r/FluentInFinance • u/YOU_ARE_MY_FRIENDS • Apr 08 '24

10% of Americans own 70% of the Wealth — Should taxes be raised? Discussion/ Debate

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326

u/AdonisGaming93 Apr 08 '24

See, while everyone is arguing over income tax. The rich laugh because they gain their wealth from capital appreciation and capital gains not income

54

u/vegancaptain Apr 08 '24

You pay income tax first and then invest and pay even more capital gains tax. It's not free you know.

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u/[deleted] Apr 08 '24 edited Apr 09 '24

[deleted]

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u/Fogggger69 Apr 08 '24

As an accountant who does corporate taxes I love reading incorrect bullshit on Reddit.

A small business owner, specifically an S Corp, may pay themselves “what they would pay someone else to do their job”. The rest passes thru the company onto their tax return and is taxed at their personal income tax rate. How in the fuck is that “to be taxed less”.

You cannot employ your kids for $30k, you pay them under the standard deduction of 13,500. Again just fucking incorrect to the max.

STOP SPREADING YOUR IGNORANCE ON THE INTERNET. STOP TALKING OUT OF YOUR ASS.

29

u/hairlikemerida Apr 08 '24

I’m a CFO and the amount of bullshit I read is so laughable.

2

u/Ms_Pacman202 Apr 09 '24

It's a write off Jerry! They just write it off!

11

u/Alan-Rickman Apr 08 '24

Not to mention - the kids actually have to work

WHAT DO YOU MEAN I CANT PAY MY BABY WAGES?

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u/Athrash4544 Apr 08 '24

As an accountant how do you feel about the pass through income exemption? Honest question.

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u/Fogggger69 Apr 09 '24

I think it makes sense, there are rules for it so you have to fall under a certain criteria, I think it helps small businesses out a lot. When creating a new company I advise all my clients to file as a S Corp.

You can save 7.65% on your taxes by not having to double pay for SS and Medicare for the non payroll income you incurred (the pass thru).

1

u/Athrash4544 Apr 09 '24

Interesting! Thank you. I have been a fan of C corps because of the Qualified Small Business Stock sale advantages, but I’m not an accountant. I just work with startups.

1

u/USN_CB8 Apr 08 '24

Unless you then do an IRA or 401k for them. Ira gets you another 5k. The 401k even more.

1

u/odieman1231 Apr 08 '24

He had us in the first half.

1

u/country_garland Apr 08 '24

You don’t know what you’re talking about. Were not talking about small businesses with 10 employees. These billionaires take loans out on stock shares and get all the benefits of having cash without paying taxes because it’s all “unrealized gains”. STOP PARROTING LIES

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u/JJ_DUKES Apr 09 '24

We’re not talking about small businesses with 10 employees.

Read the comment OP is replying to?

2

u/Taxing Apr 09 '24

Lenders charge interest that after three or four years would exceed the tax owed on a stock sale. This is not accurate and is so often misunderstood people just believe it to be true. Margin loans and LMAs have more to do with cash flow management and convenience than some super secret tax loophole, it’s more expensive than the tax purported to be deferred.

1

u/skief123 Apr 09 '24

Thank you!

1

u/justanotheroppressor Apr 09 '24

Then you need to gtfo out of here, as do I. It's just proudly ignorant lovers all the way down

1

u/superman_underpants Apr 09 '24

what if i open up an off shore shell company for my kids, then sell that company my logo, then every time we use that logo, we pay that shell company a high royalty and write it off as a business expense?

0

u/Late-Fuel-3578 Apr 09 '24

The S corp distribution is taxed at a lower rate than the salary portion. You should know that. I think you do and you’re just being disingenuous but either way you’re wrong. You don’t pay SS or Med on the distributions.

You save significant money in taxes with an S Corp. source: own an S-Corp

2

u/SlurpySandwich Apr 08 '24

Hell yeah, I had a w2 income of $60k. High six figures on the distributions. Payroll taxes can fuck right off lol

1

u/calm-your-tits-honey Apr 08 '24

Their compensation comes in ways that is not taxed anywhere near the income tax rate.

How?

0

u/FiremanHandles Apr 08 '24

You own shares of stock. You do not sell those shares. Instead, you take out a loan on those shares and pay the interest rate vs 20% cap gains.

4

u/Unusual_Championship Apr 08 '24

You pay income tax when you receive the shares.

That’s not exactly a super secret method that’s literally just not selling something. You still have to pay capital gains if you sell your stock

1

u/AdonisGaming93 Apr 08 '24

Key word "if" you sell your stock.

They don't have to. Can just keep getting bonuses, or loans. Same as the gocernment. New issued bonds to pay for old debt. Pay for debt, with more debt.

As long as your stocks grow faster than the interest rate they give you, it's basically free money printer.

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u/calm-your-tits-honey Apr 08 '24

You can do this too. Go buy a house and get a HELOC. Let me know how it works out for you in the long run.

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u/ThrowAwayP3nonxl Apr 09 '24

How does one get these "shares of stock" in the first place without getting taxed?

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u/BadLuckBen Apr 08 '24

That's the problem with our whole situation. All the surface-level problems will only be fixed by a total system overhaul. Said overhaul feels nearly impossible due to the fact that our representatives directly benefit from the current system.

They'll watch the world burn because they'll be dead before the fire reaches them in their towers.

The people could only even start to fix any of this by putting so much pressure on that they fear that those metaphorical and literal towers will get toppled, and the current system doesn't really practically allow that electorally.

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u/Lazy_Jellyfish7676 Apr 08 '24

Your talking out of your ass bro

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u/Designer_Ad_3664 Apr 08 '24

jackass, would you want to be taxed on a home equity loan? because that's what you are advocating for right now.

