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Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

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Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#91

Post by dasil003 »

princeb wrote: post #42
URSpider94 wrote: post #9

Earlier quoted context omitted.

It's not the progressive tax structure that's the problem, it's the fact that cap gains are taxed at a much lower rate than other forms of income.

capital gains is the leftover of profit after tax. taxing capital gains is taxing profit twice. in my opinion, for a clean treatment of value taxation, either corporate tax or capital gains tax must go.

No it's not, the corporation is taxed once, and the dividend recipient is taxed once. If a corporation is to have rights of personhood it needs to pay taxes as well. Also capital gains can come from many sources that aren't taxable.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#92

Post by jgalt212 »

fooster wrote: post #84
jgalt212 wrote: post #71

Earlier quoted context omitted.

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.

I agree. That is part of the problem. But, I'd argue that even if US Corp rates were much lower (say 15%), Tim Cook, ever the optimizer, would still pursue the 1% rate they currently achieve.

I think rates should be lowered and and tax avoiders/dodgers should not be allowed to bid on govt contracts.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#93

Post by alexlongterm »

vasilipupkin wrote: post #48
theodorton wrote: post #35

Earlier 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.

yes, but if you have your own corporation, unless it's an LLC, then you will have to pay corporate tax on that income in addition to personal income. And if it's an LLC, there is no difference.

^^^ this. In fact in the US the IRS will flag abnormally high salaries for small businesses (millions per individual) if no or very few dividends are paid out because income tax is less favorable to the government in the total amount the IRS receives when looking at multi million dollar salaries. Beyond the first $110kish FICA stops making a dent as social security caps out. I'm sure there are possible loopholes for very wealthy individuals but this article doesn't detail them and I'm not familiar with them either. This is the opposite of other places like Sweden where high income tax and low business taxes make dividends very favorable, and the tax authorities there will question paying dividends at too low of income levels.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#94

Post by gnicholas »

> You owe the IRS about $38,500 more, assuming each of us pays the maximum with no special deductions.

This also assumes the investor has no interest income, which would be unlikely. For a younger person with a big nest egg, this wouldn't be a huge chunk of their assets. But as you age you'd want to shift into less-risky assets, like interest-bearing ones.

Also, investors would probably be diversified into real estate (which generates rental income, which is taxed as ordinary income). There are tricks that can be played in real estate, of course, but there's also lots of ordinary income tax paid.

> I get to skip about $24,000 in payroll taxes that you and your employer must fork over each year.

"Payroll taxes" includes social security, which the worker will collect until he/she dies. It is also payable to the worker's spouse in certain circumstances. But you only get to collect social security to the extent you paid into the system. So if there's an economic downturn, the worker will have social security to fall back on in old age, where the investor will not.

The general point remains, but this is a highly stylized example designed to emphasize (hyperbolize) the author's point.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#95

Post by autokad »

taeric wrote: post #24
fortythirteen wrote: post #14

Earlier 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.

No. No. No. It is really hard to take someones money and claim you can do better with it than they can, especially if that: #1 you do not share their views #2 you have no obligation to spend the money on what you stole it for #3 you have a proven track record for inefficiency

Want to help me out? let me keep my damn money, let me decide what is right for me. you got an agenda? spend your own money toward it.

its also worth noting that almost all school funding does not come from these taxes. if you are so concerned about funding public services, demand Apple pay their taxes. they got 250 billion of the tax evaded stuff.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#96

Post by vasilipupkin »

Chardok wrote: post #75
vasilipupkin wrote: post #40

"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?

FTA “There is little empirical evidence showing that taxing investors less stimulates savings and growth,” said Emmanuel Saez, an economist at the University of California at Berkeley.

Yes. But that's because there is so little data and so many confounding variables There is little empirical evidence for everything in macroeconomics, including for Saez's claims.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#97

Post by matt4077 »

fooster wrote: post #57
etwigg wrote: post #25

Earlier quoted context omitted.

"The only risk you take is that you might select a bad company." - that's the same risk an investor takes no? Except the investor can diversify across many companies, while the employee can rely on only one. Yours seems like an argument for investors to pay a higher rate than an employee, because they can diversify their risk. Personally, I don't think taxes should be based on risk assessment.

If there was no capital gains tax it would almost certainly reduce investment in risky industries. For example, high tech.

The risks should be reflected in the possible return from the investment (pre-tax), and it is. This is most obvious with fixed-income investments (bonds) where the rate is directly derived from the perceived risks.

The justification also breaks down when you recognise that capital gains taxes are the same for investments in any sector: If it's supposed to reward risk-taking, why tax investments in retail or insurance stocks the same as early-stage venture capital?

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#98

Post by wil421 »

jgalt212 wrote: post #46
cgore wrote: post #2

Because politicians sell progressive income taxes as a way to screw the rich, when it actually just screws the upper middle class, since the actual rich don't have jobs to tax the income from.

Amen, brother. This is why I saw Hilary and Obama as a false flag Democrats. Raise the marginal rates and screw the upper middle class (who basically carry this country) and let their billionaire friends keep their loopholes and lower rates on investment income.

Democratic or Republican, no difference at the highest levels. They will always support the people in power which are the 1%.

I've seen the song and dance for a while now and hoped Obama was different. Promise enough to get elected and hope they forget about the promises after.

Trump is literally doing to same thing. NAFTA and NATO are obsolete, oh wait now that I'm in office I didn't mean what I said. They're important.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#99

Post by ckinnan »

theodorton wrote: post #35
vasilipupkin wrote: post #30

Earlier 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.

Corporations have to pay quarterly estimated taxes.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#100

Post by fortythirteen »

taeric wrote: post #24
fortythirteen wrote: post #14

Earlier 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.

Our government is more funded than any other government on the face of the planet. It's that they're unbelievably terrible at prioritizing and budgeting.
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