Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

bloomberg.com

Post reply on HN
Print view View original

291–300 of 323 posts

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

#291

Post by JamesBarney »

SilasX wrote: post #211
JamesBarney wrote: post #192

Earlier quoted context omitted.

That's the nominal corporate tax rate not the effective tax rate which is closer to 18.6%. Also you're dividing by 200 when you made 250. My calculation with those two corrections give 27.6% which is lower 13% 200 18.6% + 200 (1-18.6%) 15% + 50 15% 37.2 + 24.42 + 7.5 = 69.12 / 250 = 27.6% Marginal Tax rate for 38k-90k = 40.8% 90k-110k = 43.8% 110k - 190k - 28% 190k- 420k - 33%

>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…

Silasx do you think it would be better if they taxed capital gains as income and dropped the corporate tax rate?

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

#292

Post by dogruck »

belovedeagle wrote: post #285
URSpider94 wrote: post #176

Earlier quoted context omitted.

If you think about it, the poorest 10 percent of society consume 100% (or more) of their income, and would pay tax on all of it. The wealthiest 1 percent might only consume 20% of their income, and would therefore be taxed at a much lower rate vs. their income.

And? This is only "unfair" if you assume that people should be taxed as a percentage of their income, but by moving to consumption taxes we discard that assumption.

Also assumes that we would heavily tax the consumption of basic goods, like groceries.

More likely, we would heavily tax goods that poor people cannot afford. Things like dining out, travel, fashion, electronics, cars, and housing in excess of basic sq footage.

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

#293

Post by AnthonyMouse »

JamesBarney wrote: post #290
AnthonyMouse wrote: post #282

Earlier quoted context omitted.

The problem with considering things that way is that then you can't compare countries unless they have identical economies. Suppose two countries have exactly the same tax law. One of them is full of online retailers and the other is full of brick and mortar retailers. Maybe the second country has an oppressive package delivery monopoly. The brick and mortar retailers charge higher prices and have higher expenses (mo…

Corporations don't care what the nominal tax rate is, they just care how big their tax bill will be if they incorporate in different jurisdictions. They care about the average and the effective. They care about the average for long term investments and the marginal-effective rate expansions of projects in countries they already operate in. And while the U.S. statutory rate is highest in the developed world by a good…

You're still ignoring the fact that the effective rate depends on the company type. The US is a great market for international companies because they can hire educated US workers to design their products and then manufacture elsewhere and sell those products to US consumers, in a way that most of the profits go to offshore subsidiaries. And so we have a lot of those companies here and it brings down the average.

But the US is quite horrible for small and medium sized companies who actually do pay the high nominal rates because they have no foreign subsidiaries to park profits in.

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

#294

Post by mrguyorama »

fortythirteen wrote: post #100
taeric wrote: post #24

Earlier quoted context omitted.

They would benefit from a funded government. Schools and other public services cost money.

Our government is more funded than any other government on the face of the planet. It's that they're unbelievably terrible at prioritizing and budgeting.

Better funded per capita? Scaled by GDP? By square mile? You can't just throw a claim out there and provide no details

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

#295

Post by mrguyorama »

Shikadi wrote: post #278
almonj wrote: post #189

Any person or group that manages to avoid paying taxes should be celebrated. The solution to this "problem" should not be that the wealthy pay more taxes, but that nobody should have to pay taxes since it is blatant theft that funds incompetent and evil people. Nothing that the government does is good. All money that goes to the government is either wasted or spent in ways that make society objectively worse. All fun…

Is this satire?

Whether or not this specific example is, I know people who legitimately believe this.

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

#296

Post by JamesBarney »

JamesBarney wrote: post #290
AnthonyMouse wrote: post #282

Earlier quoted context omitted.

The problem with considering things that way is that then you can't compare countries unless they have identical economies. Suppose two countries have exactly the same tax law. One of them is full of online retailers and the other is full of brick and mortar retailers. Maybe the second country has an oppressive package delivery monopoly. The brick and mortar retailers charge higher prices and have higher expenses (mo…

Corporations don't care what the nominal tax rate is, they just care how big their tax bill will be if they incorporate in different jurisdictions. They care about the average and the effective. They care about the average for long term investments and the marginal-effective rate expansions of projects in countries they already operate in. And while the U.S. statutory rate is highest in the developed world by a good…

Most small to medium corporations are organized as pass through entities so they don't have to pay the corporate tax rate.

