Taxing Tiger

Hank Adler:

WHEN Tiger Woods collected his $1,350,000 check for winning the US Open golf championship last month, his federal and California taxes approximated $586,000. So, Tiger got to keep about $764,000, or 57 percent of his winnings.

It was fortunate for Tiger that he won in 2008. Democratic presidential candidate Barack Obama has said: "The best way forward is to adjust the cap on the payroll tax so that people like me pay a little bit more, and people in need are protected." He's also advocated "rolling back the Bush tax cuts on the top 1 percent of people who don't need it."

Spelled out, Obama's twin tax proposals are to: 1) remove the "cap" from Social Security taxes for individuals earning over $250,000, a plateau Tiger has long since surpassed in 2008, and 2) eliminate the "Bush" tax cuts, thereby raising the top marginal federal income tax rate to 39.6 percent.

This would increase Tiger's taxes on his winner's check to about $776,000, a boost of almost $190,000. Instead of keeping 57 percent of his earnings and the government taking 43 percent, Tiger's federal and California taxes under the Obama proposals would amount to 57 percent of his winnings, leaving Tiger with just 43 percent.

Prefer baseball?

The New York Yankees have a 2008 payroll of about $208 million. Under the Obama proposals, the 24 Yankee players would be hit with an aggregate increase in federal income taxes of just over $22 million - with slugger Alex Rodriguez single-handedly getting dunned with $2.6 million in added federal taxes. The Yankees' owner would owe another $7.5 million of federal taxes.

Ticket prices would need to rise about $65 million so that the owner and players could have the same after-tax income as before- an average $16 per ticket. This would more than double the cost of a seat in the bleachers, now $14.

Obama's tax proposals bring an increase in federal income taxes of about 39 percent for self-employed people earning over $250,000 - and take the top federal tax rate on self-employment income to its highest level since 1971.

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Taxes don't occur in a vacuum. Wealthy taxpayers and large businesses don't simply continue along as if tax-rate hikes of 30-plus percent are just another day at the office.

* Businesses will raise prices to try to recoup the extra costs - a cause of inflation.

* Entrepreneurs will adjust their expectations with respect to investing their risk capital - souring the economy.

* Enterprises will visit more carefully the advantages of moving business overseas.

* Generally, all such individuals and businesses will take all possible legal steps to reduce the impact of confiscatory tax rates.

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People who provide goods and services to the "rich" will also suffer because of decreased buying power. The top one percent of taxpayers already pay 39 percent of all income taxes. Obama may push that level to 50 percent and he will call that fair.

But, that custom cabinet maker that Democrats were so concerned about his inability to provide health care for his kids a year or so ago will have even fewer orders and his need will be even greater because Obama will be confiscating his customers money.

BTW, the top 25 percent of taxpayers now pay 86 percent of all income tax.

The question that needs to be put to Obama, but never is--"What percentage of federal income taxes should be paid by the top one percent?"