The richest pay almost no taxes

[thyme4change]

And we blame immigrants for sucking off the system. 🙄 Seriously, when are we going to fix the wealth gap!!

www.nbcnews.com/business/taxes/richest-americans-pay-almost-no-income-taxes-report-finds-n1270069

Richest Americans pay almost no income taxes, report finds

A report from ProPublica illustrated how wealthy people in the U.S. are able to avoid income taxes by keeping the bulk of their wealth in investments that have little or no taxes.

-----

The 25 richest Americans paid little to no federal income taxes, according to a report released Tuesday by the nonprofit news organization ProPublica, a claim that has reignited debate about the tax code and sparked an investigation by the IRS into the leak of private tax documents.

NBC News has not independently verified the documents, and ProPublica declined to disclose how it had gained access to what it called a "vast trove of Internal Revenue Service data on the tax returns of thousands of the nation's wealthiest people, covering more than 15 years."

The report does not detail any illegality by the people whose tax documents it reviewed, who include many of the richest people in the U.S., such as Jeff Bezos and Elon Musk. The White House is pushing a plan that would tax capital gains as income for those making over $1 million annually.

[NomoreDramaQ1015]

But according to the boards rich people deserve not to pay taxes because their awesome wonderful brilliance radiates down on us. Without that the world will be anarchy.

They owe the world nothing because they made their way alone.

Only poor people need to pay their fair share. Let it remind them and inspire them not to be such lazy worthless POS.

I mean this mentality has worked so well already. There is nothing in history to suggest reevaluating. Move along.

[grumpyhermit]

I'm not sure why this report was "shocking" as so many headlines seem to claim. Haven't there been discussions about the fucked up tax code in this country, and how it is stacked for AGES? It seems much more like a, "Yeah, no shit" type of revelation to me.

I feel like you have to either be 1) willfully stupid 2) living under a rock to not realize that there is something seriously wrong with the way taxes and wealth work in this country.

[tallguy]

That is a really stupid premise for an article. There are a number of things that should be fixed in the tax code. Of that there is no doubt. Complaining that billionaires don't pay tax on unrealized gains is not one of them. We have an income tax, not a wealth tax. When gains are realized, then they become taxable. Arguably, the step-up in basis should be eliminated or at least limited. And yes, it will hurt both my GF and myself (or more properly our respective kids) with six or even seven-figure tax bills by that time. It will of course be a record-keeping nightmare to do so, but it would be more fair.



I have said for many years that death is the greatest tax-avoidance scheme we have. The efforts on the right to eliminate the estate tax, even going so far as to call it a "death tax" to drum up rage against it, would make the problem even worse. There is no way to justifiably eliminate the estate tax without eliminating the step-up in basis. Of the two, I would much rather deal with the estate tax once at death than try to research cost bases on previously unknown assets from now-deceased parents, or even two or three generations back. An unrealized gains tax, where we have to figure out taxes on unrealized gains every year, or losses to carry over? No thanks. Trying to figure out those numbers over a lifetime, and what was taxed and what wasn't years ago, would be a million times more difficult. Simplify the tax code. Don't make it increasingly complex.

[justme]

Yea I stopped talking one they got to unrealized gains. Would we have to refund them money if the market was down for the year.

I'm all about closing loop holes in yearly income tax. Hell make estate taxes inescapable if you have over one billion dollars regardless of trusts and shit.

[bean29]

I think they pointed to unrealized gains because the real issue is not taxing carried interest like the rest of us get taxed on our wages.  Many of us own a rental property or a small stock portfolio and don't want to lose the small tax advantages we might be counting on for our financial future, but an estate worth less than 5 million is anything compared to the multibillion + ones these people have.

Rich people especially executives of companies, get paid in stock options.  The options are not taxed as ordinary income, and get preferential tax treatment.

Yes the tax code does favor them, and they poor financial literacy of the general public also favors the continuation of the system favoring them, because most people don't understand why they have it so much better than the common man.

It will probably never get fixed because once elected congress people are part of the elite group that benefits from the favoritism the tax code grants to the elite in our society.  

[teen persuasion]

Blithely comparing annual ordinary income to annual growth in wealth is really comparing apples and oranges (or maybe grapes and watermelons?). Sadly, most Americans aren't tax savvy enough to notice the disconnect.

