One thing I noticed that's getting pushed these days is the narrative that it's "unfair" that someone "made" obscene amounts of money but paid little to nothing in taxes, but they forget that asset appreciation is NOT income. It's only income, if you sell something off at a profit and then pay taxes on it.
So, if you started 2020 with $1B in net worth and ended up with a net worth of $1.5B at the end of the year, but you only cashed out $100K (or let it rise, but made $100K in some other fashion), then your taxable income is only $100K (minus any deductions). But with the narratives I'm seeing pushed in some of these "financial" articles, in their mind, that person made $500M.
Let's say this hypothetical person paid $10K in federal taxes. Regardless of what their top marginal tax rate is, their effective tax burden is 10%. But these financial savants would have you believe their effective tax burden was only 0.002% ($10k/$500M).
I'm oversimplifying it a bit here. It's possible that on its rise from $1B to $1.5B, that portfolio might have had taxable events such as dividends, capital gains distributions from mutual funds, etc., but for the sake of simplicity, let's pretend it didn't.
What really happened here, is that this person had assets that rose in value, from $1B to $1.5B. But then the next year, who knows? It could fall to $500M.
What a lot of these people are advocating, is actually a wealth tax, rather than an income tax. Whether they're doing that to be sneaky, or simply don't understand how math and taxes work, remains to be seen. But I have a feeling that, as time goes by, you're going to see more self-appointed experts post these types of articles. I have a feeling these are the same types of people that would short-circuit mentally if you tried to make them start a carbureted car that comes with two keys.
Exactly!
