Tuesday, June 8, 2021

Details on How the Rich Get Richer and Stay that Way

ProPublica never gets enough attention for its work. Today's huge story uncovers how little the ultra-rich pay in taxes, based on leaked information from someone at the IRS. It's an extensively documented story, but this is the short version, readable in seven minutes. Or you can check out this Cory Doctorow thread that gives his interpretation of it.

The completely new piece of information I learned from it is that the ultra-rich borrow money against their stock portfolios and other nontaxable but ill-liquid wealth, in order to live the lifestyles to which they are accustomed. This is basically tax-free income. Sure they probably have to pay some smallish amount of interest on it (compared to the amount of tax they would have to pay if they cashed in the stock), but — get this — the interest is a business expense that they can write off completely against some other expense, so it doesn't cost them anything.

I knew the tax code had been written for them, but I didn't quite know it took this form.

You may have heard that Jeff Bezos plans to be on the first rocket his company will launch, in the not too distant future. He's spending his money on bullshit like that, instead of paying taxes to contribute to the common good. Oh, and to top it off, in one tax year he even "lost" money, and so could claim a $4,000 child tax credit. I bet his accountant got a big bonus that year.

Who pays the highest federal tax rate? People who make between $2 and 5 million a year: 27.5%. The richest billionaires of all pay, on average, 15.8%.

Two legislative proposals would have some effect on all of this, one from Ron Wyden and one from Elizabeth Warren. Wyden's is a capital gains tax on "unrealized" gains, while Warren's would straight up tax 2% on wealth over $50 million. Maybe you heard her talk about that during the presidential campaign.

Neither one has any chance of passing, of course.

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