8 ms·

Rich people don't pay income taxes. They pay capital gains taxes. They typically don't have income, or very little income compared to capital gains.

Salgat 2y ago
And the beauty is that long term capital gains is capped at 20%. That's a lower overall rate than what my family pays in taxes. The rich got it made.
- polski-g 2y ago
  The top 10% of America pay 75% of all taxes received -- the top 25% pay for 89%. https://www.ntu.org/library/doclib/2024/02/2021-who-pays-2-.pdf https://www.ntu.org/library/doclib/2024/02/2021-who-pays-2-....
  - mkipper 2y ago
    Conveniently, there's no mention of the 0.1% in there, and the historical data comparing the tax contribution of the top 1% to the total tax base doesn't include any information on income and wealth growth of the 1% over that same time period. Weird! But given that the organization who published that was founded by a Newsmax board member, I'm sure they're trying to paint a clear and unbiased picture of things.
  - Salgat 2y ago
    400 families own the same wealth as 160 million Americans, so they better be paying far more in taxes. In fact, given how much taxes eat into basic living expenses for the bottom 50%, the rich should be paying even more in taxes.
skyyler 2y ago
The fact that capital gains are differently taxed than worker income is further evidence that the game is stacked in favor of the rich.
- rgbrgb 2y ago
  I don't disagree with your broader point, but isn't the lower cap gains tax rate also incentive design to reward investment over pure consumption?
  - oooyay 2y ago
    Yes, but it very much matters why you're doing it. Someone who doesn't have enough money to functionally retire, even if they're wealthy, is doing it to get closer to a retirement number. "Rich" people as described here, that make a majority of their money on investment ROI, are playing an entirely different ball game with the same mechanics.
  - skizm 2y ago
    Specifically long term investment, which is why you only get the benefit of lower taxes after a year.
    - SR2Z 2y ago
      And we need to reward this behavior SO MUCH that we'll drop more than half of the taxes? People will invest as long as the taxes aren't worse than income taxes. We don't need this much "encouragement" because stock market returns are high enough already.
  - roncesvalles 2y ago
    I don't see how that follows. A salaried person has to bootstrap a company using income-taxed money, whereas a business person can engage in creative accounting whereby an existing business can invest in a new business practically tax free. If your average income tax is 35%, you're paying a ~50% premium to acquire the same assets as someone who rolls over money from business to business. This includes real estate and everything else.
- AnthonyMouse 2y ago
  It does, however, invalidate the original argument, which was that tariffs are being promoted by the rich because it's better for them than the existing income tax. Since the existing income tax has lower rates for long-term capital gains than earned income, and the rich defer taxes in various ways or use various tax shelters so they're not even paying that, and payroll taxes (~40% of federal revenue) have a flat rate with an income cap, the conclusion then becomes completely the opposite. They don't pay the income tax as it is but they'd have to pay the tariffs like anybody else.
llamaimperative 2y ago
Plenty of people who most Americans would consider "rich" pay income tax. Edit: Uh oh, downvoted by people who apparently think either people who earn $300k - $1MM+ aren't "rich" or that they don't pay income taxes. Lol.
- dangus 2y ago
  They literally aren’t rich. And they pay a lot of income taxes. The actual rich people don’t pay as high of a tax rate, which is the problem. Let’s say you make $1 million per year and your net worth is $20 million. Elon Musk spending $1 million dollars is equivalent to you spending $50.80. That would be equivalent to the median earner ($42,000) spending 10 cents. Someone who earns $1 million a year would have to be alive for 393,000 years to earn Elon Musk’s net worth as salary. The difference between the 1% and the 0.5% is massive. The difference between the 0.5% and the 0.1% is even bigger. Don’t forget that a billionaire is a millionaire 1000 times over, and the richest billionaires are hundreds of billionaires.
  - llamaimperative 2y ago
    > Let’s say you make $1 million per year and your net worth is $20 million. Then you are unambiguously extremely rich. Yes there are people orders of magnitude richer, but yes you are orders of magnitude richer than the median American. Money is no longer a daily consideration to live a 100% comfortable and healthy (to the extent money can pay for it) life. I am well aware of how much more obscenely wealthy the ultrawealthy are. That doesn’t make a $20MM net worth or $1MM/yr household middle class.
    - dangus 2y ago
