How is it that a millionaire gets taxed only about 17% but his or her secretary who only makes?

Question

$60,000 a year gets taxed over 30%, doesn't seem fair to me

Answer 1

You're comparing apples to oranges. In the case of the secretary, you're looking at 'income'. In the case of their boss, the millionaire, you're looking at 'wealth'. There is a HUGE difference.

The US tax system is designed to tax income. But not all income is taxed. Only 'realized' income is taxed. Realized income can easily be thought of as money gained that you have immediate access to. Take your house. If your house was bought for $100,000 and is now worth $150,000 you had $50,000 of income. But that income has not been realized, since you cannot touch it. When you sell your house for $150,000, now you have access to that extra $50,000 and it is taxed.

Wealthy people usually make lots of money, but do so in a way that they don't have direct access to it. Take a construction contractor. They may make over $100,000/year, but if most of it goes back into the company, it's not realized income.

We often think of the wrong people as wealthy. A recent news item disclosed that Britney Spears makes over $700,000 per MONTH! She should be wealthy, right? Nope, she pays half of it income taxes and spends the rest. She doesn't save a thing. Athletes are like that too. And actors. That's why so many of them start ancillary businesses. It gives them someplace to stash their huge paychecks so that it's not realized income.

Fact of the matter is, the more wealth someone has, the less reliant they are on income. Someone with $10,000,000 can live comfortably on much less of their net worth than someone making $10,000. Because the $10,000 earner needs to realize more income, they pay more in taxes, as a %.

Answer 2

Well, first of all, somebody making $60K per year isn't going to get taxed 30%.

Taxes are on income, not on assets, so if the millionaire didn't have a lot of income that year he might not pay much tax. And if you're talking about Bill Gates, he and his wife give billions to charity.

Capital gains on stock sales are taxed at a maximum rate of 15% so that could contribute to the low tax for Warren Buffet - and he doesn't seem to live high, so might not actually have taken much income. And he did give a lot of money to the Gates Foundation to go to charity, so that would have affected his taxes for the year.

Sounds like you are looking at some very misleading information.

Answer 3

It was because a vast majority Mr. Buffet's income comes from Capital Gains and not from wages. This was the Bush Admin's gift to rich when he was elected. The rich got the mine....the rest of us got the shaft.......