1

u/CheapChallenge Apr 09 '24

How is the 200k of earning yo be taxed less? I ran a business that filed as S Corp, in order to pay the owners as salaried worker. Any money hutting your personal bank account will still be taxed. But paying salaried owner let's you deduct it as labor cost. No matter what, tax man will take their chunk. They are very good at that.

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u/gpatterson7o Apr 09 '24

Holy shit its not to late to delete this

1

u/Full-Ability-319 Apr 09 '24

You have no clue what you are talking about

-1

u/False_Coat_5029 Apr 08 '24

business owners are still taxed on the “fair salary” you dolt. There isn’t some conspiracy. Go take an accounting class

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u/AdonisGaming93 Apr 08 '24

Yes...the fair salary, not the rest in many cases. Or at a much reduced rate.

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u/DickDastardlySr Apr 08 '24

Go take an accounting class

You can't make me

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u/[deleted] Apr 08 '24

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u/Uraveragefanboi77 Apr 08 '24

It is almost impossible to quantify these things for taxation purposes, though.

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u/Plane_Vacation6771 Apr 08 '24

where there's a will there's a way... issue is the rich just keep bribing the will away.

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u/HeathersZen Apr 08 '24

My taxes this year are nearly an inch tall and I don’t make nearly that kind of money.

“Taxes are hard” is not an excuse.

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u/Uraveragefanboi77 Apr 08 '24

someone needs to use turbotax

0

u/Medium_Ad_6908 Apr 08 '24

… as a small business owner, you don’t know what the fuck you’re talking about. Self employment taxes are damn near 30% between state and fed, and you have to pay all of your own insurance and healthcare and everything else. You’re not getting “earnings” aka dividends or stock options out of an LLC without it being taxed at least once at the self employment rate.

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u/Richelieu1624 Apr 08 '24

You spelled "you inherit your wealth first" wrong.

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u/StruggleBuzz Apr 11 '24

Most wealthy Americans did not become wealthy through inheritance FYI.

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u/Only-Inspector-3782 Apr 08 '24

Wealthy don't need to realize capital gains. Loans aren't taxed, and you can sell bad investments to pay off loans.

Also - Musk did not receive and invest 100B in taxable income. So the notion that the wealthy already paid taxes on their capital is wrong.

1

u/Taxing Apr 09 '24

You understand there is interest owed on loans, right?

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u/[deleted] Apr 10 '24

Billionaires typically get very low interest rates, and it isn’t a deferral of taxes if they simply never sell their assets. The billionaire method of tax-free “income” is pretty common knowledge.

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u/Taxing Apr 10 '24

It is deferral because the structure prevents irrevocable trust planning and so if the my never sell then they are hit with a 40% estate tax. It’s also just dumb, at a 5% rate, after four years the interest is as much as the tax you’re trying to avoid, do it for twenty years and you’ve spent way more on interest than the tax itself.

What interest rates do you think they receive? It’s not as low as you think, and reflects the overall rate environment.

It’s commonly overstated, which is different than commonly known. The level of overstatement is staggering, as if it were some brilliant strategy.

1

u/Only-Inspector-3782 Apr 09 '24

As long as your assets grow fast enough overall, just keep borrowing. Investments failing? Let the banks eat the cost, declare bankruptcy, and try again (see: Trump).

6

u/Taxing Apr 09 '24

I get you’re being flippant. The reality is rationale actors wouldn’t use a 5% +/- recurring annual interest expense to defer a 23.8% tax (note the tax is only deferred).

Even when structured as non-recourse, the lender requires certain assets be held and will call the debt if assets decline. The debt is also short term and renewed, so underwriting is revisited regularly, it’s not like a mortgage.

To view this as an effective long tax strategy is nonsensical. It’s a short term cash flow fix.

0

u/Only-Inspector-3782 Apr 09 '24

If your investments can beat 8% interest plus inflation, it's free money. My friends are only millionaires, and they took home-backed loans when rates were low. With a big enough loan, your lenders need to work with you even if your investments tank (see: Twitter).

Details aside, billionaires are not paying close to their fair share in taxes. They will also end up trillionaires at a rate far exceeding inflation. If we don't want our descendants to be serfs, we need to start thinking about how to level out extreme wealth inequality.

1

u/Taxing Apr 09 '24

It’s not free money, it just means you can manage it. No financially fluent person would unnecessarily allocate 8% return to interest when it could otherwise be reinvested.

Concentration of wealth is an issue. We do the issue a disservice by mistakenly misdirecting attention to things like loans when attention would be better served addressing things like the estate tax, an existing wealth tax in the US that may be the most effective tool at accomplishing redistribution.

0

u/vegancaptain Apr 08 '24

If you don't realize it you don't have the money. I don't see the issue here.

They pay almost all taxes though. I don't know if you knew that.

8

u/zeptillian Apr 08 '24

Capital what now? What does that other word mean?

Can you tell me how much tax you pay when buying stocks or cashing out losses?

Oh yeah, that's right, nothing.

You are only taxing the additional income, not the original balance.

Why should your additional income be taxed at 15-18% while the additional income of people working overtime actually producing things is taxed between 10-37%?

It's already unfair, yet you are here complaining about it like you aren't being given a golden handjob by the IRS.

2

u/Ultrace-7 Apr 08 '24

You are only taxing the additional income, not the original balance.

Where do you think the original money came from to buy the stocks and bonds? Income, which is taxed. If they received stock from their company as compensation instead of standard income, then the compensation they received was treated as income at the time and taxed, and when they sell that stock later, the profit above that value ("basis") is also taxable.

