8 ms·

America's billionaires pay an average income tax rate of just 8.2%

68 points by fIoat 5y ago

secabeen 5y ago
This analysis includes as income a portion of the value of un-taxed stock gains, so it's not a traditional measure.
- phendrenad2 5y ago
  I don't understand how people keep making this mistake, unless it's not actually a mistake, and is just a way to generate outrage-inducing headlines.
  - secabeen 5y ago
    It's the latter. There is probably some value in taxing unrealized stock gains. If you purchased Google stock via options at the IPO, and have still yet to sell it, it would be reasonable to consider a portion of that profit locked in, and somehow tax it. It would be complicated, and challenging, but leaving that stock entirely untaxed until it is sold or inherited incurs different problems.
    - fIoat 5y ago
      One thing to consider is how having a large amount of stocks allows you to borrow on margin and move other people's money around in ways the less wealthy cannot. I wonder if the aim here is to tax the power, not necessarily the wealth.
      - phendrenad2 5y ago
        I'm all for taxing people whenever they benefit from their wealth. Stocks sitting in an account somewhere? Those aren't benefitting the owner. Stocks used to borrow money? Now they become a tangible benefit, and we can figure out how much to tax that event.
    - lotsofpulp 5y ago
      >It's the latter. It is not media companies creating clickbait headlines to induce outrage and get clicks. In this case, it is the President using taxpayer resources to mislead the public. While the former is problematic, the latter is far worse as it reduces trust in the whole system of governance.
      - secabeen 5y ago
        > In this case, it is the President using taxpayer resources to mislead the public. While the former is problematic, the latter is far worse as it reduces trust in the whole system of governance. Perhaps, but I can't think of any policy remedy that would prevent this. Leaders have made misleading statements to their people since time immemorial. It is incumbent on us to develop our critical thinking skills so we can call those leaders out on their misleading statements (as you are doing here), and allow that understanding to impact who we support and elevate to those positions of leadership.
        s1artibartfast 5y ago
        There isn't a policy solution, but people on both sides of the aisle need to call out intellectual dishonesty in order to preserve or raise the bar of General discourse. It's not okay if someone lies or Miss leaves just because it furthers your sides political agenda
  - closeparen 5y ago
    Generally the tax discussion is related to the wealth inequality discussion, and paper gains are definitely included in wealth inequality.
  - UncleMeat 5y ago
    It isn't a mistake, but it also isn't just to induce outrage. I think it is outrageous that after a certain amount of wealth you can literally never sell your stock and never need to pay taxes on it.
    - phendrenad2 5y ago
      So what? Do you get to take the stock with you at the end of your life? Or does it go to someone else, who will have to either hold it for their entire life, or sell it and pay that taxes? What am I missing?
      - UncleMeat 5y ago
        Step-up in basis means that a lot of the growth is never taxed.
        duped 5y ago
        There's still the estate tax.
      - fulafel 5y ago
        If it got taxed in these ways, wouldn't it make the number in the headline higher? Even if held until end of life there are enough billionaires dying per year that it would even out.
Rebelgecko 5y ago
It seems like that figure is predicated on a nonstandard definition of "income" that includes things that aren't actually income.
- tedjdziuba 5y ago
  The standard populist playbook of conflating "rise in value of an asset a person owns" with "income".
- marwatk 5y ago
  I've never understood this argument. If I buy a can of soda with 'already taxed' money for $.50 and sell it for $1, is that not $.50 of income that hasn't been taxed? What makes stock special?
  - rsj_hn 5y ago
    They are counting unrealized gains, so your example doesn't apply.
  - solveit 5y ago
    Because you don't get taxed until you actually sell the can of soda.
    - spiderice 5y ago
      Exactly this. The more appropriate example is you buy a can of soda for $0.50. Hold on to it until the value goes to $2.00, then to $3.00, and eventually sell it at $1.00. You are then taxed on that $0.50 of income. But why would it make sense to tax them at the $2.00 and $3.00 price points if they didn't even sell the soda?
      - paulryanrogers 5y ago
        Because they can use that unrealized value to get huge loans from banks at favorable rates then claim interest paid on taxes. This and other hoop jumping allows them to pay surprisingly little compared to their worth.
ChrisLomont 5y ago
What if they also pay taxes that are not listed as income taxes, say, like the majority of corporate taxes? [1] This leaves significant portions of their effective taxes off the table. [1] https://www.cbo.gov/sites/default/files/cbofiles/attachments/effective_rates_0.pdf https://www.cbo.gov/sites/default/files/cbofiles/attachments...
- BirdPlusPlus 5y ago
  The unfortunate truth about corporate taxes is they're not really possible. There are two possible outcomes. 1. The business cannot absorb the levied tax into its overhead and shuts down. Production and operations cease. Said business doesn't buy materials or supplies, workers become unemployed, and customers do not shop. Result: a net revenue loss in sales, payroll, and income taxes. 2. The business can absorb the levied tax into its overhead... which is then offloaded onto the consumer whose buying power and standard of living decreases. Follow the money long enough and you'll find most taxes are paid by the individual consumer in roundabout and convoluted ways.
