Author Topic: Wealthy paying "Their fair share"?  (Read 2132 times)

david123

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Wealthy paying "Their fair share"?
« on: January 07, 2019, 07:52:44 AM »
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

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Re: Wealthy paying "Their fair share"?
« Reply #1 on: January 07, 2019, 08:08:48 AM »
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

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Re: Wealthy paying "Their fair share"?
« Reply #2 on: January 07, 2019, 09:31:28 AM »
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

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Re: Wealthy paying "Their fair share"?
« Reply #3 on: January 07, 2019, 11:43:59 AM »
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

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Re: Wealthy paying "Their fair share"?
« Reply #4 on: February 15, 2019, 05:18:25 PM »
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

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Re: Wealthy paying "Their fair share"?
« Reply #5 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
https://youngandtheinvested.com/

Money Ronin

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Re: Wealthy paying "Their fair share"?
« Reply #6 on: February 20, 2019, 06:11:03 PM »
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. 

david123

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Re: Wealthy paying "Their fair share"?
« Reply #7 on: February 21, 2019, 11:17:31 AM »
Other countries have tried to tax wealth, and it is complicated.

Some assets are difficult to establish a "price" on such as property, business ownership, art, etc...

I think even for the very wealthy people - like Jeff Bezos - most of his wealth is tied up in Amazon stock.  If he had to pay 2-3% each year in tax on his wealth, he'd have to sell stock each year to pay the tax, and since the stock price fluctuates, what price do you use to establish his wealth?

I think you can have an estate tax, or wealth tax - but it doesn't make sense to have both since they will hit the same money.