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15% income tax? How is that possible?

asterism

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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.
 
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asterism

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So I guess we can declare this talking point to be 100% bullshit.

Funny.
 

8537

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The capital gains tax rate is 15%. I'm not sure how you can declare that fact "bullshit". it's just a fact.
 

Wiseacre

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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.
 
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asterism

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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.

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%.
 
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asterism

asterism

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The capital gains tax rate is 15%. I'm not sure how you can declare that fact "bullshit". it's just a fact.

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.
 

8537

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The capital gains tax rate is 15%. I'm not sure how you can declare that fact "bullshit". it's just a fact.

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.

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.
 

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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.
 

8537

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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.

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.
 

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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.

capital gains are not considered income per say.
 
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asterism

asterism

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The capital gains tax rate is 15%. I'm not sure how you can declare that fact "bullshit". it's just a fact.

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.

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.

True, but as has been shown there's more to the story (and much more in taxes) than just the money that Buffett or the Koch brothers collect as dividends. Warren Buffett never mentioned that besides his personal income tax rate of 17% there were all the corporate tax rates he paid through the various corporations that he owns.
 
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asterism

asterism

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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.

capital gains are not considered income per say.

They are not considered personal income. They are considered corporate income, taxed at the corporate income tax rate (currently 34-39% above $100K at the federal level).
 

Skull Pilot

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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.

capital gains are not considered income per say.

They are not considered personal income. They are considered corporate income, taxed at the corporate income tax rate (currently 34-39% above $100K at the federal level).

um no.

one does not have to be a corp to pay capital gains.

Capital Gain Definition

What Does Capital Gain Mean?
1. An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price.

2. Profit that results when the price of a security held by a mutual fund rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A capital loss would occur when the opposite takes place.

1. Long-term capital gains are usually taxed at a lower rate than regular income. This is done to encourage entrepreneurship and investment in the economy.
 

8537

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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.

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.

True, but as has been shown there's more to the story (and much more in taxes) than just the money that Buffett or the Koch brothers collect as dividends. Warren Buffett never mentioned that besides his personal income tax rate of 17% there were all the corporate tax rates he paid through the various corporations that he owns.

The money paid in taxes by the corporation isn't his money. The corporation is a separate entity.
 
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asterism

asterism

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The capital gains tax rate is 15%. I'm not sure how you can declare that fact "bullshit". it's just a fact.

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.

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.

Who owns the company?

You don't consider corporate tax rates at all?
 

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They should toss the tax code out the window and revamp the whole thing. Everybody in America should pay taxes at the very same rate. Just for conversation, let's say everybody pays 10% federal income tax. No exemptions. No deductions. If you make $500 a year your tax is pretty simple. You pay $50.00. If you make $5,000 a year, here again, pretty simple. You pay $500 in federal income taxes. Regardless of your income, you pay 10%. This way, everybody has a dog in the hunt and everybody is taxed equally and fairly. I'm tired of hearing all the whining from Obama about the "rich not paying their fair share." The rich pay far more taxes than anybody else does in this country. Let's talk about at almost 50% of the population that pay no federal income taxes. Their free loading ride should be over before the so called rich pay more.
 
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asterism

asterism

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capital gains are not considered income per say.

They are not considered personal income. They are considered corporate income, taxed at the corporate income tax rate (currently 34-39% above $100K at the federal level).

um no.

one does not have to be a corp to pay capital gains.

Capital Gain Definition

What Does Capital Gain Mean?
1. An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price.

2. Profit that results when the price of a security held by a mutual fund rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A capital loss would occur when the opposite takes place.

1. Long-term capital gains are usually taxed at a lower rate than regular income. This is done to encourage entrepreneurship and investment in the economy.

Corporations do not pay capital gains tax. They pay income tax.

http://www.irs.gov/pub/irs-pdf/f1120.pdf
 

Dont Taz Me Bro

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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.

They don't pay income tax and that figure is closer to 50%, not 40%
 
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asterism

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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.

True, but as has been shown there's more to the story (and much more in taxes) than just the money that Buffett or the Koch brothers collect as dividends. Warren Buffett never mentioned that besides his personal income tax rate of 17% there were all the corporate tax rates he paid through the various corporations that he owns.

The money paid in taxes by the corporation isn't his money. The corporation is a separate entity.

You're spinning.

$100 Million to Warren Buffett is taxed at 15% only if it's a qualified personal capital gain. However, that means the corporation he owns paid corporate income tax on a much higher number ($180,995,475.11 to be exact).

This money doesn't just fall out of the sky, investors and owners have to do something for it. In Buffett's case, in order to receive $100,000,000 he has to generate almost twice that in profits through his corporation.

Would you consider 44.75% a "fair share?"
 

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