29 ms·

US super-rich 'pay almost no income tax'

13 points by bartread 5y ago

Grakel 5y ago
If you have lots of wealth, you don't need to have much income to tax, and you can use your other resources to offset it. If you want to take more money from Billionaires, income tax isn't going to cut it.
- lend000 5y ago
  No, all you need to do is fix the tax brackets, so that when someone liquidates five billion dollars worth of capital gains income, they are paying a higher effective rate than someone making 1/10000th that in regular income (not currently the case). The solution is so trivial it hurts, but it makes it clear that no politician or "expert cabinet member" wants to solve the problem except where it might give them new political power, e.g. to track all private property to implement a wealth tax. For example, some new federal income brackets might be 50% over 3 million, 55% over 15 million, 60% over 60 million, 65% over 250 million, 70% over 1 billion, 75% over 5 billion (at 2021 USD values). Maybe a 5% discount for long term capital gains instead of the separate mega-discounted bracket we have now. If the aforementioned were implemented 30 years ago, we wouldn't be having so many wealth inequality discussions.
dang 5y ago
I'm on my phone so can't list the previous threads but if you put Propublica in the search box at the bottom of HN pages, they'll show up.
- stalled 5y ago
  https://news.ycombinator.com/item?id=27441277 https://news.ycombinator.com/item?id=27441277 380 comments https://news.ycombinator.com/item?id=27439654 https://news.ycombinator.com/item?id=27439654 1 comment https://news.ycombinator.com/item?id=27435983 https://news.ycombinator.com/item?id=27435983 6 comments https://news.ycombinator.com/item?id=27434307 https://news.ycombinator.com/item?id=27434307 553 comments https://news.ycombinator.com/item?id=27432326 https://news.ycombinator.com/item?id=27432326 956 comments
misiti3780 5y ago
I'm not saying the tax system in the US is designed properly (I think it's obvious that it's not), but unless I'm missing something here, all this article shows is that: 1. Rich people got really rich because the value of their stocks (and probably property portfolios) increased a lot in the past 20 years. This is not surprising if you look follow the Fed policy of printing money and look at a simple graph of the S&P 500 over 20 years. 2. Rich people that have their money tied up in these things only get taxed when they sell them (in the form of long term capital gain). This is by design, and I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. This would effect literally everyone who owns property and/or stocks outside of their 401ks. What is honestly interesting about this ProPublica article? The only interesting thing (as far as I can tell) about it is someone in the IRS is leaking these people's filings, which is a felony.
- joshka 5y ago
  > I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. If banks can use the increase as collateral on a loan, it stands to reason that the same increase could be similarly used as a collateral tax lien. (Lay opinion - entirely possible this is wrong)
  - Arnt 5y ago
    You're right, but think about the consequences. Taxes are mandatory. Both borrowing and selling is optional. That creates two large differences. I'll work through two scenarios: 1. When there's a price increase on something you own, you pay income tax that you can claim back if the price decreases later. In that case, owing something valuable (like your family farm, now on the outskirts of a city) lands you with a sizable tax bill as the city grows nearer and land prices grow. You have to sell the family farm, because you're taxed you on the income you would get from selling even if you never sell. (Strictly spealing you pay an advance and never get it back.) 2. Instead of paying with legal tender you could give a part of the saleable item as collateral. Great for people who are rich enough for financial acrobatics, because now they have more options for paying their tax with different assets at different past valuations.
maxk42 5y ago
This is a straw man. The super-rich don't have income taxes because they have little to no income. Bill Gates didn't become a billionaire by being paid hundreds of millions of dollars each year - he became a billionaire by building a company that is worth hundreds of billions of dollars and owning a large chunk of it. You have to sell that chunk in order to have income. He probably never has to sell a chunk again in his life.
- joshka 5y ago
  Yes but, how much of that company growth came from not paying employees a fair wage? How much lost income tax would be recovered if the minimum wage tracked closer to $27 (forget $15 - lol). Not a specific comment on BG/MS, more generalized to billionaire company ownership in general.
  - maxk42 5y ago
    The fair wage is the one you agreed to take.
    - joshka 5y ago
      Your statement is equivalent to "a particular practice defines what is fair". If this were true, then there should never be any cause for indignation over any existing or change in the application of a law (e.g. whichever side of politics you're on, use either 2A rights or LGBTQ Rights here).
      - maxk42 5y ago
        Unlike 2A or LGBTQ Rights, you've agreed to your wage.
        joshka 5y ago
        Invoking godwin... the Nazi's agreed to their orders... it did not make those orders fair (/ethical / ...) Agreement to a wage purely means that you've exhausted reasonable alternatives available to you due to your constraints (time, energy, location, family, ...)
kyleblarson 5y ago
They pay income tax when they recognize their income (selling equity). Sensationalist headline.
skoopie 5y ago
The rich have done this for a long time (borrow against assets to avoid income). What is the purpose of this article now? Are they gunning for an unrealized capital gains tax?
hindsightbias 5y ago
With over 35T in US retirement savings, an annual 10% tax would solve every problem facing humanity. The US wealth disparity vs the world is morally inexcusable.
- xscott 5y ago
  There's a lot of non-billionaire retirement money in that $35 trillion... Assuming market growth minus inflation is about 7% (yeah, the last 10 years have been crazy, but this is an accepted long term number [0]), you're killing people's retirement savings by about 3% per year. To put that in perspective, assuming a diligent and reasonably paid (i.e. non-FAANG salary) person puts $20k into their 401k and their company matches that, they can never save more than $1.3 million no matter how long they work. That's the point where 10% negates any new contribution of $40k. After 50 years (working from 22 until 72), they've paid $2 million in and only have $1 million to show for it. They're better off putting their money under a mattress and only suffering inflation losses. In other words you would ruin the 401k as an incentive to save or invest. [0] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
  - hindsightbias 5y ago
    > There's a lot of non-billionaire retirement money in that $35 trillion That’s my point. Soaking billionaires is just virtue signaling. To 98% of the world, millionaires and billionaires might as well be the same thing.

