How the rich avoid paying taxes

Capital gains taxes, explained.

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The richest in America don’t make money like most Americans. Most people pay income taxes from a regular job. But many in the top 1% make money off their investments, like stocks, and pay capital gains taxes. While normal income has a maximum tax rate of 37%, long-term capital gains tops out at just 20%. Changing that rate, and some loopholes that benefit the wealthiest, is seen as one way to tax the rich.

Read more about how the richest avoid paying income taxes from Vox:

And an investigation from ProPublica:

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50 thoughts on “How the rich avoid paying taxes”

  1. This does a pretty good job of explaining that stock is a capital gain, but you know what else is a capital gain? Houses, cars, collectibles and art. Yeah the stuff you already own and already have been taxed on the sale price. What’s worse is tax on unrealized (basically not yet sold) capital gains which they explain in the video would be such a good thing if billionaires were taxed on unrealized gains particularly in their stocks.

    To put this in perspective of why it’s a bad idea to tax unrealized gains Your house going up in value is a type of unrealized capital gain. As an example of realized and unrealized gains. Imagine you have a house worth $300k you own it for many years and sell it for $700k. Currently, as the laws stand in the us you are taxed on the capital gain or difference between your initial buy $300k and the sale price $700k, so you’re taxed on the $400k capital gain. Now imagine a world where you are not only taxed when your capital gain is realized (sold), but also when it’s unrealized (still in your possession). Say you bought a house for $500k and over the years the house price rises to $1M you would at any given point most likely yearly (and depending on how the law worked) have to come up with the money to pay for your gain in value when you probably don’t even have that kind of money. Now say for example the housing market crashes and you already paid your unrealized gains for last year do you think the government would be able to pay you and for that matter everyone with some form of rebate, because you lost on your unrealized capital gain. My answer is most likely they would not.

    I know the law wouldn’t touch these unrealized gains yet and only those of billionaires, but they could easily come for lower classes next. 😬 The history of tax in the US has shown that they continue to take more and more from everyone.

  2. Both political parties have utterly filled the American people and are corrupt. We should move to a fair tax. Stop taxing income completely. A federal sales tax would be fair. Rich people buy more and they would pay higher taxes, poor people buy less, so they would pay less taxes.

  3. Lets say government get more money by taxing these tycoons. What next, invest that money in military or in some place where few well to do people profit. I say reduce tax for all.

  4. People need to understand why you can't just tax shares that have not been sold. Share prices of a stock are non Tangable. The price doesn't exists until the share is sold. A share worth is a guess of how much it is worth. You can't tax something based on a guess. This causes two problems.

    The share could be worth $40 and say the person pays 5% tax on it ever year after 20 years the owner loses more money than they had worth. That system would destroy up the stock exchange system as owning shares would mean basically going broke and no one would buy shares either, therefore business would relocate to another country destroying millions of jobs.

    Also this will make tax worse for everyone. Since shares are capital, if you start taxing non sold shares, than you have to start taxing non sold capital overall to, That means if you own a car or house, you would have to pay tax on it every year even if you aren't a billionaire.

    and discourage business from opening ipo.

    Taxing unsold capital will cause significantlymore problem for everyone

  5. The tax difference is about risk. A paycheck is guaranteed if you work for a company. However, investments aren't guaranteed to be profitable. Ppl who want to tax rich ppl don't understand that more taxes will stifle economic growth and innovation. This is just a simple case of envious ppl wanting to punish successful ppl.

  6. Funny every time I see something like this 😂 Do people really not know “the rich” actually pay more taxes in a few months than the average person does in a lifetime? It’s true. So what’s fair? Hmmm?

  7. I'll suggest that because of the crash, choosing the appropriate stock won't be too simple. Jim Cramer mentioned that despite the crash, there are still tremendous chances, and I saw someone mention making $250k from approximately $110k since the crash. How do I generate returns like these? Nate

  8. I love how on the one hand Buffet has built this persona of a benevolent billionaire while on the other hand paying off the right people to keep things the way they are

  9. Rich avoid taxes, the poor pay taxes. Ah yes, a very fair system promoting wealth and social inequality. And the tax to be used in wars like the Iraq War. Very, very fair and perfect country the US is right now!

  10. Lower tax rate, but Warren Buffet's total amount is higher. Makes sense to me. Think about tax as the fee for using public services. Taxes are for the use of highways, police, national defense, and other infrastructure. How much infrastructure can Buffet use?

  11. I just find it ridiculous to tax unrealised capital gain because the stock could go down anytime. Unless the gov is willing to payback the tax money incase of the stock is going down. But it aint happening.

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