      It makes them effectively have similar societal power as the middle class. They don’t have anywhere near enough money to wield institutional power and at most exert control on the lives of a handful of employees or tenants or whoever. They can’t get their names on institutional buildings. They could retire immediately and live on that net worth but their standard of living would be greatly impacted by doing so rather than continuing their income-generating activities. They could face major financial consequences by spending their money frivolously or losing it in a lawsuit. They have a low enough amount of money that they could gamble it away or lose it all in a bad business investment. I think that makes them much closer to the middle class than the truly wealthy who cannot lose their fortune even if they tried their hardest and have essentially no feasible way to have their standard of living lowered. For example, if Twitter shut down after Elon bought it, there would be no detectable difference to his lifestyle or buying power. There is no amount he could gamble at a casino where he would lose his fortune.
amazingamazing 2y ago
This is false. Rich people do pay income taxes. I consider anyone in the top 10% of america to be rich. Perhaps when you say rich you only mean billionaires? Which would be a hilariously narrow view. There are tens of thousands of people in the technology industry alone making 750K+ W2 income. that's rich to me. it's sad that HN is privy to propaganda and misinformation as well. ask anyone on the street if 500K income is rich, and they will say yes.
- SiliconSplash 2y ago
  You can structure your income to be more tax efficient if you aren't a full time employee. Most people in the top 10% of wealth will be structuring their income in such a way to avoid as much tax as possible.
  - amazingamazing 2y ago
    The threshold to enter top 10% is only 180K. Do you still believe most people can do this?
    - SiliconSplash 2y ago
      > The threshold to enter top 10% is only 180K "*Only*" That is a lot of money for most people. How the other half live! > The threshold to enter top 10% is only 180K Yes. I was doing it when I was earning less than that as a contractor in the UK. I can tell you how it generally works in the UK: * You set up a LTD company. * You pay yourself a minimum salary where you pay the bare minimum tax this is approximately £13000 the last time I checked. I think you can pay any other "directors" this as well, you basically make your significant other one. * Anything related to work becomes an expense e.g. parking tickets, mileage on your vehicle, laptop, computer software etc. So you don't pay this, the company does and thus you get a tax relief. * You pay yourself dividends from your LTD company. You pay yourself the bare minimum and leave as much as possible in the company. These were taxed at a far lower rate that the equivalent money if you worked perm. * You pay your pension via the company (this is tax free upto £60,000 IIRC). In the US how it is exactly done will be of course different as the taxes are structured differently but I know for a fact that people are doing similar in the US.
maeln 2y ago
Most rich people have very substantial income. It's just that they also have a lot of capital gain. As an example, most CEO have the biggest salary in the company, but also get other capital comp like stocks. There is ofc the loan loophole, but it doesn't mean that they don't get any other income, on which they are taxed on. It is just that, if you calculate their total package, compare to an average worker they pay significantly less taxes *proportionally* because a disproportionate amount of their "income" (some of which could hardly be called income but that is another subject) are in some form that are taxed less.
- hn_throwaway_99 2y ago
  Rich people, including CEOs, are disproportionately paid with equity, so your point is pretty irrelevant. In 2022 Google's CEO made $2 million in salary and $218 million in stock awards.
  - amazingamazing 2y ago
    the equity sundar receives is taxed though as income so what is your point?
    - lossolo 2y ago
      No, it's not. You can take a loan against your stock and don't pay any taxes. Very common strategy. Elon Musk, Mark Zuckerberg, Larry Page, Jeff Bezos, etc. all use this strategy to fund their lifestyles without selling stock.
      - amazingamazing 2y ago
        first, yes, it is taxed as income, because it is income. so what - the loan has to be paid off, and the stock will inevitably be sold and taxed. there is no scheme to get away from paying taxes forever without dying, and that scheme (that one that involves dying), is the same one that benefits an average person w.r.t estate tax.
SiliconSplash 2y ago
They don't necessarily even pay that as they leverage existing assets and get loans.
nickserv 2y ago
Not sure what you mean by "rich" as it's a pretty vague term. If you mean top 0.5%, then sure, nearly all of their money typically does not come from regular income. If you mean top 10% then not really, most people in that bracket will be paying substantial income tax.
dayjah 2y ago
True of the very rich, but not the average rich. Consider how a SWE may be “rich” compared to a barista. That SWE is probably earning $200k/yr and is paying that income via W2.
CalChris 2y ago
Richer people don't even pay capital gains. They borrow money on their assets at a low interest rate.
insane_dreamer 2y ago
This is why they want to cut capital gains taxes, and corporate taxes.

