The Super Rich and Taxes

[VanWinkle]

50% of my property taxes go to schools. Beautiful new and remodeled schools. Helps my property value but I have no children. Our roads have huge potholes and the city continues to fill them with some fast-patch stinky tar. And the potholes are back next year.

Taxes, I want transparent, detailed, and specific accounting of where my taxes go and why. I'll pay them, whatever rules or laws they come up with, OK. But I want to know how, where, and when they use my money and why. Someone tell me why that is so hard. We have to explain and document to the IRS our income, and how we spend (to a degree) because our tax bill depends on it. If we donate, send kids to college, remodel our homes, affects our taxes. The report would be mind-boggling, but I want to make the city, state and fed give me an accounting rather than me having to give them an accounting every single year.

How about that?

I agree with the above, and in my great state instead of building beautiful and newly remodeled schools, the property tax money goes to a failing pension system for teachers and administration(more administration than 10 other states combined). Our schools are mostly in need of repair and in decline despite the fact that we have the 2nd highest property taxes in the nation(New Jersey gets the honor of #1).

 

[youbet]

I agree with the above, and in my great state instead of building beautiful and newly remodeled schools, the property tax money goes to a failing pension system for teachers and administration(more administration than 10 other states combined). Our schools are mostly in need of repair and in decline despite the fact that we have the 2nd highest property taxes in the nation(New Jersey gets the honor of #1).

Actually, it doesn't sound like you do agree with Rianne. Her point was that she wants more accounting of the taxing and spending to be available. You seem to be saying, in some detail, you see the data and disagree with the taxing and spending. Two different things.

While I'm very concerned about the taxing and spending in Illinois, the data does seem to be available, sad as it is. But, folks with our view don't seem to be able to get anything done about it. I do belong to, and fund, a grassroots organization that focuses on these issues and sends newsy emails out with the latest happenings. How about you?

BTW, just a detail, your property taxes fund local pensions for your firefighters, police and other county and municipal employees but not state pensions, including teachers. So, bottom line, the state pension systems are in trouble and that is widely advertised. But it's NOT your local property taxes that fund them. It's a common misunderstanding.

 

[Mulligan]

If we magically changed the tax laws to strip away generational wealth, then all the other countries in the world would become more attractive to all the "rich" folks.

After they leave, it will just be the poor left fighting over crumbs.



It might even kill productivity and motivation to work harder. Already tax brackets kill motivation to work overtime. Plenty of time I heard people tell me they weren't going to do overtime as they'll just pay more in taxes



Everyone knows the more you earn, the more you pay in taxes

Yes, the OT taxed too much myth cannot be killed. Many think they actually lose money working OT. The taxables are the taxables. OT does not change the tables. Proper withholdings seem to screw people up.

 

[pb4uski]

I don't suppose it's as easy as a google search? You're right, rather than complain, I need to research and find this data. Chicago should be an interesting read.

Easy to find in VT... not sure where you are. For us, the annual school report and budget is on the school's website and the annual town report with the town budget is on the town's website.

Have you read either the school report or the town report? Attended any school board or town meetings?

 

[schenbew]

Wealth Concentration Increasing

Tax laws and other laws and regulations dictate the rules of the economic game of capitalism, directly impacting wealth accumulation for all people, wealthy or not. I'll refrain from taking a position on what rules are best, but take a look at this data from the Federal Reserve on wealth concentration in America since 1989:

https://www.federalreserve.gov/rele...phic:networth;population:1,3,5,7;units:levels

The wealth of the top 10% has increased markedly, while the wealth of the bottom 50% has remained nearly constant.

America and many other developed western nations have benefited from the creation, and maintenance, of a thriving "middle class". Recent economic trends have been slowly whittling away at this middle class and increasing levels of wealth accumulation in the top 10% of society.

History shows that societies with high levels of wealth inequality are far more unstable and subject to populist revolts.

 

[scrabbler1]

50% of my property taxes go to schools. Beautiful new and remodeled schools. Helps my property value but I have no children. Our roads have huge potholes and the city continues to fill them with some fast-patch stinky tar. And the potholes are back next year.

