# Do the rich pay their fair share? **URL:** \ **Category:** Great Debates\ **Created:** [September 29, 2020, 3:25pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817 "2020-09-29T15:25:51Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [October 2, 2020, 11:50pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/81 "2020-10-02T23:50:40Z")
> [@Wrenching\_Spanners](#): > > The IRS would happily and easily define capital gains as one subset of income and ordinary income as a different subset of income and laugh at any tax-avoiders who tried to hire tax lawyers to tell them they were wrong. As noted in other posts, they officially on the Schedule D tax form identify realised capital gains as a form of income. If you’re going to keep trying to sell this story, I don’t see any point in continuing this discussion. ---
**Author:** ![Wrenching\_Spanners](https://avatars.discourse-cdn.com/v4/letter/w/ecb155/32.png) [@Wrenching\_Spanners](https://boards.straightdope.com/u/Wrenching_Spanners)\ **Post date:** [October 3, 2020, 9:48am UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/82 "2020-10-03T09:48:03Z")
> [@TriPolar](#): > > Then why don’t people pay income taxes on capital gains? They do. The US government, and by extension the IRS, has chosen to make a distinction between ordinary income and realised capital gains income. They’re both taxed, just at different rates. Keep in mind we’re discussing how wealth increases. It increases by a person receiving more revenue, whether realised or unrealised, than they spend and are taxed. Some people think the rich get richer because of nefarious schemes. The reality is that they have successful careers, make good business decisions, and invest successfully. Unrealised income from a growing business and investment income are every bit as real as ordinary income such as wages. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [October 3, 2020, 9:52am UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/83 "2020-10-03T09:52:43Z")
> [@Wrenching\_Spanners](#): > > They do. The US government, and by extension the IRS, has chosen to make a distinction between ordinary income and realised capital gains income. They’re both taxed, just at different rates. IOW, they are not the same thing. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [October 3, 2020, 4:17pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/84 "2020-10-03T16:17:17Z")
I’m just going to reply to this one, as going line by line is pretty useless, as it is very evident that you don’t actually bother to read what I have posted before you start replying to it. Yes, all forms of increased wealth are income, no one is disputing that. However, what is being disputed is that they are all treated as the same thing. I’m not sure if you are actually contending that, or just demanding a pendaticism that doesn’t exist in your own cites, but your insistence that we use your terminology is derailing the entire point. So yeah, we have ordinary income, then we have both short and long term capital gains as income, and we have unrealized gains, which are classed under comprehensive income. These are taxed very differently, which is the point that is being made, and that you are ignoring. BTW, your business venture is a scam if it is promising 50% returns in a year. You should look into that. Quick quotes and responses: > [@Wrenching\_Spanners](#): > > This discussion is based on a comment from Tripolar in post #27 This discussion is based on your misunderstanding of a comment by Tripolar, and your refusal to understand that what is being talked about is how these different vehicles are taxed differently, and instead demanding that they are all called “income”, rather than you being able to understand that doing so only obscures the point, that these different forms of income are treated differently. > [@Wrenching\_Spanners](#): > > 1. unrealised capital gains. I’ve provide cites that both a mainstream financial information website Investopedia considers capital gains as income: Actually, you did not provide a cite on this one. But, yes, it is on my balance sheet as comprehensive income, which is not taxed, and is only of interest to myself and any lending institution I may want to show it to. > [@Wrenching\_Spanners](#): > > and the IRS considers capital gains as income: But treats them differently than ordinary income, which is the point that you are avoiding. > [@Wrenching\_Spanners](#): > > And your argument is that some people consider ordinary income to be the accepted definition of income? No, that is not my argument, which is why I am tired of this pointless conversation. > [@Wrenching\_Spanners](#): > > I notice you’re trying to obscure the premise that capital gains are income by saying that the IRS doesn’t recognise unrealised capital gains income as taxable income, a point that was made in post #42. This is not what I am doing. I am pointing out that they are treated differently by the IRS. > [@Wrenching\_Spanners](#): > > It will work against your premise that those gains should be taxed, but please do try to work past that contradiction. That is not my premise, not even close, which is why I know that you do not bother to actually read my posts before you try to score points with your attempts at “gotchas” > [@Wrenching\_Spanners](#): > > Please provide me with an actual example of a wealth-management client who is deriving their income mainly based on loans against their appreciating assets. Well, any hedge fund or real estate holding group. That is exactly their business model. You want a specific example? I don’t really have the books of Bain Capital at my disposal here, but you can look into their business practices, and you will see that they start with capital, they buy up assets of stocks, bonds, and outright ownership of companies. Then they use those assets