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Tax Rates of Wealthy

Page history last edited by peterga 12 years, 9 months ago

Numbers

  • 6.5% - Amount of the 400 wealthiest Americans' income from wages and salaries (quickanded)
  • 16.5% - Federal income tax paid by 400 wealthiest Americans  (quickanded)
  • 17.4% - actual (not marginal) tax rate of a single person earning $50,000/year in 2009  (quickanded)
  • 24% - actual tax rate of persons earning $1m-$5m in 2007(35% marginal rate) (forbes) 
  • 43.1% - actual tax rates of $1m+ incomes in 1961
  • 23.1% - actual tax rates of $1m+ incomes in 2011 

 

Notes

  • raising the capital gains tax for wealthy Americans from 15 to 20.6 percent would reduce the deficit to 3 percent of GDP
  • Warren Buffet popularized the fact that he pays a far lower overall tax rate (17.7%) than his secretary (30%) (Sunday Times 6/28/07)
  • Reasons rich pay lower tax rates: 1. Capital gains rate (15%); 2. power to choose when to recognize income; 3. tax loopholes; 4. tax breaks  5. "carried interest" of hedge fund managers;  6. "variable prepaid forwards";
  • Lloyd Blankfein, the chief executive of Goldman Sachs, acknowledged in an interview yesterday that there were justified concerns about the huge profits generated by private equity firms and that he worried that income inequality was “poisoning democracy”. He also said that he would be voting for the Democrat candidate at the next election. Mr Blankfein is the highest-paid executive on Wall Street, earning $54 million last year.  (Ibid) 
  • In a variable prepaid forward, the owner of a big, highly appreciated stock position gets an upfront payment from an investment firm–typically for 75% to 85% of the value of his shares–in exchange for agreeing to deliver a variable number of shares or cash in the future, with the exact amount dependent on how the stock performs. This setup allows the owner to raise cash and hedge much of his single-stock risk, while claiming he hasn’t made a taxable sale of the shares. (forbes)

 

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