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One of the biggest issues is that the long term capital gains rate is only 15% (or perhaps 20% in some cases). It's likely that most of the taxed income of peop

One of the biggest issues is that the long term capital gains rate is only 15% (or perhaps 20% in some cases). It's likely that most of the taxed income of people with high net worth is from capital gains, and not from ordinary income. I'm not sure, but I think he's only talking about people with high ordinary income. He could be including capital gains too. Not sure. He's definitely ignoring high net worth. The author does not directly address the low rate for capital gains. Also, there are two ideas which are easily confused: 1) Do the rich pay more in taxes? Yes. The number of dollars Warren Buffet pays in taxes each year is more than his secratary. 2) Do the rich pay taxes at a higher percentage of their income? This article indicates the answer to this question is also yes. However because capital gains are taxed at such a low rate, and because of other loopholes, Warren Buffet's percentage tax rate is lower than his secretary's percentage tax rate. Also, people with a high net worth do not have to sell stocks which have gained every single year. Maybe they sold some stocks a few years ago, and they are spending the cash. In the author's analysis, a high net worth individual with no ordinary income and no capital gains for this year would not be included in this analysis at all, because they had almost no income last year (probabaly a little interest and dividends, but nothing else).

jshaqaw 7y ago
This is not a defense of the low capital gains tax rate but comprehensively it needs to be included that for a C corp each dollar of income is already taxed at the corp level before being distributed as capital gains or dividends. On a per dollar of income basis the gap between ordinary income and capital income is collapsed due to that double taxation.
- blacksqr 7y ago
  Only net corporate income is taxed, not gross income. Imagine if you only had to pay income tax on the money you had left over after paying all your living expenses. That's the deal corporations get.
  - jshaqaw 7y ago
    I’m not sure how the math on gross income (which I assume you mean to be revenue) would work. Any business without insanely high gross margins would cease to exist. Could you explain?
    - blacksqr 7y ago
      I was not advocating that gross corporate income be taxed. I was pointing out that your statement: "for a C corp each dollar of income is already taxed at the corp level", is flatly untrue. A lot of large corporations get their net income down to zero or next to zero, deliberately pushing their business strategies to bolster their stock price rather than net revenue. In those cases, capital gains tax is the only tax paid on their activities, and the advantage of capital gains tax rates vs ordinary income rates is by no means collapsed.

jshaqaw 7y ago

This is not a defense of the low capital gains tax rate but comprehensively it needs to be included that for a C corp each dollar of income is already taxed at the corp level before being distributed as capital gains or dividends. On a per dollar of income basis the gap between ordinary income and capital income is collapsed due to that double taxation.

blacksqr 7y ago
Only net corporate income is taxed, not gross income. Imagine if you only had to pay income tax on the money you had left over after paying all your living expenses. That's the deal corporations get.
- jshaqaw 7y ago
  I’m not sure how the math on gross income (which I assume you mean to be revenue) would work. Any business without insanely high gross margins would cease to exist. Could you explain?
  - blacksqr 7y ago
    I was not advocating that gross corporate income be taxed. I was pointing out that your statement: "for a C corp each dollar of income is already taxed at the corp level", is flatly untrue. A lot of large corporations get their net income down to zero or next to zero, deliberately pushing their business strategies to bolster their stock price rather than net revenue. In those cases, capital gains tax is the only tax paid on their activities, and the advantage of capital gains tax rates vs ordinary income rates is by no means collapsed.