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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

#141

Post by mrb »

walshemj wrote: post #68
inthewoods wrote: post #31

Earlier quoted context omitted.

Yes and we've seen the outcome - top 1% benefits too much, and results in too much concentration of wealth (along with other structural issues).

If there is no difference between income and capital taxation people wont invest in companies. And companies wont last with out access to capital trust me I have chaired share holder meetings caused by lack of capital

«If there is no difference between income and capital taxation people wont invest in companies.»

Nonsense. What alternatives do people have? Putting money in a lousy US savings account with a 1% annual interest rate? By comparison the US stock market's average annual return has been 7%. Hence even if income tax rate were the same as capital gains tax rate, the stock market would still give you returns 7× higher.

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

#142

Post by aylmao »

autokad wrote: post #95
taeric wrote: post #24

Earlier quoted context omitted.

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…

Claiming it's better to abolish public spending due to inefficiencies is like claiming we should disband all police force due to the terrible incidents that occur against civilians. Should we have everyone fend for themselves because they know what's better? No. People like to screw each other up and prefer to avoid problems that don't concern them.

We should fix the inefficiencies. Individuals have little over-arching notion or interest in what's best for a nation beyond their community or past their lifetimes.

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

#143

Post by gnicholas »

ryanmarsh wrote: post #137
gnicholas wrote: post #82

Earlier quoted context omitted.

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.

That's why you pay yourself a small, but not alarmingly small, salary W2 and take the rest on your K1 or such.

The IRS routinely audits people for not paying themselves a market salary in order to shift income to another category. So in playing this game, you have to factor in the likelihood of audit, cost of defense, and cost of penalties and interest that could be assessed.

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

#144

Post by nemo44x »

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.

Then add a progressive tax to investment income such as dividends, bond interest and proceeds.

I don't know why we have a flat tax on investment income but a progressive tax on labor. The easy, and fair fix, is to progressively tax investment income.

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

#145

Post by PeppermintGrade »

paulpauper wrote: post #39

One of the arguments for low long term capital gains taxes is that investments carry higher risk and volatility than wages. Accumulated wages grow monotonically but investments are inherently volatile and there is always the risk of losing everything

Another argument for low long term capital gain taxes is that the federal reserve (the Fed) can artificially manipulate the inflation rate (say from 1.5% to 4% / year) to increase for example the value of a home and cause everyone to pay higher capital gains without those tax-payers having actually gained any additional purchasing power.

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

#146

Post by aylmao »

rhino369 wrote: post #125
rat_1234 wrote: post #112

Earlier quoted context omitted.

I've heard the former but I have never heard the latter unless it's been one of my friends in PE trying to justify it. It's the investor's job to make sure their investments are producing an adequate risk-adjusted return, not the government's job to help you get there.

Taxes change the expected value of an investment. Thus, it changes the amount of risk v reward. If I have you 51% odds on a coin flip, that's a good bet. But if you only get paid out 60% when you win, it's a bad bet.

What I gather from the 2000 dot-com bubble, the 2008 financial crisis and a slew of startups I've been seeing lately (cue, Juicero) is that _perhaps_ there should be a little more risk to investment. Idk, my own opinion here.

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

#147

Post by e12e »

zamfi wrote: post #135
njarboe wrote: post #122

Here is a question for any tax attorneys out there. Not sure how to find a clear answer to this question but these pages[1][2] seems to suggest that the capital gains tax rate is based on your "Taxable Income". This is shown further down the second page to be "really Regularly Taxed Income minus Adjustments, Deductions, and Exemptions". If your "Taxable Income" is less than 37,950 your long range capital gains tax is…

IANATA, but if you look at the qualified dividends and capital gains tax worksheet [0] on personal income tax form 1040 (that’s the main tax form for individuals), you’ll find that your capital gains tax rate is dependent on your income including capital gains . For the purposes of your example, Larry and Sergei would pay no tax on the first 37,949 of capital gain income (thanks to the $1 salary), but regular capital…

So does that mean that the effective tax-rate on 100k in (only) capital gains is roughly 63% of the nominal capital gains rate? And how would that typically compare to taøotal taxes on, say, 50k income tax and 50k (taxed) capital gains?

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

#148

Post by inthewoods »

theodorton wrote: post #43
inthewoods wrote: post #31

Earlier quoted context omitted.

Yes and we've seen the outcome - top 1% benefits too much, and results in too much concentration of wealth (along with other structural issues).

And the problem with raising taxes on capital gains will be investors moving their holdings to other countries to reduce their taxes. So long as the taxes on capital gains are kept at a comparable rate across countries, this isn't a problem.

I don't think that's a given - there are plenty of countries with lower capital gain taxes, yet we don't see mass money moving to these countries.

Source: https://taxfoundation.org/capital-gains-rate-country-2011-oe...

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

#149

Post by euroclydon »

dogruck wrote: post #32
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.

We should tax consumption, not income.

I don't agree with that at all. Consumption taxes can be quite regressive. I guess you picture the rich guy getting a huge tax bill when he buy's his yacht, but what if he just keeps saving, investing, and then, I don't know, buys a senator?

We should be trying to discourage the accumulation of power as well.

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

#150

Post by inthewoods »

walshemj wrote: post #68
inthewoods wrote: post #31

Earlier quoted context omitted.

Yes and we've seen the outcome - top 1% benefits too much, and results in too much concentration of wealth (along with other structural issues).

If there is no difference between income and capital taxation people wont invest in companies. And companies wont last with out access to capital trust me I have chaired share holder meetings caused by lack of capital

You lost me as soon as you said "trust me."
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