They don't pay anywhere close to that, there are tons of tricks to avoid paying that % on gains and the more money you have the more leeway for loopholes.
Very relevant in startup ecosystem as well (look up exchange funds, opportunity zones etc.)
Imagine how much federal revenue would increase if that 1% paid the same effective rate as say a typical plumber, rather than the <10% they currently pay. That might actually put a dent in the trillions of dollars this congress is about to add to the national debt.
I hear that sentiment a lot, but it doesn't seem right to me. My salary is pretty close to the median plumber's income, and my family's effective tax rate last year came in at... 1.6%. And that's with all retirement account contributions going toward Roth accounts. If we'd chosen to contribute to traditional IRA/401k accounts instead, the EITC and child tax credit would easily turn our tax bill negative.
A quick search tells me the median plumber salary is ~$60k. Your telling me your entire tax burden is ~1k? I find that hard to believe, and if true is pretty darn atypical. That's closer to what I was paying when I was making ~10/hr.
Yes. We had $50k of taxable W2 income ($63k including pre-tax insurance premiums and HSA contributions), $13k of taxable family leave benefits, $4k of interest/dividends (mostly qualified dividends, taxed at 0%), and $9k of long-term capital gains (taxed at 0%), making our pre-tax gross income about $89k. Only $66k of that is subject to taxes; the standard deduction brings that down to $37k, on which the tax is $4k. With a $2,000 child tax credit, $400 saver's credit, and $200 foreign tax credit, our tax liability is reduced to $1400, which is 1.6% of $89k.
"That might actually put a dent in the trillions of dollars this congress is about to add to the national debt."
It might also result in even more spending. I don't think that there is any "natural ceiling" when it comes to willingness of politicians to spend other people's money. The only ceiling is external - how much will the system bear.
Edit: it's an honest question. Maybe the top 1% paying 40% of all income taxes is too much tax. Maybe it's not enough. Without knowing how much of all the income they make it's a meaningless number.
According to the Tax Foundation[1], for tax year 2021, the top 1% of U.S. earners—those with an adjusted gross income (AGI) of $682,577 or more—accounted for 26.3% of total AGI and paid 45.8% of all federal income taxes.
My personal opinion is that income tax should be more progressive, but I know that plenty of smart people disagree on that.
Your source leans right-center, so probably good reason to suspect their reported top 1% AGI is low and their reported federal income tax estimate is high.
1. Does not follow. Just because you don't like someone's politics doesn't mean they're dishonest.
2. Your own link contradicts you. It says explicitly that that site hasn't failed any of their fact checks and doesn't use loaded words that they say are typical of that category. It says the categorization is because the site promotes libertarian policies.
There are a lot more taxes than the federal income tax. It happens to be one of the most progressive taxes. Anyone focusing on that and ignoring all the others is trying to scam you.
This is true for ultra high net worth individuals. They can do schemes like borrowing against equities and using the tax-free cash for expenses or purchasing other assets.
It is also true for many “normal” one percenters. For example there is a service for incorporated anesthesiologists where you tell them where you plan to go on vacation and what dates, and they create a bullshit anesthesiology conference, including the brochure and other artifacts, that meet the letter of the law IRS definitions for a valid business expense. None of this stuff ever hits AGI.
The top 1% of people make 20.7% of the country's income. Given progressive tax rates, they should be paying a lot more than 40% of Federal income tax revenue, but rates don't scale enough, and aren't lax enough on other classes.
Can you explain your reasoning behind "they should be paying a lot more"? I kept hearing that they didn't pay their "fair share" when in fact it appears they pay double. It just seems like whatever they actually pay, measured in dollars or as a percentage, will always be widely regarded as not enough.
There are a couple of key phrases in politics that get used because there is no actual justification. "Fair" is one of them. It is impossible to achieve fairness in the tax system under any circumstances, it is always taking from someone who - from the fact that it isn't voluntary - we can assume quite likely disagrees with how the money is about to be used. Taxes are fundamentally arbitrary.
So in practice, if "fair" is used in politics the appropriate reading is often as a euphemism for "I think we have the numbers to push this interpretation of the world on people; it'll be good for us".
Could you help me understand why an individual with one billion, needs two? At what point would you accept that someone has more money than they'd reasonably need? And if you just thought of a maximum amount, then, wouldn't the acceptable tax rate over that amount, be 100%?
So every enterprise becomes state owned? Ilya Sutkever's new company is already worth 32B so 31/32 of it should be owned by the government in your world? Who makes the decisions for it?
Assume you think the government is in a better position to spend that billion than the billionaire is to figure out what to buy or invest their money in?
I know he's out of favor with a lot of people, but would Elon have created SpaceX or The Boring Co or Neuralink, or helped start OpenAI if he hadn't had the spare billions to do so?
I'd much rather have multi-billionaires investing in the economy, and in the future, than giving additional money to the government.
You've mis-read the comment. This logic is not strictly related but it might help you understand what he was saying:
There are ~300 million people in the US who are not billionaires. If they earn, on average, $4 each that balances out a billionaire by income [0]. Since there are <1,000 US billionaires, the average american income would need to drop back to something around the $4,000 range for billionaires to be out-earning them.
This is why taxes tend to land heavily on the middle class, the billionaires don't control most of the money. If politicians want access to money, the biggest pot isn't the billionaires.
[0] And billionaires don't generally make billions in income because it is a wealth measure.
It's important to distinguish between wealth and income. Like, I would say that a lot of HN readers are in the top decile of income in whatever country they live in, but far, far fewer are in the top decile of wealth.
Personally, I think that we should tax wealth more in general, and probably make the income tax a bit more progressive (I currently pay 52% which sucks, but if I had to pay a few pp more to get rid of homelessness and poverty in my country then I'd be ok with it).
Whatever it takes to restore 1960s level of inequity.
By whatever measure works, eg old school gini coefficient or something more modern.
You're right though: food fights over decimal points and gaming the rules nicely obfuscates any constructive debate about what kind of society we want.
Your answer begs the question - why is the 1960’s the right target?
And if the Gini coefficient is calculated pre-tax and pre-benefit distribution, it’s not going to change with high taxes and high redistribution (and yes you mentioned it may not be the right measure).
And if the Gini coefficient is calculated based on income data from the US, do we know if the better Gini from 1960’s wasn’t just due to income not being reported to the IRS?
For perspective: UK tax rate bands are 40% between £50k-£125k, 45% above that. So 50% tax for the 1% isn't wild at all in absolute (although it's a big departure from the american approach to taxes, of course)
If they don't wanna pay so much in taxes, they should stop having so much money. Taxes function to raise revenue and thus have to go where the money is.
There are no loopholes for investment gains. If you are talking about offsetting losses and delaying gains, those options would likely be available to endowment funds.
Very relevant in startup ecosystem as well (look up exchange funds, opportunity zones etc.)