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Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
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Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#12Earlier quoted context omitted.
So, what do you propose to make them pay their fair share?
Their fair share of what ? Income that they haven't actually received?
I think it's reasonably fair to point out that, sure, while these people don't have the extra wealth as income, they did indeed grow wealthier, and significantly so. And generally we tax when things make money.
A couple points about common rebuttals:
"It's not liquid so it's hard for them to pay taxes on it" - we already tax illiquid things like property taxes and when people get income that's not cash, like having debt forgiven or being given a gift of stocks. And people who have debt forgiven or are given stocks as income frequently aren't as likely to have cash to simply pay the taxes when compared to these extremely wealthy owners of capital.
"it might go back down and then they paid taxes on something they couldn't realize" - this applies to property taxes too, fwiw. But also, we deal with similar issues already - if you sell a stock at a loss, you can use it to reduce your taxable income. There's workarounds here if we are at all willing to attempt to tackle this.
And it's worth noting that, sure, this might be taxed when they do eventually sell, but:
1. there is not always a when. You can do lots of interesting things with assets like this, such as borrow against them.
2. money now is worth more than money later. Letting people defer paying taxes on unrealized capital gains is VERY generous tax treatment.
It's also worth noting that this doesn't have to make life hard for John Smith, Dirt Farmer, who owns $5000 of SPY. Just do what we do for other common scenarios like this - for instance, not having to pay capital gains tax on your first $X of cap gains for your primary residence.
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#13FWIW, the only way Pro Publica could derive the 3.4% figure was by pretending that the value of a stock going up is income, and then dividing the amount of tax paid by that amount. Warren Buffett is worth $100B. So if Berkshire Hathaway stock went up 10% in 2022, they'd say Warren Buffett made $10 billion in income, even if he didn't sell a single share. Obviously extremely misleading and if I were more cynical, I'd…
Reading the article, it says that the figures are looking at actual income, not changes in asset prices. It says the low figures come from a) lower tax rates from realized capital gain and b) deductions through charitable donations.
Capital gains in the US are taxed at a maximum rate of 20%[0] for long term holdings, vs income tax rates, which can go up to 37%.
Donations are also something that anyone can use to lower their own taxes, it's line 40 of the 1040 form.
So one can easily change the title to claim that the super wealthy donate more, but I suspect that's not as much of an eye-grabber of a headline.
There may be something to be said about donating to your own non-profits, but that's not what this article is about.
[0] https://www.nerdwallet.com/article/taxes/capital-gains-tax-r...
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#14Earlier quoted context omitted.
So, what do you propose to make them pay their fair share?
Their fair share of what ? Income that they haven't actually received?
I assume those to propose to tax unrealized gains are also going to allow deductions or refunds for unrealized losses, too. Right?
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#15The Guardian reporting misleading headlines…as usual. The claimed 3.4% tax rate comes from calculating how much taxes they paid as a percentage of their net worth increase, not income . You can make a valid argument that the way ultra-wealthy people are taxed isn’t fair and that unrealized stock/other investments appreciation should be regarded as income…but it isn’t as of now, making this headline at least misleadin…
The proposal discussed in TFA was a 20% minimum tax on income and unrealized gains, so it is reasonable that the issue is not framed in terms of simple income.
Not sure how you think this is being misleading.
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#16So 0.001% of Americans pay 3.4% of income taxes? How the fuck is that fair?
3.4% of their income in taxes. Not 3.4% of all income taxes paid in the country.
They paid $13.6 billion from 2014-2018. Total income taxes were about $1.5 trillion per year or about $7.5 trillion over the same timespan, so they paid about 0.18% of total income taxes.
