Lowering taxes on the wealthy make them more wealth, and little else.

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steross

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#21
Combining federal income, state income, property taxes, and local sales taxes adjusts the discussion.
1) Fed income taxes: No doubt that the tax revenues are paid heavily by higher income earners. Just 3% of all income earners pay nearly 50% of all fed income taxes
* The top 1% earners pay 26.8% in taxes. Six times more of a percentage than the bottom 50% who pay 4.3%.
* The top 50% earners paid 97% of federal income taxes

2) Fallacies: “the tax structure is rigged to reduce the burden for those of means and hurt those who live hand to mouth”.
Our federal tax structure heavily hits those of higher incomes (see #1 above). Property taxes hit those with more expensive properties. State income taxes hit higher wage earners hard. None of those taxes provide the tax payer any more benefit than those who don’t pay the taxes.

Yes 3) Changing capital gains tax to equal regular tax rate:
Okay, but also need to adjust rules for capital losses. There are current very low maximum amounts that can be claimed as capital losses. If we want to tax people for their gains on their risks, we need to provide same allowances for losses on those risks.
Most of executive pay is as stock or options, and the gains of such are taxed at capital gains rates.
While on their regular income as you have shown they are paying higher rates, more than half of their income is at long term capital gains rate.

You can create stats to show whatever you want about taxes. But, you cannot change the fact that those of us who aree wealthy have been enjoying more and more of the income gains despite people like yourself pulling out this type of stat to complain for us.



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Mar 11, 2006
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#26
Most of executive pay is as stock or options, and the gains of such are taxed at capital gains rates.
While on their regular income as you have shown they are paying higher rates, more than half of their income is at long term capital gains rate.

You can create stats to show whatever you want about taxes. But, you cannot change the fact that those of us who aree wealthy have been enjoying more and more of the income gains despite people like yourself pulling out this type of stat to complain for us.



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You are using a graph of CEOs of the top 500 companies as an argument?
And I want you to think a little more about your statement that more than “half of their income is at long term capital gains rate”. I believe if you think about it you may realize that statement is not entirely accurate (Hint: the way you are implying how stock options are taxed is wrong).

And as to your last sentence. What is wrong with people enjoying the income they earn? The converse of that is people should not get to enjoy the income they earn ... we may have our disagreements on taxes, but I assume that is not what you meant.
 
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steross

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#27
You are using a graph of CEOs of the top 500 companies as an argument?
And I want you to think a little more about your statement that more than “half of their income is at long term capital gains rate”. I believe if you think about it you may realize that statement is not entirely accurate (Hint: the way you are implying how stock options are taxed is wrong).

And as to your last sentence. What is wrong with people enjoying the income they earn? The converse of that is people should not get to enjoy the income they earn ... we may have our disagreements on taxes, but I assume that is not what you meant.
Who do you want a graph of, the CEO of some Instagram "company" that has $1796 in yearly revenue?
Do you have proof that it is only the S&P 500 that gives stock options as a large component of income or did you just have nothing useful to add?

I realize that stock options are not taxed exactly at cap gains rate. But, I don't have the time to type out the 15 pages of explanation of exactly how they are taxed on a message board. But, they are taxed at a lower rate than regular income and if they have a low grant price and you exercise them at a decent price, it is mostly cap gains.

And the problem with people enjoying the income that they "earned" is that it is nowhere near that straightforward. The reason that the income of the wealthly keeps increasing and the income of others has been mostly flat is policy. Policy that is influenced by the money that the wealthy are able to buy politicians with to influence policy. You can call that earning to make the grift sound good. I do not.
 
Mar 11, 2006
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#28
Do you have proof that it is only the S&P 500 that gives stock options as a large component of income or did you just have nothing useful to add?

But, they are taxed at a lower rate than regular income and if they have a low grant price and you exercise them at a decent price, it is mostly cap gains.
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Sorry, they are NOT taxed at a lower rate than regular income. I think this is why you mistakenly thought your graph was informing something that it wasn’t.

Non-qualified stock options (which is by far the most common type of stock option) are taxed as ordinary income. The difference between the grant price and exercise price does NOT in any way make it more of a capital gain. Your last sentence is factually incorrect.