I hope ProPublica's promised follow-up articles break down WHY the ultrawealthy can escape taxes. Show the different tax rates for ordinary income vs investment income. Explain the unrealized gains issue, the step up in basis, etc. The majority of taxpayers with primarily ordinary income have no clue about the rest, just have a nebulous concept that the ultrawealthy get unnamed tax breaks or write offs. Those common taxpayers need to see it spelled out how the deck is stacked against them/in favor of the wealthy in the tax code, to be motivated to demand tax reform.

[kadee79]

Jun 10, 2021 10:03:13 GMT -5 teen persuasion said:

Blithely comparing annual ordinary income to annual growth in wealth is really comparing apples and oranges (or maybe grapes and watermelons?). Sadly, most Americans aren't tax savvy enough to notice the disconnect.

I hope ProPublica's promised follow-up articles break down WHY the ultrawealthy can escape taxes. Show the different tax rates for ordinary income vs investment income. Explain the unrealized gains issue, the step up in basis, etc. The majority of taxpayers with primarily ordinary income have no clue about the rest, just have a nebulous concept that the ultrawealthy get unnamed tax breaks or write offs. Those common taxpayers need to see it spelled out how the deck is stacked against them/in favor of the wealthy in the tax code, to be motivated to demand tax reform.

Some of us know, but getting others to believe us isn't always easy....or understand what we are trying to explain to them in more simple terms.  

[haapai]

I'd recommend reading the ProPublica article before reading the commentary on it.  There's a link to it in the link in the OP. 

I'm not trying to be pious (go to the primary sources first), or to point fingers at anyone (nobody comes to mind).  It's just truly remarkable how much more sense the original story makes and what hash the articles written about it are. 

[haapai]

I'm slightly miffed by how ProPublica ignores increases in the value of retirement accounts when attempting to figure out how much a typical, median-income earner in their forties, sees their wealth increase. 

The increase in the value of my retirement (and HSA) assets has been spectacular in the last 10-15 years.  It dwarfs the increase in my home equity despite me buying this house within six months of the absolute bottom of the housing trough.  Don't families earning twice as much as me contribute anything to retirement accounts?  Lord knows that I was late in contributing to them, but I did get saner in my late 30s. 

I can kinda see how that if you cross your fingers and toes and imagine that your mother isn't reading about what you said, you can consider traditional IRAs and 401(k)s a form of deferred income but I just can't do that for Roths. 

ETA:  I also think that reducing automobile and student loans should count for something, although I am the first to admit that they don't show up in anyone's tax filings and are a cast-iron fiend to estimate. 

[Opti]

Jun 9, 2021 10:02:52 GMT -5 thyme4change said:

And we blame immigrants for sucking off the system. 🙄 Seriously, when are we going to fix the wealth gap!!

www.nbcnews.com/business/taxes/richest-americans-pay-almost-no-income-taxes-report-finds-n1270069

Richest Americans pay almost no income taxes, report finds

A report from ProPublica illustrated how wealthy people in the U.S. are able to avoid income taxes by keeping the bulk of their wealth in investments that have little or no taxes.

-----

The 25 richest Americans paid little to no federal income taxes, according to a report released Tuesday by the nonprofit news organization ProPublica, a claim that has reignited debate about the tax code and sparked an investigation by the IRS into the leak of private tax documents.

NBC News has not independently verified the documents, and ProPublica declined to disclose how it had gained access to what it called a "vast trove of Internal Revenue Service data on the tax returns of thousands of the nation's wealthiest people, covering more than 15 years."

The report does not detail any illegality by the people whose tax documents it reviewed, who include many of the richest people in the U.S., such as Jeff Bezos and Elon Musk. The White House is pushing a plan that would tax capital gains as income for those making over $1 million annually.

This has been true for years and the govt doesn't go after rich tax dodgers as much as the very poor, because it costs significant money and time to find rich tax cheats and they can afford the best lawyers and politicians. On the other hand, scammers or exaggerators on WIC, EBT or the EIC are far easier to track and unlikely to push back.

The US is slanted towards the rich, and it should not be IMO if we really do believe as Americans we are the land of opportunity.

[Opti]

Jun 10, 2021 10:03:13 GMT -5 teen persuasion said:

Blithely comparing annual ordinary income to annual growth in wealth is really comparing apples and oranges (or maybe grapes and watermelons?). Sadly, most Americans aren't tax savvy enough to notice the disconnect.

I hope ProPublica's promised follow-up articles break down WHY the ultrawealthy can escape taxes. Show the different tax rates for ordinary income vs investment income. Explain the unrealized gains issue, the step up in basis, etc. The majority of taxpayers with primarily ordinary income have no clue about the rest, just have a nebulous concept that the ultrawealthy get unnamed tax breaks or write offs. Those common taxpayers need to see it spelled out how the deck is stacked against them/in favor of the wealthy in the tax code, to be motivated to demand tax reform.