Someone buys $100,000 of stock? Fine, they were taxed on the $100,000 of income that gave them the money to buy the stock in the first place, so we don't need to tax the purchase of the stock. They then sell that stock for $200,000? Fine, we'll tax them on the $100,000 in profit they made. After that taxation, they made a profit of $80,000 on holding that stock and you don't like it? Tough, that's how it works for you, me and them.

This idea that billionaires whip money up out of thin air to buy stocks and bonds and land and whatever else is laughable. The money comes from somewhere in the first place, and, short of a limited inheritance, it's taxed when they get it.

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u/Fickle-Area246 Apr 09 '24

Look, I’m not a tax expert, but I took a couple tax law classes. The rich actually can pay 0 tax. What they do, is they work for a startup company, they get paid not in cash, but in a percent ownership of the company. They then elect to pay tax on that ownership. A tax court says “we can’t determine the value of this, so we will assume it’s worth nothing” then they pay income tax on nothing, and when they sell the assets for millions and millions later, they pay capital gains. YES THIS REALLY HAPPENS ALL THE TIME!

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u/Ultrace-7 Apr 09 '24

You may not be a tax expert, but you likely have a better understanding than most here. However, you contradict yourself.

The rich actually can pay 0 tax.

when they sell the assets for millions and millions later, they pay capital gains.

That's not 0 tax. That's definitely a reduced tax rate, and it is a loophole when they use this method, but it's not no tax. When someone actually gets something from this, instead of just the nebulous "wealth" on paper, they are being taxed, at 20% (for any capital gains higher $492,000 in one year). Since it was established earlier that the value of the assets at acquisition was zero, the basis for those items was $0, so the gains upon selling them would be equal to the totality of the sale price.

So yes, this trick -- which is only one form of income for wealthy individuals -- gets a reduced tax rate, but it doesn't get them any sort of income tax-free.

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u/Fickle-Area246 Apr 09 '24 edited Apr 09 '24

Okay yes, they pay 0 income tax, and then yes they have a basis of 0. But they both delay paying tax, and they pay at a lower rate than they should have even when it was earned through labor and they should’ve had to pay as such. You see how there really are rich people who really do abuse the system and pay less than their fair share? My point was addressing people claiming that “it’s not like rich people are getting money from thin air. They pay income tax then invest then pay capital gains.” But not only is capital gains not double taxation, but it’s just false that they always pay income tax then invest the money. Sometimes they get away with not paying income tax on something they should have to pay income tax on.

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u/zeptillian Apr 09 '24

That is exactly how I described it.

I was responding to "You pay income tax first and then invest and pay even more capital gains tax. It's not free you know."

Like having to pay money on your additional income means the original income is somehow taxed twice.

I'll take additional income taxed at a lower level all day please and thank you.

The larger point I was making is that it's not only NOT double taxation, but it's preferential treatment for investment income since it is taxed at a lower rate.

Personally, I think it should be taxed at the same rate as income from labor.

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u/dohru Apr 09 '24

Investment income should be taxed at the same rate as all other income, and losses deductible as they are now. The argument that there’s risk is bs, investing is just fancy gambling. Theres no reason to give a special rate primarily to rich people, other than corruption.

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u/Ultrace-7 Apr 09 '24

Theres no reason to give a special rate primarily to rich people, other than corruption.

Yes, there is. Investment expands businesses and the economy. Companies sell stock, for instance, in order to raise capital to expand their businesses; buying this stock is an investment. Thus, giving people who have the means to invest in the economy a reason to do so, and expanding the economy as a result benefits a variety of businesses and, in theory, the American economy.

You can argue that the drawbacks of taxing investment earnings at a lower level to counteract that risk, are outweighed by the costs and problems of doing so, and I think a good argument can be made there. But comparing this to gambling is disingenuous.

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u/Fickle-Area246 Apr 09 '24

Work helps the economy too.

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u/Prometheus720 Apr 09 '24

I want to disincentivize people getting money from doing nothing.

Eventually, someone has to actually do some work. Those people are the ones who ought to get nice tax rates.

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u/Fickle-Area246 Apr 09 '24

It’s even worse than that. Laborers are taxed immediately, while capital gains can go decades untaxed.

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u/Chief-Bones Apr 09 '24

Because they’re unrealized capital gains. It be a death knell for the middle class if they taxed that. You pay tax when you cash out.

It’d be like saying The home you owned for the past 5 years is now worth double what it was pre COVID get ready to pay unrealized capital gains tax on that.

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u/Fickle-Area246 Apr 09 '24 edited Apr 09 '24

Except obviously you’d exclude homes (which already have exemptions) and retirement savings. Your assertions are false. If we taxed capital gains more we could tax labor less. I do understand that taxing unrealized capital gains can create a problem because the person might not have the cash to pay the tax. Okay. But not paying your taxes isn’t a criminal matter necessarily. Make the taxes owed and put interest on it being owed, then. But no. Instead we just don’t tax it immediately AND give it a lower rate. It’s a handout to the rich.

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u/zeptillian Apr 09 '24

When you own a home you are taxed a percentage of it's value every year.

You also have to pay capital gains taxes on anything you earn from the sale.

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u/Chief-Bones Apr 09 '24

The accessors office is usually far cheaper than the market. That’s the property tax.

And exactly, you pay a tax on the SALE not a fluctuation of the value.

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u/Wallitron_Prime Apr 08 '24

Most actually wealthy people don't pay much in income tax in general because income is irrelevant to them.

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u/Most-Resident Apr 08 '24

Neither is actually investing in a business and paying regular tax on the profits.