  - ChrisLomont 5y ago
    >Follow the money long enough and you'll find most taxes are paid by the individual consumer in roundabout and convoluted ways. I take it you didn't look at the link I posted. The entire field of economics would disagree with you. Part of the cost is shifted to consumer, depending on elasticity. The rest is paid by owners. Billionaires tend to own companies that pay tax, money which would otherwise have accrued to the owner. That is what the CBO report I linked quantifies.
  - mercutio2 5y ago
    I don't think economists agree that tax incidence is so consistently one sided. It's a whole field of study. "Not really possible" seems like an extraordinary claim.
    - BirdPlusPlus 5y ago
      Just earlier this week I was talking about this concept over drinks with my uncle, who has a PHD in Economics. - though I didn't mean to imply that the entire tax gets offloaded downstream. That was clumsy. My point is that taxing corporations without inordinately harming their employees and consumers' standards of living is impossible. Even worse, it grants a competitive edge to established corporations over lesser competing firms, which lack the connections or resources to navigate that tax code as efficiently. It just isn't healthy for the market or effective at its purpose. If we're serious about maintaining healthy competitive markets and a public with purchasing power, we should consider different options.
khaki54 5y ago
"Pay your fair share billionaires!" screeched the 61% of Americans paying no federal income tax.
- dane-pgp 5y ago
  To be clear, the 61% figure is unique to the exceptional circumstances of 2020, and "It's expected to fall back down to 42% in 2022 and remain at around 41% or 42% through 2025".[0] I don't know if you think that 42% of Americans paying no federal income tax would be a sufficiently small percentage that the criticism of billionaire tax rates would suddenly become valid, but it's worth pointing out that 58% of Americans therefore would be paying these taxes and would constitute a majority of the voting public. [0] https://www.cnbc.com/2021/08/18/61percent-of-americans-paid-no-federal-income-taxes-in-2020-tax-policy-center-says.html https://www.cnbc.com/2021/08/18/61percent-of-americans-paid-...
  - khaki54 5y ago
    No. I think that people who are paying zero or almost no federal tax should not be claiming that people paying $50K, $100K, or $1M aren't paying their fair share.
- KorematsuFredt 5y ago
  Yeah, I demand my fair share of hat Bezos or Musk have earned. Drives away in my Tesla before the downvotes come.
dane-pgp 5y ago
By framing things in terms of income taxes, the debate is already conceded. Instead, the question should be "What percentage of their net worth does an average American billionaire pay in taxes each year?". I don't have the answer to that question, but let's compare it to the median American household, for which numbers are available. The median family's net worth[0] in the US is about $120k, and the median household federal tax burden[1] is about $10k per year, which coincidentally equates to an 8.3% annual wealth tax. If billionaires were paying 8.2% of their net worth in tax every year, I think people would find the system a lot more fair than it is today. [0] https://dqydj.com/average-median-top-net-worth-percentiles/ https://dqydj.com/average-median-top-net-worth-percentiles/ [1] https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax https://www.propublica.org/article/the-secret-irs-files-trov...
closeparen 5y ago
It is pretty frustrating how these outrage-inducing statements about billionaires are mostly used to justify tightening the screws on us "labor aristocrats." Turning up the top marginal tax rates is obviously not a way to touch billionaires. Billionaires don't pay anything close to income tax rates. But it sure as hell will touch the engineer trying to buy a house in San Francisco. I mean, we probably should be paying higher taxes too, but we could at least have the intellectual honestly to talk about the cohort that actually pays huge income tax bills (educated workers in HCOL cities) instead of gesturing at billionaires who have nothing to do with the income tax scale.
- imapeopleperson 5y ago
  Well said, but I don’t know why you’d offer up paying even more taxes. If anything, taxing billionaires should help lower the burden on labor aristocrats. The real issue is government having a monopoly on tax revenue and not pushing a penny far enough.
  - BirdPlusPlus 5y ago
    >The real issue is government having a monopoly on tax revenue and not pushing a penny far enough. I definitely agree with this but is it even possible to incentivize that? Sometimes I wish we could put an honest "I" in IRS and sic 'em on the government.
  - syshum 5y ago
    The Parent offering to pay more is more ethical than pointing over there and screaming them, send the men with guns after them to take their money, dont take my money I need it more than them.... >The real issue is government having a monopoly on tax revenue No the real issue is government having a monopoly on money, and the money supply, combined with not having any actual constitutional limits on spending. Spending is the root cause problem here.
- JKCalhoun 5y ago
  Are people suggesting turning up the top marginal tax rates? Because I hear about adding a new higher bracket, and/or taxing wealth, raising the inheritance tax, an AMT for capital gains, etc.
quantumBerry 5y ago
Taxation is theft.