Taxes, I want transparent, detailed, and specific accounting of where my taxes go and why. I'll pay them, whatever rules or laws they come up with, OK. But I want to know how, where, and when they use my money and why. Someone tell me why that is so hard. We have to explain and document to the IRS our income, and how we spend (to a degree) because our tax bill depends on it. If we donate, send kids to college, remodel our homes, affects our taxes. The report would be mind-boggling, but I want to make the city, state and fed give me an accounting rather than me having to give them an accounting every single year.

How about that?

While I agree with your second paragraph, I don't necessarily agree with your first paragraph. In my co-op apartment complex, we send very, very few kids to our local schools because most of our residents/shareholders are elderly and/or simply childfree (like me). Higher school taxes means our monthly maintenance payments are higher, and that puts downward pressure on the value of our apartments. When I was shopping for my apartment, I didn't care about the quality of the schools. But I did care about the monthly maintenance charges which are driven in large part by the school taxes. The higher the school taxes, the less I'd want to pay for the apartment.

 

[jkern]

Yes, the OT taxed too much myth cannot be killed. Many think they actually lose money working OT. The taxables are the taxables. OT does not change the tables. Proper withholdings seem to screw people up.

I believe the culprit is the tax withholding algorithm. When people work OT the tax withholdings increase as if they are making this much more money all the time. No matter how many times I tell some people that OT is not taxed any differently than just earning more money they will never get it. All they see is the net pay.

 

[ERD50]

.... I recall Lester Thurow (an economics professor at MIT), another panelist on that show, made the point you made - the complication in the tax code is not with the rates but with the definition and determination of income.

That's true. And the "simple solution" (which will never be implemented for many reasons), is to stop taxing "income" (because it is hard to define).

Instead, tax consumption (national Sales Tax). It makes a lot of sense. No complications on how it was made. State sales tax in IL is pretty simple. It rings up on the register, I pay it. No forms to fill out, no withholding, takes almost zero time (OK, the business has to report it, and make deposits, probably fairly simple?) etc, etc.

And those plans include a "pre-bate" to all (no questions, no qualifications to be determined, no subjectivity) so that in effect, the first $XX,XXX of spending is not taxed.

-ERD50

 

[jldavid47]

If we magically changed the tax laws to strip away generational wealth, then all the other countries in the world would become more attractive to all the "rich" folks.
After they leave, it will just be the poor left fighting over crumbs.

50 or so years ago there was a top 40 song "I'd Love To Change The World" by a British group called 10 Years After that had this lyric:


"Tax the rich, feed the poor, 'til there are no rich no more."


My response even back then was "How do you feed the poor after there are no more rich to tax?"

 

[mpeirce]

Taxes, I want transparent, detailed, and specific accounting of where my taxes go and why. I'll pay them, whatever rules or laws they come up with, OK. But I want to know how, where, and when they use my money and why. Someone tell me why that is so hard. We have to explain and document to the IRS our income, and how we spend (to a degree) because our tax bill depends on it. If we donate, send kids to college, remodel our homes, affects our taxes. The report would be mind-boggling, but I want to make the city, state and fed give me an accounting rather than me having to give them an accounting every single year.

How about that?

In Ohio we have the Ohio Checkbook. It’s a pretty good way to see where the money goes.

https://checkbook.ohio.gov

The Ohio Checkbook is a result of a joint initiative from two first-of-their-kind sites, Ohiocheckbook.com and Ohio's Interactive Budget. The collective effort enhances government transparency by providing real-time state financial and transactional data. Users can view online government spending, as well as how revenue is allocated.
​

 

[OldShooter]

If we magically changed the tax laws to strip away generational wealth, then all the other countries in the world would become more attractive to all the "rich" folks. After they leave, it will just be the poor left fighting over crumbs. ...

In 1990, Margaret Thatcher responded to a question posed in the House of Commons ... about wealth inequality in the UK by saying "He would rather that the poor were poorer, provided that the rich were less rich. ... "

 

[jldavid47]

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.

There are HUGE practical problems with treating unrealized gains over the course of a year as income. It's the main reason it hasn't happened in over 100 years of income tax law.

For things like stocks, bonds and mutual funds which are publicly traded and have an objective market value the simplest thing to do would be to "mark to market" all of those assets on 12/31. But is that "fair" (whatever that really means)? What happens if the overall value of those assets dropped over the previous 12 months? Do you give them a full credit against other income for that decline? Seems only "fair" right?