Salgat 2y ago

And the beauty is that long term capital gains is capped at 20%. That's a lower overall rate than what my family pays in taxes. The rich got it made.

polski-g 2y ago
The top 10% of America pay 75% of all taxes received -- the top 25% pay for 89%. https://www.ntu.org/library/doclib/2024/02/2021-who-pays-2-.pdf https://www.ntu.org/library/doclib/2024/02/2021-who-pays-2-....
- mkipper 2y ago
  Conveniently, there's no mention of the 0.1% in there, and the historical data comparing the tax contribution of the top 1% to the total tax base doesn't include any information on income and wealth growth of the 1% over that same time period. Weird! But given that the organization who published that was founded by a Newsmax board member, I'm sure they're trying to paint a clear and unbiased picture of things.
- Salgat 2y ago
  400 families own the same wealth as 160 million Americans, so they better be paying far more in taxes. In fact, given how much taxes eat into basic living expenses for the bottom 50%, the rich should be paying even more in taxes.

skyyler 2y ago

The fact that capital gains are differently taxed than worker income is further evidence that the game is stacked in favor of the rich.

rgbrgb 2y ago
I don't disagree with your broader point, but isn't the lower cap gains tax rate also incentive design to reward investment over pure consumption?
- oooyay 2y ago
  Yes, but it very much matters why you're doing it. Someone who doesn't have enough money to functionally retire, even if they're wealthy, is doing it to get closer to a retirement number. "Rich" people as described here, that make a majority of their money on investment ROI, are playing an entirely different ball game with the same mechanics.
- skizm 2y ago
  Specifically long term investment, which is why you only get the benefit of lower taxes after a year.
  - SR2Z 2y ago
    And we need to reward this behavior SO MUCH that we'll drop more than half of the taxes? People will invest as long as the taxes aren't worse than income taxes. We don't need this much "encouragement" because stock market returns are high enough already.
- roncesvalles 2y ago
  I don't see how that follows. A salaried person has to bootstrap a company using income-taxed money, whereas a business person can engage in creative accounting whereby an existing business can invest in a new business practically tax free. If your average income tax is 35%, you're paying a ~50% premium to acquire the same assets as someone who rolls over money from business to business. This includes real estate and everything else.
AnthonyMouse 2y ago
It does, however, invalidate the original argument, which was that tariffs are being promoted by the rich because it's better for them than the existing income tax. Since the existing income tax has lower rates for long-term capital gains than earned income, and the rich defer taxes in various ways or use various tax shelters so they're not even paying that, and payroll taxes (~40% of federal revenue) have a flat rate with an income cap, the conclusion then becomes completely the opposite. They don't pay the income tax as it is but they'd have to pay the tariffs like anybody else.

llamaimperative 2y ago

Plenty of people who most Americans would consider "rich" pay income tax. Edit: Uh oh, downvoted by people who apparently think either people who earn $300k - $1MM+ aren't "rich" or that they don't pay income taxes. Lol.

dangus 2y ago
They literally aren’t rich. And they pay a lot of income taxes. The actual rich people don’t pay as high of a tax rate, which is the problem. Let’s say you make $1 million per year and your net worth is $20 million. Elon Musk spending $1 million dollars is equivalent to you spending $50.80. That would be equivalent to the median earner ($42,000) spending 10 cents. Someone who earns $1 million a year would have to be alive for 393,000 years to earn Elon Musk’s net worth as salary. The difference between the 1% and the 0.5% is massive. The difference between the 0.5% and the 0.1% is even bigger. Don’t forget that a billionaire is a millionaire 1000 times over, and the richest billionaires are hundreds of billionaires.
- llamaimperative 2y ago
  > Let’s say you make $1 million per year and your net worth is $20 million. Then you are unambiguously extremely rich. Yes there are people orders of magnitude richer, but yes you are orders of magnitude richer than the median American. Money is no longer a daily consideration to live a 100% comfortable and healthy (to the extent money can pay for it) life. I am well aware of how much more obscenely wealthy the ultrawealthy are. That doesn’t make a $20MM net worth or $1MM/yr household middle class.
  - dangus 2y ago
    It makes them effectively have similar societal power as the middle class. They don’t have anywhere near enough money to wield institutional power and at most exert control on the lives of a handful of employees or tenants or whoever. They can’t get their names on institutional buildings. They could retire immediately and live on that net worth but their standard of living would be greatly impacted by doing so rather than continuing their income-generating activities. They could face major financial consequences by spending their money frivolously or losing it in a lawsuit. They have a low enough amount of money that they could gamble it away or lose it all in a bad business investment. I think that makes them much closer to the middle class than the truly wealthy who cannot lose their fortune even if they tried their hardest and have essentially no feasible way to have their standard of living lowered. For example, if Twitter shut down after Elon bought it, there would be no detectable difference to his lifestyle or buying power. There is no amount he could gamble at a casino where he would lose his fortune.