You are misunderstanding the impact of holding an exercised stock later to a later date. It is certainly true that later when you sell the stock and the price of the stock grew from you exercise day...you would pay capital gains on the growth ...but, again you already paid regular income rates prior.


Now, if you want to argue the lesser used Incentive Stock Options —- they are capital gains taxed. But with a low $100K/annual max —- I am sure that is not what you meant when talking S&P 500 CEOs (since that still would not come close to 50% of pay) Plus they have other tax issue (AMT, for instance).
 
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steross

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#29
Sorry, they are NOT taxed at a lower rate than regular income. I think this is why you mistakenly thought your graph was informing something that it wasn’t.

Non-qualified stock options (which is by far the most common type of stock option) are taxed as ordinary income. The difference between the grant price and exercise price does NOT in any way make it more of a capital gain. Your last sentence is factually incorrect.

You are misunderstanding the impact of holding an exercised stock later to a later date.


Now, if you want to argue the lesser used Incentive Stock Options —- they are capital gains taxed. But with a low $100K/annual max —- I am sure that is not what you meant when talking S&P 500 CEOs (since that still would not come close to 50% of pay) Plus they have other tax issue (AMT, for instance).
Who generally gets ISO vs NQSO? Do the low paying employees tend to get those tax favorable options because, you know, as you claim our system is hard on the wealthy?

And, when the median American household income is $68K per year, you talking about a $100K max tax break as "low" while at the same time claiming the tax system is so hard on the wealthy is quite ironic.
 
Mar 11, 2006
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#30
Who generally gets ISO vs NQSO? Do the low paying employees tend to get those tax favorable options because, you know, as you claim our system is hard on the wealthy?

And, when the median American household income is $68K per year, you talking about a $100K max tax break as "low" while at the same time claiming the tax system is so hard on the wealthy is quite ironic.
Look you didn’t know and made an incorrect assumption about stock option taxes —not a big deal.
Again, stock options are nice because it is more pay, but they are mostly NOT tax favorable options.

If you are tying to claim that S&P500 CEO pay is mostly taxed as capital gains, then yes $100K max is low. Hence, why stock options for them is mostly non-qualified.
 

steross

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#31
Look you didn’t know and made an incorrect assumption about stock option taxes —not a big deal.
Again, stock options are nice because it is more pay, but they are mostly NOT tax favorable options.

If you are tying to claim that S&P500 CEO pay is mostly taxed as capital gains, then yes $100K max is low. Hence, why stock options for them is mostly non-qualified.
And you skipped the entire point of my post to bicker about tax details. Yes, I do know but I did not know the $100K cap. And, yes, despite you still not admitting it, the executives are the ones that get the tax-favored options.

But the main point that you ignored to bicker about tax law minutia because it doesn't fit your belief system as I said at the beginning of this thread is this:
And the problem with people enjoying the income that they "earned" is that it is nowhere near that straightforward. The reason that the income of the wealthy keeps increasing and the income of others has been mostly flat is policy. Policy that is influenced by the money that the wealthy are able to buy politicians with to influence policy. You can call that earning to make the grift sound good. I do not.
 
Jan 14, 2006
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#32
People should get paid the market rate for the product or service they provide.

Every time the government gets involved they make it worse. Taxing the rich at a higher rate only makes them better at hiding their income. Their cleverness is why they got rich in the first place.

Income inequality is irrelevant. Overall wealth and employment is much more important.
 

steross

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#33
People should get paid the market rate for the product or service they provide.

Every time the government gets involved they make it worse. Taxing the rich at a higher rate only makes them better at hiding their income. Their cleverness is why they got rich in the first place.

Income inequality is irrelevant. Overall wealth and employment is much more important.
Why isn't that true in other nations?

I know Australia because I lived there. They taxed the wealthy at higher rates than here (which I admit hurt while I was there!). But, they did not have enormous amounts of tax fraud as you suggest. And, they have less inequality and from my experience the lifestyle/income of the average middle-class worker was much better than here. Their median wage is higher than the US and their average wage is lower.
 
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#34
And you skipped the entire point of my post to bicker about tax details. Yes, I do know but I did not know the $100K cap. And, yes, despite you still not admitting it, the executives are the ones that get the tax-favored options.