Assets that do not have an active public market similar to stocks like real estate, art or a private business need to determine some type of objective valuation at the end of every year. Realistically, how do you do that? And even if you can, what makes anyone think that rich people with lots of accountants and lawyers won't come up with a way of appraising those assets as low as possible?

You'd need to double the size of the IRS just to handle this monster and even then tax courts would be jammed for years.

One of the main complaint of progressives is that those assets sit and appreciate and rich people simply borrow against those assets. Fine. Then create a tax against borrowings of that sort. That would be a lot simpler and "fairer" than trying to treat asset appreciation as income. Or, as some here have suggested, tighten the screws upon death of the asset holder.

I don't have the answer but I know that taxing asset appreciation is a bad idea.

 

[Car-Guy]

50 or so years ago there was a top 40 song "I'd Love To Change The World" by a British group called 10 Years After that had this lyric:

Another British group Tax record hit. (Taxman by the Beatles)


If you drive a car, I'll tax the street,
If you try to sit, I'll tax your seat.
If you get too cold I'll tax the heat,
If you take a walk, I'll tax your feet.

https://video.search.yahoo.com/sear...=338fc9896ae717d16d1c7f2495386577&action=view

 

[OldShooter]

... I don't have the answer but I know that taxing asset appreciation is a bad idea.

Agreed. As is taxing assets.

For example, the numbers one gets by marking large illiquid positions to market are complete nonsense. If Buffett, for example, were to liquidate his Berkshire position he would take a huge hit both because of the size of the sale and because it would imply that Buffett no longer believed in the company.

Another example which applies to both the unrealized gains tax and the assets tax is any asset that is illiquid and hard to value. Coal or oil in the ground? Private equity? Patents and trademarks? There may not be enough attorneys available in the US to litigate all the valuation arguments that would arise if the IRS were told to tax assets.

And, of course, taxing paper gains implies that paper losses will be deductible, creating a glorious timing mess.

For practical reasons IMO neither of these ideas is feasible, however good some may consider them to be.

 

[4legsgood]

I think getting rid of the step up in basis of inherited assets would not only help with subsequent generation untaxed, unearned wealth but also loosen up the real estate market. I say this as someone with a large increase in value of real estate. I'd happily adjust to no step up in basis and downsize, opening up housing in first tier suburb.

 

[jldavid47]

Agreed. As is taxing assets.

For example, the numbers one gets by marking large illiquid positions to market are complete nonsense. If Buffett, for example, were to liquidate his Berkshire position he would take a huge hit both because of the size of the sale and because it would imply that Buffett no longer believed in the company.

Mr. Buffet has been quoted often as saying that he and his fellow billionaires don't pay enough in taxes. My suggestion to Mr. Buffet is that he should determine how much he thinks he should pay in taxes and write a check for the difference between that and his actual tax bill to the Treasury Department every year. They happily accept "donations" to "help reduce federal debt."

 

[aja8888]

Yes, the OT taxed too much myth cannot be killed. Many think they actually lose money working OT. The taxables are the taxables. OT does not change the tables. Proper withholdings seem to screw people up.

Have you looked at the new federal withholding calculation forms and instructions lately? I did....for my daughter. I have an MBA in finance and had a hard time figuring this out.

 

[Midpack]

Mr. Buffet has been quoted often as saying that he and his fellow billionaires don't pay enough in taxes. My suggestion to Mr. Buffet is that he should determine how much he thinks he should pay in taxes and write a check for the difference between that and his actual tax bill to the Treasury Department every year. They happily accept "donations" to "help reduce federal debt."

In 2011, I believe Buffett shared that his secretary paid a higher % in taxes than he did - not an unreasonable basis for his statement IMO.

His point was that ALL billionaires (and other wealthy individuals) should be paying more, not just those very few who might choose to voluntarily. Billionaires who would voluntarily pay more than required by IRS tax code would be a small group - just like at every level of income. So dismissing the idea with let volunteers pay more misses his point...

Besides, the mechanics of how to alter the tax code are relatively simple, several options. The issue is driving that policy change, good luck with that...

Buffett vs. his secretary

We fact-checked Warren Buffett's statements about taxes in the New York Times. Buffett said that his taxes amounted to "only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent." Individual tax filings are private, so there was no way we could compare Buffett's actual tax return with that of his secretary and other co-workers. (We contacted his office when we did the fact-check and didn't hear back.) So instead, we checked Buffett's statement that the "mega-rich" pay about 15 percent in taxes, while the middle class "fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot." We rated the statement True.

