The Rich Do Pay Higher Taxes Than You

https://www.bloomberg.com/opinion/articles/2019-10-10/the-rich-really-do-pay-higher-taxes-than-you

by Bostonian • 7 years ago

34 77 7 years ago

bloomberg.com

blacksqr3• 7 years ago

Author asserts that the poor pay less in taxes after counting stuff that's not taxes.

Meanwhile, Warren Buffet pays his taxes at the same effective rate as his secretary.

rmason• 7 years ago

This is a misleading statement. She's paid a salary while he's living off capital gains and they're taxed at separate rates.

https://www.entrepreneur.com/article/338189

sidlls• 7 years ago

They're taxed at separate rates, and the net effect is that his tax rate in income from whatever source is the same as his secretary's. Distinguishing by source is more misleading, in my opinion.

danhak• 7 years ago

That is exactly the point. The tax code privileges sources of income that prevail among those who already possess wealth. That is the definition of regressive.

1ris• 7 years ago

That's absolutely not misleading, but point on.

As you said:

She's paid a salary while he's living off capital gains and they're taxed at separate rates.

pbreit2• 7 years ago

And THAT is precisely why the wealthy pay lower taxes!

darawk7• 7 years ago

Author asserts that the poor pay less in taxes after counting stuff that's not taxes.

Except that his statement was already true before accounting for those things.

According to the nonpartisan Congressional Budget Office, the lowest-income 20% of households have an average federal tax rate of about 2%. Those in the middle 20% pay 14% of their income in federal taxes. Higher-income households face higher rates. The top 20% pay a 27% federal rate. And the federal tax rate for the top 1% is 33%. These data are for 2016, the most recent year available.

Retric3• 7 years ago

Ignoring Social Security, Medicare, State, and Local Taxes etc makes for meaningless comparisons.

pbreit2• 7 years ago

Does the article seriously quote the non-effective rates as the wealthy paying more?

rtkwe• 7 years ago

The important fact is "[percent] of their income" much of the earns at the top end get shifted to capital gains which aren't counted as income and get taxed much lower.

uberman• 7 years ago

The top 1% tend to have significant income that is not wage based. The rich pay less as a percentage thanks to long term capital gains being taxed at 20%.

Note, the truly rich would consider anyone (no matter how much they make) as a poor wage slave if their primary source of income was wage based.

AdrianB12• 7 years ago

Please help me understand the subtleties of your comment: he is paying millions in taxes, she is paying thousands and the problem is he is not paying enough?

ceejayoz3• 7 years ago

How far does that argument go?

If Buffett's secretary pays $20k in taxes, and Buffett pays $21k, is that fair because he's still paying more?

How much lower can his tax rate go versus his secretary's rate before it's unacceptable?

bitexploder• 7 years ago

Correct. The tax rate on the richest few thousand is at a historically low rate. In the great depression era the tax rate was very high for the wealthiest in the nation and they have been very successful at lowering their tax burden over the years, to where we are now, where the billionaire class is paying a much lower effective tax rate than ever before. Taxing the ultra wealthy at a much higher rate can fix our deficit issues without breaking the economy and taking money out of small businesses, for example.

yifanlu• 7 years ago

Daily reminder that Bloomberg published “The Big Hack” a year ago and haven’t redacted it or made any updates.

StriverGuy• 7 years ago

What evidence do you have to support that the article was false?

Additionally, what in the world does it have to do with the OP?

Bloomberg is a relatively moderate news source with a strong track record.

EdwardCoffin• 7 years ago

The burden of proof is on Bloomberg to show that the article has basis in fact, not the other way around.

It is relevant to the OP because it gives an idea of how reliable other articles from the same source might be.

with a strong track record.

This is what they are disputing.

AlexandrB2• 7 years ago

What evidence do you have to support that the article was false?

There has been zero corroborating evidence found for the article. Bloomberg themselves has offered no corroboration either. At this point it's safe to assume it's false. Beyond that, it's like asking: "prove that the Sasquatch doesn't exist".

geogra4• 7 years ago

That's still so unbelievable. No evidence and no retraction.

gamblor9563• 7 years ago

China has a documented history of state sponsored corporate espionage targeting Western companies.

AlexandrB2• 7 years ago

No one said Bloomberg's article wasn't plausible. It's just there's been no evidence to show that it's actually true.

htfu4• 7 years ago

What terrible analysis.

"Saez and Zucman train much of their focus on the 400 wealthiest Americans. This group makes up 0.0003% of households. The New York Times column describing the Saez-Zucman estimates reports that last year this group had a 23% combined federal, state and local tax rate.

In fact, the jury is still out on that number, which is based on a forecast of what income might have been last year. (The data for 2018 aren’t in. If you filed for an extension, your taxes for 2018 aren’t due until next week.) Even if it turns out to be correct, it doesn’t follow that the U.S. system is not progressive."

Basically saying "sure, by their metric they're right, but whatever, so there. I win!!"

refurb4• 7 years ago

That seems like a reasonable argument to me.

The data they used wasn’t actual data.

htfu4• 7 years ago

I think we all know a ten-point swing is not forthcoming. Especially looking back, it's not like this is the first time someone's run the numbers...

And most of the piece is spent arguing against something somewhere between an aside and a strawman, then towards the end they admit as much(!), but have nothing substantial to add.

Whether your gut agrees with the "message", rhetorically it's just really awful.

sedeki• 7 years ago

Is the effective tax rate is _primarily_ a function of income, or rather on how much you pay on tax professionals?

toast0• 7 years ago

Tax professionals aren't going to have much to work with if you have a traditional job with a salary. Make sure you take all the deductions that apply and maybe change a couple behaviors to enable more deductions or deferment.

