That’s not true. They pay taxes, just less taxes because their income is qualified dividends, tax-free bond interest, and long term capital gains. You don’t pay FICO taxes on any of that. And the actual tax rate is low or zero.
Blame mostly Republicans for lowering those rates. They usually say it benefits retirees, which is true, but not poor retirees. There needs to be a minimum tax when your income is above $1 million. At least 20%, if not more.
No. Tax rates that high encourage wealthy people to spend money on accountants because the benefits are so great. Each dollar that is untaxed is like $5 taxed. It’s like multiplying their income by 5x. They will literally spend billions on it and avoid it.
The better way to do it is through enforcing corporate taxes and setting minimums. Say a corporation has a $100 million in taxable income and a tax rate of 20%. Increasing the tax rate by 5% yields $5 million dollars relatively easily. All you have to do is monitor the business expenses and make sure no one is using private jets, cars, credit cards, or real estate for personal reasons. You can tax the money at the source and corporate workers have little reason to hide their boss’s illegality.
Now let’s say you didn’t increase the corporate taxes, so the tax rate is 20% and $80 million is available to shareholders. To get that $5 million from shareholders you have to increase taxes on all forms of investment income by 6.25% (5/80). Plus you have to audit everyone to guarantee that you get all the money. It costs more because there’s more people involved.
An 80% income tax would not affect investors unless they received unqualified dividends (look up “qualified dividends”). Not only that, they could delay the income taxes entirely by not paying out the money. Now you get no extra taxes and the company uses the money to lobby for Republicans to lower income taxes (then pay out later).
It’s very much not that simple. Look at Amazon. They don’t pay dividends. Elon keeps his money completely tied up in that company and others. If he needs money he takes loans against the stock he owns. That’s not income. So you can capitalize on the increase in the stock price without ever actually selling stock or generating any income. He never pays off the principal on the loan, just the interest. What happens to the interest? If it’s a business loan, that can be used offset income taxes. So when he does sell stock to pay interest, it’s offset by the loan interest.
Zero taxes and the ability to spend money.
At least, that’s what I would do with my very basic understanding of the financial system. He has experts who probably teach him to do much better.
Loans against stock are not income because the gains haven’t been realized yet. There’s still a risk the stock can drop so he hasn’t actually earned anything. This is exactly what happened with Tesla and Twitter.
Elon took out loans against Tesla stock to buy Twitter. Tesla stock fell. Then he mismanaged Twitter (X, lol) and its value fell (theoretically because it’s private). Elon is not a smart man. Not only is he bad at running a business, he’s also bad at managing his money. He’s spending (actually wasting) money that he hasn’t even earned yet.
It’s like someone taking out a home equity loan. They wouldn’t get taxed on it because it’s a loan. They haven’t sold the house yet.
Although there is a good argument for higher corporate taxes. That would tax the money before it became dividends or buybacks or capital gains or a margin loan (what you’re talking about). Corporate taxes are simple and hard to avoid, if created properly. Just make treaties with other countries to avoid the dumb “Ireland” tax scenario where Apple designs phones in California, builds them in China, sells them around the world, and pretends the company actually exists in Ireland.
That’s not true. They pay taxes, just less taxes because their income is qualified dividends, tax-free bond interest, and long term capital gains. You don’t pay FICO taxes on any of that. And the actual tax rate is low or zero.
Blame mostly Republicans for lowering those rates. They usually say it benefits retirees, which is true, but not poor retirees. There needs to be a minimum tax when your income is above $1 million. At least 20%, if not more.
The top marginal tax rate before the end of ww2 was (iirc) around 80% on the highest income. THAT should be the norm.
No. Tax rates that high encourage wealthy people to spend money on accountants because the benefits are so great. Each dollar that is untaxed is like $5 taxed. It’s like multiplying their income by 5x. They will literally spend billions on it and avoid it.
The better way to do it is through enforcing corporate taxes and setting minimums. Say a corporation has a $100 million in taxable income and a tax rate of 20%. Increasing the tax rate by 5% yields $5 million dollars relatively easily. All you have to do is monitor the business expenses and make sure no one is using private jets, cars, credit cards, or real estate for personal reasons. You can tax the money at the source and corporate workers have little reason to hide their boss’s illegality.
Now let’s say you didn’t increase the corporate taxes, so the tax rate is 20% and $80 million is available to shareholders. To get that $5 million from shareholders you have to increase taxes on all forms of investment income by 6.25% (5/80). Plus you have to audit everyone to guarantee that you get all the money. It costs more because there’s more people involved.
An 80% income tax would not affect investors unless they received unqualified dividends (look up “qualified dividends”). Not only that, they could delay the income taxes entirely by not paying out the money. Now you get no extra taxes and the company uses the money to lobby for Republicans to lower income taxes (then pay out later).
Corporate taxes are easier.
It’s very much not that simple. Look at Amazon. They don’t pay dividends. Elon keeps his money completely tied up in that company and others. If he needs money he takes loans against the stock he owns. That’s not income. So you can capitalize on the increase in the stock price without ever actually selling stock or generating any income. He never pays off the principal on the loan, just the interest. What happens to the interest? If it’s a business loan, that can be used offset income taxes. So when he does sell stock to pay interest, it’s offset by the loan interest.
Zero taxes and the ability to spend money.
At least, that’s what I would do with my very basic understanding of the financial system. He has experts who probably teach him to do much better.
Loans against stock are not income because the gains haven’t been realized yet. There’s still a risk the stock can drop so he hasn’t actually earned anything. This is exactly what happened with Tesla and Twitter.
Elon took out loans against Tesla stock to buy Twitter. Tesla stock fell. Then he mismanaged Twitter (X, lol) and its value fell (theoretically because it’s private). Elon is not a smart man. Not only is he bad at running a business, he’s also bad at managing his money. He’s spending (actually wasting) money that he hasn’t even earned yet.
It’s like someone taking out a home equity loan. They wouldn’t get taxed on it because it’s a loan. They haven’t sold the house yet.
Although there is a good argument for higher corporate taxes. That would tax the money before it became dividends or buybacks or capital gains or a margin loan (what you’re talking about). Corporate taxes are simple and hard to avoid, if created properly. Just make treaties with other countries to avoid the dumb “Ireland” tax scenario where Apple designs phones in California, builds them in China, sells them around the world, and pretends the company actually exists in Ireland.