The Super Rich and Taxes

[Rianne]

I always hear the super-rich pay little in taxes because they know how to game the American tax system. This article goes deeper. It's specific about the million/billionaires we always read about and wonder if it's true. From the article:

"Periodically, we get a glimpse into the financial lives of the ultrarich. A pro athlete signs a huge contract, a tech CEO sells a boatload of shares in their company, or a billionaire heir unloads a Manhattan penthouse. Based on these nuggets of information, the media speculates as to how much income the rich might bring in every year. But nobody actually knows.


Taking Aim at Billionaire Tax Avoiders, Biden Proposes Minimum Tax for Ultrarich
Thanks to an analysis of its unprecedented trove of IRS data, ProPublica is revealing the 15 people who reported the most U.S. income on their taxes from 2013 to 2018, along with data for the rest of the top 400."

https://www.propublica.org/article/...ET_HITS-EN-DAILY-SPONSORED&BOOKBUB-2022_04_15

The link at the very bottom of the article is the most revealing. And just X out of the ad. It is not a paywall.

 

[pb4uski]

There is already different thread on this subject.

 

[MarieIG]

I am not a fan at taking aim at a particular class. There are "good" and "bad" across every income level.

From what I can see, most people on this board work to avoid, not evade, taxes; and many seek to minimize their income to maximize their subsidies. It seems as if most want someone else to pay their taxes and/or pay for their benefits.

When I pay my estimated taxes, the IRS states if your payment is in excess of 100 million, to break it up into partial payments. BTW, that doesn't pertain to me.

We know that most taxes are paid by higher earners but when was the last time that the administration sent out a thank you to the high tax payers?

 

[pacergal]

All I know is if you are making(especially big) money, you ought to be paying taxes.

I believe we need a tax overhaul, in general. But have no idea what or how. If we could simplify and get rid of so many deductions, it would help. I am not sure a flat tax is a great idea either, as I have read it is harder on those with less money, but admit I don't know that much about it.

Without getting into politics, this is a difficult discussion for some folks.
I would love to hear ideas if we can stay out of politics!

 

[Gumby]

As U.S. Circuit Court of Appeals Judge Learned Hand observed in Gregory v. Helvering, 69 F.2d 809, 811 (2d Cir., 1934), "[a]ny one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes." This applies to ultra rich and not so rich alike, although the ultra rich man can best take advantage of the laws that allow him to "arrange his affairs." And I don't fault him for doing what the law allows. Illegal tax evasion, on the other hand, should be a capital offense in my opinion. It is most certainly not a victimless crime, because it adds to the burden of all of us who do pay what we legally owe. However, ultra rich people can pay for high priced legal help that will keep them on the safe side of the avoidance/evasion line.

If you really want the ultra rich to pay more taxes, you need to change the laws, which will require that you stop allowing them to buy a Congress amenable to them. Good luck with that.

 

[pacergal]

True to that, Gumby!

 

[Rianne]

The article was interesting to me. I never understood how anyone knew how much someone else was worth. How do journalists and the media come up with the numbers? How do we know who pays what taxes? Does my neighbor have the ability to know what our net worth is?

Also, how one billionaire pays a different rate than another based on how they claim income. Maybe it's a "duh" moment. It's how business and income are structured. For instance, Bill Gates paid an effective income tax rate of 18.4% and Isreal Englander paid 30.8%. Accountants matter?

 

[SecondCor521]

The article has a link to another article describing ProPublica's methodology.

In it, they point out that these rich people get taxed preferentially on their qualified dividends. So do I and so does every US taxpayer.

In it, they point out that these rich people get to deduct the full value of donated appreciated stock. So do I and so does every US taxpayer.

In it, they point out that the rich people don't pay proportionately more in Social Security taxes. They conveniently ignore the fact that rich people also don't get any more in Social Security benefits, and in fact get proportionately less (via the bend points) than lower income people.

In it, they point out that rich people get a deduction for charitable contributions. With the caveat that the standard deduction makes it easier not to but that I get a much higher standard deduction than I used to, so do I and every other US taxpayer.

