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Author asserts that the poor pay less in taxes after counting stuff that's not taxes. Meanwhile, Warren Buffet pays his taxes at the same effective rate as his

Author asserts that the poor pay less in taxes after counting stuff that's not taxes. Meanwhile, Warren Buffet pays his taxes at the same effective rate as his secretary.

rmason 7y ago
This is a misleading statement. She's paid a salary while he's living off capital gains and they're taxed at separate rates. https://www.entrepreneur.com/article/338189 https://www.entrepreneur.com/article/338189
- sidlls 7y ago
  They're taxed at separate rates, and the net effect is that his tax rate in income from whatever source is the same as his secretary's. Distinguishing by source is more misleading, in my opinion.
  - sieabahlpark 7y ago
    No it's not, to even get capital gains you must have kept that money in the market for a year, if you pull out early it's taxed as income. Nothing about it is misleading.
    - toomuchtodo 7y ago
      "Why not tax it all as income?" is the point folks are trying to make. Treating "Real Work" > "Capital Work", because income is income. You might argue, "That'll dissuade investment!", but when $17 trillion in negative yield bonds [1] (a third of the bond market) are communicating, "Hey there, not a lot of investment dollars needed kthx", that argument falls flat. Your investment dollars aren't needed. There is nowhere productive for them to go. So why have public policy treat their income differently? [1] https://www.bloomberg.com/graphics/negative-yield-bonds/ https://www.bloomberg.com/graphics/negative-yield-bonds/
      - fyz 7y ago
        This is the right take. When you get to a certain level of income/wealth, it's all about figuring out ways to: 1. shift earned income into capital gains (e.g., private equity carry, small business earnings into equity vs salary) 2. defer taxes (401k, mortgage deductions, 1031 exchanges on real estate, etc) 3. avoid taxes (shift jurisdictions) 4. get accountants, lawyers, and lobbyists to figure out additional ways to lower tax burden I'm not saying the government is efficient or that 100-200k incomes should be taxed more, I'm just saying that's the game as it stands. Tax expenditures are the ways the government gives (rebates?) money back, mostly to the wealthy.
      - clairity 7y ago
        even without the bond market signals, the “dissuade investment” argument for the capital gains rate fails miserably. capital wants to be invested if there’s even one dollar to be gained over any alternatives. and no, most rich americans won’t move to vietnam or whereever just to avoid those taxes.
      - nightski 7y ago
        My argument would not be that it would dissuade investment, but rather limit the ability to achieve class mobility in the United States. It's near impossible to move up an economic class without investment. You can only get so far by saving alone (and it really isn't that far if you are fighting inflation without any return on that cash). But now if you tax the hell out of that vehicle, then it limits the ability to move oneself up even further. Everyone talks like it is only the rich that invest. This just isn't true.
        toomuchtodo 7y ago
        The most likely way one becomes wealthy in America (class mobility) is through starting a business [1]. Treating investment income as income does not change that, when existing legislation promotes reinvesting profits from a business back into a business. [1] https://whorulesamerica.ucsc.edu/power/wealth.html https://whorulesamerica.ucsc.edu/power/wealth.html
        deleted 7y ago
- danhak 7y ago
  That is exactly the point. The tax code privileges sources of income that prevail among those who already possess wealth. That is the definition of regressive.
  - dahdum 7y ago
    Capital gains are lower because because corporations pay income tax on their earnings already.
    - ceejayoz 7y ago
      Salaries aren't paid out of earnings?
    - cma 7y ago
      Not exactly, capital gains also cover things like passively growing trees as a land barron.
    - kingraoul3 7y ago
      I pay taxes on my income and again at the point of sale.
      - basch 7y ago
        and you pay capital gains if something you owns appreciates and you sell it.
    - gamblor956 7y ago
      That is why dividends are subject to special rates, not capital gains.
    - Catsandkites 7y ago
      Is that a good or fair argument though? I get paid and pay 20% then 40% on the rest (banded)... Then as soon as I buy practically anything I'm taxed another 20% on top of that. A corporation pays 19% and then those profiting from that owe 7/32/38% (depending on their total income).
- 1ris 7y ago
  That's absolutely not misleading, but point on. As you said: She's paid a salary while he's living off capital gains and they're taxed at separate rates.
- pbreit 7y ago
  And THAT is precisely why the wealthy pay lower taxes!
darawk 7y ago
> Author asserts that the poor pay less in taxes after counting stuff that's not taxes. Except that his statement was already true before accounting for those things. > According to the nonpartisan Congressional Budget Office, the lowest-income 20% of households have an average federal tax rate of about 2%. Those in the middle 20% pay 14% of their income in federal taxes. Higher-income households face higher rates. The top 20% pay a 27% federal rate. And the federal tax rate for the top 1% is 33%. These data are for 2016, the most recent year available.
- Retric 7y ago
  Ignoring Social Security, Medicare, State, and Local Taxes etc makes for meaningless comparisons.
  - darawk 7y ago
    Two paragraphs later: > When assessing the total tax burden facing different U.S. households, looking at federal, state and local taxes is instructive. The federal system is more progressive than state and local systems, but combining them — as the Institute on Taxation and Economic Policy has done — doesn’t change the story: the higher your income, the greater your tax burden. Harvard economist and top Obama adviser Jason Furman confirms this by combining federal taxes and transfers with state and local taxes.
    - Retric 7y ago
      Hold up, I was just looking at that CBO report you linked: “Income before transfers and taxes consists of market income plus social insurance benefits (including benefits from Social Security, Medicare, unemployment insurance, and workers’ compensation). Means-tested transfers are cash payments and in-kind services provided through federal, state, and local government assistance programs.” That’s exactly the arbitrary definitions used to distort what’s going on. I am not saying it’s inaccurate data based on defines used, but all choices are subject to spin. Choices like using 6.2% or 12.4% for Social Security tax rates make a huge difference, and really should be included in these discussions. PS: Progressive also implies the top 0.1%, and 0.0001% also have higher effective tax rates not just an arbitrary top bucket of say 1%. Using words like ‘top’ is again arbitrary. PPS: Anyway, do you have a link for that report your referencing?
AdrianB1 7y ago
Please help me understand the subtleties of your comment: he is paying millions in taxes, she is paying thousands and the problem is he is not paying enough?
- ceejayoz 7y ago
  How far does that argument go? If Buffett's secretary pays $20k in taxes, and Buffett pays $21k, is that fair because he's still paying more? How much lower can his tax rate go versus his secretary's rate before it's unacceptable?
  - umvi 7y ago
    Why isn't it fair that they pay the same tax rate? That's called a flat tax rate and I'm actually in favor of it because of its simplicity. I think all income, regardless of source, should be taxed at a flat rate. It's how it works for tithing in a lot of churches, and it's a very simple but effective system.
    - Frondo 7y ago
      Are the societal effects of a flat tax worth the simplicity? If you optimize for simplicity, but at some greater cost to having a society that functions for all its citizens and residents, is it worth focusing on simplicity?
    - ceejayoz 7y ago
      > Why isn't it fair that they pay the same tax rate? As Buffett points out, they don't. Buffett's is lower, because capital gains are privileged with a substantially lower rate, because the mega-wealthy largely benefit there.
      - umvi 7y ago
        Ah, I misunderstood. I think it's a little bogus that the income source determines the tax rate, because then the rich just manipulate their income to use the source with the lowest rates which is a luxury the poor can't afford.

