|Professional Athletes Making Millions Are A Few of the US Taxpayers|
Who Pay the Highest Marginal Income Tax Rates on Salary Each Year
Supporters of the progressive income tax think it is the greatest thing since sliced bread because it makes taxes more ‘fair’.
Wrong. It just makes everyone who supports class warfare feel better because they think they are 'sticking it to the rich' when, in reality, it doesn't on very high net worth individuals.
The proposed new tax brackets would collapse the existing 7 tax rates down to three: 12, 25 and 35 percent. There is speculation that the tax package now under consideration by Congress will not reduce the highest tax rate for multi-millionaires from 39.6% and might, in fact, raise it on them.
It won't matter. For reasons discussed below.
The top marginal income tax rate is 39.6% today and is effective on taxable income of $418,400+ for single filers and $470,700+for married couples filing jointly.
The premise behind keeping a 4th bracket at 39.6% and/or adding a much higher tax rate for the super-wealthy is that 'rich people should pay more in taxes!' without really specifying how much more would be satisfactory.
The real question is: ‘Would a super high income tax rate on the uber-wealthy bring in a lot more tax revenue to pay for all the stuff we want our federal government to pay for?'
Uber-wealthy people have access to unbelievably smart and clever tax accountants, estate planners and tax lawyers. If you don't believe it, ask one of them.
As long as we have a tax code rife with hundreds of specific personal and corporate tax deductions, exemptions and credits, very wealthy people will be able to hire enough tax accountants and lawyers to drive their 'effective' tax rate down to whatever level they choose to pay.
If there is a very wealthy person actually paying 39.6% on any income, they need better tax accountants and lawyers.
Why is this true?
Most very wealthy people do not take any salary once they reach a certain point in wealth accumulation. Therefore, many do not pay ANY income tax at all. Period.
No federal or state income taxes are paid since they don't take any income in salary. No payroll taxes are paid into Social Security or Medicare Part A withheld each pay period because they don't get paid like the majority of other taxpayers who earn a paycheck every week.
They collect income in the form of capital gains or qualified dividends which are taxed at the 20% rate, not 39.6%. Many capital gains are offset by tax losses on other investments or in like-kind exchanges in which case, no tax revenues are generated from asset sales by many rich people in a given year.
They invest in tax-free municipal bonds for example. Hard to collect taxes from tax-free incomes.
The number of legal tax schemes available to the super-wealthy in America today to offset non-salaried income are legion. Why any colossally-wealthy people pay any tax every year except for perhaps public relations purposes is mind-boggling.
Since CBO doesn’t use dynamic scoring, perhaps Congress should add on a super-duper marginal tax rate of 70% on everyone in the highest earned income salary levels since static scoring would presume little-to-no change in behavior, although we all know it does.
Based on other similar projections, CBO might up with a score of at least $1.5 trillion of increased revenues over the next 10 years at least on paper. Technically, that would make this bill ‘budget-neutral’, even though hardly any of these projections would come true.
The people who would be thrilled with this new tax bracket, besides advocates of the progressive income tax, would be the very same tax accountants and lawyers who have already figured out how to minimize tax exposure for super-wealthy people at 39.6% today.
They can do it at 70% or above, too.