In it, they link to yet a third article talking about a "true tax rate" by including unrealized income because rich people are not taxed on it. Neither am I nor is any other US taxpayer.

Finally, tax returns are private. I'm not sure how they acquired their data, and have no idea how they can confirm whether it's accurate or not. I read their disclaimer that none of the people involved disputed the figures, but that doesn't mean the figures are accurate - I would imagine the rich people would prefer not to waste their time and would prefer not to get into that sort of discussion or debate with them.

 

[38Chevy454]

....and the point is? Nothing new, and until any of these people are found guilty in tax court of tax evasion, I have to believe the "ultra-rich people" are following the US tax laws and paying what they are required to. The articles like this do not solve anything. They merely stir the crap and emotions of general public while stoking the flames of class warfare and division.

If you want to say tax laws need to be changed, that is a different argument. For now we all are required to follow the tax code and laws as they are currently valid. Affecting all from the ultra-poor to the ultra-rich.

 

[Gumby]

.. So do I and so does every US taxpayer....

“The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal loaves of bread.”

Anatole France - The Red Lily (1894)

 

[COcheesehead]

I know a lot of lower income people who don’t pay taxes either. Just because you use the tax laws to your advantage when you have money, is that any different than using the laws to your advantage when you have little …or can control your income. Subsidies anyone?

 

[target2019]

Socialism for the middle class, like the others get.

 

[Car-Guy]

....and the point is? Nothing new, and until any of these people are found guilty in tax court of tax evasion, I have to believe the "ultra-rich people" are following the US tax laws and paying what they are required to. The articles like this do not solve anything. They merely stir the crap and emotions of general public while stoking the flames of class warfare and division.

If you want to say tax laws need to be changed, that is a different argument. For now we all are required to follow the tax code and laws as they are currently valid. Affecting all from the ultra-poor to the ultra-rich.

Absolutely agree... Also, many other aspects to the ultra rich "discussion" too.. ex. How many jobs to they create either directly or indirectly? Many that are good paying too.


I wonder "percentage wise" how many ultra rich" illegally avoid taxes VS the general population?

 

[SecondCor521]

“The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal loaves of bread.”

Anatole France - The Red Lily (1894)

I think that's a different line of discussion.

The article says a number of things along the lines of "These rich people get to donate stock and deduct the full value." I think statements of that sort invite the unaware to think that the tax laws are written to say that only rich people are entitled to that treatment and poor people are not. Which is inaccurate, and I suspect deliberately so.

 

[Bamaman]

That reminds me. I better sit down and do my 2021 income taxes. But of course, I'm no billionaire.

Nice to keep things simple when it comes to my business. And I don't have the headaches of having to plan out and execute any saving tax strategy either.

But this is the starting year of my RMD's, and more decisions will be required.

 

[Locotony]

I reality most individuals that complain about the wealthy not paying taxes are those that never have accumulated any wealth or any type of nest egg that could be used to live on. They fail to realize that a lot of the wealth these people have isn't even taxable in the way that most think of as it is not "income" in the form of salary. Once you are at the point most of us are where you are using your money to make more money or at least to stay even and support your lifestyle until you die you realize that the uber rich are doing the same only at a more macro scale as they can afford to spend more. It's all gaming the system and if a person with an "income of 2 billion only pays 400 mil in taxes that's just like me making 200K and paying 40K its just the scale as some people are repulsed that a person is allowed to have 2 billion in wealth to begin with.

 

[OldShooter]

The one that always gets me is the "The rich should pay their fair share." No one ever says what that share should be. I may agree with the statement, but not its usual meaning, which is "The rich should pay more than we're taking now."

The other question I have when I see these propublica type pieces, which are basically anecdotal is: How many samples of rich people data did they review before they found the number of anecdotes they needed to support their predefined conclusion?

 

[youbet]

It isn't all that complicated. I should pay less in taxes. Everyone else should pay more.

 

[youbet]

I believe we need a tax overhaul, in general. But have no idea what or how.

