alt Hacker NewsThis made me research how much taxes would a wealthy californian pay assuming:
- 2.5M worth of real estate bought recently
- 1M of job income
- 1M selling shares that 10xed (some stock option idk)
- driving a 150k $ car
- spending 150k $ over the years in taxable goods
It came around 840'000 $ or around 40.1 %.
I wouldn't say it's that bad, this even includes sales taxes (probably the fairest of all taxes).
With even basic tax optimization (401k, federal deductions) you get that number down to 780'000 $, with something a bit more sophisticated depending on circumstances you can get it easily lower than 600k or 32% ish.
The biggest problem is that people above that tier end up effectively paying less sometimes even in absolute terms just by borrowing against their equity and not triggering taxable events.
Honestly taxes are complicated to implement, I'm not sure how can you implement a progressive yet fair system without loopholes and without severely degrading services (roads, infrastructure, education, healthcare, military, etc, etc).
And every time you decide to cut on services, you are just moving money elsewhere: more inequality -> more social tensions and criminality, you just end up paying way more to live in a safe place and pay for private and public security and prisons.
It's really difficult.
Replies
>> taxes are complicated to implement, I'm not sure how can you implement a progressive yet fair system without loopholes
It's hard, but possible. However the goal of people who created current tax code is exactly opposite: to create system with loopholes.
US tax code is a mess, there should be less amount of different taxes, more unified taxes.
>I'm not sure how can you implement a progressive yet fair system without loopholes
Georgism, a single tax on the unimproved value of land
> sales taxes (probably the fairest of all taxes).
Just curious: what makes you come to this conclusion?
I can't say how much such a person should pay in taxes, but it is kinda funny that I'm paying the same amount 39.5-40% with my five digit salary and no property.
I don't know who should pay what amount, but I'm pretty sure that me and that millionaire should have different tax brackets. Let alone people with tens, hundreds of millions or more.
PS: I'm in EU, not USA, but here I'm in a highest tax bracket so the point still stands, my tax rate is the same as for any local millionaire. Maybe even more, since those people are aggressively utilizing tax loopholes, shell corporations and offshore tax havens.
This doesn't seem quite right. Even using SmartAsset's income tax calculator for a city in California, I'm getting around a 45%+ tax rate for someone making one million a year of income.
It's actually pretty easy to pay an 80%+ tax rate in California if you consider taxes that your employer pays, sales tax (11%+ in some areas), local assessments, capital gains tax, etc.
Sales tax is one of the most UNFAIR, being a flat tax, it affects people in indirect proportion to their wealth (poorest hit hardest, proportionately).
Even Georgism style taxes will face the problem that if the tax is high enough, it will be worth hiring some really smart person to figure out how to work around it.
Of course, you're also going to have to face the problem that representative democracy includes the ability to buy loopholes.
And then, there are unintended consequences because representatives aren't necessarily the most financially savvy. I'm thinking about the 401k program that disproportionately advantages high income people when it was touted as a savings route for middle class people.
Just make borrowings above the basis taxable as gains, its not hard
I mean Capitalism's solution to labor movement is to create company towns and using scrip to prevent it's workforce from freedom to leave. Maybe we can apply similar Capitalist principles/established solutions in this scenario?
I agree with your overall point. But I find it odd that you consider sales taxes to be the "fairest". Similarly, I find it odd that you put "progressive" taxes in some tension with "fair" taxes. Folks in the highest income range arguably benefit the most from govt services (e.g., infrastructure, defense, R&D, rule of law). They also have a much higher ability to pay well beyond basic survival needs. And, they can reduce sales tax burden by saving versus consuming, a choice that is not available to lower-income.