Author asserts that the poor pay less in taxes after counting stuff that's not taxes. Meanwhile, Warren Buffet pays his taxes at the same effective rate as his secretary.

rmason 7y ago

This is a misleading statement. She's paid a salary while he's living off capital gains and they're taxed at separate rates. https://www.entrepreneur.com/article/338189 https://www.entrepreneur.com/article/338189

sidlls 7y ago
They're taxed at separate rates, and the net effect is that his tax rate in income from whatever source is the same as his secretary's. Distinguishing by source is more misleading, in my opinion.
- sieabahlpark 7y ago
  No it's not, to even get capital gains you must have kept that money in the market for a year, if you pull out early it's taxed as income. Nothing about it is misleading.
  - toomuchtodo 7y ago
    "Why not tax it all as income?" is the point folks are trying to make. Treating "Real Work" > "Capital Work", because income is income. You might argue, "That'll dissuade investment!", but when $17 trillion in negative yield bonds [1] (a third of the bond market) are communicating, "Hey there, not a lot of investment dollars needed kthx", that argument falls flat. Your investment dollars aren't needed. There is nowhere productive for them to go. So why have public policy treat their income differently? [1] https://www.bloomberg.com/graphics/negative-yield-bonds/ https://www.bloomberg.com/graphics/negative-yield-bonds/
    - fyz 7y ago
      This is the right take. When you get to a certain level of income/wealth, it's all about figuring out ways to: 1. shift earned income into capital gains (e.g., private equity carry, small business earnings into equity vs salary) 2. defer taxes (401k, mortgage deductions, 1031 exchanges on real estate, etc) 3. avoid taxes (shift jurisdictions) 4. get accountants, lawyers, and lobbyists to figure out additional ways to lower tax burden I'm not saying the government is efficient or that 100-200k incomes should be taxed more, I'm just saying that's the game as it stands. Tax expenditures are the ways the government gives (rebates?) money back, mostly to the wealthy.
    - clairity 7y ago
      even without the bond market signals, the “dissuade investment” argument for the capital gains rate fails miserably. capital wants to be invested if there’s even one dollar to be gained over any alternatives. and no, most rich americans won’t move to vietnam or whereever just to avoid those taxes.
    - nightski 7y ago
      My argument would not be that it would dissuade investment, but rather limit the ability to achieve class mobility in the United States. It's near impossible to move up an economic class without investment. You can only get so far by saving alone (and it really isn't that far if you are fighting inflation without any return on that cash). But now if you tax the hell out of that vehicle, then it limits the ability to move oneself up even further. Everyone talks like it is only the rich that invest. This just isn't true.
      - toomuchtodo 7y ago
        The most likely way one becomes wealthy in America (class mobility) is through starting a business [1]. Treating investment income as income does not change that, when existing legislation promotes reinvesting profits from a business back into a business. [1] https://whorulesamerica.ucsc.edu/power/wealth.html https://whorulesamerica.ucsc.edu/power/wealth.html
        deleted 7y ago
danhak 7y ago
That is exactly the point. The tax code privileges sources of income that prevail among those who already possess wealth. That is the definition of regressive.
- dahdum 7y ago
  Capital gains are lower because because corporations pay income tax on their earnings already.
  - ceejayoz 7y ago
    Salaries aren't paid out of earnings?
  - cma 7y ago
    Not exactly, capital gains also cover things like passively growing trees as a land barron.
  - kingraoul3 7y ago
    I pay taxes on my income and again at the point of sale.
    - basch 7y ago
      and you pay capital gains if something you owns appreciates and you sell it.
  - gamblor956 7y ago
    That is why dividends are subject to special rates, not capital gains.
  - Catsandkites 7y ago
    Is that a good or fair argument though? I get paid and pay 20% then 40% on the rest (banded)... Then as soon as I buy practically anything I'm taxed another 20% on top of that. A corporation pays 19% and then those profiting from that owe 7/32/38% (depending on their total income).
1ris 7y ago
That's absolutely not misleading, but point on. As you said: She's paid a salary while he's living off capital gains and they're taxed at separate rates.
pbreit 7y ago
And THAT is precisely why the wealthy pay lower taxes!

