Well it looks like the U.S. President and Congress have decided to extend the Bush tax cuts for two more years for ALL taxpayers. This only happened after the President and Democratic members of Congress finally relented on their previous demand that the â€œGolden Geeseâ€ (i.e. top 1% of taxpayers) not be included in this extension.
So what has been the reaction of the Golden Geese?
So far, the feedback that I have received from my Golden Geese clients is that they feel like they have been granted two more years of runway in order to arrange their orderly legal departure from the U.S. tax net. This feedback is from Golden Geese of all political stripes because they acknowledge certain Facts:
1. The U.S. tax revenue model is very skewed and relies on the 1% Golden Geese for over 40% of the total federal individual tax burden. This is situation is even more skewed at the state level, read this WSJ blog;
2. The fiscal needs of the U.S. government are dramatically increasing simply because an aging population will be placing ever greater demands on Social Security, Medicare, and Federal Government retiree benefits. Banning earmarks, cutting defense spending, and other expense cuts are just rearranging the deck chairs on a ship which is on a collision course with these fiscal icebergs. The reality is that neither party currently has the political will to address the problems that will be caused by these sacred cows; and as a result
3. When the U.S. federal and state governments look for the additional money they will need, they will turn to their best customersâ€¦..the Golden Geese. This reality is confirmed by the almost universal agreement by both Republicans and Democrats that this tax cut extension was only temporary in order to avoid the risk of a double-dip recession;
Furthermore, for Golden Geese as for everyone, their perception is their reality. While the above are agreed upon Facts, the following are the perceived realities that my Golden Geese clients see:
1) If a Golden Goose wants to address a societal need or problem, government is not a very efficient means of execution. They feel that every tax dollar saved, is another dollar to put into a strategic philanthropic vehicle (either their own or outside existing ones) which will be a more effective, sustainable and accountable method of addressing the need; and
2) If an individual Golden Goose ever had thoughts of engaging in tax evasion, they know that in a post UBS world this is not a smart thing to do, as can be read on my website. Those who were foolish enough to try this in the past, read this Bloomberg article for some examples, are now paying the price in taxes, interest, penalties. In addition, the threat or realty of incarceration along with the personal humiliation of wearing the scarlet letter of â€œtax evaderâ€ is just too high a price to pay for these types of games.
The bottom line is that until politicians and voters tackle the three Facts outlined above, their will continue to be an acceleration of the phenomena known as â€œThe Flight of the Golden Geeseâ€!
David S. Lesperance, Barrister and Solicitor