As you're working on this, please try to avoid painful, unintended consequences.

 

[Aerides]

If you really want the ultra rich to pay more taxes, you need to change the laws, which will require that you stop allowing them to buy a Congress amenable to them. Good luck with that.

In addition, those who will never have the means to "buy" a Congress, tend to vote as if one day, they just might. They vote to protect their never-to-really-be Future self, who, just maybe, becomes a billionaire, and they would not want that future billionaire self to have any less ways to reduce their taxes.

Many people don't vote with their actual wallet, but their fantasy wallet.

I'm also fine with anyone taking full advantage of legal allowances..to a point. When it comes to shell corporations, off shore stuff, eh....dodgy.

 

[travelover]

........If you really want the ultra rich to pay more taxes, you need to change the laws, which will require that you stop allowing them to buy a Congress amenable to them. Good luck with that.

Exactly. A congress person only earns $176,000 a year, yet millions and millions are spent on every race for a two year term. That money buys low taxes for the donors and is apparently an excellent investment.

 

[Jerry1]

My concern is more about the number/percentage of people who pay no taxes. I’m all for helping out people in need, however, it concerns me that there could be a significant number of people who have no direct connection to the money our government spends. Articles about the rich not being taxed enough ignore the possibility that there are many who are not taxed enough. As for definitions as to what is enough - enough that you care what the government spends money on. As for the ultra wealthy, there probably does need to be some consideration of a wealth tax but as has been stated, as long as they work within the rules, I can’t fault them for following the law.

 

[W2R]

The only thing I dare say in this thread (since I don't want to get too political and get in trouble with the mods!) is this:

The very wealthiest people I have known or been around, ALL complain bitterly about their tax burden and how the tax structure dissuades people from making money. So, I tend to think they pay more taxes than a lot of people would like to believe.

I could be wrong! But I'm happier without that heavy ol' chip on my shoulder.

 

[OldShooter]

It isn't all that complicated. I should pay less in taxes. Everyone else should pay more.

You pay income taxes?!!? 60% of US citizens do not. The only taxes they pay are sales taxes.

 

[scrabbler1]

The article has a link to another article describing ProPublica's methodology.

(1) In it, they point out that these rich people get taxed preferentially on their qualified dividends. So do I and so does every US taxpayer.

(2) In it, they point out that these rich people get to deduct the full value of donated appreciated stock. So do I and so does every US taxpayer.

(3) In it, they point out that the rich people don't pay proportionately more in Social Security taxes. They conveniently ignore the fact that rich people also don't get any more in Social Security benefits, and in fact get proportionately less (via the bend points) than lower income people.

(4) In it, they point out that rich people get a deduction for charitable contributions. With the caveat that the standard deduction makes it easier not to but that I get a much higher standard deduction than I used to, so do I and every other US taxpayer.

(5) In it, they link to yet a third article talking about a "true tax rate" by including unrealized income because rich people are not taxed on it. Neither am I nor is any other US taxpayer.

(6) Finally, tax returns are private. I'm not sure how they acquired their data, and have no idea how they can confirm whether it's accurate or not. I read their disclaimer that none of the people involved disputed the figures, but that doesn't mean the figures are accurate - I would imagine the rich people would prefer not to waste their time and would prefer not to get into that sort of discussion or debate with them.

I agree with much, but not all you wrote here.

(1) Before 2003, qualified dividends were not taxed at a lower rate. Rich people are the ones who predominantly make use of this preferential tax treatment, even if it is available to all taxpayers. If this preferential tax treatment were to end (and we return to how dividends were taxed for decades prior to 2003), there would be more money coming into the U.S. Treasury, and most of that additional revenue would come from rich people.

(2) Rich people, again, are the ones who take advantage of this preferential tax treatment. See (1).

(3) I agree, and have often made this point when there are discussions about raising the SS income cap, especially without raising the SS benefit cap.

(4) I agree.

(5) I agree that unrealized income should not be used to make one's case for saying the rich don't pay their fair share in taxes.

(6) I agree.