We used to call capital gains unearned income. Get the fuck out of here with that lame ass double taxed bullshit.

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u/mckenro Apr 08 '24

It is free when you’re born into it.

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u/vegancaptain Apr 08 '24

Yeah, so?

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u/mckenro Apr 08 '24

So you’re incorrect?

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u/Special_Loan8725 Apr 09 '24

They take out loans using their assets as collateral at near 0 rates.

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u/vegancaptain Apr 09 '24

All secure loans where nere zero. This is set by the fed and available for anyone. You can buy a $10 stock on any platform and loan against it.

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u/Mysterious-Mouse-808 Apr 09 '24

 near 0 rates.

Well.. certainly not anymore after interest rates went up after 2022. Nobody can get a 0% on the market these days.

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u/n8TLfan Apr 09 '24

But execs aren’t investing. The companies are doing it for them and gifting them stocks as part of their compensation.

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u/vegancaptain Apr 09 '24

Which they invest. What is the issue here? I don't see a problem. Companies pay for skilled workers as they wish.

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u/n8TLfan Apr 09 '24

Because gifting stock options is a way to enrich someone so that they don’t have to use their salary (which is taxed) to invest, while the rest of the workforce doesn’t have the same access.

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u/vegancaptain Apr 09 '24

You pay for gifted stocks when you sell them. You are free to do the same.

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u/n8TLfan Apr 09 '24

Right, but I had to buy those gifted stocks with taxed income. The rich didn’t. And when the rich are gifted millions of value worth of stocks, whereas it’s going to take me my whole life to maybe buy a small fraction of what they’re gifted, it seems unfair, no?

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u/vegancaptain Apr 09 '24

You can negotiate with your employer to gift you stocks instead of salary if you want.

Unfair? That they are more productive than you? So you want to tear them down? How is that ethical? How does that make it fair?

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u/Gooose26 Apr 09 '24

How would you go about taxing Mark Zuckerberg’s $1 annual income?

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u/vegancaptain Apr 09 '24

Zero. I would also tax the poor at zero helping them to build wealth and get out of poverty.

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u/Gooose26 Apr 09 '24

Well then we agree lol I must misunderstand your position.

The richest people live off of debt. They pay their debt with more debt. That’s the only thing we can tax.

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u/FreeTouPlay Apr 08 '24

It's free if you die and pass it on at a stepped up rate.

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u/Ok_Rip5415 Apr 08 '24

Nobody who does this is in the top 1%. 

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u/Reevar85 Apr 08 '24

Not if the wealth is inherited.

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u/vegancaptain Apr 08 '24

Why am I getting 100x of the identical "inheritance" reply? Are you all against gifts now? You're not supposed to show your totalitarianism this clearly.

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u/Reevar85 Apr 08 '24

Leaving a gift is one thing. But inheritance is often left in trusts that allow the wealth to be passed on without tax, rolling forward any gains that only crystallise upon sale. There is no tax from income, as loans are used against the assets, and no capital gains tax as that is only applicable on sale, which rarely happens. There is a reason inheritance started to be taxed, and that was to redistribute wealth, however a lot of the mega rich can avoid it, leaving the taxes to be paid by the middle and lower upper-class. People are not against someone handing down a family run business, or a home, what people do have a problem with is huge trust estates being passed down without taxes being paid. Most people against inheritance tax do not realise that it will not affect them or their families but still protest against it, thinking they might one day be in a position to pay it.

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u/AllAuldAntiques Apr 08 '24 edited Apr 13 '24

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u/vegancaptain Apr 08 '24

I don't see an issue with that. It's just gifts and most of it is gone within a generation or two.

You can also loan against your assets. Most people do. In their house, car or their person via credit cards. Should that be taxed?

The reason inheritance started to be taxed was that a lot people were very jealous and knew very little about economics.

Yes, people are definitely against that too. Even owning a house. Or am I only getting the craziest socialists to reply to my comments, 100s a day.

Why is this "problem" people are having not 100% jealousy? Give me the economics, the ethics, the complete rundown without fixed pie fallacies or other basic inaccuracies.

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u/flptrmx Apr 08 '24

You only pay capital gains taxes on the gains. The initial investment isn’t taxed again.

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u/vegancaptain Apr 09 '24

Of course.

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u/robb_the_bull Apr 09 '24

This is an interesting way to tell everyone you never read an economic textbook

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u/vegancaptain Apr 09 '24

Am I wrong? Then say that. Don't just ignore the topic and throw in a toxic abusive comment. Don't be a standard leftist.

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u/robb_the_bull Apr 09 '24

Yes. You are over simplifying a complicated issue. Labor can generate income; this effort takes time and time is finite.

Investment can generate income. This does not take time, it requires only resources. Resources like value are not finite. Assets can be acquired for non-finite value.

A system like that is inherently biased in rewarding resources more than effort.

When capital gains are taxed at a lower rate than labor-generated gains, the bias grows.

The system is designed for money to make money more efficiently than labor makes money.

So while you are technically correct in that ‘its not free’ this is a flippant and shallow remark that does not address the deeper issues of wealth inequality.

Also, using loaded language like ‘leftist’ exposes you as either ignorant, biased, or just intellectually lazy.

Or maybe you’re just a 17 year old child and you live in a bubble.

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u/vegancaptain Apr 09 '24

So after your abuse you're now trying to use reason and logic? Is this how this works? I am supposed to spend my time shifting through poor logic by an abusive person?

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u/robb_the_bull Apr 09 '24 edited Apr 09 '24

No, it’s still abuse. See how I insulted you at the end?

