Why do Wealthy Americans pay less taxes?
2June 27, 2022 by Aleksandra Łuczak
Author: Javidan Aliyev
The 400 richest American families paid an average income tax rate of just 8.2 percent from 2010 to 2018, according to a recent study by White House economists. In comparison, the average tax rate for Americans in 2018 was 13.3 percent. All taxpayers, even the wealthiest ones, are included in this number. Besides that, it excludes annual investment gains, which the White House report uses to calculate total wealth.
The main reason for this is that income from wealth and income from wages are taxed differently. Hourly pay or a regular salary is how the vast majority of Americans who work are paid. Income taxes are automatically subtracted in both situations. However, wealthy individuals frequently derive the majority of their income from real estate, stocks, properties or other investments.
How is income from wealth used to buy something if it operates and is taxed differently than income from work? How does an asset become money that can be spent? The quick response is that wealthy folks rely on loans. Many of these people borrow money to finance their lifestyles rather than selling their stocks or real estate, which would subject them to tax, and then using the proceeds to support themselves. High net worth individuals frequently employ professionals, donate to lawmakers, and invest in policies that are committed to keeping their taxes low and their wealth expanding unrestrictedly.
This column has shown how they even pay lower personal tax rates than many middle-class families, which is evidence that, in my opinion, the current tax system fails to make the ultrawealthy pay their fair share. The wealthy should pay much more than the rest of the population, especially given the recent rise in income and wealth inequality. Those who can afford to pay more should do so. Perhaps you have a question: should the situation change for the wealthy or now it is fair enough?
Have your say!
Category economy, ethics, Taxes, USA | Tags: economy, ethics, Taxes, USA
I personally agree with the problems concerning taxes and therefore agree with your view over the people mentioned and the procedures they use to pay less taxes. I completely understand the message that it is trying to be given but in the point where you stand for, ” the wealthy should pay much more”, I disagree in the stance that this needs to be better explained. Are you saying that in terms of percentage they need to contribue more, meaning that the taxes for them are for example 20% or do you say that they need to pay the same tax, meaning the same percentage as the others?
First of all, thank you for your comment, Pedro. I’m really pleased that you asked this question because now I see it really needs further explanation. In my opinion, every country should regulate the tax contributions of wealthy people differently. There are several factors that taxation should depend on. First of all, the reason for that is every citizen of a country should contribute their fair share to his/hers country’s development through the taxes they pay. For example, when an ordinary citizen earns a wage, that wage is taxed immediately. However, especially in the US main income sources of billionaires are their assets such as stocks and properties. Thanks to the stepped-up basis policy of the American economy, assets that generated income are not taxed at all if they are not sold and passed to an heir.
Therefore, I’m not in the opinion that the wealthy should pay a fixed or the same tax as everyone which would be ridiculous. My suggestion is that wealthy folks should be taxed more fairly which will close the unfair loophole between the taxation of assets and wages.