But the main point that you ignored to bicker about tax law minutia because it doesn't fit your belief system as I said at the beginning of this thread is this:
You are the one that made a point by posting:
“most of executive pay is as stock or options, and the gains of such are taxed at capital gains rates.
While on their regular income as you have shown they are paying higher rates, more than half of their income is at long term capital gains rate.”

You were using that point as the crux of your argument. It is not bickering about tax law minutia. It may not change your legitimate opinion, but if that assumption was informing your opinion it was incorrect. Stock options are taxed as ordinary income and 50% of CEO pay, as shown in your table, is not taxed as long term capital gains.

This is a political message board. I enjoy debating taxes, but there are opinion items (which we can disagree) and there are factual items. We can debate opinions, but using incorrect facts to back your opinion is worthy to be pointed out.

EDIT: One item that is true is that highly compensated earners can DEFER a significant portion of their pay. And they can earn interest while deferring compensation to future tax years. The deferment is like a larger 401k, if you will. But once they finally are paid out in the future they are taxed as ordinary income.
 
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Jan 14, 2006
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#35
Why isn't that true in other nations?

I know Australia because I lived there. They taxed the wealthy at higher rates than here (which I admit hurt while I was there!). But, they did not have enormous amounts of tax fraud as you suggest. And, they have less inequality and from my experience the lifestyle/income of the average middle-class worker was much better than here. Their median wage is higher than the US and their average wage is lower.
Obviously there's nuance, and while my bachelor's is in accounting, I'm not up to date on the Australian tax code. While your evidence is anecdotal, I won't discount it. I think our tax code is in major need of simplification.
 
Jun 20, 2012
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#36
Combining federal income, state income, property taxes, and local sales taxes adjusts the discussion.
1) Fed income taxes: No doubt that the tax revenues are paid heavily by higher income earners. Just 3% of all income earners pay nearly 50% of all fed income taxes
* The top 1% earners pay 26.8% in taxes. Six times more of a percentage than the bottom 50% who pay 4.3%.
* The top 50% earners paid 97% of federal income taxes

2) Fallacies: “the tax structure is rigged to reduce the burden for those of means and hurt those who live hand to mouth”.
Our federal tax structure heavily hits those of higher incomes (see #1 above). Property taxes hit those with more expensive properties. State income taxes hit higher wage earners hard. None of those taxes provide the tax payer any more benefit than those who don’t pay the taxes.

Yes 3) Changing capital gains tax to equal regular tax rate:
Okay, but also need to adjust rules for capital losses. There are current very low maximum amounts that can be claimed as capital losses. If we want to tax people for their gains on their risks, we need to provide same allowances for losses on those risks.
Show your work, please.
 

steross

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#37
You are the one that made a point by posting:
“most of executive pay is as stock or options, and the gains of such are taxed at capital gains rates.
While on their regular income as you have shown they are paying higher rates, more than half of their income is at long term capital gains rate.”

You were using that point as the crux of your argument. It is not bickering about tax law minutia. It may not change your legitimate opinion, but if that assumption was informing your opinion it was incorrect. Stock options are taxed as ordinary income and 50% of CEO pay, as shown in your table, is not taxed as long term capital gains.

This is a political message board. I enjoy debating taxes, but there are opinion items (which we can disagree) and there are factual items. We can debate opinions, but using incorrect facts to back your opinion is worthy to be pointed out.

EDIT: One item that is true is that highly compensated earners can DEFER a significant portion of their pay. And they can earn interest while deferring compensation to future tax years. The deferment is like a larger 401k, if you will. But once they finally are paid out in the future they are taxed as ordinary income.
The gains of options are taxed at capital gains rates. There is no assumption in that statement that is incorrect. The only thing I worded incorrectly is that half of their income is at long-term tax rates because for one I was not aware of a 100K cap and two I did as one does on a message board and wrote 10 words when 50 are needed to explain the detail. But, options are clearly of benefit. If they were simply regular income they would not exist. Acting like it is all just the same is disingenuous and wrong.

And we could detail out many other benefits that are largely used by the wealthy. One item, LOL.