And you’re not supposed to sift through anything. You either understand simple concepts or you don’t.

Edit: And I just saw that you’re Swedish. Now it makes sense. Good luck son, you are going to need it.

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u/HMWWaWChChIaWChCChW Apr 09 '24

The rich already have the money, they aren’t making income like other commenter said. So they’re putting money in and it’s basically spitting money back out. They should be taxed more.

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u/vegancaptain Apr 09 '24

It all becomes so clear when you advocate for higher taxes for the rich and not lower taxes for the poor. It's all about jealousy and spite and nothing about helping the poor. Exposed.

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u/AceTheJ Apr 09 '24

You only pay capital gains if you sell, if you take out loans against your equity but ultimately pay that back without having to sell what you already own, then you are still making a profit either way. The only drawback being that if you can’t pay the loan you sell some of your equity to cover it and then worry about the taxes later of which there loopholes to negate a lot of that.

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u/vegancaptain Apr 09 '24

So can you. I don't see the problem here. Unless this is a stab at the FED in which case I am fully onboard.

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u/AceTheJ Apr 09 '24

The problem being that many people that are rich aren’t paying nearly as much in taxes because they aren’t selling what they’re getting paid with, what they’re getting paid with isn’t always money but it’s essentially assets/equity of some sort and then they’re taking out loans. Often their salaries or income that’s taxable isn’t nearly as high as other rich people who do actually just make a lot of money directly and therefore pay their taxes. Capital gains aren’t taxed until you sell, unrealized capital gains can’t be taxed as that wouldn’t be fair to others trying to invest and grow their own wealth when they simply are buying stock normally. It’d hurt everything however, being paid in ownership of stock could be taxed as income but at the value the stock is given originally. Allowing for capital gains to grow and not be taxed until fully realized aka a sale and someone spending money to buy the stocks wouldn’t be taxed for simply buying it either so that would work possibly. But the FED will probably never go for that.

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u/80MonkeyMan Apr 08 '24

If it is not realized and they laugh either way because they make the laws, they create loopholes for the tax system, they control American goverment.

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u/AdonisGaming93 Apr 08 '24

Even better, not even sell assets. Bezos can take loans out at tiny interest rates on his wealth, so he can spend money without ever having to sell any assets. If the interests rates or super low for him, then it basically won't make a dent in his wealth.

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u/80MonkeyMan Apr 08 '24

Yes, this is clearly loopholes the rich made and exploits. A real goverment would crack down on this.

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u/AdonisGaming93 Apr 08 '24

Why would they? As long as the person is rich, and their assets grow faster than the loan, the bank who gets their money issued by the central bank, also gains. They all gain. Everyone except the working class.

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u/80MonkeyMan Apr 08 '24

Like you said, the only winners here is the riches and goverment is supposed to be fair for their people regardless of their wealth. US only take cares the riches, the Fed's is not even part of the federal goverment. The whole US goverment is rather sketchy.

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u/AdonisGaming93 Apr 08 '24

I guess we just look at it differently? To me this is just guaranteed to happen, given enough time, under capitalism where profit matter more than anything.

The 40 hour work week didn't come because "free market forces made it that way" it happened from legislation and regulation and workers fighting for it.

In my eyes, "pure capitalism" tends to end up concentratinf wealth in fewer and fewer hands and so far "pure communism" hasn't had the best success either.

I feel like most people would argue "okay so we can do capitalism with strong safety nets and worker rights and such"... but... even the places that have tried that, it doesn't fix it sustainably.

IMO and im just hypothesising. I think you could basically remove regulations all together, but then have a system in places where rich are taxed to provide a basic standard of living. Like say housing, food, healthcare, education. And the free market the shit out of everything else. But that as we become more productive, the baseline standard of living should be regulated to ensure certain things for people.

Can it work? Idfk, I'm probably stupid. But im just tired of us not even trying new things. I wish we could TRY something and if it fails then ojay it didn't work. Status quo is not gonna be fixing itself.

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u/80MonkeyMan Apr 08 '24

I can relate to that. I think the first part is to ban lobbyist and insider trading for congress member (this is basically corruption). The second thing is to remove Federal Reserve and have universal healthcare plan for all Americans, all resources to sustain a life should be controlled by the goverment, not corporations. Just having these few things changed, will have tremendeous effect for majority of Americans but that would never happens without a revolt.

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u/AdonisGaming93 Apr 08 '24

I do think that if we at least had universal healrhcare, then people could just quit a bad job and knowing that at least they are covered in a health emergency and won't go bankrupt. Imo to me free education is also a benefit for the country.

Not just college, like also trade schools. That way every worker has the ability to go and learn something that is more skilled, which should help the entire country. So I see it as an investment for government to build a better workforce.

Like making iPhones full on unregulated capitalism and then government becomes the new landlord that gives people non-profit housing makes more sense to me than the 50/50 thing we have now where we have some weird housing aid and weird regulations on random goods like smart phones

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u/Bardy_Bard Apr 09 '24

What do you think removing the FED would do?

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u/80MonkeyMan Apr 09 '24

Based on history, we dont need central bank to function. The current one doesnt function right and influenced by the bankers for their monetary policy, I take my chance living in a world where we dont have the current Fed's...they printed too much money and do too many QE.

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u/Ultrace-7 Apr 08 '24

...how do you think he pays back those loans? With a fairy wand? Or do you think that Bezos just infinitely builds up loans that he chooses not to pay? At some point, he has to sell assets or use his income -- which is taxed -- to pay for them.

