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Federal tax regulation and the critical mass if investment wealth.

Is the way the investment wealthy work the system fair or unfair?

  • Sure. If they can. Why not.

    Votes: 2 25.0%

  • Nope. Why should they be able to do what’s described in the thread below.They should the % others do

    Votes: 6 75.0%
  • Total voters
    8

ModernDiogenes

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Just in case you don’t know how it works, let me explain how federal taxation (or the lack thereof) works for those who make the vast bulk of their income from investing.

At a certain place in the rarified air one reaches a point of critical mass where one can stop working for the money and let their money work for them.

In investing one can own paper that’s worth money and, if smart, that paper yields profit.

That profit is only federally taxed if it’s cashed in. However, one need never cash it in. One can establish a business that owns the paper, takes a business loan out with the stock as collateral, pay in the area of a percent above prime (7.5% today - which is tax deductible, to service the loan and if required remove just enough principle of the investment to make up a shortfall paid to yourself as income that, through loopholes, can be reduced even further so the end result is you live the life of a wealthy person paying, between the loan servicing and the loophole reduced income managing your own money if required - so that you can pay, by percentage in federal tax, MUCH less of what you made in that fiscal year than a salaried person making far, far, far, far, far less than you do.

That’s how someone worth 10s of millions pays single digit percentage, servicing of the loans and federal tax combined, of what their investments made in that fiscal year while some chump working for his $100K pays twice to three times as much as a percentage of his income in federal taxes.

The question is, is that fair?
 
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Both my son and I are participants in that system, and I hate it. But not as much as he does. I'm in favor of two things to balance the system: taxing all income the same, and taxing wealth (including and especially inherited wealth) even as I intend to pass wealth to my children.
 
If you think it isnt fair, then get the tax code changed
That is what MANY MANY people have been trying for ages
But those that want changes cant agree on what changes they want
flat tax? nope
vat tax? nope
national sales tax? nope

So what is your plan? Other than the rich just paying more
 
I've posted my plan several times, though no one really seems interested in a discussion on how the tax code could/should be changed.
Basically, I eliminated all loopholes, adjustments, deductions, and taxed gross income regardless of source, eliminated the FICA tax, adjust wages to compensate for the employer FICA share, and began the progressive tax tables at 15% with increments based on multiples of the GNI per person. The lowest income earners would essentially pay about what they previously were paying as FICA tax, while the highest income earners would pay much more than they currently pay, and a surtax would be applied to balance the budget when necessary, a percentage increase applied to the tax owed from the tax table, increasing everyone's tax bill by the same percentage. When the people ask/allow government to spend more, everyone pays more tax.
 
I'm retired, so I expect my currency to work and earn at least 10% of it's value each year to offset devaluation.
 
Individual said:
I'm retired, so I expect my currency to work and earn at least 10% of it's value each year to offset devaluation.
Click to expand...

So if you applied that to Bezos? I’m going to oversimplify this to make it easier to get the point across but even though the actuality is more complex the point I’m making is still accurate.

If his Trillion in assets/stocks made $100 billion and against that he took out a loan of $100M @7.5%, rolled over the asset profit on the fiscal year thus paid no tax on the $100B he profited, he’d pay the $7.5M that year on the $100M, living very large, readily servicing the debt, and paying only 7.5% on the loan and no federal tax. Yet some schmoo making $100K would be paying around 22% gross after deducting his standard deduction. Almost three times more.

Again, the question is, is that fair taxation?
 

I’d tax all income as income, at the same rate, and some amount of inherited wealth over a given amount. I’m not sure I’d tax accumulated wealth already taxed as income. In fact I’d lean against it if it’s already been taxed as income. Like I said, it’s about fairness in the system, not taxing what’s already been taxed, as long as it was taxed fairly at the time, seems unfair.

I’m not anti-wealth. I’m pro fairness.

Thanks for realizing it’s an unfair system though.
 
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I’ve gone on record as a hybrid flat taxer.

I’d have one graduated step: a national poverty level. No tax paid on anything below that. Every dollar made after that, no matter how you made it, federally taxed at the same fiat rate across the board. The only question is whether I’d have a primary mortgage deduction but other than that, no loopholes. Zero deductions.

Just a poverty level no tax, MAYBE a primary mortgage deduction (I’d lean not), and the rest totally fiat. One page income tax filing whether you’re a janitor or a billionaire.
 
Here's the reason why I'd tax wealth (although if all income is taxed the same, it is less urgent): most accumulated wealth is never taxed. There are so many loopholes and exceptions, entire branches of tax practice (and other areas of the law) are devoted to creating and exploiting them. I did so in behalf of clients, too.

Consider, for example, the billionaires who have sheltered vast wealth in Roth IRA's, or the passing of corporations through inheritance. Trump would be a thousandaire if it weren't for fake loss carryovers in real estate (as well as just plain tax cheating).

I, too, am not anti-wealth (not into self-loathing), and in favor of fairness, even when it costs me (as eliminating cap gains benefits would).
 
Flat tax is a non starter for me, but a graduated tax can still be a one-pager.
 
Well at least some are begining to realize how skewed our tax regulations are in favor of the rich.

Now the wealthy have spent decades and hundreds of millions of dollars on politicians and lobbiest to write this tax code in their favor.

Do you believe congress will ever go against their donors and fix this?
 
Not a chance, so long as elections can be rigged with hidden money. People also don't realize how skewed the financial system is to legally launder money.
 