 

[skipro33]

I read the link and the link in the link. The title of this thread is very misleading. What applies to these super rich is the same thing we all practice. We are taxed on INCOME, not WEALTH. Thank god for that! What if every year you were taxed on your wealth or even the growth of your wealth instead of your actual income, the money you used and spent?
The second link compared Bezos to the average American. The average American paid 14% taxes on his income. Bezos paid 21% taxes on his income. Just because Bezos's investments soared into the billions, just like your investments, they are not taxed, but deferred. 'unrealized gains' I think they called it.
So I worry that the rank and file average citizen will take to heart that the ultra rich don't pay their taxes when in fact they pay just as much or more income taxes on their income. Attacking their wealth by taxing is likely to destroy the very things that makes our lives more comfortable.
Besides, who cares if they are worth billions? It's only what you spend as income that the IRS is concerned about.

In regard to tax code that allows deductions and other legal maneuvers to avoid paying any more taxes than required, well who wouldn't take advantage of those as long as they are legal? The problem is with the legislation and rule makers that allow the tax breaks, not the ultra-rich scamming the system as implied. You may as well say creating a trust for your wealth is scamming the system as well as posturing income for ACA benefits, or ROTH conversions....

 

[Midpack]

I read the link and the link in the link. The title of this thread is very misleading. What applies to these super rich is the same thing we all practice. We are taxed on INCOME, not WEALTH. Thank god for that! What if every year you were taxed on your wealth or even the growth of your wealth instead of your actual income, the money you used and spent?
The second link compared Bezos to the average American. The average American paid 14% taxes on his income. Bezos paid 21% taxes on his income. Just because Bezos's investments soared into the billions, just like your investments, they are not taxed, but deferred. 'unrealized gains' I think they called it.
So I worry that the rank and file average citizen will take to heart that the ultra rich don't pay their taxes when in fact they pay just as much or more income taxes on their income. Attacking their wealth by taxing is likely to destroy the very things that makes our lives more comfortable.
Besides, who cares if they are worth billions? It's only what you spend as income that the IRS is concerned about.

I don't disagree with your assessment, but there's good reason to care about the consider imbalance between Federal revenue (taxes) and spending. The trend is cause for concern.

 

[OldShooter]

... the step up in basis of inherited assets ...

That's a hard one for me to defend, though I hope our heirs benefit from it.

 

[jkern]

I don't understand why so many people care if sone very wealthy person has assets that were worth $25B last year and are now worth $50B. I am not poorer or worse off because this persons assists grew in value. By the same token, a couple of months ago when Mark Zuckerburg lost $31B in one day I didn't become richer or better off.

 

[4legsgood]

That's a hard one for me to defend, though I hope our heirs benefit from it.

I don't think people will be claiming Elon Musk's kids @#$%@#$ and
*%&$%&$% are job creators and deserve tax leniency .

I try to keep a good portion of my stock gains harvested just in case the tax code changes on this.

 

[skipro33]

I don't disagree with your assessment, but there's good reason to care about the consider imbalance between Federal revenue (taxes) and spending. The trend is cause for concern.

I may have missed your point, but how is it the ultra-rich's fault the government spent more than it took in and drove up the debt?

The imbalance is caused by the legislative branch spending more than it takes in. It's not because they were expecting more to come in and miscalculated, it was done on purpose, with a vote used to pass the decision to spend more than they have in revenue. How is that related to this topic? Should the ultra-rich pay off the national debt? And if they do, should they have more input in the future on what is in the budget since they are paying the larger revenue to do so?

Reading this morning that Russia spends $68B on it's national defense and the USA spends over $680B. 10 times as much. Prior to COVID, we could have wiped out the national debt in a few years by cutting defense spending to only 5X what the Russians spend. I can imagine there's plenty of ways to trim the budget and that spending discipline is needed more than figuring a way to tax wealth.

 

[Letj]

History shows that societies with high levels of wealth inequality are far more unstable and subject to populist revolts.

But not in America because anybody can be as rich if they work hard. The rich is admired. Remember this is America where we prefer the Hollywood version.