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>it is usefull to protect billionaires Income taxes aren't on wealth; they're on income. Billionaires usually own most value in stock (and usually in a compan

>it is usefull to protect billionaires Income taxes aren't on wealth; they're on income. Billionaires usually own most value in stock (and usually in a company they own or founded). The majority of the Forbes 400 are there due to founding a company that was found so useful to others, that the owner is worth billions. When they sell ownership they get taxed at very high rates, and this is after their company being taxed (which is simply an income tax on owners, but called corporate tax). If they give the ownership to others (like children), they get taxed.

MuffinFlavored 7y ago
> Income taxes aren't on wealth; they're on income. What about estate taxes? Say a billionaire is holding 3,412,037 shares of SPY. 0 transactions buying or selling for the full fiscal year. Just dividends being paid out reinvesting. What taxes would this person pay?
- ChrisLomont 7y ago
  That person is paying corporate income tax and taxes on dividends. If you own an asset that is constantly paying taxes, you have lost that value to taxation. A stock shareholder owns a portion of the company. A stockholder loses value exactly equal to the amount of taxes the corporation paid. This is why economists have the maxim: "companies don't pay taxes; people pay taxes." This doesn't mean companies don't pay tax; it means every dollar a company pays in tax is a dollar taken from some set of people. Without corporate taxation, the shareholders would own a company which owns more cash. Academic literature has shown a dollar in cash at a company is worth a dollar in market cap, which is priced into stock values. Now, depending on how dividends work, the billionaire likely also paid taxes on those, either at cap gains rates (remember, that income was also already taxed at the corporate level) or at personal income levels, depending on whether the dividends are classified as qualified dividends or non-qualified dividends. Then, when the billionaire dies, the rest gets taxed if he/she passes it own. This rate for a billionaire is currently around 40%, and many states have an inheritance tax on top of that. So the billionaire does and will pay significant amount of taxes over their lifetime.

MuffinFlavored 7y ago

> Income taxes aren't on wealth; they're on income. What about estate taxes? Say a billionaire is holding 3,412,037 shares of SPY. 0 transactions buying or selling for the full fiscal year. Just dividends being paid out reinvesting. What taxes would this person pay?

ChrisLomont 7y ago
That person is paying corporate income tax and taxes on dividends. If you own an asset that is constantly paying taxes, you have lost that value to taxation. A stock shareholder owns a portion of the company. A stockholder loses value exactly equal to the amount of taxes the corporation paid. This is why economists have the maxim: "companies don't pay taxes; people pay taxes." This doesn't mean companies don't pay tax; it means every dollar a company pays in tax is a dollar taken from some set of people. Without corporate taxation, the shareholders would own a company which owns more cash. Academic literature has shown a dollar in cash at a company is worth a dollar in market cap, which is priced into stock values. Now, depending on how dividends work, the billionaire likely also paid taxes on those, either at cap gains rates (remember, that income was also already taxed at the corporate level) or at personal income levels, depending on whether the dividends are classified as qualified dividends or non-qualified dividends. Then, when the billionaire dies, the rest gets taxed if he/she passes it own. This rate for a billionaire is currently around 40%, and many states have an inheritance tax on top of that. So the billionaire does and will pay significant amount of taxes over their lifetime.