darawk 7y ago

> Author asserts that the poor pay less in taxes after counting stuff that's not taxes. Except that his statement was already true before accounting for those things. > According to the nonpartisan Congressional Budget Office, the lowest-income 20% of households have an average federal tax rate of about 2%. Those in the middle 20% pay 14% of their income in federal taxes. Higher-income households face higher rates. The top 20% pay a 27% federal rate. And the federal tax rate for the top 1% is 33%. These data are for 2016, the most recent year available.

Retric 7y ago
Ignoring Social Security, Medicare, State, and Local Taxes etc makes for meaningless comparisons.
- darawk 7y ago
  Two paragraphs later: > When assessing the total tax burden facing different U.S. households, looking at federal, state and local taxes is instructive. The federal system is more progressive than state and local systems, but combining them — as the Institute on Taxation and Economic Policy has done — doesn’t change the story: the higher your income, the greater your tax burden. Harvard economist and top Obama adviser Jason Furman confirms this by combining federal taxes and transfers with state and local taxes.
  - Retric 7y ago
    Hold up, I was just looking at that CBO report you linked: “Income before transfers and taxes consists of market income plus social insurance benefits (including benefits from Social Security, Medicare, unemployment insurance, and workers’ compensation). Means-tested transfers are cash payments and in-kind services provided through federal, state, and local government assistance programs.” That’s exactly the arbitrary definitions used to distort what’s going on. I am not saying it’s inaccurate data based on defines used, but all choices are subject to spin. Choices like using 6.2% or 12.4% for Social Security tax rates make a huge difference, and really should be included in these discussions. PS: Progressive also implies the top 0.1%, and 0.0001% also have higher effective tax rates not just an arbitrary top bucket of say 1%. Using words like ‘top’ is again arbitrary. PPS: Anyway, do you have a link for that report your referencing?

AdrianB1 7y ago

Please help me understand the subtleties of your comment: he is paying millions in taxes, she is paying thousands and the problem is he is not paying enough?

ceejayoz 7y ago
How far does that argument go? If Buffett's secretary pays $20k in taxes, and Buffett pays $21k, is that fair because he's still paying more? How much lower can his tax rate go versus his secretary's rate before it's unacceptable?
- umvi 7y ago
  Why isn't it fair that they pay the same tax rate? That's called a flat tax rate and I'm actually in favor of it because of its simplicity. I think all income, regardless of source, should be taxed at a flat rate. It's how it works for tithing in a lot of churches, and it's a very simple but effective system.
  - Frondo 7y ago
    Are the societal effects of a flat tax worth the simplicity? If you optimize for simplicity, but at some greater cost to having a society that functions for all its citizens and residents, is it worth focusing on simplicity?
  - ceejayoz 7y ago
    > Why isn't it fair that they pay the same tax rate? As Buffett points out, they don't. Buffett's is lower, because capital gains are privileged with a substantially lower rate, because the mega-wealthy largely benefit there.
    - umvi 7y ago
      Ah, I misunderstood. I think it's a little bogus that the income source determines the tax rate, because then the rich just manipulate their income to use the source with the lowest rates which is a luxury the poor can't afford.