[giantg2]

Interesting. I think it would be more impactful/meaningful if it also had columns for inflation adjustment, income distribution, and average effective tax rate.

It seems like when it first started, it only taxed the rich and at a very low rate. Then it expanded from there, to the point where 20% was the min and 91% was the max. Then lower to what we have now.

[ljhsiung]

Looking at 1961, where we have 20% and 91% marginal tax rates, this comes out to be ~19k and 1.9mil, adjusted for inflation (2k and 200k nominally).

Compare these days, where we have 12% min and 37% max for 10k and 500k respectively.

If we were to tax at 37% using 1961 threshholds, you'd have to be making 95k inflation adjusted (that's the 38% threshhold), or 10k nominally.

Something else I found fascinating was that we had over 25 brackets back in the day. I can only imagine the headache that would be without an Excel spreadsheet.

People (myself included) might complain about taxes now, I can only imagine in the 60s.

Thanks for the insights, OP.

[giantg2]

It might not be that bad, depending on the simplicity of deductions and other structures.

For example, 401k, IRA, 529, 403b, etc didn't exist. A lot of states and localities didn't have income taxes at that time either. If the deductions and overall tax code was simpler, then calculating the brackets would be easy - you're basically taking the percent times each bracket max until you get to your top bracket, then the amount in that bracket times that percent.

My understanding is that most people could do their taxes just based on the instructions on the back of the form just because there weren't so many deductions, credits, and complicated securities/instruments.

I couldn't find info on the deductions, but this was interesting.

https://www.nbcnews.com/id/wbna29861648

[rootusrootus]

> Something else I found fascinating was that we had over 25 brackets back in the day. I can only imagine the headache that would be without an Excel spreadsheet.

I have to imagine that the IRS tax tables aren't a recent creation, so the math should have been similarly easy.

[HarryHirsch]

Nowadays you get taxed because your mate lent you 1200 dollars through Venmo because you couldn't make the security deposit for the new overpriced apartment. (Of course your mate will be taxed as well when you repay him.) But Jeff Bezos can borrow against stock that he owns. Income tax is completely meaningless when the 1%-ers have tax evasion strategies that Joe Citizen couldn't possible take advantage of.

[modeless]

This is false in the US. Neither loans nor gifts of $1200 are taxed.

Also, loans don't evade the capital gains tax, they merely delay it. Stepped-up basis is what evades the capital gains tax.

[HarryHirsch]

Yes, when your friend says it's a loan and you treat it appropiately on your tax return it's not taxed. Else it will be. And if you can delay capital gains tax, great for you! How do I delay income tax?

[modeless]

Wrong. If it's not a loan then it's a gift and that's not taxed either for $1,200 as I mentioned. No need to even report it if it's under $16,000 per year.

[HarryHirsch]

Venmo will happily send you a 1099 form if it's above the 600 dollar threshold. We have Joe Biden to thank for that. It used to be higher.

[vmception]

A form doesn’t mean a tax is due

It means a transaction was reported and that you better have a good story about why the tax isn’t due and why you didn’t report it on your own forms

The people that are worried about the venmo 1099 are the people that have not been doing a lot more under the table

(Not to invalidate the rest of the population that is just irrationally afraid of tax collectors)

[oh_sigh]

The 1099 is for sales of goods and services. Your friend loaning you $1200 is not a sale of a good or service.

[onlyrealcuzzo]

The 1% aren't borrowing against stock - or if they are - it's minimal and not worth discussion.

99% of the borrowing is coming from people worth close to a billion or more (0.001%).

[giantg2]

I have no idea if this is how they do it, but I imagine they somehow "mortgage" their shares, then use the money as their own. Any interest you pay on investments is tax deductible, so that would reduce their tax burden. Not to mention, most of it isn't taxed since they aren't realizing those gains.

Again, just me brainstorming loopholes.

[modeless]

The interest is only tax deductible if you reinvest the money, which essentially means you can't use it. If you use it for living expenses, to buy a lambo, etc, then no deduction for you. Also, the loan must eventually be repaid, which means selling the assets and paying the taxes. Only if you carry the loan and pay the non-tax-deductible interest all the way until you die, then the capital gains taxes get erased by stepped-up basis and your heirs pay off the loans without paying capital gains tax. So stepped-up basis is the loophole, not the fact that you can take loans.

Also, carrying ever-increasing loans (including loans to pay the interest on the previous loans) until you die means you pay a lot of interest! The "buy, borrow, die" strategy only works if you withdraw about 1% per year or less, otherwise the loan interest will catch up to you, and eventually you'll be at risk of losing everything to margin calls. Meanwhile if you withdraw normally without loans, then you can withdraw more like 4% per year indefinitely and have way more money to spend per year even after paying tax. So "buy, borrow, die" only works for huge fortunes where you didn't plan to withdraw more than 1% per year anyway. It's not something that most rich people are going to do. It severely limits your cash flow during your lifetime simply for the sake of saving taxes for your heirs.

The people complaining about these loans have no idea how it actually works.

[giantg2]

"The people complaining about these loans have no idea how it actually works."

Not that I'm one complaining about the loans, but so you have a link to how it works?

I didn't mean they directly use it like that, which is why I mortgage in quotes. I thought there's a specific type of small corp the wealthy use to avoid/reduce taxes by going through a sort of conversion.

[modeless]

I explained how it works. Which part is unclear? How you get the loans? At the asset levels where you might consider the "buy, borrow, die" strategy, like $100m+, you can simply ask your banker or more likely your family office will do it for you.

[vmception]

You talk to an investment bank and ask

You can borrow against anything, if someone is willing to lend

Collateralized lending is the least constructive of all

Make it worth their while

[oh_sigh]

I'd encourage you to actually research how any of this works, because you are extremely misinformed and parroting the same lines that I see repeated verbatim around the internet by other misinformed people(ie "Bezos can just borrow against stock he owns and never pay any taxes!").

[giantg2]

Do you have a link or can give a brief explanation? How the loans work that you say we don't understand?

[oh_sigh]

Not really, because I have no idea the extent of ignorance I'm dealing with.

A simple question would be - how does the loan ever get paid off?

A simple point would be that not paying taxes on loans is not some crazy loophole that only the rich have access to. Literally anyone who has ever taken out a mortgage for a house or a loan for a car has taken advantage of this - I'd guess at least 80% of adults in America have a car or home loan.

[giantg2]

How about a link then? It seems like you're trolling or otherwise violating the spirit of HN. I mean calling us all ignorant and uninformed, telling us that we're all wrong, then not explaining how we're wrong. In fact, your second comment conflicts with your prior one (claiming that Bezos can't borrow against stock to avoid taxes, then claiming that's exactly what people do).

[oh_sigh]

Here you go, enjoy: https://www.irs.gov/privacy-disclosure/tax-code-regulations-...

Who is "us all" I'm calling wrong? Are you part of a group of tax ignorant fellows with HarryHirsch? Is it a group of people who get their understanding of tax code from r/antiwork?

Delaying taxes is not the same as avoiding or evading them.