Billionaires sit in huge pools of money and wealth, and only a small portion of their wealth goes to federal income tax. I have paid an average of 8.2% income tax rate over the last 10 years.
according to it New report From analysts at the White House’s Council of Economic Advisers and the Office of Management and Budget — and they say it’s another justification for raising the tax rate of the wealthiest Americans and changing the way capital gains tax is applied. Says.
From 2010 to 2018, the country’s wealthiest 400 families paid an average income tax rate of 8.2% on their $ 1.8 trillion income. The analysis weighed statistical data from the Internal Revenue Service, the Fed’s Consumer Finance Survey, and Forbes’ annual estimates of the wealthiest people in the United States.
“Preferential capital gains and step-up bases (tax law provisions that allow wealthy taxpayers to wipe out unrealized capital gains for income tax purposes when passing assets to heirs) contribute to this low tax rate. “I will,” said the researcher. Greg Riserson, Senior Economist of the Council of Economic Advisors and Danny Yagan, Chief Economist of the Office of Management and Budget.
Researchers admit that the White House’s analysis differs from other estimates of actual tax bills for very wealthy people. For example, according to Congressional independents, the wealthiest 715,000 households in the United States will have an effective 26% income tax rate in 2021. Joint committee on taxation.
However, the new analysis focuses on smaller groups, assessing the value of “unrealized” capital gains, and as income inequality worsens and the economy recovers, America’s wealthiest households become “fair” in taxes. Pandemic will supply more feed to the Biden administration’s claim to pay a “share”.
Some critics argue that tax rates in tax law are already steep enough to make people richer. “The current US tax and fiscal system is very progressive and redistribution,” said Erica York, an economist at the Right-Wing Foundation, pointing out a study by a group like the Joint Tax Commission. rice field.
“A better approach to raising the tax burden on the wealthy is to pursue progressive sales tax. Progressive sales tax is a tax and financial system with less administrative and economic costs than policy makers are currently pursuing. We can be even more progressive, “York told Market Watch.
Taxing wealth and taxing work
Taking into account the unsold “paper profit” is ruining unfair hypothetical measures, York pointed out. It’s like “telling middle-class families that they’re undertaxed because they didn’t pay income tax on the rising value of their homes and the growth of their annual retirement plan,” she said. rice field.
Earlier this week, IRS filing statistics showed Rich families were moving fast to report capital gains The 2020 return may occur because we want to take advantage of the current capital gains ratio before future growth. By the end of July, households worth at least $ 1 million reported capital gains and / or losses $ 22 billion more than at the same time a year ago.
On paper, the income tax rate has risen from 10% to 37%, down from 39.6% during the 2017 Trump era tax reform. Meanwhile, the maximum capital gains rate has been raised from 15% to 20%. 2013% of the Obama administration.
When President Joe Biden gives way, the highest income rate will return to 39.6%, and people worth at least $ 1 million will pay 39.6% (and the existing 3.8% net investment income tax) on capital gains. Become.
Matching the income tax rate with the capital gains rate means amending the tax law Current injustice In the eyes of White House officials, work is taxed more than wealth.
This is a major reason why millionaires have reached an average of 8.2% in the first place, according to researchers.
One dollar of wages is immediately taxed at the normal income tax rate, but one dollar from a rise in stocks is taxed at a lower capital gains rate, the researchers said. “Return on investment is the main source of income for the wealthy, and this incentive for return on investment is a valuable benefit to the wealthiest Americans,” they write.
Income tax increases can generate overhead costs
Mr York said the new analysis is worth noting that it does not count overhead costs that people may have to pay as a result of a corporate income tax hike. She said the cost of raising corporate income tax would be passed on to shareholders in the form of smaller post-tax returns.
Biden previously he Open to corporate income tax rate Currently between 21% and 25% to 28%.
But stock profits may not be taxed-and that’s the second biggest reason for the 8.2% estimate, White House researchers said.
Finish “basically step up”
“If wealthy investors never sell valued stocks, their return on investment will be wiped out for income tax purposes when their assets are passed on to their heirs,” they said. rice field. This is due to the so-called step-up based rule, where the “cost base” of the inherited asset is reset to the fair market price on the day of death.
Therefore, if children receive stocks that are already skyrocketing in value, they can sell and avoid many capital gains taxes under current law.
Biden’s proposal will find a way to achieve these “unrealized” profits by completing a step-up of profits in excess of $ 1 million. According to the White House, if other real estate tax exemptions are introduced, it will be $ 2.5 million for couples.Some experts said This is a way to tax the wealth accumulated by the elite Those who can reduce their tax exposure when they reduce their salary slightly and borrow on their possessions.
The White House’s analysis highlights Biden’s plans, but it’s not the only tax increase proposal.
The Ways and Means Committee recently announced plans to raise the highest capital gains rate to 25%.While it digs Retirement account tax law changesThe Proposal of the Method and Means Committee basically does not provide any changes to the rules surrounding the step-up.
According to the White House, billionaire income taxes are a small part of their wealth.This is the average rate they pay
Source link According to the White House, billionaire income taxes are a small part of their wealth.This is the average rate they pay
The post According to the White House, billionaire income taxes are a small part of their wealth.This is the average rate they pay appeared first on Eminetra.