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Wealthy paying "Their fair share"?

Started by david123, January 07, 2019, 07:52:44 AM

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david123

Warning - This may digress into more of a political discussion...

Now that democrats have the house again, I've heard more talk that the rich have to pay their fair share, and talk of 70% marginal tax rates.  This is a pet peeve of mine.  First off "fair share" is an arbitrary term, so is "wealthy".  Secondly, there is a misconception that the "rich" don't pay any taxes, when all the statistics show this to be completely opposite of the truth (the top 1% who make more than $421k per year make 20% of the income and pay 40% of the federal taxes - more than the lower 90% who make 53% of the income and pay 29% of the federal taxes).

One new representative said it would only affect the top 0.1%, or 0.5%, or 1% - which is a huge difference.  The top 1% cutoff is somewhere around the $421K mark where the top 0.1% is is in the $2.75M area.

I think the net of this is that the government will continue to spend beyond it's means, and government will look towards the wealthy to pay.

Sam

Isn't the cut off for a 70% tax at over $10M/year?

So many ways to avoid that tax. I'm not worried.
Regards,

Sam

david123

70% on over $10 Million was one of the ideas floated by Ocasio-Cortez with some sketchy details, but all the democrat front runners (Joe Biden, Bernie Sanders, Elizabeth Warren, ...) have called for increasing taxes on the wealthy.

I'm actually not completely opposed to raising taxes on wealthy (or others), but doing on the basis that the wealthy aren't currently paying their "fair share" is deceptive and panders towards class warfare.

From an financial standpoint, obviously paying as little taxes as you legally have to is the goal.  For those self employed, there are more options.  For W2 people, we run out of options pretty quickly.

Ocko

There really isn't much benefit to worrying about some political lip service being given to tax increases.

Taxes will always increase and the going rate for mortality will always be paid in full.

To those who fret about taxes going up, remember as I reiterate some advice from Sam, taxes can be mitigated with a little research and some creativity.

Stay positive folks ;D. Keep your perspective as we're all in this together. 

Oh and as to the question of are the "wealthy paying their fair share?" [Insert your own ideological persuasion here.]

Sam

The real tax to focus on is the wealth tax or estate tax. Creating multi-generational dynasties is an interesting debate.
Regards,

Sam

Young And The Invested

Wealth inequality is the real issue.  It compounds over time and results in the accrual of wealth in the hands of a select few. 

Thomas Picketty advocates for a global wealth tax to fight wealth inequality and not an income, nor a consumption-based tax.

https://www.cnbc.com/2015/03/10/why-we-need-a-global-wealth-tax-piketty.html
https://youngandtheinvested.com/

Money Ronin

The general population and the media tend to conflate wealth and income.  When I was less wealthy and had higher income, I paid far more taxes than I do today.  That does seem unfair.  I would be in favor of higher taxes on either income or wealth, although I think an annual wealth tax would be far more difficult to implement.

I do believe it was entirely unnecessary to double the estate tax exemption from $11M to $22M per couple in the 2017 tax law changes.  There is no magical number that is absolutely correct, but it felt like the $11M figure was more than adequate, perhaps adjusted for inflation each year.

Recently I was fairly involved with a wealthy friend's estate execution.  His wife had been fighting cancer for 5 years.  She passed in away in 2018 shortly after the new tax law passed.  This couple was worth somewhere between $11M and $22M.  This is how we was able to benefit from the current tax laws:

1. Her death generated no estate taxes because their wealth is safely under the $22M limit.
2. He happened to be selling a sizable investment that would have generated a large capital gain.  Because his wife passed away before the sale, all their assets received a step up in tax basis resulting in 0 capital gains on the proceeds.
3. Much of his assets are held in real estate, automobiles, jewelry--assets with a subjective value even when professionally appraised.  It would be easy to omit some items or stretch the values in either direction.
    a.  If one were over the $22M limit, pick a lower valuation
    b.  If one were under the $22M limit, pick a higher valuation because you want your new cost basis to be as high as possible without exceeding the $22M limit.  Why? To minimize your heirs' future capital gains.

Most of this person's assets are in plain sight in the US.  Imagine the games that are played by people who have their wealth spread around the world under shell companies. 

WengerTodd

#7
Quote from: Young And The Invested on February 16, 2019, 10:07:34 AM
Wealth inequality is the real issue.  It compounds over time and results in the accrual of wealth in the hands of a select few. 

Thomas Picketty advocates for a global wealth tax to fight wealth inequality and not an income, nor a consumption-based tax.

https://www.cnbc.com/2015/03/10/why-we-need-a-global-wealth-tax-piketty.html


This is actually a big misnomer. Gone are the days of the dynasty families during the Gilded age. Since the great depression, it's a consistently proven fact that for the vast majority of millionaire+ families, wealth is gone completely by the 3rd generation. As a matter of fact, the overwhelming vast majority of millionaires in this country started off poor, or came here from another country.

This concept of "wealth inequality" or "wealth gap" is a nonsensical idea. It's not really a thing. You can't allow yourself to be drawn into a classically false narrative that wealth is static. A lot of people use this fake idea of a "wealth gap" to push the idea that in order for someone to become wealthy, another person must become poor. It's simply not how wealth works in our economy. Wealth grows, very much like a tree. It can be nurtured and grown. It can also die out. Our financial system isn't backed by the gold standard anymore, so it truly isn't a static concept... wealth is built upon perceived value of goods and / or services.

Incidentally, there's also a big misrepresentation of the middle class. You probably keep hearing people say "The Middle Class is Shrinking!" While that's true, it's not for the reasons you believe it is. Incidentally, the Lower Income Class, and the Middle class BOTH shrank, and the Upper Income class grew. There are lots of articles that harp on the shrinking middle class, but never really tell you the numbers. Unfortunately, this is very misleading information. Here are some articles that explain exactly why the middle class (and lower income class) are shrinking, and why the upper income class is increasing. Essentially, a huge group of America has moved up. We are in the strongest economy this nation has ever seen. Here are a few articles that really explain it:

Forbes: https://www.forbes.com/sites/timworstall/2016/06/21/sure-the-middle-class-is-shrinking-30-of-americans-are-too-rich-to-be-middle-class-now/
La Times: https://www.latimes.com/opinion/op-ed/la-oe-schiller-shrinking-middle-class-20190131-story.html
Cato Inst: https://www.cato.org/blog/middle-class-shrinking-households-become-richer


Furthermore, there's another thing that needs to be considered. Over the past... maybe 5-6 years, we've had a massive influx of wealthy move to the United States from places like South America and Eastern Europe. I'm not going to beat around the bush, most of these individuals are fleeing Socialism and Communism. I'm from South Florida, and I've seen South Florida change over the past 6 years. You have a vast influx of Venezuelans, Argentines, Brazilians, and others flood into South Florida. They pay cash for homes and condos, and transfer their vast wealth from these countries that have turned socialist.

... really, this should be a warning to anyone who actually believes a "wealth tax" is worth considering. It's failed in every country. The most recent country to try this was France, and it led to a vast exodus of wealthy, which had a catastrophic effect on the tax revenue generated there.

So, ultimately... the failure of these governments in South America, Russia, China, have all led to enormous sums of wealth in the United States over the past few years. I hope none of this sounds political, it's not my intention.