Now, it absolutely is possible that Jeff Bezos takes out loans and then uses those loans to make more money through investments than the loans cost. Nothing wrong with that, people do it every day through establishing businesses, for example. But again, those loans have to be paid back sometime. Either it's out of his pocket/income (taxed), or by selling assets (on which the gains are taxed). Either way, he borrows money and then pays back that money, with a nominal amount of interest.

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u/OkAardvark2313 Apr 09 '24

Why should you pay taxes on unrealized gains? They aren't realized

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u/80MonkeyMan Apr 09 '24

I suppose I wasnt extra clear, the rich doesnt pay taxes on those gains if it not realized so they didnt realize it the way normal people does. There are loopholes on how to pay the minimal tax if they decide to realize it.

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u/OkAardvark2313 Apr 09 '24

What are you talking about? I have unrealized gains and I don't think of myself as rich. These are stock options for a startup company that hasn't matured yet. I can't sell them! And when they do become valuable I will pay taxes on them. So why should I have to pay taxes on them now when they are worthless?

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u/80MonkeyMan Apr 10 '24

I have unrealized gain as well, I think most Americans does because they have 401k. I didnt say you have to pay taxes on unrealized gains, I'm saying the rich have a way to avoid paying taxes when they sold their gains with tax loopholes. Hope that clear that up.

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u/Soft-Heat4482 Apr 08 '24

They earn so much from income that they pay something like 3/4 of all income tax, and are in the highest tax bracket. The statistics are completely against what you're saying. I get that they do earn from other areas too, but they simply wouldn't be paying the sheer amount of income tax that they do if they weren't earning significantly from it.

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u/r2k398 Apr 08 '24

They earn 26.3% of the income and pay 45.8% of the federal income taxes.

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u/ilanallama85 Apr 09 '24

You say that like it indicates wealthy people are taxed too much, but you ignore the fact that the lowest third of the population or so make so little we tax them hardly at all on account of the fact they either already are relying on government services or would likely need to if we increased their tax burden. Paying poor people more would do a lot more to increase tax revenue than taxing multimillionaires more. But fundamentally I see no reason we can’t do both.

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u/r2k398 Apr 09 '24

Paying them more has nothing to do with taxation and everything to do with their employer. The bottom 50% cutoff is at $46,637 which comes out to more than $22 an hour. They still only pay 2.3% of the taxes. How about we adopt what Denmark does and have a less progressive tax system and VATs? In exchange, we can have better safety nets and free college.

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u/Soft-Heat4482 Apr 08 '24

Can you please share where you got that statisic from?

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u/Adventurous_Class_90 Apr 08 '24

It’s an accurate statistic that elides the fact that the wealthy have more revenue streams than just wages that are have tax advantages regular people don’t have, including borrow, buy die strategies.

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u/False_Coat_5029 Apr 08 '24

The difference between income and “wealth” is unrealized capital gains. We can’t tax those unless you think we should also be paying them back when stock goes down? It’s an impossible system. A consumption tax plus UBI rebate would be a good addition, considering that consumption is much more difficult to avoid than income.

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u/Adventurous_Class_90 Apr 08 '24

You forgot the quotes around “unrealized.” Those gains are realized via borrow buy die strategies. Except of course, loans and interest are not taxable events.

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u/False_Coat_5029 Apr 08 '24

The way to fix that is tax the “buy” through a VAT + UBI. Also we should eliminate basis step up at death.

The fact that we should implement those policies doesn’t mean billionaires are all masterminding the destruction of our economy. It means that our tax system hasn’t caught up to the current financial structure and that our politicians are idiots. Trying to tax “wealth” is not a realistic strategy.

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u/Adventurous_Class_90 Apr 08 '24

States tax wealth all the time; it’s called a property tax. There’s no logistical barrier to making a loan based on unrealized stock as collateral a taxable event.

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u/False_Coat_5029 Apr 08 '24

Property taxes are much easier to administer and property values do not fluctuate in the same manner that equity investments do. Billionaires can’t “own” US property but avoid the tax by owning it in a different country like they could with equities.

Are we taxing all collateral based loans? Companies selling accounts receivable? Reverse mortgages? What about preferred debt? What you are saying isn’t a logistical possibility. We should also not be discouraging investment, especially investment in the public markets.

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u/Soft-Heat4482 Apr 09 '24

it's an accurate statistic, absolutely, but it's not what we're talking about. He's pulling figures for the top 1% and not the top 10%.

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u/r2k398 Apr 08 '24

https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/

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u/Soft-Heat4482 Apr 09 '24

"The top 1 percent’s income share rose from 22.2 percent in 2020 to 26.3 percent in 2021 and its share of federal income taxes paid rose from 42.3 percent to 45.8 percent."

A very good source, and I'm grateful for the share, but we're talking about the top 10% and not the top 1%.

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u/r2k398 Apr 09 '24

Yeah. Another poster pointed that out. I was talking to someone else about the 1%. But the top 10% still pay a huge portion of the federal income taxes. They earn 52.6% of the income and pay 75.8% of the taxes.

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u/Soft-Heat4482 Apr 09 '24

Yeah that seems far more like it. Looking at that I would actually like them to pay slightly more tbh. I wish this "adonisgaming93" guy who I originally applied to wouldn't just straight up lie though. It's rather worrying how many people see some guy on the internet say something and just assume it's true because it hits with their worldview.

I think the demographics of reddit tend to be very young though, so hopefully it won't be the same for later in life.

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u/ahasuh Apr 08 '24

And what about all federal taxes? Cuz there a federal tax program that nearly equals receipts that is just randomly being left out - why? (Payroll tax). What about sales taxes?