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#17FWIW, the only way Pro Publica could derive the 3.4% figure was by pretending that the value of a stock going up is income, and then dividing the amount of tax paid by that amount. Warren Buffett is worth $100B. So if Berkshire Hathaway stock went up 10% in 2022, they'd say Warren Buffett made $10 billion in income, even if he didn't sell a single share. Obviously extremely misleading and if I were more cynical, I'd…
Reading the article, it says that the figures are looking at actual income, not changes in asset prices. It says the low figures come from a) lower tax rates from realized capital gain and b) deductions through charitable donations. Capital gains in the US are taxed at a maximum rate of 20%[0] for long term holdings, vs income tax rates, which can go up to 37%. Donations are also something that anyone can use to lowe…
There is also tax loss harvesting, paying yourself via loans against assets, and using LLCs to purchase items like houses etc. to avoid taxation.
It doesn't surprise me that billionaires pay substantially lower rates than long-term capital gains would imply they should.
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#18The only thing that upsets be about this everyone should be paying 3.4%. The government wastes nearly everything that is handed to it. The old "oh but what about police and fire" compromises a micron of the what is sent to the government. All of it ends up in the pockets of Senator's friends.
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#19FWIW, the only way Pro Publica could derive the 3.4% figure was by pretending that the value of a stock going up is income, and then dividing the amount of tax paid by that amount. Warren Buffett is worth $100B. So if Berkshire Hathaway stock went up 10% in 2022, they'd say Warren Buffett made $10 billion in income, even if he didn't sell a single share. Obviously extremely misleading and if I were more cynical, I'd…
Reading the article, it says that the figures are looking at actual income, not changes in asset prices. It says the low figures come from a) lower tax rates from realized capital gain and b) deductions through charitable donations. Capital gains in the US are taxed at a maximum rate of 20%[0] for long term holdings, vs income tax rates, which can go up to 37%. Donations are also something that anyone can use to lowe…
"Donations are also something that anyone can use to lower their own taxes"
This is false. It used to be less false, but now is mostly false.
In order to get any tax advantage from donations, you must itemize as all hyper rich do. Full stop. If you take the standard deduction as almost everyone else does (more than 90 %) then you get nothing for your charitable giving.
Note that when the hyper rich do give and get credit it is very often not to organizations that are very "charitable" at all. If you don't believe this to be true simply look up what a how "private foundations" and particularly "donor advised funds" work.
Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals
#20FWIW, the only way Pro Publica could derive the 3.4% figure was by pretending that the value of a stock going up is income, and then dividing the amount of tax paid by that amount. Warren Buffett is worth $100B. So if Berkshire Hathaway stock went up 10% in 2022, they'd say Warren Buffett made $10 billion in income, even if he didn't sell a single share. Obviously extremely misleading and if I were more cynical, I'd…
Reading the article, it says that the figures are looking at actual income, not changes in asset prices. It says the low figures come from a) lower tax rates from realized capital gain and b) deductions through charitable donations. Capital gains in the US are taxed at a maximum rate of 20%[0] for long term holdings, vs income tax rates, which can go up to 37%. Donations are also something that anyone can use to lowe…
> Reading the article, it says that the figures are looking at actual income, not changes in asset prices.
They used actual income... but not for the 3.4% figure that's in the headline. When using actual income (i.e. personal income and cap gains) to calculate tax rate, they ProPublica article said:
> Collectively, the top 400 paid an average tax rate of 22% from 2013 to 2018.
So... where did they get the 3.4% figure that's in the headline? By including unrealized cap gains:
> Then they pay very little in tax when it’s measured against their growing wealth. The top 25 wealthiest Americans got $401 billion richer from 2014 to 2018, but paid just $13.6 billion in federal income taxes, a “true tax rate,” as we called it, of 3.4%.
What's a "true tax rate?", you ask?
> To capture the financial reality of the richest Americans, ProPublica undertook an analysis that has never been done before. We compared how much in taxes the 25 richest Americans paid each year to how much Forbes estimated their wealth grew in that same time period. We’re going to call this their true tax rate.
In other words, ProPublica invented the term 'true tax rate' to represent a fake tax rate that treats unrealized cap gains as income. The Guardian then wrote a headline that conflates the fake tax rate with the real tax rate.
Whenever you find yourself believing something that's not true, be sure to take a hard look at the source who mislead you. You'll find that it was rarely by mistake.