Fair and unfair don't enter into it. The world is unfair. What we have is an epic fail tax system. It doesn't work. So it must be changed.
 
Federal Taxes hurt taxpayers in many ways, but the top three are:
1) Taxes will always be artificially high (meaning that we're paying much MORE in taxes that is actually needed).

2) The higher the tax revenues available for federal government spending, the more likely they are to squander the revenues on worthless crap, OR they squander it on special-interest groups.

3) When Congress can't get enough in Tax revenues to pay for needless pet projects, they must BORROW it, and Taxpayers then must pay the interest on that borrowed money (aka servicing the National Debt). The interest alone on the national Debt was $1.6 Trillion.
 
In order to shelter "vast wealth" in a Roth IRA, you had to have converted pre-tax IRA/401k money to an after-tax Roth, requiring that ordinary income taxes be paid at the time. Then, you have to give it time to grow tax-free to make up for the taxes you paid. THEN, you're ahead.

Conversely, if you're fortunate enough to work for a company that offers a Roth 401k, you can bypass the pre-tax 401k and make all your contributions to the after-tax Roth. You still need enough time to make up for having paid taxes today.
 

I’m a second generation child of immigrant working class poor grand parents on both sides of my family. My parents were children of the Depression. I took their lessons to heart on what’s real from what’s make believe. Paper assets can go away. Tangible assets hold value.

It’s simplistic and I acknowledge limiting. You can grow paper assets very fast. It can go away just as fast. I don’t trust things of that nature. Never have. Like I said, I acknowledge the limits that places on expansion but I find the lesser stress of the tangible life extending. I own things. Not paper representing things. Especially not paper representing things whose valuations are speculative at best. So I’m not wealthy. Maybe just reaching well off, if that, but for a kid of Depression era parents I’m fine with that when I know what I own won’t go away readily in my old age (all ready upon me). All of it principle taxed as it was all purchased with post taxed income.

Well wishes expressed your way…
 
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We have an economic system where those who make the most money are people who already have the most money. Moreover, our tax system privileges this class of people over any other group.

For anyone to think this system is sustainable, forget ethical or moral or just, I've got beachfront property in the Sahara to sell you.
 
Wealth inequality at its current levels are a very unhealthy sign. It si no sustainable, as you so correctly point out. It WILL rebalance itself, one way or another. It woudl be much better if we made a plan on how to do it.
 
I could totally agree with that....
And the first 40k would be my cutoff (if under that, you pay zero tax)

Everything above that is taxed at a flat rate (say 20%) with no deductions
That means most seniors on SS would be good....highest SS is about 3600 mo
The 100k worker would be taxed at 60k x 20% or 12k which is close to what they pay now
But the higher ups would definitely pay more
 
If you look at wealth distribution you'll see that countries without the huge disparity we have take better care of their citizens.

They have universal healthcare, paid maternal leave, mandatory paid vacations, a workable child care system.

Federal Reserve data indicates that as of Q4 2021, the top 1% of households in the United States held 30.9% of the country's wealth, while the bottom 50% held 2.6%.[7] From 1989 to 2019, wealth became increasingly concentrated in the top 1% and top 10% due in large part to corporate stock ownership concentration in those segments of the population; the bottom 50% own little if any corporate stock.[8] From an international perspective, the difference in the US median and mean wealth per adult is over 600%.[9] A 2011 study found that US citizens across the political spectrum dramatically underestimate the current level of wealth inequality in the US, and would prefer a far more egalitarian distribution of wealth.[10]

During the COVID-19 pandemic, the wealth held by billionaires in the U.S. increased by 70%,[11] with 2020 marking the steepest increase in billionaires' share of wealth on record.[12]

wiki

I always keep in mind this is the wealth we know about. The uber wealthy are uber good at hiding assets. The disparity may be much greater.

When I see these numbers I think 1789. The price of bread was the key to that.
 

The part you are missing in this scenario is that anyone living that way is a market downturn away from losing everything. So yeah, it's fair.

Taxing them on unrealized income is like taxing someone on what they might when in their Sunday NFL parlay.
 
Point 3 is why taxes need raised. The old, and completely disproven mantra of conservatives, of starve the beast, does not and has never worked. When Republicans slash revenues, all that happens is deficits and the debt skyrocket.
 

Put they are realizing the income through the loan. And someone with that kind of money will be able to cover that bet if it lost AND if they. Ouudht at that level it wouldn’t matter as we’d be so totally f###ed there would be no one left to collect.
 

No, they are realizing a loan through a loan. Their net worth doesn't increase with the loan.
 
The question I answered was "Is the way the investment wealthy work the system fair or unfair? "
Though I'm not that wealthy, I find benefit from working the system in the same way.

The tax system is something else, and I've tried many times to begin a discussion on changing it, in a way that would help the lower income earners begin to accumulate some wealth at a reasonable cost to those most wealthy, while eliminating or at least reducing the costs of living to future generations yet born.
My tax plan for example, with a balanced budget amendment would tax:
The minimum wage workers gross income of $16,575.75 would be taxed 15% or $2,486.36 while
someone with a gross income of $300,000,000 would be taxed at the highest progressive tax rate 37% or $110,953,600 if
the CBO projected the tax revenue would result in a balance budget.
If the CBO projected a 15% deficit, then the minimum wage earner would see their tax increased 15% or become $2,859.31
while the $300M income earner would also see their tax increased 15% or become $127,596,640.
 
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