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Wealthy investors do not pay anything close to 47.3% on their capital gains. Looking at the statutory rates is ridiculous. It's not at all true that "before th
by millstone 9y ago
Wealthy investors do not pay anything close to 47.3% on their capital gains. Looking at the statutory rates is ridiculous.
It's not at all true that "before the capital can pay out anything, the investment must pay taxes on profits." Familiar examples are commodities, Bitcoin, REITs, Amazon in the 90s, carried interest. Hell, I have a friend who makes a living buying stuff at flea markets and reselling stuff on eBay - that's capital gains.
But below that there's a whole industry devoted to transforming ordinary income into capital gains, like the Ernst & Young Contingent Deferred Swap (which they landed in hot water for). This is the sort of malinvestment that differential taxation encourages.
- candiodari 9y agoYes, but let's take the path of income, if you're an investor in a company. So company does work, makes gizmo, whatever, and gets out of this x, and makes costs of y. So the basis of the income of the investor is x-y, let's call that z. Ok. Most, but not all, companies would pay VAT on z. 10% in the US, 20% in Europe. That reduces the income from z to, let's call it 85% z. Then there's corporate tax. 35%. That makes it 55.25% z. The result of this is then used for dividends, which are then taxed at 15%. That makes it 46.9% z. So there's a tax rate for these investments of somewhere near 53% or so, and I bet it'll be more in practice. Also, the odds of getting an IRS audit if you have a company go up 10-fold. So the base taxes on corporate profits are higher than income taxes, no ? What am I doing wrong.