Its not entirely apples and oranges, and here's why. Roughly 20 to 40% of Americans don't make enough to have investment income let alone survive without social programs. (I will skip the very real issue with ultra wealthy corps and individuals not paying living wages and making the taxpayers as a whole cover some of those missing wages that weren't paid that end up in the rich corp's pocket or individuals wealth stash.)

Taxes could be designed to be more fair, but they are not. Stocks given to employees could be taxed as income based on value at issue, but that's generally not how its done. The wealthy donate to politicians to tweak the tax code. Not sure that a block of poor folk is going to have the same leverage, but I suppose we could try.

[djAdvocate]

we should probably just have a flat tax with a $50k deductible.
no loopholes.
no exceptions for capital gains.
nothing.

the coffers would overflow with revenue.

edit: I forgot to mention the percent.  it is a fairly simple calculation.

total household income is $17.6T

total persons working is 151.2M

total deduction = $7.6T

total "taxable income" = $10T

US budget = $4.829T

let's call it 50% (including SS and MC)

pretty simple, really.  would produce a $171B surplus.

would really simplify things for businesses, too.

anyone making under $25/hr would have no withholdings

other than private benefits like retirement and medical.

[teen persuasion]

Jun 10, 2021 16:11:44 GMT -5 haapai said:

I'm slightly miffed by how ProPublica ignores increases in the value of retirement accounts when attempting to figure out how much a typical, median-income earner in their forties, sees their wealth increase. 

The increase in the value of my retirement (and HSA) assets has been spectacular in the last 10-15 years.  It dwarfs the increase in my home equity despite me buying this house within six months of the absolute bottom of the housing trough.  Don't families earning twice as much as me contribute anything to retirement accounts?  Lord knows that I was late in contributing to them, but I did get saner in my late 30s. 

I can kinda see how that if you cross your fingers and toes and imagine that your mother isn't reading about what you said, you can consider traditional IRAs and 401(k)s a form of deferred income but I just can't do that for Roths. 

ETA:  I also think that reducing automobile and student loans should count for something, although I am the first to admit that they don't show up in anyone's tax filings and are a cast-iron fiend to estimate. 

Yeah - is ProPublica implying average earners have no retirement accounts worth mentioning?  Or just conveniently ignoring because those also don't get reported on tax returns?

It occurs to me that my numbers would look just as outrageous (though orders of magnitude smaller) as the billionaires mentioned.    I mean, my AGI is maybe a third of our gross income, I owe zero tax, and get significant tax refunds from refundable credits.  Yet we have ~30x AGI in tax advantaged accounts of various types all growing tax free ATM, maybe 40% of the total will never be subject to tax, and the remaining 60% can likely be converted to tax free forever accounts over time w/o paying tax.

The only payroll/income tax I regularly pay and cannot escape is FICA.  But again - the billionaires get the advantage of a cap, and/or that $1 cash salary with $$$ stock incentives workaround.

[thyme4change]

Jun 11, 2021 20:55:57 GMT -5 teen persuasion said:

Jun 10, 2021 16:11:44 GMT -5 haapai said:

I'm slightly miffed by how ProPublica ignores increases in the value of retirement accounts when attempting to figure out how much a typical, median-income earner in their forties, sees their wealth increase. 

The increase in the value of my retirement (and HSA) assets has been spectacular in the last 10-15 years.  It dwarfs the increase in my home equity despite me buying this house within six months of the absolute bottom of the housing trough.  Don't families earning twice as much as me contribute anything to retirement accounts?  Lord knows that I was late in contributing to them, but I did get saner in my late 30s. 

I can kinda see how that if you cross your fingers and toes and imagine that your mother isn't reading about what you said, you can consider traditional IRAs and 401(k)s a form of deferred income but I just can't do that for Roths. 

ETA:  I also think that reducing automobile and student loans should count for something, although I am the first to admit that they don't show up in anyone's tax filings and are a cast-iron fiend to estimate. 

Yeah - is ProPublica implying average earners have no retirement accounts worth mentioning?  Or just conveniently ignoring because those also don't get reported on tax returns?

