuts have charitable remainder trusts and other entities set up to avoid paying taxes. They want everyone but themselves to pay taxes.

High income people pay most of the taxes, but some of those are not really taking home the bacon as it may appear. I have a friend who does large contracts for the government. If he sells a $3 million dollar job in which he expects to have a profit of $1M and has it half complete by the end of the year, he has to pay taxes on the $500,000 in accrued profit. Since he actually won’t receive any money from the government until late in the following year, he has to go out and borrow $200,000 to pay his taxes. If, for some reason, he does not actually make a profit, he gets a refund a year later. Of course, he has been paying interest on $200,000 the borrowed the previous year.

Likewise, a young couple fresh out of professional school may jointly make $275,000 in Manhattan. A lot of money. However, they may also have $300,000 in debt and must pay very high rent. Are the rich? Technically, they are bankrupt. However, they pay tax at a high rate and cannot take deductions for student loan interest, etc., because those deductions phase out as one’s income increases.

In contrast, a couple with $4 million in CDs and yearly income of $200,000 will pay much less in taxes even though they are much “wealthier” than the young couple.

The irony for those who criticize the tax cuts is that a good economy generates much more tax revenue. That is why we don’t mind that Utah’s rate of spending has been well above inflation + population growth. The good economy feeds the government and lets it give us a tax break to keep us pacified.

Blake Snow

Apr 13, 2007 at 12:10 am

Charitable remainder trust FTW!

Blake Snow

writer-for-hire, content guy, bestselling author

Lee Iacocca on America’s current status quo

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