Also parking profits in different companies doesn't affect the average or marginal effective tax rates because effective and average tax rates are only computed using the profit. And parking cash in offshore subsidiaries doesn't get recorded as profit for the U.S. corporation.

You've argued that effective/average rates depend on the type company. But the amount you pay in taxes depends on what type of company too. So this is a feature not a bug. For instance how many buildings do you own, how much debt you have, how much and what types of equipment do you own. All of these things affect how much you pay in taxes so of course they affect average and effect tax rates but not nominal rates.

My point is corporations care more about average and effective tax rates because they are more representative of what they will pay than nominal tax rates.

Here is the paper which lists the methodology the CBO used. https://www.cbo.gov/system/files/115th-congress-2017-2018/re...

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

#297

Post by rat_1234 »

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.

Ok yes that's definitely a fair point. To be clear I like the idea of the tax code being simpler and rates lower since it unlocks more NPV positive projects by removing an important cost.

But I do think that's a different argument by a few degrees than the idea that capital gains taxes should be lower to somehow compensate investors for their risk.

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

#298

Post by baursak »

dogruck wrote: post #288
baursak wrote: post #281

Earlier quoted context omitted.

I guess it is. Haven't read Piketty, but from hearsay I thought he argues for wealth tax too.

Piketty's writing doesn't apply to the US. His work applies to Europe, where legacy far outweighs entrepreneurship.

And yet it's the US where wealth inequality is higher.

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

#299

Post by AnthonyMouse »

JamesBarney wrote: post #296
JamesBarney wrote: post #290

Earlier quoted context omitted.

Corporations don't care what the nominal tax rate is, they just care how big their tax bill will be if they incorporate in different jurisdictions. They care about the average and the effective. They care about the average for long term investments and the marginal-effective rate expansions of projects in countries they already operate in. And while the U.S. statutory rate is highest in the developed world by a good…

Most small to medium corporations are organized as pass through entities so they don't have to pay the corporate tax rate. Also parking profits in different companies doesn't affect the average or marginal effective tax rates because effective and average tax rates are only computed using the profit. And parking cash in offshore subsidiaries doesn't get recorded as profit for the U.S. corporation. You've argued that…

> Most small to medium corporations are organized as pass through entities so they don't have to pay the corporate tax rate.

In which case they can't defer paying personal income tax to much the same effect.

> Also parking profits in different companies doesn't affect the average or marginal effective tax rates because effective and average tax rates are only computed using the profit.

They reduce their profits in the higher tax jurisdiction by paying more for products or services from a subsidiary in a lower tax jurisdiction, which lowers their effective tax rate because the cost paid to the foreign subsidiary is a deductible expense which reduces their tax burden.

> You've argued that effective/average rates depend on the type company. But the amount you pay in taxes depends on what type of company too. So this is a feature not a bug.

It is a bug if you are trying to compare effective tax rates between countries that have different types of companies, because you end up comparing company types instead of tax codes.

> My point is corporations care more about average and effective tax rates because they are more representative of what they will pay than nominal tax rates.

They obviously care about their own effective tax rate, but that may have little or nothing to do with what companies in other lines of business that represent the country's average are doing.

Moreover, they care about all the details of the tax code, and make decisions based on it. High property taxes cause companies to avoid/minimize owning real property, high income/profit taxes cause companies to avoid reporting profits in that country, high consumption taxes cause companies to conserve resources or acquire them offshore, etc.

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

#300

Post by ReallyAnonymous »

mi100hael wrote: post #219
chrismealy wrote: post #47

If your only income is qualified dividends you can make about $90,000/year and pay zero taxes.

If you're making $90k a year in qualified dividends, you're almost guaranteed to be pulling a good chunk of change in other forms of income as well.

My parents saved their whole lives and now make about $100,000 / year in qualified dividends - They pay about 6K in federal taxes with all that income.

My dad bought pcg_pe for $12 / share when they went into bankruptcy protection bc Enron/etc. When they came out of bankruptcy they had to back pay him all the missed dividends and now continue to pay $1.75/share/year. For his cost basis, its 15% return yearly. Not too shabby.

Post reply on HN