It occurs to me that my numbers would look just as outrageous (though orders of magnitude smaller) as the billionaires mentioned.    I mean, my AGI is maybe a third of our gross income, I owe zero tax, and get significant tax refunds from refundable credits.  Yet we have ~30x AGI in tax advantaged accounts of various types all growing tax free ATM, maybe 40% of the total will never be subject to tax, and the remaining 60% can likely be converted to tax free forever accounts over time w/o paying tax.

The only payroll/income tax I regularly pay and cannot escape is FICA.  But again - the billionaires get the advantage of a cap, and/or that $1 cash salary with $$$ stock incentives workaround.

I think ProPublica is saying that people who have many many BILLIONS of dollars aren't paying much in income taxes. I haven't written any tax codes, but I am sure I could figure out how to tax someone with a billion dollars without harming run of the mill millionaires.

[bean29]

Jun 11, 2021 20:55:57 GMT -5 teen persuasion said:

Jun 10, 2021 16:11:44 GMT -5 haapai said:

I'm slightly miffed by how ProPublica ignores increases in the value of retirement accounts when attempting to figure out how much a typical, median-income earner in their forties, sees their wealth increase. 

The increase in the value of my retirement (and HSA) assets has been spectacular in the last 10-15 years.  It dwarfs the increase in my home equity despite me buying this house within six months of the absolute bottom of the housing trough.  Don't families earning twice as much as me contribute anything to retirement accounts?  Lord knows that I was late in contributing to them, but I did get saner in my late 30s. 

I can kinda see how that if you cross your fingers and toes and imagine that your mother isn't reading about what you said, you can consider traditional IRAs and 401(k)s a form of deferred income but I just can't do that for Roths. 

ETA:  I also think that reducing automobile and student loans should count for something, although I am the first to admit that they don't show up in anyone's tax filings and are a cast-iron fiend to estimate. 

Yeah - is ProPublica implying average earners have no retirement accounts worth mentioning?  Or just conveniently ignoring because those also don't get reported on tax returns?

It occurs to me that my numbers would look just as outrageous (though orders of magnitude smaller) as the billionaires mentioned.    I mean, my AGI is maybe a third of our gross income, I owe zero tax, and get significant tax refunds from refundable credits.  Yet we have ~30x AGI in tax advantaged accounts of various types all growing tax free ATM, maybe 40% of the total will never be subject to tax, and the remaining 60% can likely be converted to tax free forever accounts over time w/o paying tax.

The only payroll/income tax I regularly pay and cannot escape is FICA.  But again - the billionaires get the advantage of a cap, and/or that $1 cash salary with $$$ stock incentives workaround.

teen persuasion How do you achieve "tax free forever over time w/o paying tax"?

[teen persuasion]

Jun 14, 2021 17:21:56 GMT -5 bean29 said:

Jun 11, 2021 20:55:57 GMT -5 teen persuasion said:

Yeah - is ProPublica implying average earners have no retirement accounts worth mentioning?  Or just conveniently ignoring because those also don't get reported on tax returns?

It occurs to me that my numbers would look just as outrageous (though orders of magnitude smaller) as the billionaires mentioned.    I mean, my AGI is maybe a third of our gross income, I owe zero tax, and get significant tax refunds from refundable credits.  Yet we have ~30x AGI in tax advantaged accounts of various types all growing tax free ATM, maybe 40% of the total will never be subject to tax, and the remaining 60% can likely be converted to tax free forever accounts over time w/o paying tax.

The only payroll/income tax I regularly pay and cannot escape is FICA.  But again - the billionaires get the advantage of a cap, and/or that $1 cash salary with $$$ stock incentives workaround.

teen persuasion How do you achieve "tax free forever over time w/o paying tax"?

We do a Roth conversion ladder over many years, convert up to the standard deduction for free.  If we can keep the tIRA balances from growing, maybe whittle them down a bit, and keep all bonds in tIRA (slower growth), by the time SS kicks in and then RMDs - the RMDs will be small enough that taxable SS will also be small, so still the combo fits within the standard deduction.  Roth withdrawals for spending, and some HSA (both tax free).

If I can't keep it tax free, it's likely because the tIRA grew faster than I can convert it, so bigger balances.  Good problem to have, happy to pay a bit of tax to convert a bit more each year.  Of course, at that low level, converting an extra $10-20k would be in the 10% bracket, so only cost $1-2k.

ETA: Forgot about state taxes - no tax on SS, and state exempts first $20k withdrawal/conversion of tIRA per person from state taxes plus standard deduction.  So that's $56k +SS eventually state tax free annually, more if they ever index it for inflation as they've tried to pass.