The Triumph of Injustice
Saez's first book was an economics flop, but social phenomenon amongst the illiteratti, this was his second.
~ Aristotle Sabouni
Created: 2020-01-28 |
It is so dumb that only a Berkeley Graduate in economics (or CBS FakeNews which reported this as groundbreaking) could not point at it and laugh at the fallacies and errors contained in the premise.
Saez/Zucman are playing leftist games by distorting facts: they claim is that 22% long term cap gains (when founders sell stock) is a lot lower taxes than their other workers (making many hundreds of thousands per year), who might have a top marginal rate of 24-37% income tax. Only that's not true.
Stock Sales (Cap Gains) and Total Tax burden[edit | edit source]
| 🗒️ Note: |
|---|
| The reason capital gains taxes is less, is about risk/reward. If you work at any company, the borrowed money -- and the risk taken in loaning that money demands a return or you won't invest it, and thus the company wouldn't be there, or wouldn't be able to grow. So we discount the tax punishments to keep people investing in growth and job creation, otherwise they just hoard and hide money in the mattress (safer) and the economy seizes up: no/slower growth and jobs.) |
Here's some of the basics:
- When you create a company and you own a piece of it (because you founded Apple/Google/etc), and when that company grows, that company pays taxes, every year on the property, energy, profits, employees (payroll), and other taxes and regulatory costs.
- Since the founder/owner/CEO owns a piece of that company (Stock), they own a share of all those corporate taxes that are paid out (if they didn't have to pay those taxes, their company could grow faster, or compensate them more). So they paid those costs, every year.
- That's on top of the burden of any income they take out of the company in salary, which they pay the highest rates on just everyone else.
- Then when they sell the stock (infrequently), they pay a slightly lower rate (≈22.5%) on the investment returns.
So selling shares at 22%, isn't counting the 21% corporate tax on the money that was paid every year before that, or all the other taxes (payroll,, energy, property, etc), that are stacked on top.
So if I had $1M in stock, paid 20%/year on it in corporate taxes for 10 years, and took out $10M. Great investment = 10x in 10 years. Yet, my effective tax amount was $11M for the corporate taxes (20% for every year) + $2.2M in long term capital gains taxes when I finally take that money out. Explain to me how $13.2M in taxes on $9M in profit (60% tax rate) is somehow less than the secretary that would have to make over $150K to be higher than 22%.
Effective income tax rates[edit | edit source]
The way the tax schedules work if you're married and filing jointly, you pay 10% on the first $20K, then 12% up to $80K, then 22% up to $171,050... and so on, up to 37% on any money over $622K.
The max rate implies that if you made $100K, that you would be at 22% and thus you paid $22K in taxes. That isn't how it works.
The effective rate is that you paid $13,600 (or 13.6%)
- you paid 10% ($2K) on the first 20K
- 12% on the next $60K ($7,200)
- and 22% on the next $20K ($4,400)
However, that doesn't factor in deductions which mostly only applies to low/middle income. Deductions like:
- Up to $3,600 per kid off your taxes (tax credits)
- 401K/Pension gets taken out before income (but is capped so doesn't apply to rich)
- Healthcare is deductible
- Subsidies apply to poor and middle class (that give them money back, or discounts on other things)
In the real world a family with 2 kids making $100K is pays ≈$6,892 in federal taxes (according to Mottly Fool[1]): or a 6.8% total tax rate -- not the max rate of 22%. And if you get much below that in base income, usually the tax benefits/credits exceed the effective rates (you're getting more money/benefit out than you put in). Anyone that implies you paid 22% tax rate, when you only had to pay <$7,000 is a fool or fraud.
Conclusion[edit | edit source]
| 🗒️ Note: |
|---|
| There are some very tiny windows/conditions where a few rich can get a slightly better rate, for outlier years, than those making over $650K or $1M, if you don't average out ALL their taxes over time. However, should the middle class really care that someone clearing $1M/year in salary is paying a fraction of a percent more than Tim Cook does 1 year out of 10 or 20?) |
So Saez lies. This brings us back to the first and last rule of economics: Never trust a progressive economist.
There are no competent or honest economists that fail to understand this -- and thus any "Economist" that doesn't factor this into their calculation or explanations on the total effective taxes on the returns versus personal income is either dishonest, a fraud, or both. Saez and Zucman didn't count or explain those, because they knew their outrage mob of readers and students, don't want to know. They value the perceived injustice more than the actual injustice of taxing the rich too much.
Thus while Saez/Zucman scam claims the rich are underpaying on investment, the truth is they are likely overpaying. Our corporate taxes and other regulatory burdens are one of the top reasons jobs go offshore to other countries. Communist countries like China, and all the kinda "Socialist" scandavaian countries in Europe, have LOWER corporate tax burdens than the U.S.
What is the cure? For the left, it is to punish people for investing in businesses (holding/selling stock) as if that will help the thousands of employees dependent on that capital for jobs and the growth -- as well as punishing them in their 401K/pensions (where they are investors)? All to try to gouge the rich? When in truth, it won't matter nearly as much to them as everyone else? The progressive solution to someone else getting ahead is to set off a suicide vest to teach them a lesson.
🔗 More
| |
| |
| |
| |
🔗 Links
- https://www.amazon.com/Triumph-Injustice-Rich-Dodge-Taxes/dp/1324002727/
- https://www.cbsnews.com/news/americas-richest-400-families-pay-a-lower-tax-rate-than-the-middle-class/
- Tax Schedules: https://www.forbes.com/sites/kellyphillipserb/2019/09/12/your-first-look-at-2020-tax-rates-projected-brackets-standard-deduction-amounts-and-more/
Tags: Reviews FakeNews Books CBS Saez
