Taxes and Billionaires – You’re Subsidizing the Ultra-Wealthy

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Americans have trouble saving for retirement. Americans have trouble saving for retirement because Americans don’t make enough money to save. And even if Americans do manage to save some for retirement – they don’t know what they’re doing. That’s because most Americans don’t know jack about squat when it comes to money.

Meanwhile…….

WHY?

Well-known billionaires are paying exactly zero in income taxes. These billionaires are enjoying the benefits of America that you are subsidizing with your tax dollars. You are financing their lifestyles. Why are you doing this?

Well, it’s not because you want to. Almost no one in America actually wants to subsidize the lifestyles of famous billionaires. But your government won’t do anything to reform the tax system that has you subsidizing Jeff Bezos’ multi-million dollar home in Miami.

Your government won’t do anything to reform the tax system because it has been captured by far-right idealogues who have convinced themselves (and perhaps you) that if billionaires are in any way inconvenienced by taxes then America will literally be destroyed.

The rich have been inconvenienced by taxes before in the history of America and not only was America not destroyed, it was widely acknowledged as ‘great.’ When America was ‘great’, rich people paid taxes (about 42% of their income.)

….the average effective tax rate on the 1 percent highest-income households is about 5.6 percentage points lower today than it was in the 1950s….

Five point six percentage points lower now may not seem like much to some, but it is a big deal to the rest of us. 5.6% of just one billion dollars is $56,000,000. Fifty-six million dollars. Fifty-six million dollars Americans are just giving away for each billion a billionaire receives. Jeff Bezos is supposedly worth about $211 billion. Give or take. 5.6% of that is almost $12,000,000,000. 12 billion dollars means a lot to you and me and spending it on the things this country actually needs would mean a lot to everyone.

It means almost nothing to Jeff Bezos. He has been known to increase his net worth by 8 billion dollars in a single day. In other words, restoring the tax receipts from back when America was ‘great’ would mean a whole lot to the country and almost nothing to the ultra-wealthy.

Lobbyists and Idealogues

But back then America was not overrun by lobbyists whose apparent goal is actually to destroy America. Or perhaps just destroy the American dream (an endeavor they’ve actually succeeded at pretty well).

So lobbyists and right-wing idealogues – 2 stellar culprits in a situation you neither enjoy nor approve of. So now we know a little bit of the why you’re inadvertently buying cannabis for Elon Musk. But how – how exactly is it that billionaires pay zero in income tax when you probably don’t?

HOW DO THE WEALTHY AVOID TAXES, THOUGH?

The stock market that’s how. The stock market goes up, the stock the billionaires have goes up in value, the billionaires get rich and can buy yachts and prime bud and real estate and cattle ranches or your entire town if they want to.

But wait – if they want to spend money, don’t they have to sell some of the stock they have? And aren’t there taxes when you sell stock? It’s called capital gains tax and billionaires are paying it right?

Ha ha. No. You’re paying capital gains tax if you have stock to sell. Billionaires are not.

Wait, what? Why am I paying capital gains tax and billionaires are not? That’s doesn’t seem fair.

WAIT, WHY AGAIN?

Here’s why billionaires aren’t paying capital gains tax: they’re rich.

People give stuff to rich people. People treat rich people differently. In this case, they treat rich people differently than they do you by allowing billionaires to borrow money against their stock holdings so they don’t actually have to sell stock to get cash. And when they do sell stock, they balance out any gains with losses from other stock holdings so that it looks, for tax purposes, as though billionaires don’t have any money at all to tax.

That’s kinda crazy, right? Cuz the people who don’t have any money – are the people who do pay taxes.

Here’s something else billionaires have that you don’t – time. They have time because they are not working full-time jobs that don’t allow them to save jack for squat. And since they do not have to devote so much time to mere financial survival, they have plenty of time to figure out how to squeeze every last penny out of everyone and everything else.

Now, if you are merely a millionaire, you might end up paying taxes that billionaires don’t. Let’s give an example from J.P.Morgan Private Bank. Their example starts like this:

Say you have a $30 million portfolio that generates an annual yield of just 2%.

Taxes on Millionaires

Ha ha ha ha ha. Do you have a $30 million portfolio that generates an annual yield of just 2%?

Of course you don’t. No one has a portfolio of $30 million that generates an annual yield of just 2%. You don’t have $30 million of anything.

And people that do have $30 million manage to generate a lot more than 2% on it. But that’s not the bank’s point. The bank’s point is that if you generate a 2% return on that kind of money, you’re making 600K a year for doing squat. You’re not doing anything and 600,000 dollars a year is rolling your way.

How would you like to make six hundred thousand dollars a year for doing absolutely nothing? You would like it a lot. But it ain’t gonna happen because you don’t have 30 million dollars that you can just allow to lie around and collect extra money for you.

But if you are a mere millionaire and take that $600,000 for doing nothing as income – you’ll get taxed. Because it’s income. Not stock. So you, a mere multi-millionaire, will still end up subsidizing the cattle ranches of the billionaires.

Wait, why again?

Because the highest tax rates on income are higher than the tax rates on long-term capital gains. The rate on long-term capital gains is 23.8%. The highest rate on income right now is 37%. Millionaires with income pay more than billionaires with capital gains.

Wait, even millionaires are getting screwed on their taxes?

Yeah, even those coastal elites the red state baiters like stir up resentment against – yeah they’re subsidizing the rich too. That’s why red state baiters like Fox News Channel like to stir up resentment against them – cuz it takes the focus away from people like Rupert Murdoch (the guy behind Fox News Channel) – the guys who are screwing everyone.

Theoretically, the idea behind a low capital gains tax is to encourage investment. You’d be getting richer if you had more money in an S&P 500 index fund, for example. And perhaps you do have money in such a fund.

But lots of people don’t. Because they don’t have money to invest. And because they cannot afford to lose any of the money they do have. Because the thing about the stock market is that you can lose it all. And people do lose money in the stock market. Lots of money.

The thing about the American system switching from pensions to 401k plans is that it switched the risk of retirement from corporations (like GM) to individuals (like you). Now you can lose everything in your retirement fund. That’s not the case with a pension. GM is supposed to be on the hook for the pension even if there’s a market downturn.

It’s sort of like Americans have accidentally said to each other (thanks to their government representatives) – “Hey, when the economic waters get choppy, let’s just throw all the regular people off the boat – so that ultra-wealthy don’t get seasick! That’s the ticket!”

You are more than welcome to get pretty fed up about this state of affairs. For it is waay past time to do something about it.

Tags: government