5 ms·
Interesting, but Pro Publica’s calculation of effective tax rate as taxes payed divided by wealth increase is weird. I don’t think there’s a jurisdiction in the
by bjornsing 5y ago
Interesting, but Pro Publica’s calculation of effective tax rate as taxes payed divided by wealth increase is weird. I don’t think there’s a jurisdiction in the world that calculates tax that way, and there are good reasons for that.
- speapr 5y agoThe exact point is that because taxation does not consider this income, the vast majority of the money made by very rich people takes this form. Pro Publica's point is not that these people are breaking the law, but that the tax system should be different.
- WalterBright 5y agoProPublica confuses wealth with income. If you have $2b in wealth, and lost $1b in bad investments one year, you're still a billionaire, and your tax rate is 0%.
- jl2718 5y agoNope. $3000 yearly passive loss exemption. Let's say you operate a business netting you $1B and then buy a $1B pokemon card, which you sell for $0. You owe tax on $1B - $3000.
- WalterBright 5y agoIf you have $2b in wealth, and lose $1b of it, you do not owe taxes on $1b.
- jl2718 5y agoAt some point they may have paid taxes on that $2B asset distribution, but of course they still have it, so maybe they took out a $1B loan to pay the IRS. Now they sell the asset, and they are lucky that it fetches $1B, enough to pay the loan. Now they have $0, and a huge sigh of relief. Could have been much worse. So you see, a lot of these equity-based billionaires would owe more than they have without these 'loopholes', and some obviously not much with them.
- WalterBright 5y agoIt's not a "loophole" to not owe taxes on lost money.
- jl2718 5y agoSorry; I'm not making myself clear. The current tax law makes it very possible to pay taxes on lost money. My perspective is that this is horrible policy. A simple example is an equity distribution that sells for less than taxes owed on it. The distribution is taxed at last trade price, and the loss in the sale is limited to $3000 annually. Many people do not realize how disastrous it can be to assess tax on anything that isn't legal tender, and this article seems to be promoting that.
- EricRiese 5y agoThat's not how you would want to implement the tax law, but it reflects the moral intuition.