15% income tax? How is that possible?

Discussion in 'Economy' started by asterism, Sep 2, 2011.

  1. asterism
    Offline

    asterism Congress != Progress

    Joined:
    Jul 29, 2010
    Messages:
    8,592
    Thanks Received:
    906
    Trophy Points:
    190
    Location:
    Central Florida
    Ratings:
    +1,073
    I've been hearing more and more of this nonsense that "the rich" only pay 15% of their income due to the low capital gains tax rates. Barring specific rare loopholes, how does someone who earns the bulk of their money through investing pay only this rate?

    I think the talking point is bullshit, but I'll gladly admit I'm wrong if someone has some actual facts.
     
  2. asterism
    Offline

    asterism Congress != Progress

    Joined:
    Jul 29, 2010
    Messages:
    8,592
    Thanks Received:
    906
    Trophy Points:
    190
    Location:
    Central Florida
    Ratings:
    +1,073
    Nobody has any facts?
     
  3. asterism
    Offline

    asterism Congress != Progress

    Joined:
    Jul 29, 2010
    Messages:
    8,592
    Thanks Received:
    906
    Trophy Points:
    190
    Location:
    Central Florida
    Ratings:
    +1,073
    So I guess we can declare this talking point to be 100% bullshit.

    Funny.
     
  4. 8537
    Offline

    8537 Senior Member

    Joined:
    Aug 23, 2010
    Messages:
    7,754
    Thanks Received:
    729
    Trophy Points:
    48
    Location:
    New England's West Coast
    Ratings:
    +729
    The capital gains tax rate is 15%. I'm not sure how you can declare that fact "bullshit". it's just a fact.
     
  5. Wiseacre
    Offline

    Wiseacre Retired USAF Chief Supporting Member

    Joined:
    Apr 8, 2011
    Messages:
    6,025
    Thanks Received:
    1,192
    Trophy Points:
    48
    Location:
    San Antonio, TX
    Ratings:
    +1,194
    Maybe I'm not understanding your question, if an investor such as Warren Buffett makes 100 million bucks in a year and 90% of his/her income is from capital gains, then their tax rate is not going to be too far above the 15% cg rate.

    Now if you want to propose that the cg rate be raised, then you have to understand that some investment capital will flow out of the country to places where it'll be taxed less. That tax rate is perhaps the most damaging to the economy if you raise it.
     
  6. asterism
    Offline

    asterism Congress != Progress

    Joined:
    Jul 29, 2010
    Messages:
    8,592
    Thanks Received:
    906
    Trophy Points:
    190
    Location:
    Central Florida
    Ratings:
    +1,073
    If an investor such as Warren Buffett makes $100 Million through a corporation then the corporation is subject to corporate income tax first, which is 35% at that level. Then he as an investor can take that money for himself and pay a personal capital gains rate of 15%. So if the venture makes $100 Million in a year the actual after tax result is $55.25 Million, for a total federal tax rate of 44.75%.
     
  7. asterism
    Offline

    asterism Congress != Progress

    Joined:
    Jul 29, 2010
    Messages:
    8,592
    Thanks Received:
    906
    Trophy Points:
    190
    Location:
    Central Florida
    Ratings:
    +1,073
    That's the capital gains rate of a personal realization of a long term investment. Corporate taxes are also paid on the gains but are paid before the investor is paid. The other way is to files as an S-Corporation where all income passes through to the owners and those earnings (even if left in the company) are all taxed at the personal income rate.
     
  8. 8537
    Offline

    8537 Senior Member

    Joined:
    Aug 23, 2010
    Messages:
    7,754
    Thanks Received:
    729
    Trophy Points:
    48
    Location:
    New England's West Coast
    Ratings:
    +729
    But the investor doesn't pay the corporate taxes, they only pay taxes on the income that is distributed to them via a realized gain.
     
  9. signelect
    Offline

    signelect BANNED

    Joined:
    Dec 10, 2010
    Messages:
    1,863
    Thanks Received:
    216
    Trophy Points:
    0
    Location:
    Houston, TX
    Ratings:
    +216
    I am still not sure how 40+% of the population pay no tax. Even welfare recipients should have to pay something. I like the flat tax. If I buy a $1,000 car I pay for the value if you buy a $100,000 car you pay 100 time more than I do.
     
  10. 8537
    Offline

    8537 Senior Member

    Joined:
    Aug 23, 2010
    Messages:
    7,754
    Thanks Received:
    729
    Trophy Points:
    48
    Location:
    New England's West Coast
    Ratings:
    +729
    40% of the population don't pay "no tax". Every American with a job pays between 7.65% and 15.3% of their first 106,000 of earnings in federal taxes. They also pay a host of other taxes.
     

Share This Page