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Billionaires do pay income tax on investment income.
by WalterBright 2y ago
Billionaires do pay income tax on investment income.
- sunflowerfly 2y agoNot at rates anywhere near tax rates on wages of a middle class worker.
- rtp4me 2y agoBecause investment income is not the same as wage income. Nor should they be.
- brewdad 2y agoWhy not? Money is fungible. A dollar is a dollar. Why should investment dollars be taxed less than those earned through the sweat of one's brow?
- rtp4me 2y agoMainly to encourage people to save their money. You know, "work smarter, not harder"...
- t-3 2y agoFinancial policy is very specifically against people saving their money though - that's why a certain level of inflation is considered desirable to mainstream economists. Spending and borrowing is heavily encouraged at all levels, while investment opportunities are gated based on wealth and income to prevent the poor from being able to "work smarter".
- WalterBright 2y ago> investment opportunities are gated based on wealth and income Anyone can install robinhood on their phone and trade using their credit card. > Financial policy is very specifically against people saving their money No, it isn't. People who save money are terrified of risk. There's nothing stopping anyone from investing the money. > that's why a certain level of inflation is considered desirable to mainstream economists That's the excuse the government makes to inflate the money. You'll never see a politician point out the real reason for inflation. It's so they can spend it without raising taxes, but it does cause inflation, and inflation has to be blamed on something else. Anything but the truth.
- t-3 2y ago> Anyone can install robinhood on their phone and trade using their credit card. Buying a few stocks on an app is not anywhere near the same thing as being an accredited investor. Access to the most lucrative investment opportunities are not available to the average person, and that's almost entirely due to rules intentionally created to block anyone but the already wealthy.
- ringeryless 2y agoTo say nothing of insider trading for those connected to folks setting policies that affect the economy
- rtp4me 2y agoRight, because the average worker has insider connections that set policies that affect the economy. /s
- high_na_euv 2y agoWhat are the examples?
- rtp4me 2y agoPlease, this thread is about the average wage-grade worker (money earned via the "sweat of one's brow"), not an "accredited investor". In this example, almost anyone in the US can open up a Robin Hood, Vanguard, Schwab, Fidelity, etc account with probably $25. You don't need access to the most lucrative investment opportunities to make money; simply buy a standard S&P 500 ETF and call it a day. Over time, the chances of you making money with your investments are high, and the tax burden is lower, meaning you get to make and keep more money in your pocket. That is a win for everyone - not just the magical "billionaire". The average worker in the US needs these sorts of opportunities to be self reliant. You don't need to be a billionaire to make money on the market, you just need a few dollars, some time, and the will to take a little risk. Stop hating on the average worker...
- corimaith 2y ago
- rtp4me 2y agoSorry, nothing prevents the poor from working smarter. Just because you are poor does not mean you are uneducated. And, investment opportunities are NOT gated based on wealth and income. Literally anyone in the US can open an investment account and get started. The lack of desire is the real issue.
- FireBeyond 2y ago> And, investment opportunities are NOT gated based on wealth and income. What? There is literally a class of people considered accredited or sophisticated investors. To be considered an accredited investor by the SEC you must have a net worth of over $1M -not including- your primary residence, and you must have an annual household income of over $300K. It is quite literally a wealth and income gate.
- UncleMeat 2y agoWe have tax-advantaged retirement accounts to enable the middle class to save a reasonable amount in order to retire without being a burden on society. A typical saver doesn't have additional extra money leftover for a taxable brokerage account that exposes them to capital gains taxes. Low capital gains taxes aren't meaningfully encouraging somebody making 75k and saving 10k annually to continue with their saving plan.
- zelon88 2y agoSo you tax the person extra who needs to eat their money, and let the person who is swimming in money keep more of it? And you earnestly can't understand why the poor want to increase taxes on the rich?
- cactacea 2y agoSo we can tax it at a higher rate? Couldn't agree more.
- WalterBright 2y agoShort term dividend income is taxed at the same rates as wage income.
- rtp4me 2y agoThanks, I should have been more clear.
- triceratops 2y agoIf they sell and incur capital gains. But they have so many better alternatives than you or me. And if they do incur capital gains they pay the same tax rate (or maybe 5 basis points higher, depending on your income) as you or me.
- WalterBright 2y agoWhat alternatives are those, that enable realizing income without incurring income tax?
- triceratops 2y agoBorrowing against assets. Wealthy people get low, low rates, much lower than the hoi polloi would get on a HELOC or brokerage account margin loan. Banks like having them as clients.
- jstanley 2y agoAnd how do you pay back the loan without realising a gain?
- triceratops 2y agoYou don't pay back the loan. You die, your assets pass to your heirs, and their cost basis is stepped up. The heirs sell some of the assets to pay the loan back. They don't have capital gains because of the stepped-up cost basis. That's the gist I got from reading https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26rsf/buy_borrow_die_explained/ https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26... There are finer points I don't understand such as: 1. Is the stepped-up cost basis available to the estate or only to the heirs? If it's to the estate, it's easier for the bank to trust they'll be paid back. 2. If the heir gets the stepped up cost basis, what legal guarantees does the bank have that the heir will pay the loan back? And probably a lot else. I assume there's expensive lawyering and accounting involved in setting it up, so it isn't cost-effective unless you have a certain amount to shield from taxes in the first place.
- ajross 2y agoOnly short term gains are taxed as income. Long term capital gains tax caps at 20%, wildly lower than the top income tax bracket of 37%. And it's always possible to defer short term gains (e.g. put your trading money in an IRA).
- throwaway-blaze 2y agoIRA contributions are drastically limited to a $7000 cap per year under 50. Whether they should be is another question, and one worth exploring. Long-term investment is rightly seen as something to be encouraged hence the lower tax rates. You can make the argument that the rate should be more like 0% since the money invested and risked was already taxed most likely...20% is a reasonable value for the market regulating infrastructure provided by gov't entities.
- ajross 2y agoThere are loopholes to roll all sorts of nonsense into an IRA though. There was a whole news cycle in the 2012 election about Mitt Romney's $4M "IRA" or somesuch. And IRAs are hardly the only shelter from income tax, they're just the most obvious. The simple truth is that wealth beyond the ~$10M level in the US pays essentially zero "income tax". It just doesn't happen, no one does it. Short term gains are only taxed for small investors who don't know any better.
- WalterBright 2y agoAccording to Google: "Entrepreneur Elon Musk announced on social networks that this year he will pay 11 billion dollars, thus becoming the largest taxpayer in the history of the USA."
- ajross 2y agoThat was on a sale of Tesla stock that he'd held for much longer than the long term rate threshold. He paid 20% on it, or plausibly less. I, personally pay a higher rate than that. Big numbers notwithstanding, Elon Musk shouldn't be paying less tax than I do, sorry.
- Sonnigeszeug 2y agoWhen i needed money for a house, without a good security i had to pay 1.6 and with 0.8. Rich get richer, poor never see this advantage.