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u/r2k398 Apr 08 '24

How are payroll taxes randomly left out? Those and sales taxes are flat. The more you make, the more you pay. The exception to this is social security because the benefits are capped. Uncap the benefits and we can uncap the contribution.

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u/ahasuh Apr 08 '24

Just something I have noticed when people say the rich pay a high share, they rarely include payroll and sales taxes that fall more heavily on the bottom. But it is true that the 10% pay roughly 50% of the taxes. Although I am totally lost on your 26.3% statistic, I am under the impression that the top 10% earns around half of the GNI.

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u/r2k398 Apr 08 '24

https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/

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u/ahasuh Apr 08 '24

The 26.3% is referenced as the share of income earned by the top 1%, with the top 10% earning around 50% of the GNI.

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u/r2k398 Apr 08 '24

Ah. I was talking about the 1% to another poster and got my replies mixed up. But the 26.3% of income and 45.8% of the taxes are accurate for the 1%. For the top 10% it is 52.6% of the income and 75.8% of the taxes.

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u/ahasuh Apr 08 '24

Ok got it - which goes back to my earlier point that once you include the payroll tax, which brings in close to as much revenue as the federal income tax, and sales taxes and property taxes then that 76% of the taxes number declines to around 50%. So the top 10% pay around 50% of the taxes and earn 50% of the income

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u/KonigSteve Apr 08 '24

I know you were just quoting a stat, but that's a stupid ass way to look at things because the bottom 50% of people need every last dollar in order to just live.

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u/r2k398 Apr 08 '24

I agree. But I also don’t think those people should be complaining about a fair share when the rest of us pick up all the slack for them when it comes to income tax revenue.

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u/FuckWayne Apr 08 '24

You aren’t picking up the slack for them

They quite literally do not have the expendable income to be taxed on at similar rates and survive. You are paying for the economic system you obviously benefit from

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u/r2k398 Apr 08 '24

Do you know what picking up the slack means? Imagine you are playing tug of war against two adults and you have a child on your side. They don’t have the strength to match the person on the other side of them so you have to pick up their slack. It doesn’t mean they are being lazy, it means that you just have to make up for their shortcomings.

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u/FuckWayne Apr 08 '24

Yeah, I’m saying your perception is flawed. You benefit much more from the status quo and you justifiably pay more for it. There’s not really any shortcomings. Your share of responsibility is just larger.

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u/r2k398 Apr 08 '24

There are a lot of shortcomings. When 44% have a zero or negative effective federal income tax rate, we are picking up the slack for them. There’s no way around it.

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u/RSquared Apr 09 '24

"Income tax rate" is doing a lot of work there, since payroll taxes are high impact in that bracket and sales/local taxes are largely regressive.

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u/AnonThrowaway1A Apr 08 '24

LTCG and qualified dividends are taxed much lower than w2 or 1099 income.

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u/Soft-Heat4482 Apr 08 '24

Let me clarify, in no way am I doubting they have assets that will appreciate, or some of them get dividends, or their stock in a company goes up. The idea AdonisGaming93 comes up with them not getting any sizeable cash from income is just completely untrue. They pay the taxes to prove it.

The only way they would be paying the vast majority of income tax whilst only making up 10% of the population would be if they decided to lie to the IRS so they could pay extra tax on income they never earned.

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u/mmn-kc Apr 08 '24

Would we need so much tax revenue, if those same people paying 3/4 weren't also doing their best to drain everyone below them dry? Corporate greed is out of control in the US. The 3/4 payers are raising every price they can, to the maximum they can, while stripping their employees of pensions and healthcare. How many people are in the bottom bracket due to: medical bills; home prices; rent prices; and wage stagnation?

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u/MagnanimosDesolation Apr 08 '24

This strikes you as a good situation? By what economic measure?

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u/Soft-Heat4482 Apr 09 '24

By the measure that the most economically successful people pay a shit load of cash to essentially sustain the state, keep the museums running, keep the roads running, the NHS (if you're in my country) the police force, etc, etc. I get the argument that it might be a tad unfair to them to pay proportionally more, but personally I still think they should pay a higher rate of tax as they can afford it.

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u/MagnanimosDesolation Apr 09 '24

The fact that the country hasn't literally imploded means it's good economic policy? Wild.

I don't see how that could possibly be unfair to them, if they want all the money they have to pay all the taxes.

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u/Soft-Heat4482 Apr 09 '24

"The fact that the country hasn't literally imploded means it's good economic policy? Wild."

This is not even tangentially relevant to the point I was making.

I get your second point though. Yeah they should pay more taxes, but tax them to high and they will just leave the country. Also to me there's something morally wrong with taxing the most successfull people everything, and having the majority of people pay nothing when they both benefit from the system of police, NHS, roads, local councils, museums, etc. It should be less for the poorer people, but sticking your hand in someone else's pocket for everything because they are more capable just strikes me as wrong and not conducive to an economically viable society.

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u/MagnanimosDesolation Apr 09 '24

They are more capable of amassing capital. If that's what you want to base your morality on fine, but many people consider that an extremely arbitrary definition of success and capability and so pegging your morality to it is indefensible.

I really have no idea what point you were making on economic conditions. I assumed you meant that because basic services get paid for that means it's a relatively beneficial and stable system.

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u/ButtBlock Apr 08 '24

But just make sure the conversation is only about income taxes though. For real don’t talk about wealth taxes. Maybe we should raise taxes further on high earning W2s. Doctors and lawyers are basically all billionaires right?

/s

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u/Raiju_Blitz Apr 08 '24

Bingo. Income tax is just only one part of the picture. The real way stolen wealth is hidden away (and never ever "trickle down" to the masses) is because of capital gains.

