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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

#241

Post by maxxxxx »

vasilipupkin wrote: post #132
maxxxxx wrote: post #118

Earlier quoted context omitted.

And they would have had much more money to invest if their income tax had been lower. You don't seem to want to understand my point: Low taxes for investment benefits wealthy people disproportionately. Yes, lower income also get some benefit but the vast majority goes to the wealthy. Same for all the Republic "tax reform" proposals: A little tax cut for small incomes, large tax cut for high incomes.

it's a zero sum view of the world that is not correct. You could be lower income when you are 30 and wealthy when you are 65. So it's a lot of the same people that benefit. But more importantly, you are not considering the benefit of higher investment that the wealthy make because their investment taxes are lower. Higher investment leads to more economic activity and more jobs. In fact, the whole world has moved over…

Most people aren't wealthy at 65. Some do, but that's an exception. You seem to live in a different world than I do.

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

#242

Post by AnthonyMouse »

JamesBarney wrote: post #230
SilasX wrote: post #211

Earlier quoted context omitted.

>That's the nominal corporate tax rate not the effective tax rate which is closer to 18.6%. That's with journalist accounting where they reject valid expenses to "prove" that the tax rate is lower. >Also you're dividing by 200 when you made 250. No -- the investment paid for itself (the 100) then earned 200 (the amount above what I invested), then paid 50 out of that as a dividend. It looks strange because it doesn't…

Oh whoops I messed up with the 250. You're right it should have been 200. The 18.6 number doesn't come from journalists though but from the CBO. And these numbers are in line with similar studies by other entities. I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters.

> I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters.

If you're a retailer and you buy 1000 widgets at $9 and sell them at $10, then pay $350 in income tax, is your effective tax rate 35% or 3.5%? Can you see the problem if the government demanded 35% of total revenue instead of total profit?

What you're no doubt complaining about is the fact that many of the deductions can be gamed. But that doesn't mean you can discount the legitimate ones.

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

#243

Post by _m8fo »

vasilipupkin wrote: post #236
_m8fo wrote: post #234

Earlier quoted context omitted.

You have to pay depreciation recapture tax whether or not you actually depreciate your house[1]. Not depreciating a rental property is just stupid. [0] https://www.thebalance.com/depreciation-recapture-3192979 [1] Internal Revenue Code section 1250(b)(3)

I agree, I am just saying, depreciation is not a free pass, since when you sell, you have to pay the tax.

True, but you'd have to pay tax either way (e.g. don't have a rental and pay capital gains, though this is minimized if you're a first time homeowner), is what I'm saying. Though, the cool thing is that if your house is a rental (as opposed to residential) you can actually offset depreciation recapture by passive loss throughout the time the property was a rental. Often this completely negates the tax.

Man... too many benefits are given to those who own property.

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

#244

Post by rhino369 »

aylmao wrote: post #146
rhino369 wrote: post #125

Earlier quoted context omitted.

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.

There was a ton of risk (they lost their pants) but they just didn't recognize it.

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

#245

Post by vasilipupkin »

_m8fo wrote: post #243
vasilipupkin wrote: post #236

Earlier quoted context omitted.

I agree, I am just saying, depreciation is not a free pass, since when you sell, you have to pay the tax.

True, but you'd have to pay tax either way (e.g. don't have a rental and pay capital gains, though this is minimized if you're a first time homeowner), is what I'm saying. Though, the cool thing is that if your house is a rental (as opposed to residential) you can actually offset depreciation recapture by passive loss throughout the time the property was a rental. Often this completely negates the tax. Man... too man…

doesn't passive loss lower your tax basis? so, no, I don't think it negates the tax.

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

#246

Post by vasilipupkin »

maxxxxx wrote: post #241
vasilipupkin wrote: post #132

Earlier quoted context omitted.

it's a zero sum view of the world that is not correct. You could be lower income when you are 30 and wealthy when you are 65. So it's a lot of the same people that benefit. But more importantly, you are not considering the benefit of higher investment that the wealthy make because their investment taxes are lower. Higher investment leads to more economic activity and more jobs. In fact, the whole world has moved over…

Most people aren't wealthy at 65. Some do, but that's an exception. You seem to live in a different world than I do.

Average net worth of a 65 year old is over half a million in the US.

most 65 year olds who are wealthy at 65, weren't at 30. Just pointing out that if you support a policy because you don't think it will affect you, it very well might later on. But that's an aside point, not the main point.

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

#247

Post by jgalt212 »

vasilipupkin wrote: post #103
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...

If Apple pays a dividend, it has to pay taxes on it first. You are confusing that with their overall tax rate. It's low because they have a pile of cash that they aren't paying out

It's in good part because of that cash pile (now above $250B) that Apple stock price is so high. And this post is about capital gains being taxed lower than income.

Time Cook pays himself in options, which influenced by untaxed cash hoard.

https://www.cnbc.com/2017/05/02/apples-cash-hoard-swells-to-...

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

#248

Post by IncRnd »

aaronblohowiak wrote: post #54
danudey wrote: post #37

Earlier quoted context omitted.

As someone who works at a startup and has interacted with many others, there is some merit to the claims. I agree that these loopholes should be closed and the tax system reformed, but I think we should be careful to do it in such a way that doesn't negatively affect e.g. companies like the one I work for, which went from three people to 70 and millions in revenue in just a few years. Especially as Vancouver is tryin…

Since you pay taxes on profits and not revenue how would they impede growth? Money reinvested is tax free.

Money is reinvested tax free for a c corp. That is not always true.

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

#249

Post by abhinavkulkarni »

vasilipupkin wrote: post #222
_m8fo wrote: post #167

One thing a middle class friend of mine does is the following: 1. Buy house 2. Rent out rooms 3. Deduct all expenses that you'd have to pay anyway, utilities, internet, etc. as "business expenses". 4. Depreciate house 5. Renovate the house and depreciate the new fixtures/additions/etc. 6. Reappraise the house after a certain time and refinance. 7. Take money out after refinancing and buy more property. Go back to (1)…

when you sell those properties, you still have to pay all the taxes. Depreciating doesn't save you from having to pay tax, it just defers the tax liability to the future.

Not if you do a 1031 exchange. In that case, you never pay taxes on the depreciation.

It just basically becomes a snowball, you keep on upgrading properties.

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

#250

Post by JamesBarney »

AnthonyMouse wrote: post #242
JamesBarney wrote: post #230

Earlier quoted context omitted.

Oh whoops I messed up with the 250. You're right it should have been 200. The 18.6 number doesn't come from journalists though but from the CBO. And these numbers are in line with similar studies by other entities. I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters.

> I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters. If you're a retailer and you buy 1000 widgets at $9 and sell them at $10, then pay $350 in income tax, is your effective tax rate 35% or 3.5%? Can you see the problem if the government demanded 35% of total revenue instead of total profit? What you're no doubt complaining about is the fact th…

A more apt analogy is imagine you are selling 1000 widgets @ $10 that you bought for $9 in two different countries.

One country taxes you 20% but you can't mark down the depreciation of the building you're using so you're taxed $200 of your $1000.

The other country taxes you 30% but you get to mark down the $500 depreciation of the building you're using as an expense so instead you record $500 profit. Which means you're taxed $150.

You can see how even though the statutory tax rate is higher in the first country the effective tax rate is lower in the second.

Different tax jurisdictions have different allowable expenses and deductions, which mean your recorded profit can be different between them. The U.S. has an especially high statutory rate, but also allows for many more deductions and expenses than other countries. The effective tax is how you take into account these differences in deductions and expenses between countries, and the U.S. has one that is in the middle of the pack.

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