Baum: The Real Cost of the 'Fiscal Cliff'
It is with great frustration as a tax paying citizen, private business owner and employer of 80 people between the USA and Hong Kong that I listen to the continued FALSE CLAIMS in the rhetoric emanating from Washington in regards to tax policy.
We pay taxes, health care and retirement benefits in both Hong Kong and the USA for our employees in accordance with all laws. (Read More: What is the 'Fiscal Cliff'?)
CNBC's Gary Kaminsky recently did a piece on FSA for employees. Thank goodness someone recognized the harm caused to our employees by the Affordable Health Care Act! As a Sub-Chapter "S" Corporation shareholder I am not eligible for FSA, but my employees went from a pre-tax maximum deposit of $6,500 to a legal maximum of $2,500. Any employee with children is devastated by this change! We put in FSA to offset the burden of higher deductibles so as to keep benefits, yet manage health care costs for our company and employees.
Also, as a Sub-Chapter "S" my income is all either K-1 ordinary or W-2 driven. As a resident of New York with business in California as well, my effective tax rate on 98 percent of my annual income is already 40 percent. I do not enjoy much in carried interest, capital gains, or qualified dividend income. I also have yet to see any "tax benefit" for having jobs in Hong Kong! Now I am being told that after January 1, my rate should go to 39.6 percent, which given my circumstances will mean a tax rate near or even exceeding 50 percent — including the 3.8 percent from the Affordable Care Act. (Read More: What a Post-'Fiscal Cliff' Deal Will Cost U.S. Households)
These increases will be in addition to increases in capital gains and qualifying dividend income. When am I paying enough? When am I considered to be doing the "right thing" in the eyes of government officials? (Read More: Fiscal Cliff - Complete Coverage)
I am not pleading poverty as I earn over 7 figures, give over 6 figures annually to charity, treat my employees as family members with liberal time off and their many benefits. I want fiscal reform to insure these potential benefits and standards of living for future generations. (Read More: Why CNBC's Rise Above?)
However, enough already! An exit poll taken after voting claimed 60 percent of those who voted wanted the wealthy to pay higher taxes. What a surprise? Did you expect them to say they wanted to pay more and are under paying currently? How about asking someone like me if I already pay a lot and 60 percent of the time the response would be of course. (Read More: 'Fiscal Cliff' Mess Is a 'Grand Canyon' - Bill Gross)
However, the most disingenuous comment belongs to Mr. Buffett who says, "it is wrong his secretary pays a higher rate than he does". Really now, why not tell Mr. Buffett he no longer gets preferential tax treatment on his income and must declare it ALL as ordinary and pay AT LEAST 40 percent instead of 15 percent -20 percent? The extra 25 percent he would pay far exceeds the extra I will be paying going from 40 percent to 50 percent. (Read More: Prescriptions for America)
The claims that the "richest Americans" should pay the Clinton rates is an example of government officials castigating the wrong people. Unless carried interest, and other loop holes are closed business owners/job creators like me will be unfairly punished while those who truly are the richest continue to enjoy more of their rewards. How about doing a piece on that travesty and fallacy?
Peter Baum is currently COO/CFO of Essex Mfg. Inc. and Baum-Essex Manufacturing (H.K.) Ltd. We design, source and distribute various consumer products in North America, Central America, South America, Europe, Australia and Asia. Baum is a graduate of the Wharton School of University of Pennsylvania with a B.S. In Economics. He has appeared on CNBC's Squawk on the Street and Strategy Session, to discuss the slow-down in China in manufacturing and the economy in general.