68 points by fIoat 5y ago

secabeen 5y ago

This analysis includes as income a portion of the value of un-taxed stock gains, so it's not a traditional measure.

phendrenad2 5y ago
I don't understand how people keep making this mistake, unless it's not actually a mistake, and is just a way to generate outrage-inducing headlines.
- secabeen 5y ago
  It's the latter. There is probably some value in taxing unrealized stock gains. If you purchased Google stock via options at the IPO, and have still yet to sell it, it would be reasonable to consider a portion of that profit locked in, and somehow tax it. It would be complicated, and challenging, but leaving that stock entirely untaxed until it is sold or inherited incurs different problems.
  - fIoat 5y ago
    One thing to consider is how having a large amount of stocks allows you to borrow on margin and move other people's money around in ways the less wealthy cannot. I wonder if the aim here is to tax the power, not necessarily the wealth.
    - phendrenad2 5y ago
      I'm all for taxing people whenever they benefit from their wealth. Stocks sitting in an account somewhere? Those aren't benefitting the owner. Stocks used to borrow money? Now they become a tangible benefit, and we can figure out how much to tax that event.
  - lotsofpulp 5y ago
    >It's the latter. It is not media companies creating clickbait headlines to induce outrage and get clicks. In this case, it is the President using taxpayer resources to mislead the public. While the former is problematic, the latter is far worse as it reduces trust in the whole system of governance.
    - secabeen 5y ago
      > In this case, it is the President using taxpayer resources to mislead the public. While the former is problematic, the latter is far worse as it reduces trust in the whole system of governance. Perhaps, but I can't think of any policy remedy that would prevent this. Leaders have made misleading statements to their people since time immemorial. It is incumbent on us to develop our critical thinking skills so we can call those leaders out on their misleading statements (as you are doing here), and allow that understanding to impact who we support and elevate to those positions of leadership.
      - s1artibartfast 5y ago
        There isn't a policy solution, but people on both sides of the aisle need to call out intellectual dishonesty in order to preserve or raise the bar of General discourse. It's not okay if someone lies or Miss leaves just because it furthers your sides political agenda
- closeparen 5y ago
  Generally the tax discussion is related to the wealth inequality discussion, and paper gains are definitely included in wealth inequality.
- UncleMeat 5y ago
  It isn't a mistake, but it also isn't just to induce outrage. I think it is outrageous that after a certain amount of wealth you can literally never sell your stock and never need to pay taxes on it.
  - phendrenad2 5y ago
    So what? Do you get to take the stock with you at the end of your life? Or does it go to someone else, who will have to either hold it for their entire life, or sell it and pay that taxes? What am I missing?
    - UncleMeat 5y ago
      Step-up in basis means that a lot of the growth is never taxed.
      - duped 5y ago
        There's still the estate tax.
    - fulafel 5y ago
      If it got taxed in these ways, wouldn't it make the number in the headline higher? Even if held until end of life there are enough billionaires dying per year that it would even out.