amazingamazing 2y ago

This is false. Rich people do pay income taxes. I consider anyone in the top 10% of america to be rich. Perhaps when you say rich you only mean billionaires? Which would be a hilariously narrow view. There are tens of thousands of people in the technology industry alone making 750K+ W2 income. that's rich to me. it's sad that HN is privy to propaganda and misinformation as well. ask anyone on the street if 500K income is rich, and they will say yes.

SiliconSplash 2y ago
You can structure your income to be more tax efficient if you aren't a full time employee. Most people in the top 10% of wealth will be structuring their income in such a way to avoid as much tax as possible.
- amazingamazing 2y ago
  The threshold to enter top 10% is only 180K. Do you still believe most people can do this?
  - SiliconSplash 2y ago
    > The threshold to enter top 10% is only 180K "*Only*" That is a lot of money for most people. How the other half live! > The threshold to enter top 10% is only 180K Yes. I was doing it when I was earning less than that as a contractor in the UK. I can tell you how it generally works in the UK: * You set up a LTD company. * You pay yourself a minimum salary where you pay the bare minimum tax this is approximately £13000 the last time I checked. I think you can pay any other "directors" this as well, you basically make your significant other one. * Anything related to work becomes an expense e.g. parking tickets, mileage on your vehicle, laptop, computer software etc. So you don't pay this, the company does and thus you get a tax relief. * You pay yourself dividends from your LTD company. You pay yourself the bare minimum and leave as much as possible in the company. These were taxed at a far lower rate that the equivalent money if you worked perm. * You pay your pension via the company (this is tax free upto £60,000 IIRC). In the US how it is exactly done will be of course different as the taxes are structured differently but I know for a fact that people are doing similar in the US.

maeln 2y ago

Most rich people have very substantial income. It's just that they also have a lot of capital gain. As an example, most CEO have the biggest salary in the company, but also get other capital comp like stocks. There is ofc the loan loophole, but it doesn't mean that they don't get any other income, on which they are taxed on. It is just that, if you calculate their total package, compare to an average worker they pay significantly less taxes *proportionally* because a disproportionate amount of their "income" (some of which could hardly be called income but that is another subject) are in some form that are taxed less.

hn_throwaway_99 2y ago
Rich people, including CEOs, are disproportionately paid with equity, so your point is pretty irrelevant. In 2022 Google's CEO made $2 million in salary and $218 million in stock awards.
- amazingamazing 2y ago
  the equity sundar receives is taxed though as income so what is your point?
  - lossolo 2y ago
    No, it's not. You can take a loan against your stock and don't pay any taxes. Very common strategy. Elon Musk, Mark Zuckerberg, Larry Page, Jeff Bezos, etc. all use this strategy to fund their lifestyles without selling stock.
    - amazingamazing 2y ago
      first, yes, it is taxed as income, because it is income. so what - the loan has to be paid off, and the stock will inevitably be sold and taxed. there is no scheme to get away from paying taxes forever without dying, and that scheme (that one that involves dying), is the same one that benefits an average person w.r.t estate tax.

SiliconSplash 2y ago

They don't necessarily even pay that as they leverage existing assets and get loans.

nickserv 2y ago

Not sure what you mean by "rich" as it's a pretty vague term. If you mean top 0.5%, then sure, nearly all of their money typically does not come from regular income. If you mean top 10% then not really, most people in that bracket will be paying substantial income tax.

dayjah 2y ago

True of the very rich, but not the average rich. Consider how a SWE may be “rich” compared to a barista. That SWE is probably earning $200k/yr and is paying that income via W2.

CalChris 2y ago

Richer people don't even pay capital gains. They borrow money on their assets at a low interest rate.

insane_dreamer 2y ago

This is why they want to cut capital gains taxes, and corporate taxes.