Can settle a tax question as to why the rich seem to pay less taxes than the rest of us?

Question

I say they pay less because they spend more money overall

My friend says they pay less because there are more middle/poor class taxpayers than rich taxpayers.

Who's right or are we both wrong?

Streaker: I am referring to the very rich like celebrities, sports stars and people like the wicked Donald Trump and Russell Simmons...

Answer 1

Um...it depends.

If 2 people have a job (ie, "earned income") and one earns 40K and the other earns 200K, the latter will be in a higher income bracket and pay a LOT more in taxes.

However......

If they can show "paper losses" on things like automobiles, companies, jet skies, and properties, that second person may be able to show an income of only $20K. Lower income bracket, less taxes.

AMT (alternative minimum tax) makes such behaviors more difficult.

Warren Buffet (world's 3rd richest man) makes nearly all of his money by selling shares in stocks that he owns. Since he holds them for more than 1 year, they're taxed at the "long term capital gain" rate of 15% (federal).

So, if you compare his 15% to someone elses "earned income" of 50K, he's going to pay a smaller percentage.

Ultimately it all comes down to how the money was earned. The IRS tax code is something like 30,000 pages long (and growing). There are thousands of different scenarios that can be played out.

In a nutshell, tax laws favor those who own their own businesses, own real estate, or own securities (like stocks). These people tend to be the rich.

Answer 2

The only rich people would pay less than the average person is if their income was derived from investments such as tax free bonds, capital gains, and qualified dividends (taxes at maximum 15%)

Warren Buffet was on 60 minutes 2 weeks ago and said the same things. He thought that it is wrong for the percentage of his income subject to taxes to be lower than his employees.

The tax code is based largely on 2 things; ability to pay and creation of jobs. That is why middle class families with children, the poor, and investors pay the least.

Should millionaires pay more for the infrastructure than the average person; after all this country has been very good to them? The top 3% of income earners pay 17% percent of all the taxes, the top 10% pay %47 of the taxes (taken from the wall street journal). For all the flat taxers out there; if taxes for the rich go down, who will pay more?

Answer 3

I think the common misconception is between dollars and percentages. Often the rich pay less of an effective tax rate than what is associated with their class based on the progressive income tax rate table. This is possible because a good chunk of their income is either tax-free investments or capital gains which are taxed at a lower rate. They also make sure to make full use of allowable deductions. Dollar wise, your previous answerers are correct, the rich pay most of the countries taxes. Percentage wise as it relates to your effective tax rate can provide misleading numbers if not looked at closely. Don't let statistics fool you, read into what they're really telling you.

Answer 4

Approximately 95% of US taxes are paid by the rich...the myth that the rich pay little is just that, a myth. The tax laws are geared in such a way that the more you make, the higher the percentage of what you make goes to the governemnt....called tax brackets. Rich people are able to invest in tax-free bonds, etc, but the days of shelters is pretty much passed. IF we had a flat tax rate that would cover the insane enpense of the US and State governments, you and I would have little, if any money left over to live on. Be thankful to those rich who, no matter how you look at it, support us tax-wise. This idea seems to arise from poorer people everytime they take a look at their net pay after taxes...trust me, if you think you pay too much, you should hear what my rich friends scream! With Social SEcurity taxes, Federal TAxes, and sTate and local Taxes, the rich pay as much as 55% of their income to the govenrment! You and I pay 22-28 % typically. Poorer people pay nothing, for by the time they deduct their dependents from their gross, they fall under the taxable rate. Note that ALL pay social security tax, all pay sales tax..but federan and state income taxes have a cut off limit on the bottom end. Good luck and peace.

Answer 5

You're both wrong. The top 10% of all earners in the US pay about 50% of all taxes. The bottom 50% of all earners pay about 4% of all taxes.

It's a common misconception that the wealthy pay less tax than they should. Many of them pay much lower rates than their income would indicate since a significant portion of the income of many wealthy individuals is from long term capital gains that are taxed at a lower rate. However they do pay their fair share and then some in nearly all cases.

Answer 6

So what precisely is your query? As you reported the "wealthy" quite pay a majority of the federal earnings taxes interior the U. S.. They pay a much better share of their earnings to the federal government than the different tax team. the element is, some human beings available does no longer be happy till they could positioned all agencies out of organization by taxing them to the factor of financial ruin. What additionally they look at, is their dollar fee or nicely worth, no longer their earnings. the nicely suited 50% of earnings earners pay over ninety 5% of all earnings tax sales to the federal government. the nicely suited 25% pay merely approximately seventy 5% of those taxes, and the nicely suited 5% pay approximately 50% of the taxes paid to the government. additionally they pay bigger probabilities of sales taxes simply by fact they have an inclination to purchase issues that value further and further of them.

Answer 7

When you say Rick, are you talking aout celebrieties.sports figures...They should pay a lot more than we do but they are wise and donate a lot and take the deductions and have off shore accounts where the govenments can't get to them...It is called creative financing...

It seems the middle/lower class seems to be supporting the rich class these days...Last year I only made 20,000 and had to pay taxes on it even though I had just about every tax you could think of taking out of my pay check...

I believe the income tax should be gone and replace it with a flat tax that everyone should pay....They have tried this and it failed...The IRS needs to go..

Answer 8

You are both wrong.

The highest income taxpayers pay more tax as individuals regardless of how much income they spend.

As a group, the highest income taxpayers pay more taxes than the larger group of lower income taxpayers.

Answer 9

Both you and your friend are incorrect.
The wealthy pay a lot more taxes than the poor.
Tax rates are a lot higher. Unless they engage in very creative tax arbitrage, they definitely get hit.

Answer 10

Both percent-wise and in actual amount of wealth, the rich pay more.

Even though, they're still left of with more amount of wealth than poor people. I could give you examples, but I think you get gist of it.