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Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

theguardian.com

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Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#21

Post by missedthecue »

lhorie wrote: post #13
missedthecue wrote: post #2

FWIW, 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…

This is what the article says

"Collectively, the top 400 paid an average tax rate of 22% from 2013 to 2018."

"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%"

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#22

Post by monoprotic »

uberman wrote: post #19
lhorie wrote: post #13

Earlier quoted context omitted.

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…

You're entitled to a deduction of up to $300 (or $600 if married and filing jointly) for charitable donations even if you take the standard deduction.

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#23

Post by missedthecue »

slater wrote: post #3
missedthecue wrote: post #2

FWIW, 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…

So, what do you propose to make them pay their fair share?

The top 1% of earners make 20% of the income but pay 40% of federal income taxes. Can you tell me why that's not fair?

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#24

Post by AnimalMuppet »

plainnoodles wrote: post #12
AnimalMuppet wrote: post #4

Earlier quoted context omitted.

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…

What this does to John Smith, Dirt Farmer, is that his land went up $500/acre, and he's got 1000 acres, and now he's got an "income" of $500,000 this year, which he can't actually get until he sells the land, which he doesn't want to do until he retires. So the options are:

- He sells some of the land to pay the taxes.

- He takes out a loan to pay the taxes.

- We make a special carve-out for people in that situation so that the tax doesn't apply to them.

The third solution seems kind of fake to me. "We don't like the results of this set of rules, so we're going to make exceptions for all the results that we don't like." Maybe it's telling us that the rules aren't all that great?

> money now is worth more than money later. Letting people defer paying taxes on unrealized capital gains is VERY generous tax treatment.

They don't have the money yet. Charging them tax on money they haven't even received yet seems like very ungenerous tax treatment - abusive, even. It only makes sense if you have already defined unrealized capital gains to be income - but that's begging the question.

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#25

Post by belval »

Disregarding the misleading headline, it is overall a tough problem to define if and how to tax wealth. Most people would agree that applying a blanket tax on unrealized gains is problematic (since it would force you to sell to pay for gains), but at the same time most people also agree that having $100B in TSLA/AMZN stocks and borrowing against those assets while paying less taxes than people in the $5M income bracket is also an issue.

This is fun HN bait because we discuss it every few weeks yet I haven't seen any real solution.

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#26

Post by feoren »

exabrial wrote: post #18

The 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.

This is a very myopic view that basically comes down to "I can't immediately think of thousands of different government services that require money, so they therefore don't exist and it all must be wasted."

Yes, there is some corruption and waste, especially in the DoD. It's a non-trivial percentage, and too high. I too wish we gave less money to the defense industry. But when a suspension bridge needs substructure repairs for $400 million, and that contract might go to a Senator's buddy's company, it represents corruption, but not necessarily a huge amount of waste. It's only waste if the company is actually significantly worse at delivering. There are some bad incentives, but mostly everyone is still incentivized to do the job right. I'm hesitant to estimate a percentage on the amount of taxes that are outright wasted due to corruption, but I have serious doubts it's higher than 10%. Yes, that's WAY TOO HIGH, but it's not close to "all of it minus a micron", like you say. Nor is it nearly enough for 3.4% to actually sustain everything; nor is 0% waste possible (but we should still try!).

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#27

Post by Manuel_D »

Is this just income taxes? Excluding capital gains and estate taxes (when they pass)? If so then this is not surprising. Most of the wealthiest people derive the vast majority of their wealth from capital gains, not income. And it looks like that's what's being described by the article:

> The difference in tax rates between the wealthiest Americans and the average worker comes down to two critical factors, according to the investigation: first, the wealthy have their income taxed at a lower rate because much of their wealth is accumulated through investments, like stocks; and second, the wealthy are able to use large charitable donations to get huge deductions.

TL;DR: Capital gains taxes are distinct from income taxes. Journalist courts clicks by conflating the two.

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#28

Post by rufus_foreman »

TheCoelacanth wrote: post #16
rufus_foreman wrote: post #10

So 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.

So 0.001% of people paid 0.18% of income taxes?

How the fuck is that fair?

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#29

Post by silksowed »

plainnoodles wrote: post #12
AnimalMuppet wrote: post #4

Earlier quoted context omitted.

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…

big fan of this idea. I would be more sympathetic to not tax increase of stock values if it was not the largest driver of increased wealth. W-2 for the ultra wealthy is such a small chunk of their net worth's. houses and stock portfolio's are both assets, why is one taxed and the other not

Re: Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

#30

Post by hedora »

missedthecue wrote: post #23
slater wrote: post #3

Earlier quoted context omitted.

So, what do you propose to make them pay their fair share?

The top 1% of earners make 20% of the income but pay 40% of federal income taxes. Can you tell me why that's not fair?

The issue isn't with the top 1%. It's the top 0.01%, which make a big chunk of that 20% and pay almost nothing in tax.
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