Thursday, May 22, 2008
So I just figured out why wealthy people are lying whenever they tell you that 50% of their income goes to the government, and the reason is not tax shelters. Here's how it works. There are a few major forms of taxation: income tax, capital gains tax, property tax. The taxes that we should focus on are the first two. Income tax for the wealthiest people is between 30 and 35 per cent of income. On top of that, people with long-term investments pay capital gains tax, wherein another 10 to 20 per cent of their investments are taxed. Now here's where the casuistry comes in. Because the people do not remove their long-term investments, they don't count them as part of their income. But they are making money off of these investments, and that's why these investments are taxed. So when these people talk about their taxes, they include both capital gains and income. However, when they talk about their income, they are only referring to salary- or wage-income. Thus, yes, their taxes amount to somewhere around 50% of their salary- or wage-income, but they're feeding you a load of horse shit when they tell you that this is their total income. Now, if you factor in tax shelters, you'll probably find even more discrepancy, but I couldn't begin to explain those to you.