13 points by bartread 5y ago

If you have lots of wealth, you don't need to have much income to tax, and you can use your other resources to offset it. If you want to take more money from Billionaires, income tax isn't going to cut it.

lend000 5y ago
No, all you need to do is fix the tax brackets, so that when someone liquidates five billion dollars worth of capital gains income, they are paying a higher effective rate than someone making 1/10000th that in regular income (not currently the case). The solution is so trivial it hurts, but it makes it clear that no politician or "expert cabinet member" wants to solve the problem except where it might give them new political power, e.g. to track all private property to implement a wealth tax. For example, some new federal income brackets might be 50% over 3 million, 55% over 15 million, 60% over 60 million, 65% over 250 million, 70% over 1 billion, 75% over 5 billion (at 2021 USD values). Maybe a 5% discount for long term capital gains instead of the separate mega-discounted bracket we have now. If the aforementioned were implemented 30 years ago, we wouldn't be having so many wealth inequality discussions.

dang 5y ago

I'm on my phone so can't list the previous threads but if you put Propublica in the search box at the bottom of HN pages, they'll show up.

stalled 5y ago
https://news.ycombinator.com/item?id=27441277 https://news.ycombinator.com/item?id=27441277 380 comments https://news.ycombinator.com/item?id=27439654 https://news.ycombinator.com/item?id=27439654 1 comment https://news.ycombinator.com/item?id=27435983 https://news.ycombinator.com/item?id=27435983 6 comments https://news.ycombinator.com/item?id=27434307 https://news.ycombinator.com/item?id=27434307 553 comments https://news.ycombinator.com/item?id=27432326 https://news.ycombinator.com/item?id=27432326 956 comments

misiti3780 5y ago

I'm not saying the tax system in the US is designed properly (I think it's obvious that it's not), but unless I'm missing something here, all this article shows is that: 1. Rich people got really rich because the value of their stocks (and probably property portfolios) increased a lot in the past 20 years. This is not surprising if you look follow the Fed policy of printing money and look at a simple graph of the S&P 500 over 20 years. 2. Rich people that have their money tied up in these things only get taxed when they sell them (in the form of long term capital gain). This is by design, and I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. This would effect literally everyone who owns property and/or stocks outside of their 401ks. What is honestly interesting about this ProPublica article? The only interesting thing (as far as I can tell) about it is someone in the IRS is leaking these people's filings, which is a felony.

