What tax rate do middle-class families pay on their net worth? 0% I believe, since we don't have wealth taxes?
EDIT: Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay.
This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.
I don’t think that’s quite true - I would say a better definition would be that a company is worth what someone will pay for it, regardless of if you actually sell it or not.
Stocks, piles of gold and cash are just different types of asset all of which have value.
And you have to really tax all of that, otherwise the wealthy will just avoid taxes by being paid in untaxable gold bricks and trade those for purchases rather than dollars.
Same as stock grants: if you're paid in stock, you pay income taxes when that stock is granted, at the market value of that stock.
You aren't taxed on the FMV increase of that stock until you sell it (at which point you're taxed on capital gains).
this is a good definition for someone like me. if I had to liquidate all my assets today, I could easily figure out how much they are worth just by looking at existing bids.
while no less "true", this definition isn't very helpful at scale. warren buffet can't just sell all his berkshire stock by filling orders. depending on the circumstances of the sale, it could either be worth a lot more than n * last price or a lot less.
In the 90s there were stories of a fan who caught a milestone home-run baseball and because of its sentimental value didn't want to sell it, but had to do so in order to pay the tax bill.
In the extreme case, if I have a child, does that constitute income equal to the price a human-trafficker would be willing to pay for him or her?
Then maybe we should give the poor some of this "fake money" since it's fake and doesn't matter anyway.
>EDIT: Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay.
>This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.
This is an actual big lie, since you can borrow against assets like this with secured loans. And you can turn it into cash without moving out immediately with reverse mortgages. How are you able to get "free real money" from "fake money"? Maybe it's not as fake as you think.
Okay, and how do you pay back these loans? That's right: with your income. You're just moving the problem around.
At the end of it all, they have enough dividends/rental income, that's paying for lavish lifestyles, and they still own all of the hard assets that they can then pass down to their heirs with minimal taxable events.
Most anybody has the means to research how to set up an amazon store, a blog, or a youtube channel and start making business income. But instead of spending their time learning how to better their life, they waste it on social media, watching tv, etc.
Those are barely above MLM scams in likelyhood of making money.
You're sort of proving the opposite of your point by giving those as examples to pull yourself out of poverty.
You can lead a horse to water but you can't make it drink though.
And the supplementing your income with Uber, etc. thing is slightly different in that you get compensated for each hour you put in starting with your first hour. The big issue I have is with schemes that take time and capital investments where you probably won't make a dime.
What do you mean by this? Inflation over the past couple decades has come in around 2-3%. The stock market has appreciated by much more.
http://www.shadowstats.com/alternate_data/inflation-charts
In this view, there has been no asset appreciation. It's a myth to quell the masses achieved by manipulating inflation rates.
Plus if your argument were fair, we wouldn’t be seeing the kind of wealth concentration in the system.
It’s essentially a sign that financial engineering is an un-checked force multiplier which regulation has not kept up with.
Finally - asset appreciation is real, yes interest rates have been low and would typically be inflationary - however we’ve also had multiple massive disasters in a short span of time which have crushed demand and economic activity.
They have many problems as well, but that's a wealth tax.
So they are getting appreciation on leverage.
I would argue the median homeowner is being subsidized, having a negative wealth tax.
The local government takes away 1%, but the Federal government pumps up your asset price by >2% - that's a -1% wealth tax (paid entirely through inflation by non-homeowners).
The only wealth taxes the US has are property taxes. We all just think of wealth as the stuff that doesn't get taxed. The richer you get, the less of your wealth is taxable. The poorer you get, the more you pay wealth taxes.
In theory, we tax rich people when they convert their wealth to income. In practice, they all convert their wealth to income by borrowing against it, then dying, then having their estate pay their debts tax free.
The difficulty you are having in parsing out the comparison here is because the comparison is difficult to make (and possibly you are just trolling). How would you word this sentence to make it more clear? It is clear from the rest of the document that what is being compared is not the "wealth tax" on families, because as you said we don't have wealth taxes.
The comparison is what percentage of wealth do families already give to the government through taxes in general. Nowhere does it mention an existing "wealth tax". Most middle-class families build their wealth from a paycheck, while ultra-rich families can do so through other means that aren't taxed. Whether or not you agree that a wealth tax would be of benefit here, it's hard to argue against that point. And that is what your referenced quote is trying to elucidate.
Well of course not. There isn't one. And the Senate can't pass one because the Constitution (happy birthday) doesn't allow them. Elizabeth Warren knows that a wealth tax is unconstitutional. She swore to support and defend the Constitution. And she is championing a wealth tax.
(I am purposefully ignoring the companies not paying taxes since that I think is a valid issue if we are talking about income).
So Warren Buffet may have $84 billion in stocks and assets, but how much did he actually sell? How much money went from selling stocks to his bank account?
I think that number if far more important.
Yes it is true that we have excise taxes on cars and property taxes on homes, I feel like a just plain "wealth" tax is not the right solution.
I don't like the idea that the government can say, "you have X amount in stocks, you must sell a certain perfect so you can pay us in taxes". Which is what this sounds like to me? Or am I majorly missing something here. Taking the Warren Buffet example, he would have to come up with 2.5 billion in taxes
If you have $84 billion (or even $20 million) in stocks and assets, you can borrow against them without converting them to income. Then you can die. Then your estate pays off the debt without paying income taxes. Thus, 0 income taxes over a lifetime of converting wealth to income.
Wouldn't that loophole be the better thing to try to address then?
Instead of just focusing on their wealth, instead focus on the loopholes.
* round nubmers ** you'd pay 150,000 usd on a 1 million dollar investment cashout
federal income tax on a salary of 100,000 USD times 10 is 151,040
So the government still gets their tax's (and more if you countother ancillary tax's) AND 10 people have a job
When you buy stock, you're not paying salaries. You're buying ownership of something that has value, generates income, and mostly intends to use that income to pay salaries.
The argument you're making is an argument against corporate income taxes. That's different.
But surely you have to make payments on those loans before then... interest payments at least. You're either making those payments with the money you were loaned or from your regular income (that was taxed in the first place). At that point you might as well just pay the capital gains taxes because you're losing the same money to interest payments anyway.
> Merrill Lynch recently quoted an interest rate of 3.2% to clients with at least $1 million in assets. Those with $100 million or more can get a rate as low as 0.87%.
These are loss leaders for banks. They want to entice incredibly wealthy people to do business with them and have their companies do business with them.
Wealthfront has a product for the merely rich: https://www.wealthfront.com/portfolio-line-of-credit
> Because your line of credit is secured by your diversified investment portfolio, we can keep the rates low for you. Depending on account size, current rates are 2.40% - 3.65%. Using a line of credit is generally cheaper than carrying a balance on a credit card or taking out a personal loan.
> Borrow up to 30% of your account whenever you need it, for whatever you need. Pay back what you borrow and the interest payment on your own schedule.
And remember the ultra-rich themselves own the bank. Warren Buffet has huge multi-billion dollar positions in Goldman Sachs and Wells Fargo, in addition to owning the real-estate arm of Berkshire Hathaway itself. And the ones that don't own the banks, still get favorable personal treatment from banks in order to get their M&A or underwriting business.