And, even yet for the third time, you are ignoring the crux of the argument because you are so excited to point out a minor flaw. While at the same time saying "It's no big deal." Ok, quit posting about it and respond to the primary point that government policies and the economic change they cause have made nearly all of the income gains go to only select people in this country instead of being shared like in the past.
 

steross

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#38
Obviously there's nuance, and while my bachelor's is in accounting, I'm not up to date on the Australian tax code. While your evidence is anecdotal, I won't discount it. I think our tax code is in major need of simplification.
Yes, while the rates are higher their taxes are far simpler. One year while living there and earning my money in AUD my Australia taxes were 6 pages and my US taxes were 182 pages.

My evidence is anecdotal, but the economic paper that agrees with it that started this thread is not. As I said at the start, for many it is a belief system so data doesn't change that mind. If this message board had a good search function we could go back 10 years and find posts from me completely agreeing with what you are saying. But, I don't anymore. I've seen a society that rewards labor and capital a slight bit more equally and, while it personally hurt my pocketbook a little, the rewards were worth it. I just hope we realize it before it goes to the extreme that it is headed which typically ends in strife and war/revolution. And, no, I'm not claiming that just taxes fixes all that. Mindset when determining all policy does.
 
Mar 11, 2006
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#39
The gains of options are taxed at capital gains rates. There is no assumption in that statement that is incorrect. The only thing I worded incorrectly is that half of their income is at long-term tax rates because for one I was not aware of a 100K cap and two I did as one does on a message board and wrote 10 words when 50 are needed to explain the detail. But, options are clearly of benefit. If they were simply regular income they would not exist. Acting like it is all just the same is disingenuous and wrong..
I still do not think you understand stock options.

* “Gains of options are taxed as capital gains rates”.
Of course, they are. But that occurs after the ordinary income generated by stock options have already been taxed. There is ZERO difference if you bought $1k of stock from money from your paycheck. If the stock grows to $1.5k and you sell, you pay cap gains on $500, not the entire $1.5k. Stock options work exactly the same.

* ”If they were simply regular income they would not exist”.
True, but not because of what you imply. They are used to offer potential large sums of money AND to retain employees. Remember they are only beneficial if they stock price increases and it has increased after a specific vesting date. The vesting date is a key because it helps to retain. Tax advantages of capital gains are generally not an advantage.

* “Acting like it is all just the same is disingenuous and wrong”
The leads me to believe you still don’t understand stock options and tax impact. As stated above, stock options and bonuses are used to incent and retain employees. Stock options are taxed “just the same” as regular pay in your paycheck. The major difference has nothing to do with taxes...it is risk and the significant fact you may never see the money from the stock options because the stock price might be underwater.
 
Mar 11, 2006
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#40
Show your work, please.
https://www.aier.org/article/the-1-pay-37-of-federal-income-taxes/

It’s true the remainder of the top 1% (those with incomes between roughly $500,000 and $10 million) paid a slightly higher effective rate, at 26.5%, than the top 0.01% did. But tax rates drop rapidly from there, with filers in the $50,000 to $75,000 reporting bracket (approximately the median U.S. family income) facing an average federal income-tax rate of 8.4%.
People who earned between $15,000 and $40,000 paid an average federal rate of merely 4% of their adjusted gross incomes in 2018. And thanks to the earned-income tax credit and others like it, the poorest earners paid very little if any federal income tax at all.


In short, the federal income-tax structure still places the unambiguous bulk of its burden on the highest earners. The Trump tax cut hasn’t changed that. In 2018, the top 1% of U.S. earners paid roughly 37% of all federal income taxes. The top 5% paid around 58%


https://taxfoundation.org/summary-of-the-latest-federal-income-tax-data-2020-update/
* The share of reported income earned by the top 1 percent of taxpayers rose to 21 percent, from 19.7 percent in 2016. Their share of federal individual income taxes rose to 38.5 percent, from to 37.3 percent in 2016.
* In 2017, the top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.
* The top 1 percent paid a greater share of individual income taxes (38.5 percent) than the bottom 90 percent combined (29.9 percent).
* The top 1 percent of taxpayers paid a 26.8 percent average individual income tax rate, which is more than six times higher than taxpayers in the bottom 50 percent (4.0 percent).