joshka 5y ago
> I'm very curious how a system could be re-designed to tax people when the value of something like a stock increases, but is not sold. If banks can use the increase as collateral on a loan, it stands to reason that the same increase could be similarly used as a collateral tax lien. (Lay opinion - entirely possible this is wrong)
- Arnt 5y ago
  You're right, but think about the consequences. Taxes are mandatory. Both borrowing and selling is optional. That creates two large differences. I'll work through two scenarios: 1. When there's a price increase on something you own, you pay income tax that you can claim back if the price decreases later. In that case, owing something valuable (like your family farm, now on the outskirts of a city) lands you with a sizable tax bill as the city grows nearer and land prices grow. You have to sell the family farm, because you're taxed you on the income you would get from selling even if you never sell. (Strictly spealing you pay an advance and never get it back.) 2. Instead of paying with legal tender you could give a part of the saleable item as collateral. Great for people who are rich enough for financial acrobatics, because now they have more options for paying their tax with different assets at different past valuations.

maxk42 5y ago

This is a straw man. The super-rich don't have income taxes because they have little to no income. Bill Gates didn't become a billionaire by being paid hundreds of millions of dollars each year - he became a billionaire by building a company that is worth hundreds of billions of dollars and owning a large chunk of it. You have to sell that chunk in order to have income. He probably never has to sell a chunk again in his life.

joshka 5y ago
Yes but, how much of that company growth came from not paying employees a fair wage? How much lost income tax would be recovered if the minimum wage tracked closer to $27 (forget $15 - lol). Not a specific comment on BG/MS, more generalized to billionaire company ownership in general.
- maxk42 5y ago
  The fair wage is the one you agreed to take.
  - joshka 5y ago
    Your statement is equivalent to "a particular practice defines what is fair". If this were true, then there should never be any cause for indignation over any existing or change in the application of a law (e.g. whichever side of politics you're on, use either 2A rights or LGBTQ Rights here).
    - maxk42 5y ago
      Unlike 2A or LGBTQ Rights, you've agreed to your wage.
      - joshka 5y ago
        Invoking godwin... the Nazi's agreed to their orders... it did not make those orders fair (/ethical / ...) Agreement to a wage purely means that you've exhausted reasonable alternatives available to you due to your constraints (time, energy, location, family, ...)

kyleblarson 5y ago

They pay income tax when they recognize their income (selling equity). Sensationalist headline.

skoopie 5y ago

The rich have done this for a long time (borrow against assets to avoid income). What is the purpose of this article now? Are they gunning for an unrealized capital gains tax?

hindsightbias 5y ago

With over 35T in US retirement savings, an annual 10% tax would solve every problem facing humanity. The US wealth disparity vs the world is morally inexcusable.

xscott 5y ago
There's a lot of non-billionaire retirement money in that $35 trillion... Assuming market growth minus inflation is about 7% (yeah, the last 10 years have been crazy, but this is an accepted long term number [0]), you're killing people's retirement savings by about 3% per year. To put that in perspective, assuming a diligent and reasonably paid (i.e. non-FAANG salary) person puts $20k into their 401k and their company matches that, they can never save more than $1.3 million no matter how long they work. That's the point where 10% negates any new contribution of $40k. After 50 years (working from 22 until 72), they've paid $2 million in and only have $1 million to show for it. They're better off putting their money under a mattress and only suffering inflation losses. In other words you would ruin the 401k as an incentive to save or invest. [0] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
- hindsightbias 5y ago
  > There's a lot of non-billionaire retirement money in that $35 trillion That’s my point. Soaking billionaires is just virtue signaling. To 98% of the world, millionaires and billionaires might as well be the same thing.