Don't Billionaires Pay the Same High Tax Rates the
Rest of Us Pay?
By Charles Hugh Smith
August 01, 2021: "Information
Clearing House" --
As with everything else in
polarized America, billionaires proclaiming space
tourism is the next big thing for humanity
neatly divides opinion into two camps: those who
laud the initiative, hard work and innovations of
the billionaires as laudable examples of the
American Can-Do Dream, and those who wished the
billionaire space tourists had taken a one-way
flight to a distant orbit of blissful silence.
Setting aside that bitter divide, let's explore
another divide: how our two-tier tax system enables
billionaires to become billionaires while the rest
of us get poorer. Whenever I discuss the taxes
of the non-billionaire self-employed, armies of
apologists leap to the defense of the status quo
with various quibbles: the 0.9% Medicare surcharge
only kicks in above $200,000, the cap on Social
Security taxes is $142,800, and so on.
Setting aside the quibbles--and recall the tax
code with regulatory notes is thousands of
pages--let's deal with the real issue, which is that
billionaires and their corporations pay a thin slice
of taxes as a percentage of total income if they
pay any at all, while self-employed and small
business pay extraordinarily high tax rates.
To all the quibblers: please add the 15.3%
Social Security/Medicare tax rate (self-employed /
sole proprietors pay both the employee and employer
share of this tax) to the federal tax rate of 24%
for income above $85,520. It's 39.3%.
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Just how hard
would it be to conclude that everyone earning more
than $142,000 should pay at least the same rate the
rest of us pay?
Aren't we showing all those same laudable traits of
the billionaires, just on a smaller scale? Why
should we pay 40% and the billionaires pay
Gee, do you reckon paying no taxes might help
folks become richer? Garsh, nobody ever asked that
question before. And do you reckon paying 40% of
your income might make you poorer over time? Golly
gee, how come the talking heads worshiping the
billionaires never ask these questions?
Since Social Security and Medicare/Medicaid are
the bedrock of America's social safety net, why
shouldn't billionaires pay to support these
programs? Well, why not? Just how lame do the
excuses have to be to be recognized as laughably
Here's the trick billionaires use to evade taxes.
There are countless ways for the super-wealthy to
evade taxes--funnel earnings through an Irish post
office box, buy a tax break in Washington DC, slide
the money into one of dozens of global tax havens,
and so on.
But a simple one is to report no income and live
large off borrowed money. As the billions of
dollars in capital gains pile up as the
billionaire's stock holdings soar (thanks, Federal
Reserve, for the free trillions; awful swell of you
to give us all that free money), there's no income
generated until the billionaire sells some shares.
No sale, no income. Just pay yourself $1 a year in
salary, borrow against your billions at super-low
rates of interest, and voila, you're tax-free while
you build your super-yacht, buy your private island,
and so on.
Just as a thought experiment, suppose the first
$50,000 in earnings for everyone were tax-free, and
a 40% tax rate was collected on all income above $1
million, both earned and unearned (capital gains),
not when the gains were realized in a sale but at
the end of every tax year, whether the shares that
rose in value were sold or not.
So Billionaire Space Tourist reaped $10 billion
in capital gains from the appreciation of stocks
held, then the Billionaire pays 40% of those gains:
$4 billion. There is a way to not pay any taxes
on capital gains--have your portfolio lose value. No
gains, no taxes. And to close all the loopholes, the
tax rate is on all assets and income connected in
any way, shape or form with the U.S. First they pay
the U.S. taxes, then if they want to pay other
nations' taxes as well, be my guest. But the 40% is
due and payable regardless of any other conditions.
You don't like it, then stop selling any products
in the U.S. or holding any assets in the U.S.
Why should billionaires get to set up immensely
profitable monopolies, quasi-monopolies, cartels and
corporations in the U.S. but pay near-zero in taxes?
Why should billionaires be free to profit from
America's economy but pay nothing to support its
What precisely is the logic of reducing taxes on
the wealthiest few to near-zero? If there is no
logic, then we're left with corruption: America
is a moral cesspool.
The truth is America has lost its way if
commoners pay a rate of 40% but its billionaires pay
next to nothing. Please note Karma and Divine
Retribution are not controlled by the billionaire's
lackeys and apparatchiks in the Federal Reserve. The
pendulum of exploitation has reached its extreme,
and the reversal to the opposite extreme is
Charles Hugh Smith is a novelist and commentator.
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