[harryh]

Well, roughly 2.6 million Americans died in 2014. I've read that 1 in 500 estates gets taxed so that's about 5200 estates.

19 billion / 5200 = an mean of ~3.65 million per taxed estate. That's all I know off the top of my head.

In general I've found the trope of "the rich don't pay taxes because of their fancy lawyers and accountants" generally turns out to be false.

[smtddr]

>>In general I've found the trope of "the rich don't pay taxes because of their fancy lawyers and accountants" generally turns out to be false.

It's not that they don't pay taxes at all, but they definitely pay less than they should. http://money.cnn.com/2013/03/04/news/economy/buffett-secreta...

There's no way you can believe otherwise, a millionaire can afford all kinds of financial experts to work 40hrs/week to move money all over the place to avoid taxes. It's unreasonable to think they don't (ab)use that ability.

[harryh]

Buffet doesn't pay lower taxes because of fancy lawyers and accountants though. He pays lower taxes because capital gains are taxed at a lower rate than ordinary income.

We can certainly debate whether that is good policy or not, but it has absolutely nothing to do with any sort of fancy tricks.

[ashwinaj]

I wonder which group of people lobbied for capital gains to be taxed lower than ordinary income? Is it coincidence that since the law (one of Reagan's tax cuts) was passed a lot of executives are paid a lower base salary and tons of stock options?

I'd consider that a fancy trick :)

EDIT: To answer harryh: Yes and it has been steadily decreasing [1]. And your point is? I think we can agree this mainly benefits the rich; I don't see someone in the middle class would have the discretionary income (not 401k, I'm talking about leftover income after expenses) to put his/her money in massive amounts stocks.

[1] http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...

[harryh]

Capital gains taxes have almost always been lower than ordinary income taxes. This is not a new post-Reagan phenomenon.

[drumdance]

The rate was much higher pre-Reagan, nearly double what it is today.

Also, the rise of finance means a lot of Wall Street hedge fund managers who should be paying ordinary income tax are paying cap gains rates through the carried interest exception. Venture capitalists too.

http://avc.com/2010/05/why-taxing-carried-interest-as-ordina...

[harryh]

Reagan lowered max cap gains rates from 39% down to 20% but then back up to 28%. At the same time he lowered the max rate on ordinary income from 70% down to 50% then down to 28%. So ya, at the end their they were briefly the same (which is why I used the word almost). But in general my point stands. Capital gains rates are generally lower than ordinary income rates as a matter of public policy.

A similar point holds for the carried interest rule. Those taking advantage of it aren't doing so because they've hired amazing accountants to file their taxes. They're just following relatively straight forward tax law.

Adjacently, while I generally agree with you on the topic of carried interest I did find this column thought provoking. You might enjoy it.

http://www.nytimes.com/2012/03/04/business/capital-gains-vs-...

[walshemj]

And it makes sense as there would be no incentive to invest in business if you are taxed the same on T Bills, Bonds Consols, Guits etc

[mikeyouse]

But Buffett does make his capital gains exclusively through Berkshire who absolutely does make money through fancy lawyers and tax loopholes.. See the pointless Burger King / Tim Horton's inversion they shepherded through last year;

http://www.bloomberg.com/news/articles/2014-12-15/berkshire-...

This isn't productive work on any scale except tax optimization and is only available to massive companies and their teams of lawyers.

[harryh]

Shares of BRK.B are available to anyone who wants to buy them. So they can participate in those gains as well.

What you're really getting at is tax incidence. Ultimately corporate taxes are still taxes on people. It's a complicated question to figure out which people. Sometimes it's shareholders like buffet, but it's also often employees or customers.

I do generally agree with you though that corporate taxes probably fall disproportionately on rich shareholders so to whatever degree there are shenanigans it's probably benefiting those rich shareholders.

Personally this makes me question the value of corporate taxes entirely. Just get rid of them and tax people directly. It would save a lot of paperwork and be easier for everyone to understand. Most people disagree with me on this point (though I would say that's because they don't think about tax incidence!).

[plonh]

Not everyone can obtain very many BRK shares. Buffet has very many.

[harryh]

Yes. Clearly. Hence "I do generally agree with you though that corporate taxes probably fall disproportionately on rich shareholders."

[drumdance]

This is why I actually favor doing away with the corporate income tax. Hundreds of thousands, maybe millions, of accountants and tax lawyers would be out of work, but on the flip side companies would have no incentive to play all these games and keep money offshore. Just pay a dividend, or don't, and let the investors figure it out.

[plonh]

Then you'd need a property tax or else the investors can keep accumulating value and never paying tax.

[drumdance]

No, you'd still tax distributions to investors. Basically, once money touches a personal bank account, it becomes taxable. The difference is that corporations would have much less incentive to hide their earnings.

[sageikosa]

How much one "should" pay in property/income forfeiture is, of course, a matter of political policy.

Just think how much money goes into the economy to preserve income...if we simplified the tax code in any way, so many people would be out of work in both the private and public sectors.

[harryh]

> if we simplified the tax code in any way, so many people would be out of work in both the private and public sectors.

This is an excellent demonstration of the broken window fallacy.

[washadjeffmad]

From 2003 to 2013, the top marginal and capital gains tax rates were 35% and 15% respectively, and the top 0.01% of taxpayers faced an average tax rate of effectively 25%. The last time rates were that low was before WW2, leading up to a period we remember as the Great Depression. During the nation's most prosperous decades, those rates were consistently above 40%, and leading up to them, ranged between 60% and 40%.

The issue isn't that the mega-wealthy pay no taxes, but that the value of the taxable income of a handful of people vastly supersedes that of most of that of the rest of the population. In essence, lower tax rates didn't fix anything about the economy unless you thought taxes were the problem and provided no overall boost to the economic security or general prosperity of the public.

So when GE Capital pays no corporate taxes and someone points that out, you're likely to hear that they pay those taxes through the number of people they employ. This is deceptive, since a legitimate small business would be paying both taxes. That entities like GE Capital exist is the trope that you need to dispel. Or did those estate taxes not come from the earnings of mom and pop shop owners and people who put in their 40 quarters with a little wise investing?

[asmithmd1]

Taxes are for the 99% The 1% can and do pay lawyers to get out of paying much. Check out this loophole - it is complicated but basically if you can afford to set up one of these trusts you can give money to your kids tax free:

https://en.wikipedia.org/wiki/Grantor_retained_annuity_trust

[sumedh]

> "the rich don't pay taxes because of their fancy lawyers and accountants" generally turns out to be false.

So why does Buffett keep on saying that he pays low taxes compared to his secretary?

[kspaans]

Short explanation: capital gains, dividend income is taxed less than normal (wage, salary, etc) income. And I believe Buffett means that he pays a lower effective tax rate than his secretary, not fewer taxes in absolute terms.