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Letter: Obama’s Tax on Wealth

To the Editor:

I was very surprised and disappointed to see a proposal for what is essentially a wealth tax as part of Obama’s budget proposal. I’m referring to the $3 million cumulative limitation that would be placed on tax-sheltered savings. Those savings aren’t easy to build and require careful planning and sacrifice to reach $3 million. Mandatory withdrawals are required starting at age 701/2, with the required percentage increasing each year. At age 83, for example, the required withdrawal is approximately 10 percent, and all the money — capital gains, dividends and interest included — is taxed at ordinary income rates. In taxable accounts, capital gains are taxed only when stock is sold and at a lesser rate, and dividends are taxed at a much lower rate. A dollar limitation as proposed would discourage tax-free saving — the very reason tax-free accounts were created.

Apropos of this, I was very interested to read in a recent Economist article on Margaret Thatcher the following quotation from Abe Lincoln that she carried in her handbag:

You cannot strengthen the weak by weakening the strong.

You cannot bring about prosperity by discouraging thrift.

You cannot help the wage-earner by pulling down the wage-payer.

What Abe was saying is that, in trying to do what many of us think of as evening things up economically, we are actually creating new economic problems. We have suffered from a slow economy for far too long. Discouraging saving, raising taxes and increasing government size and cost have not helped but have hurt economic growth. I think Abe had it right on economics as well as human rights.

Dick Justice