By Richard Billes of AllThingsPoliticalToday.com

Barack Obama, in his recent State of the Union Message, again brought up the tax issue. Besides having Warren Buffett’s “secretary” in attendance, he went after the capital gains rate of 15%. Obama wants everyone who makes over $1 million a year to pay 30% of it to the Federal government. He referred to his new economy as an economy built to last.

Let’s take a look at his proposal, although it seemed more like campaign rhetoric than an actual proposal. He’s proposing the increase to the multiple levels of taxation that we currently are subjected to by the Federal government.

Of course, with the example of Mitt Romney’s earnings staring us all in the face, Obama had an easy target. Obama would not want to point out the fact that Romney paid a high rate on the original earnings and was now paying a double tax on the earnings from that original income.

Let’s take a look at how our “fair” system of taxation works. First, if you immediately spend all of your earnings without saving a dime, there’s no need to go any further. The government will only tax you once on ordinary earnings. But the vast majority of Americans save and invest at least a portion of their income in the American economy.

Once, you make any type of investment, the Federal taxation system begins to chip away at your savings and investments. Let’s say you have an IRA (or even a non-IRA account) with mutual funds and stocks in it. Most people think that this type of investment is tax-deferred. Well, think again.

All of the investments within your IRA are taxed. If they’re corporations, they’re taxed at the highest corporate rate in the world, 35%. If you think that buying mutual funds avoids that rapacious rate, think again. Mutual funds are generally made up of corporations within a particular financial sector. About the only tax-free vehicles that you can buy are tax-free municipal bonds.

So, if you have any type of investments in any type of profitable corporation, you’re going to be taxed indirectly. This holds true for any and all investments, whether tax-deferred or not.

Tax-deferred, of course, doesn’t mean tax-free. It only means that the income is tax-deferred until you take it out of the shelter of an IRA or some other type of tax-deferred vehicle. Tax me now or tax me later.

So far we have a tax on ordinary income, a tax on corporate income within your investment vehicles and a tax on deferred income once you remove it from a tax shelter vehicle.

There are still more taxes due to the IRS. If your investments are profitable, you will receive income from dividends and interest. You guessed it, you’re taxed again. Even though you may have paid taxes on the original investment, any money that you earn is also taxed.

Finally, all of the hard work of investing and earning money on your original investments, goes up in smoke when you die. If you think that your family will benefit from it, think again. The Federal estate or inheritance tax is approaching the confiscation level. Then, of course, there are state estate taxes to pay.

Of course, we’re only covering the Federal tax structure here. Depending on your state of residence, you could be subject to the same taxes in smaller amounts. So it’s pay me now, pay me later, and later, and later, times two.

So the next time you hear a politician talk about things like “everyone making over $1 million a year should pay at least 30% in taxes” understand that when you add it all up you could be paying way more than that now.

Richard Billies is founder and purveyor of  AllThingsPoliticalToday.com  and a frequent SNSPost contributor.  The opinions expressed in this article are those of Mr. Billies and not necessarily those of the SNSPost or its staff.