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We are publishing the tax secrets of the .001%

propublica.org

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Re: We are publishing the tax secrets of the .001%

#231

Post by cycomanic »

microdrum wrote: post #191
whiddershins wrote: post #92

Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time. The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value. I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.

I agree. As someone from a poor family, never received inheritance of any kind, and now (40 years old) makes +/- $1M per year, I climbed through every 'tax bracket'. The income tax system is absolutely designed to make it very hard to move through working class into middle class, and then from middle class to upper middle class. Once you have escape velocity, you've got room to move with debt facilities and other opt…

That you consider yourself upper middle class with an income of 1M a year already says a lot about how skewed your view is (not surprising there was some article on HN recently about research showing that the rich and the poor consider themselves middle class both). Sure you are not a billionaire but you are not middle class anymore, you earn 30 times the median income in the US. Now comparing yourself with the superrich might make you think you're not that rich, but you are.

Re: We are publishing the tax secrets of the .001%

#232

Post by omgwtfbbq »

microdrum wrote: post #191
whiddershins wrote: post #92

Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time. The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value. I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.

I agree. As someone from a poor family, never received inheritance of any kind, and now (40 years old) makes +/- $1M per year, I climbed through every 'tax bracket'. The income tax system is absolutely designed to make it very hard to move through working class into middle class, and then from middle class to upper middle class. Once you have escape velocity, you've got room to move with debt facilities and other opt…

Eat the rich bitch.

Re: We are publishing the tax secrets of the .001%

#233

Post by WalterBright »

dangus wrote: post #156
dhd415 wrote: post #132

Earlier quoted context omitted.

>>A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living. The "in a good year" q…

Of course it does. The working class doesn’t get stock options, vesting cliffs, inheritance, or capital gains! Or much of a savings account or 401k, for that matter. The option to stop working for more than a few weeks or months takes you squarely out of the working class. Basically, what I’m trying to say is that the parent comment to ours is attempting to advocate for taxing just the billionaires and not to tax the…

> The working class doesn’t get stock options, vesting cliffs, inheritance, or capital gains!

robinhood.com would beg to differ. Anyone can invest in the stock market and get capital gains.

Re: We are publishing the tax secrets of the .001%

#234

Post by MR4D »

iso1631 wrote: post #224
twinge wrote: post #145

Earlier quoted context omitted.

Only 55% of Americans own stock: https://news.gallup.com/poll/266807/percentage-americans-own...

most of those will be in retirement plans which I assume aren't taxed?

> which I assume aren't taxed?

It depends on which kind of retirement account. Might be in Roths and Roths-401Ks which are taxed when the money goes in (treated as regular income), or IRAs and regular 401Ks which are taxed as regular income when the money comes out.

Re: We are publishing the tax secrets of the .001%

#235

Post by w4 »

edmundsauto wrote: post #217
HPsquared wrote: post #212

Earlier quoted context omitted.

When a person moves house, the proceeds from the sale of the old house are used to buy the new house. If someone has lived in an area for a long time, wants to move across the street to an otherwise identical house with the same value, why should they be taxed for that move but not for simply living in the first house?

This is exactly what happens. If you buy house #2 within 90 days, you can do a 1031 (I think?) property exchange. Then you don’t pay taxes on the first sale.

1031 exchanges are not available to homeowners, they are exclusively available for investment properties. Homeowners receive a $250k/$500k tax shelter as discussed above.

Re: We are publishing the tax secrets of the .001%

#236

Post by cletus »

whiddershins wrote: post #92

Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time. The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value. I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.

> The worse tax situation is always the person who makes 500k in a good year

What's the problem here? Income tax rates are moderately progressive. They'll pay a higher marginal tax rate and a moderately higher total tax rate in this year. That seems fine to me.