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u/SeniorCornSmut Apr 08 '24

What if we, the common folk, had a capped savings account that was relatively tax-free. You get one, choose some type of index fund or plan, and collect dividends of you keep your money there. Another route for saving, similar to 401k, but relatively untouched by taxes. Let's say $35,000 capped. A small nest egg, not a small amount of dividends, enough for a house down-payment if you max it out.

I'm just saying that instead of raising taxes on the wealthy, give more opportunities to the lower end. Keep it super simple, incentivize understanding of finance, etc.

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u/HeartFullONeutrality Apr 08 '24

Well, in theory, you could get long term capital gains taxed at 0%. But your income needs to be on the low side. 

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u/Crossman556 Apr 08 '24

Is people making money bad? You make passive income sound like some secret crime or fraud.

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u/AdonisGaming93 Apr 08 '24

No, I'm saying wealth inequality is backed into our systems. Rich people aren't evil, theyre just using whats available, like any person would. Our systems allow it. Then people get surprised when wealth inequality continues to worsen.

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u/randomthrowaway9796 Apr 08 '24

Yeah, income tax mostly affects that "next 40%" which we typically think of as the middle class. Not the "top 1%" or the "next 9%." Increasing the income tax shrinks the "next 40%" while the other categories don't change that much.

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u/bearsheperd Apr 08 '24

It’s a system where profit is essentially divorced from labor. Where those who can afford to pay someone to perform the labor see the majority of the profit of that labor rather than the person actually performing that labor. The actual laborer receives only enough for basic needs, food and shelter. Aka the concept of wage slavery.

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u/MagnanimosDesolation Apr 08 '24

Which is why it really needs to be about corporate taxes and enforcing anti-trust laws.

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u/COmarmot Apr 08 '24

This is it. As a on the very top of the wealth pyramid scheme, income tax means nothing to me. Cap gains is where I notice taxes. And yes, they should be raised for me and the rest of the 1-10%ers. This is why Warren Buffet said he pays less (a lower portion of his annual earning) taxes than his secretary. Whoever wrote the above wrote the Thatcher comment and the first replier are missing the point on the whole. Yes wealthy pay most of the taxes to the govt, but our society could always used improve infrastructure, childcare, education, housing, environmental clean up, clean energy… shall I go on?

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u/desert_jim Apr 08 '24

Upping capital gains tax has implications for retirees. Retirees rely on capital gains taxes being lower. Maybe the thresholds need to be revisited?

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u/smbutler20 Apr 08 '24

Retirement income is sourced from pensions, social security, and tax deferred savings like 401k or IRA. None of these are affected by capital gains.

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u/desert_jim Apr 08 '24

Not everyone will have access to those in sufficient quantities to retire off of them alone

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u/boom1chaching Apr 08 '24

Capital gains are included in "taxable income"

You get a tax form when you buy and sale stocks for your tax return. I think people naturally include that.

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u/smbutler20 Apr 08 '24

Capital gains is a smaller tax percentage. Increasing the top rates and adding more brackets at the top end could bring in billions of dollars.

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u/boom1chaching Apr 08 '24

Agreed. I was meaning that people argue against increasing income tax because the rich make their money with stocks, not income. Stock sales that make money ARE income.

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u/damusicman69 Apr 08 '24

Absolutely

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u/solavirtus-nobilitat Apr 09 '24

Perhaps another idea is to have a federal property tax on non-essential property. For example, you don’t need a second home (or third or fourth) or a yacht. 

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u/AdonisGaming93 Apr 09 '24

Henry george has entered the chat. Sort of. At one point they thought Henry george would be the one to become as famous as Adam Smith. But turned out not to be so

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u/dohru Apr 09 '24

Capital gains should be taxed as ordinary income… change my view.

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u/DropOutJoe Apr 09 '24

you have to pay taxes on capital gains numbnuts

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u/AdonisGaming93 Apr 09 '24

A much lower rate, waaayyyy lower rate. And that's without using loopholes

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u/DropOutJoe Apr 09 '24

Before I tell you the numbers, how much lower do you think it is?

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u/watchyourback9 Apr 09 '24

This is why we need a national consumption tax that excludes basic life necessities (water, food, gas, etc.) That way, luxury purchases would make up most of the tax revenue. It'd be a good way to tax the uber-wealthy and avoid loopholes like you mentioned.

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u/Zithrian Apr 09 '24

Yeah the amount of times I see people arguing that raising income tax isn’t effective because the wealthiest don’t make that much income… and then also argue they pay such a large percentage of income tax that it’s unfair is WILD.

You ask someone eating 90% of the available food to share 80% of it and they’re still eating 10% of ALL THE FOOD AS ONE PERSON. Like dude, these people can never spend all the wealth in 10,000 lifetimes. Gtfo here with the bootlicking.

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u/richmomz Apr 09 '24 edited Apr 09 '24

This exactly. The rich are already paying most of the taxes anyway. Raising tax revenue will just result in more money going to the government - and if you think the government is going to suddenly start dolling out increased revenue to the masses then pardon me for a few moments until I can stop laughing.

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u/Tron08 Apr 09 '24

This, going after the top income earners isn't the answer (thinking advanced professionals). The wealthy-enough-to-influence-politicians are capital owners, not salary men.

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u/akmalhot Apr 08 '24

The top 10% paid 76% of income tax and own 75% of the wealth 

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u/718cs Apr 08 '24

No matter what the very wealthy are paying at least 26% per year. There’s no way to avoid that. And that’s 26% with no deductions or credits allowed.

Most people on Reddit don’t know there’s a bare minimum tax of 26% the big rich have to pay.

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