Comment by jagged-chisel
5 hours ago
The annoying/sad/infuriating thing is the ultra wealthy don’t have “income.” Technically, according to IRS rules, much of what they experience (housing, food, etc) should be classified as income. But their lawyers and accountants help them keep that looking quite low.
I used to think this - but when I talked to a tax lawyer friend and we walked through the steps they take, usually they're just deferring taxation that does end up getting paid by an entity eventually.
Capital gains tax is clearly lower than income tax. So why did you change your mind?
Their income would be capital gains regardless of whether they use these methods or not.
Not the commenter you replied to, but one thing to note is that capital gains tax (at least in the context of investments in corporate equities) is applied after corporate taxes. Profits and reinvested earnings are taxed as profits, and they're two of the key components to valuing an equity.
As such, when comparing income tax and capital gains, you should add the impact of corporate taxes. Incidentally, corporate taxes are why many small business owners pay themselves wage income, rather than doing stock buybacks or dividends.
16 replies →
If they donate the wealth to their own foundation to continue to hold close and control, it doesn't get taxed. If they borrow against the wealth at low interest rates until they die and the basis is stepped up ("buy, borrow, die"), it doesn't get taxed. Certainly, deferment is a component, but there are obvious examples of the very wealthy operating in a manner to avoid taxes entirely when they're able to (realizing the benefit of the wealth without having to realize a taxable event). Trust stacking is a recent fad as well, although I don't have enough data to say whether it is a material concern from a tax revenue perspective.
Silicon Valley Is Obsessed with 'Trust Stacking,' and the IRS Doesn't Like It - https://news.ycombinator.com/item?id=48727963 - June 2026
The cases you're talking about are all delaying taxation, not eliminating it. Eventually someone has to draw that wealth - the foundation has to spend for public benefit to be eligible for 501(c)3 status, for instance.
8 replies →
Was your ‘friend’ Jeffery Epstein?
This report is only about wages, so even if the ultra-wealthy reported their real sources of income, they wouldn’t shut up as “labor” the way this defines it.
Capital gains not being considered earned income is simply sensible use of terminology to categorize different ways of amassing purchasing power. For example, in order to carry out the linked analysis.
It has nothing to do with the IRS or taxes.
Income goes straight to a person, capital gains is a little return from other people generating income. Basically a MLM lol.
even with this scam the top 1% of earners still have more annual income than ~75% of the population