Rebelgecko 5y ago

It seems like that figure is predicated on a nonstandard definition of "income" that includes things that aren't actually income.

tedjdziuba 5y ago
The standard populist playbook of conflating "rise in value of an asset a person owns" with "income".
marwatk 5y ago
I've never understood this argument. If I buy a can of soda with 'already taxed' money for $.50 and sell it for $1, is that not $.50 of income that hasn't been taxed? What makes stock special?
- rsj_hn 5y ago
  They are counting unrealized gains, so your example doesn't apply.
- solveit 5y ago
  Because you don't get taxed until you actually sell the can of soda.
  - spiderice 5y ago
    Exactly this. The more appropriate example is you buy a can of soda for $0.50. Hold on to it until the value goes to $2.00, then to $3.00, and eventually sell it at $1.00. You are then taxed on that $0.50 of income. But why would it make sense to tax them at the $2.00 and $3.00 price points if they didn't even sell the soda?
    - paulryanrogers 5y ago
      Because they can use that unrealized value to get huge loans from banks at favorable rates then claim interest paid on taxes. This and other hoop jumping allows them to pay surprisingly little compared to their worth.

ChrisLomont 5y ago

What if they also pay taxes that are not listed as income taxes, say, like the majority of corporate taxes? [1] This leaves significant portions of their effective taxes off the table. [1] https://www.cbo.gov/sites/default/files/cbofiles/attachments/effective_rates_0.pdf https://www.cbo.gov/sites/default/files/cbofiles/attachments...

BirdPlusPlus 5y ago
The unfortunate truth about corporate taxes is they're not really possible. There are two possible outcomes. 1. The business cannot absorb the levied tax into its overhead and shuts down. Production and operations cease. Said business doesn't buy materials or supplies, workers become unemployed, and customers do not shop. Result: a net revenue loss in sales, payroll, and income taxes. 2. The business can absorb the levied tax into its overhead... which is then offloaded onto the consumer whose buying power and standard of living decreases. Follow the money long enough and you'll find most taxes are paid by the individual consumer in roundabout and convoluted ways.
- ChrisLomont 5y ago
  >Follow the money long enough and you'll find most taxes are paid by the individual consumer in roundabout and convoluted ways. I take it you didn't look at the link I posted. The entire field of economics would disagree with you. Part of the cost is shifted to consumer, depending on elasticity. The rest is paid by owners. Billionaires tend to own companies that pay tax, money which would otherwise have accrued to the owner. That is what the CBO report I linked quantifies.
- mercutio2 5y ago
  I don't think economists agree that tax incidence is so consistently one sided. It's a whole field of study. "Not really possible" seems like an extraordinary claim.
  - BirdPlusPlus 5y ago
    Just earlier this week I was talking about this concept over drinks with my uncle, who has a PHD in Economics. - though I didn't mean to imply that the entire tax gets offloaded downstream. That was clumsy. My point is that taxing corporations without inordinately harming their employees and consumers' standards of living is impossible. Even worse, it grants a competitive edge to established corporations over lesser competing firms, which lack the connections or resources to navigate that tax code as efficiently. It just isn't healthy for the market or effective at its purpose. If we're serious about maintaining healthy competitive markets and a public with purchasing power, we should consider different options.

