If capital gains taxes are raised, then someone who invests outside of a 401k or IRA gets double screwed.
Where does the double come from? Each dollar only gets taxed once... only the profit gets taxed when investing, not the principal, right?
Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
81–90 of 323 posts
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#82Earlier quoted context omitted.
I am confused. If you put your bonus into a corporation, you will have to pay tax twice, the corporate tax and your personal tax. And if your corporation is an LLC, it all flows through to your personal taxes anyway. So, I don't see how you shelter this just by putting into a corporation.
Salaries (and bonuses) are considered expenses for the company and will be tax deductible. I believe the example was that you may as a contractor (with your own company) receive a bonus to your corporation and be able to offset taxes for another 11 months compared to having the bonus paid out personally.
Working as a contractor for your wholly-owned company would never pass muster with the IRS. You might be able to avoid audit for a little while, but when this catches up to you it will be a huge mess. They would recast the transactions (they can do this) and you'd end up owing a ton of tax and penalties.
Source: I'm a (former) tax lawyer.
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#83"Taxing investors less is really not what the U.S. needs now,” Saez said. “Instead, we should focus on trying to rebuild middle-class wealth” by encouraging families to save for retirement and pay down mortgages." How do you encourage families to save for retirement? isn't a lower tax rate on investment income a way to do that?
But how do you save for retirement when most of your income goes to expenses? It's not the tax rate on investment that keeps the middle class from investing - it's a lack of funds.
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#84Earlier quoted context omitted.
the corporation also pays taxes on the income before distributing it to you.
Not if you're Apple, et al. https://www.nytimes.com/2016/09/01/business/yesterday-outrag...
Thats because US corporate tax rates are ridiculous and so big corp plays games. Small corp of course are the real victims because they can't afford the army of lawyers and accountants to manage all the complex tax avoidance schemes so they get stuck with some of the highest corporate tax rates in the world.
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#85The biggest lie is this nonsense about "double taxation," ie taxing money that's already been taxed is somehow unfair. So stupid. Capital gains tax shouldn't exist. It should all be one income tax. You can carve out discounts or exemptions for things like sale of PPOR, sale of family business up to a certain point, if you want.
I don't see it that way. When you invest you risk the capital. You might get a return, you might not and therefore the taxation rules should reflect that. The situation as a worker is different. The only risk you take is that you might select a bad company.
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Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#86> Americans in the top 1 percent, and especially the top 0.1 percent, have seen their wealth and income multiply in recent decades as the rest of the country’s share of the economic pie shrank. Since 2000, a recent study found, the top 1 percent have made those gains almost entirely on income from capital, especially corporate stock—not on labor income. One reason may be the financial options of the wealthy: Business…
This is very true. The hard part is we need corporations to create jobs, provide housing and finance company growth. You get what you reward and optimize for. The problem is that we aren't optimizing for the right things. I think we need to drop things such as "like kind exchange" and find new ways for people to use their retirement to start business but with tax forgiveness if it fails that could be used to refund retirement.
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#87Earlier quoted context omitted.
Salaries (and bonuses) are considered expenses for the company and will be tax deductible. I believe the example was that you may as a contractor (with your own company) receive a bonus to your corporation and be able to offset taxes for another 11 months compared to having the bonus paid out personally.
Working as a contractor for your wholly-owned company would never pass muster with the IRS. You might be able to avoid audit for a little while, but when this catches up to you it will be a huge mess. They would recast the transactions (they can do this) and you'd end up owing a ton of tax and penalties. Source: I'm a (former) tax lawyer.
So you're not allowed to be self-employed by a corporation that you own yourself in the US? I thought this was pretty normal practice for contractors, especially in IT.
I own my own company where I do contracting work for clients and the income goes to the company. I might have misunderstood or phrased myself badly above.
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#88Earlier quoted context omitted.
it's not just capitalists who get a lower tax on investment income - it's everyone.
It's a little skewed towards wealthier people, don't you think?
Think of it this way. If taxes on investment income are raised, those who aren't wealthy will have an even harder time catching up to those who are
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#89If capital gains taxes are raised, then someone who invests outside of a 401k or IRA gets double screwed.
Where does the double come from? Each dollar only gets taxed once... only the profit gets taxed when investing, not the principal, right?
If you make capital gains tax the same as income tax, then you're making the situation worse for people who invest their actual income over trust fund babies, not better.
It places another barrier on hard working people trying to move from middle to upper-middle or upper class status.
Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
#90Earlier quoted context omitted.
That's not true. Actual poor people pay very little, if any, income tax. As the article pointed out, this is most damaging to the upper-middle class.
They would benefit from a funded government. Schools and other public services cost money.
Schools in the US are funded at the local county/township/municipal level, typically by property taxes or sales taxes, though it varies from state to state. Nothing really to do with income taxes, apart from the occasional grant.