To really make a difference in taxation, you need to have the ability to change the character of your income. If you run a tightly held corporation, you can (with some limits) reduce your salary but compensate by paying a dividend, turning more of your income into capital gains. If you run a low employee count company, you can move your income into employer paid 401k contributions, deferring taxes, etc.

berndtj• 7 years ago

This is looking purely at income tax rate, not rate based on actual taxes paid. Article is misleading at best.

gok• 7 years ago

The math in this article is much more correct than Leonhardt’s but they're both kind of missing the real issue. Yes, income taxes are very progressive, but that's going to need to change if we want to raise a meaningful amount of more revenue. There just isn't enough income at the highest percentiles to move the needle very far.

ojnabieoot• 7 years ago

There are serious and intellectually honest disagreements about how to actually measure wealth and taxation. And I don't want to accuse the author of outright bad faith. But in my view this segment - the core of the argument - plays fast-and-loose with the facts in a way that is reckless at best:

"According to the nonpartisan Congressional Budget Office, the lowest-income 20% of households have an average federal tax rate of about 2%. Those in the middle 20% pay 14% of their income in federal taxes. Higher-income households face higher rates. The top 20% pay a 27% federal rate. And the federal tax rate for the top 1% is 33%. These data are for 2016, the most recent year available.

This is half of the story. When assessing the progressivity of the U.S. federal system, it makes sense to look at both taxes and the means-tested transfer payments — Medicaid, food stamps and Supplemental Security Income — that those taxes fund."

It is in fact one third of the story. It appears the author is conflating federal income taxes with overall federal taxes - specifically, the truly regressive payroll tax is ignored, yet the payments from this tax are counted in the opposite direction. This is just plain bad accounting, and a common enough bit of misunderstanding that Strain should have directly addressed it.

Partisan anti-tax activists don't mention the payroll tax, but for the very wealthy it is a pittance, versus a serious burden for the working poor. I think the income cap for payroll taxes is something like $150k: all income beyond that is completely untaxed. For people with 7-figure incomes, it is downright regressive. As someone trying to present a more intellectually serious case than Grover Norquist, Strain should do better, and not let readers like myself wonder if he's lying to them.

And I thought this "question" deserved a lot more than one line, considering the issue of untaxed capital gains is the primary reason why left-liberals (correctly) assert the US has a regressive tax system:

"How to account for unrealized capital gains when determining income?"

In fact, phrasing this as a "gee whiz, what a difficult but ultimately technical question" makes me wonder about the author's intentions. This is the same author who, in 2008 while doing research for the Fed, wrote a shameless and factually ungrounded article supporting the payday loan industry: https://www.responsiblelending.org/sites/default/files/nodes... It is worth noting that this is not a "he got the facts wrong" problem so much as "there is no excuse for getting these facts wrong." He has been a New Right Intellectual for quite some time and I am not very impressed.

I am guessing there is a lot of motivated reasoning in here versus outright dishonesty. But either way this Bloomberg article is bad, insulting to the reader, and the ways that they are bad are easily predictable from this author's career.

basch2• 7 years ago

payroll, property, corporate (paid by shareholders), estate, and sales tax all being left out of this article make its argument exactly what it accuses other arguments of being; incomplete.

plus, would you argue that payroll tax is a tax on the employee or the shareholder, whos paying it? is it a cost of employing someone, or the cost of being employed?

fabiofzero• 7 years ago

It's Bloomberg, of course they would publish a self-serving article like this. The medium is the message, the source is part of the content.

golover721• 7 years ago

What a useless article. No one is disputing the fact that “income tax” is progressive. The problem is the truly wealthy make their money via other mechanisms which are taxed differently. The main one being capital gains which is taxed significantly less than income.

kangnkodos• 7 years ago

One of the biggest issues is that the long term capital gains rate is only 15% (or perhaps 20% in some cases). It's likely that most of the taxed income of people with high net worth is from capital gains, and not from ordinary income. I'm not sure, but I think he's only talking about people with high ordinary income. He could be including capital gains too. Not sure. He's definitely ignoring high net worth.

The author does not directly address the low rate for capital gains.

Also, there are two ideas which are easily confused: 1) Do the rich pay more in taxes? Yes. The number of dollars Warren Buffet pays in taxes each year is more than his secratary. 2) Do the rich pay taxes at a higher percentage of their income? This article indicates the answer to this question is also yes. However because capital gains are taxed at such a low rate, and because of other loopholes, Warren Buffet's percentage tax rate is lower than his secretary's percentage tax rate.

Also, people with a high net worth do not have to sell stocks which have gained every single year. Maybe they sold some stocks a few years ago, and they are spending the cash. In the author's analysis, a high net worth individual with no ordinary income and no capital gains for this year would not be included in this analysis at all, because they had almost no income last year (probabaly a little interest and dividends, but nothing else).

jshaqaw2• 7 years ago

This is not a defense of the low capital gains tax rate but comprehensively it needs to be included that for a C corp each dollar of income is already taxed at the corp level before being distributed as capital gains or dividends. On a per dollar of income basis the gap between ordinary income and capital income is collapsed due to that double taxation.

blacksqr3• 7 years ago

Only net corporate income is taxed, not gross income.

Imagine if you only had to pay income tax on the money you had left over after paying all your living expenses. That's the deal corporations get.

jacknews• 7 years ago

Is it me or does the content of the article not in fact support the headline.

Let alone the true facts, ie how the rich actually pay themselves (not just in taxable income), etc.

The Rich Do Pay Higher Taxes Than You

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