Comment by dwa3592
2 hours ago
Last year year Jeff bezos and I both paid taxes for the year of 2024. The percentage he paid on the money he made is far less than I did. I gave higher share of my income to the government than he did. Bezos's true tax rate was less than 1% and mine was around 25%.
Link - https://itep.org/washington-post-rich-not-paying-fair-share/
>(including unrealized gains)
They wrote that whole article out just to make it all meaningless with 3 words in parenthesis.
"The plane crashed and everyone lived! (not including those who died)"
IDK what Bezos made as "income" last year but paper gains in asset values are not "income" for tax purposes, though some people might look at the increase in his wealth and call that money he "made" that year. But we don't have a wealth tax on a federal level at least.
> some people might look at the increase in his wealth and call that money he "made" that year
What in gods name would you call that otherwise?
> But we don't have a wealth tax on a federal level at least
And that somehow justifies rich people paying less taxes, because they navigate the system better than regular people?
He pays income tax just like everyone else. But the majority of his money is in investments, which many Americans already do as well with 401k and personal brokerage accounts. The people who can't afford to invest like that already pay close to 0% income tax as 40%-60% of households, historically, have paid 0% income tax in the US.
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Let's say you own your home and it increased in value last year. Do you feel like you "made" any money from that? Unless you sold it, probably not.
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This post makes the mistake of counting unrealized gains as income. That's not how taxes or investments work. Unrealized gains are NOT income. That's how they mistakenly come up with the number that he pays less than 1% in income tax. Investments, in general, are not income (unless held less than 12 months or if they pay dividends).
Imagine you had to pay income taxes every year on the unrealized gains of your 401k, house, and car value. You too would be said to be paying a very low income tax rate. But again that's not how income taxes work because none of those things are income.
If Bezos were to sell those shares and actually realize those gains then he would be rightly taxed but that would also likely tank the stock as his 8% ownership is significant enough to drop the price drastically. 55% of Amazon is owned by 401k and other retirement accounts so if the price tanks average Americans take a huge hit.
Bezos does sell shares, all the time actually. You can see this in the SEC filings. And he is rightly taxed on those realized gains. But he's not going to sell all of his shares as that would be damaging to Amazon, the workers, retirement accounts, and his own investments.
Instead, the money stays in the company paying worker wages, buying new facilities, etc. This is even better for the economy because it keeps the funds in circulation. This generates even more tax revenue than if he did a 1 time sale of his investments. That's why unrealized gains don't get taxed, because its financially a worse outcome than keeping the money in circulation.
>>This post makes the mistake of counting unrealized gains as income. That's not how taxes or investments work. Unrealized gains are NOT income.
Rich people always borrow money on the stocks they own. In effect, those unrealized gains help them borrow money which they spend like income. I will spend part of my paycheck to buy a cup of coffee and they will spend part of the loaned money to buy the same cup of coffee. They can also buy a house with that money. All they need to do is keep paying the 4-5% interest rate on that loan meanwhile the underlying stock appreciates at 15-20%.
Is this a loophole that rich people enjoy? Absolutely. Does this loophole need to be closed - absolutely.
The interest rate charged generates taxes, the purchases they make with the credit they borrow generate taxes, and the money they leave in their investments generate taxes through capital usage like paying employees, paying vendors, building facilities, etc. The government taxes every little thing so don't think that money is not generating taxes at all. It actually generates more federal and state taxes by staying invested and that's why unrealized gains are not taxed. The tax revenue outcome is better that way.
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Yes, "collateralization counts as realization" is the bare basement minimum of what we should do to fixed up the tax code, but I'm less offended by the scenario you described -- which involves skin-in-the-game capital allocation decisions, the whole point of capitalism -- than I am by the far more common situation where the assets just sit and grow and are rewarded for their sloth by a complete absence of tax on the one activity billionaires are best at: sitting back and getting paid for being rich.
Property tax on stock is a better place to aim.
What is the loophole? That banks are allowed to give out loans to trusted clients? Are you proposing that banks can no longer loan to rich people or what? Why does the source of the collateral being a stock matter? A normal person gets a loan based on his home value, assets, other factors, all of which might appreciate faster than the interest rate. When does it become a loophole?
You really don't want loans to be taxed as income, that would cause a lot worse problems than rich people existing...
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This post makes the mistake of assuming that everyone is on board with the "unrealized gains are totally different from income and should never ever be taxed a penny because that would be communism and implode the economy and kill kittens" hustle. It's a good hustle, because it takes precision to argue against and it's built around a kernel or two of truth, but these two kernels are firmly planted in a gigantic monumental turd of tax avoidance by the obscenely wealthy.
Would you rather they hoard the money under their mattress or invest it back into the economy? Like I explained, the reason unrealized gains are not taxed is because they generate more tax revenue than if the individuals pulled out the money, made a 1 time lump sum tax payment, and hoarded the rest. Its not tax avoidance at all. Its a way to multiply tax revenue as that capital is used through numerous transactions that all generate federal and state income and sales taxes.
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It seems your article is saying the same sort of thing I already stated - "The share of taxes paid by the richest 1 percent (24 percent)", right?
You are talking about effective taxes rates, which are different. To discuss that, I would have liked to see a bit more detail in the article, like what the income sources were and the deductions and losses to offset gains. I think changes around capital gains and loans against equities could use some adjustments. The other taxes like payroll are basically moot as Bezos's payroll income is only about $90k per year anyways.
> I think changes around capital gains and loans against equities could use some adjustments.
At minimum, taking out a loan based on the current value of an asset should trigger immediate realization of capital gains/losses for at least those assets used as collateral. After all, the gains are already de facto being realized for the purpose of the loan.
Unfortunately, I'm not quite sure how to address the other side of things - that said loans often don't have to be repaid so long as the assets continue to gain. As such, the capital gains are actually being realized continuously by the loan, but I doubt it's feasible to properly handle that in tax law.
The easy thing to do is set a limit for how much and how long you can borrow against, tax the loans as income, or outlaw loans against investment instruments entirely.