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Comment by chii | Hacker News Reader

> Is it really fair that a wealthy investor pays 15% tax, while a doctor pays 35%?

no. But then the wealthy's capital gains could come from gains in stock or a company, and those gains have already had company tax paid on them, e.g., if a company makes a profit of $100, they'd have to pay $21 in tax, and the company's equity gain is then $79. If you then charge a 35% tax on top of the $79, then that means you've taxed the $100 profit at 56%, which is a lot higher than the normal amount. So by reducing capital gains tax to 15%, you'd end up charging only 36% in total.

It makes sense.

However, why this doesn't apply to a bank's interest payment is beyond me. So may be it is rigged...

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The counterargument here is that the officers of the company can make most of their income not from being paid oodles of cash, but from being given oodles of stock that they later sell back to the company, which is now capital gains and not ordinary income.

From a matter of tax form simplicity, it is much easier--and probably better for society--just to count everything as ordinary income and tax it as such. Fewer potential for loopholes that drive your effective tax rate down to 0; easier to actually do your taxes yourself; etc.

How do they avoid paying tax on receiving the stock? If you're given shares, that counts as income at fair market value.

> The counterargument here is that the officers of the company can make most of their income not from being paid oodles of cash, but from being given oodles of stock that they later sell back to the company, which is now capital gains and not ordinary income.

Unless the stock option gains value (which is capital gains), no, the option itself is treated the same as if they had been paid cash.

> In general, the tax treatment for stock received as compensation for your services -- that is, stock in lieu of pay -- is the same as for regular pay. You must pay income taxes on the fair market value of the stock you received. Say an employer gave you 100 shares of stock in lieu of pay, and on the day you received the shares, the stock was trading at a price of $40. You've received the equivalent of $4,000 in income, so you'll be responsible for paying taxes on $4,000 in income. How much that tax will be depends on your tax bracket.

https://finance.zacks.com/tax-stock-lieu-pay-11287.html

Many corporations pay 0 tax as well. So in many instances, double taxation is not occurring.

This is just another example of the rich getting richer, leading to the massive income inequality that is destabilizing America.

If your life is also becoming easier and more comfortable as well, how does income inequality affect it?

>If your life is also becoming easier and more comfortable as well, how does income inequality affect it?

Is his though? only seems to be getting easier for the top.

Then you admit income inequality isn't what is important here. but absolute quality of life.

Life isn't getting easier for the majority of Americans. Life expectancy is literally going down.

Then you admit income inequality isn't what is important here. but absolute quality of life.

A priori, that's a huge if.

Income inequality causes auction-priced goods and sevcices (much to most spending, including housing) to be bid up in price, it also creates power imbalance that can lead to more wealth extraction from the poor.

Is that what's going on, wealth extraction from the poor? Because it seems to me that poor people today are taking more out of the system than putting into it.

48.65% is not 56% fyi

where did you get 48.65 from?

> if a company makes a profit of $100, they'd have to pay $21 in tax, and the company's equity gain is then $79. If you then charge a 35% tax on top of the $79, then that means you've taxed the $100 profit at 56%, which is a lot higher than the normal amount. So by reducing capital gains tax to 15%, you'd end up charging only 36% in total.

35% of $79 is $27.65. Total tax according to your example would be $21 + $27.65 = $48.65.

They were being a bit pedantic, but their math is correct.

good spot, i miscalculated.

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