> or sells a house they held for 25 years which went up a bunch in value

This is what I have a problem with. This house has already had plenty of favourable tax treatment, which could include:

- Tax-deductible mortgage interest

- Gains on that property deferred for up to 25 years. To give you a comparison, zero coupon bonds don't get this favourable tax treatment;

- Possibly capped or even frozen property tax increases;

- Long-term capital gains are generally significantly lower than income taxes

Just how much tax subsidies does real estate need?

> I suspect this is a significant factor in social mobility.

Let me give you an example where this is definitely true. In Australia, pretty much every state charges stamp duty on the sale when you purchase property. It's typically in the 2-5% range. There are various exemptions and allowances for first home owners and the like (this varies from state to state).

This was all meant to go away 25 years ago when the Federal government replaced a bunch of taxes with a consumption tax (ie the GST) but it didn't happen, largely because the states were addicted to the income, which became hugely significant as property prices skyrocketed in the early 2000s.

The median price of a house in Sydney is now over A$1m. How do we expect anyone to have any kind of mobility when simply moving may result in a $50-100k+ tax?

Now the US has some of this. For example, to buy my one bedroom apartment in NYC I had to pay a "mansion tax" (that's literally what it's called) but at least it was only 1%.

My point is it could be much, much worse.

Re: We are publishing the tax secrets of the .001%

#237

Post by WalterBright »

bjornsing wrote: post #190

Interesting, but Pro Publica’s calculation of effective tax rate as taxes payed divided by wealth increase is weird. I don’t think there’s a jurisdiction in the world that calculates tax that way, and there are good reasons for that.

ProPublica confuses wealth with income.

If you have $2b in wealth, and lost $1b in bad investments one year, you're still a billionaire, and your tax rate is 0%.

Re: We are publishing the tax secrets of the .001%

#238

Post by hellbannedguy »

MR4D wrote: post #205
Wowfunhappy wrote: post #175

Earlier quoted context omitted.

But the Bay Area's high prices are driven by scarcity + demand, not intrinsic cost. So if everyone had a higher tax burden, I'd expect costs to come down.

Unless a huge earthquake hits it, the Bay area will always be worth more than central Kansas. At a minimum, there is one simple reason for this - the amount of infrastructure investment over the years (power, sewer, roads, etc), of which there is basically none in central Kansas, but loads of in the bay area.

Plus beaches, mountains, culture. (I do like Kansas people better than my neighbors though?)

Re: We are publishing the tax secrets of the .001%

#239

Post by ta1234567890 »

kbelder wrote: post #196
Wowfunhappy wrote: post #172

Earlier quoted context omitted.

I'd love to see some data on how big a deal this really is, because I would normally assume that by the time you've reached the levels of wealth we're talking about, "tax assistance" is a trivial expense.

I think at this level, tax protection isn't 'hiring a decent accountant' or 'donate $10,000 to charity', but instead is 'moving your base of operations off-shore' and things like that. Things you can do with a ten-million dollar income, but not a half-million.

Yes. And the reason for that is the cost of lawyers to setup and run the structure. Lawyers could actually charge less and open access to more people, but then it wouldn’t be as exclusive.

Re: We are publishing the tax secrets of the .001%

#240

Post by sokoloff »

fairity wrote: post #182
jedberg wrote: post #155

Earlier quoted context omitted.

You'd need a crazy high interest rate to account for market volatility. If the bank could make accurate predictions as to the future value of the stock, they would just invest in the stocks. Loans against other assets are much less risky, because they are backed by actual things. If the bank screws up in predicting the future value of a house, they can still own the actual house and land if you default. With stocks i…

Hm, is it possible to define a range for "crazy high interest"? As the debtor, I'd be willing to pay up to the difference in long-term and short-term capital gains (~15%). I guess where I'm going with this is: I don't understand why the average person ever pays short-term capital gains tax.

I pay STCG on option contracts written and on (profitable) short sales (where the holding period is defined to be short-term).

Other positions have a defined thesis and, if that thesis gets invalidated, I close out the position sometimes at a gain. I do try to make most of my gains be LTCG, but trying too hard to optimize capital gains rates can lead to poorer investment decision-making/asset allocation.

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