khaki54 5y ago

"Pay your fair share billionaires!" screeched the 61% of Americans paying no federal income tax.

dane-pgp 5y ago
To be clear, the 61% figure is unique to the exceptional circumstances of 2020, and "It's expected to fall back down to 42% in 2022 and remain at around 41% or 42% through 2025".[0] I don't know if you think that 42% of Americans paying no federal income tax would be a sufficiently small percentage that the criticism of billionaire tax rates would suddenly become valid, but it's worth pointing out that 58% of Americans therefore would be paying these taxes and would constitute a majority of the voting public. [0] https://www.cnbc.com/2021/08/18/61percent-of-americans-paid-no-federal-income-taxes-in-2020-tax-policy-center-says.html https://www.cnbc.com/2021/08/18/61percent-of-americans-paid-...
- khaki54 5y ago
  No. I think that people who are paying zero or almost no federal tax should not be claiming that people paying $50K, $100K, or $1M aren't paying their fair share.
KorematsuFredt 5y ago
Yeah, I demand my fair share of hat Bezos or Musk have earned. Drives away in my Tesla before the downvotes come.

dane-pgp 5y ago

By framing things in terms of income taxes, the debate is already conceded. Instead, the question should be "What percentage of their net worth does an average American billionaire pay in taxes each year?". I don't have the answer to that question, but let's compare it to the median American household, for which numbers are available. The median family's net worth[0] in the US is about $120k, and the median household federal tax burden[1] is about $10k per year, which coincidentally equates to an 8.3% annual wealth tax. If billionaires were paying 8.2% of their net worth in tax every year, I think people would find the system a lot more fair than it is today. [0] https://dqydj.com/average-median-top-net-worth-percentiles/ https://dqydj.com/average-median-top-net-worth-percentiles/ [1] https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax https://www.propublica.org/article/the-secret-irs-files-trov...

closeparen 5y ago

It is pretty frustrating how these outrage-inducing statements about billionaires are mostly used to justify tightening the screws on us "labor aristocrats." Turning up the top marginal tax rates is obviously not a way to touch billionaires. Billionaires don't pay anything close to income tax rates. But it sure as hell will touch the engineer trying to buy a house in San Francisco. I mean, we probably should be paying higher taxes too, but we could at least have the intellectual honestly to talk about the cohort that actually pays huge income tax bills (educated workers in HCOL cities) instead of gesturing at billionaires who have nothing to do with the income tax scale.

imapeopleperson 5y ago
Well said, but I don’t know why you’d offer up paying even more taxes. If anything, taxing billionaires should help lower the burden on labor aristocrats. The real issue is government having a monopoly on tax revenue and not pushing a penny far enough.
- BirdPlusPlus 5y ago
  >The real issue is government having a monopoly on tax revenue and not pushing a penny far enough. I definitely agree with this but is it even possible to incentivize that? Sometimes I wish we could put an honest "I" in IRS and sic 'em on the government.
- syshum 5y ago
  The Parent offering to pay more is more ethical than pointing over there and screaming them, send the men with guns after them to take their money, dont take my money I need it more than them.... >The real issue is government having a monopoly on tax revenue No the real issue is government having a monopoly on money, and the money supply, combined with not having any actual constitutional limits on spending. Spending is the root cause problem here.
JKCalhoun 5y ago
Are people suggesting turning up the top marginal tax rates? Because I hear about adding a new higher bracket, and/or taxing wealth, raising the inheritance tax, an AMT for capital gains, etc.

quantumBerry 5y ago

Taxation is theft.