as collateral to borrow more and to buy more. > [@Wrenching\_Spanners](#): > > investment of $100 million. If I invest in them, and I make a pre-tax 50% profit, I get to take home $5 million? What business start up are you thinking of that needs $100 million? You would be much better off loaning them the money, and collecting interest, rather than trying to then extract your money at a profit. > [@Wrenching\_Spanners](#): > > Or I can just choose to leave my investment in the business forever. That’s not investment, that’s charity. No, that’s how businesses usually work. Bezos didn’t take all of his money out of Amazon, that’s not charity. > [@Wrenching\_Spanners](#): > > That’s not much incentive over investing in Treasury Bonds which have essentially zero risk. Yes, and that pay, depending on what term you are buying, somewhere between .09% all the way up to .69% if you get a 10 year. And then you’d still have to pay tax on it. > [@Wrenching\_Spanners](#): > > By the way, would by investment that I can’t profitably take advantage of be subject to a wealth tax? This sentence makes no sense. Any way I parse it, it is either grammatically incorrect, or it is wrong, or it is dead wrong. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [October 3, 2020, 4:22pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/85 "2020-10-03T16:22:18Z")
> [@Little\_Nemo](#): > > But we’re talking about government policy here. Why should the government incentivize one type of economic benefit and not the other? Why does long term investment get encouraged by a favorable tax policy and long term employment does not? They are two completely different situations, and your point is not really relevant to the thread of asking about rich people. But, I will say that there are a number of problems with such a proposal. The first is that employees have less control over their employment than their employers do. So, if you have a tax incentive to stay with a company longer, then you are punishing employees for being laid off or let go. The second is that employees should not be trapped at an employer. One of the biggest reasons that I am for ACA is because of all the people that would like to find a job that better suits them, but cannot because they don’t want to lose health benefits. This would only add to the employers leverage over their employee, as, if they were to find something that they preferred, then they are not only starting over, and possibly losing benefits, but they are also now taking a tax penalty for having done so. Such a policy would only strengthen the hold of an employer over their employees, and, even as an employer myself, I don’t think that that is necessary. Now, if you are saying that the employer should have tax incentives to have long term employees, I could get behind that, but it would be pretty complicated to implement. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [October 3, 2020, 4:24pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/86 "2020-10-03T16:24:01Z")
> [@k9bfriender](#): > > BTW, your business venture is a scam if it is promising 50% returns in a year. You should look into that. I didn’t see where a business was _promising_ 50% returns. The up and coming successful companies return a lot more than that when their share price explodes. Of course enough don’t that investing in even only the most promising companies would not return anything like 50% over the long run. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [October 3, 2020, 4:25pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/87 "2020-10-03T16:25:51Z")
Well, he is saying it as though it were something to be expected when he made the investment. I suppose he is just able to see the future. Either that, or that example of his was irrelevant to both the thread and to reality. ---
**Author:** ![Red\_Wiggler](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/red_wiggler/32/13190_2.png) [@Red\_Wiggler](https://boards.straightdope.com/u/Red_Wiggler)\ **Post date:** [October 3, 2020, 5:10pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/88 "2020-10-03T17:10:54Z")
Only if the investor makes some monstrous additional income from other sources. ---
**Author:** ![beowulff](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/beowulff/32/542_2.png) [@beowulff](https://boards.straightdope.com/u/beowulff)\ **Post date:** [October 3, 2020, 5:12pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/89 "2020-10-03T17:12:47Z")
That’s not what the poster was proposing. He wanted a 90% marginal tax rate at that income level. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [October 3, 2020, 5:24pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/90 "2020-10-03T17:24:40Z")
As has been talked about quite a bit on this thread, and yet for some inexplicable reason, not understood, ordinary income is differently from capital gains income, and is taxed differently as well. If you make the mistake in just calling them all “income”, then you are just going to confuse yourself. I also did not _want_ an income tax at that level, I pointed out that it used to be that high and higher, and said that I would not have a problem with it being reinstated at that level, if that is what is necessary to pay for the government programs that we want to have, when I was asked how much is too much\*. That’s a very different position than “want”, as you wrongfully assert. \*good thing there is no tax for run on sentences, but I don’t really feel like reparsing that. ---
**Author:** ![Kearsen1](https://avatars.discourse-cdn.com/v4/letter/k/3d9bf3/32.png) [@Kearsen1](https://boards.straightdope.com/u/Kearsen1)\ **Post date:** [October 5, 2020, 2:18pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/91 "2020-10-05T14:18:52Z")
None of it would be safe from cuts. Too much of government activity today is either, inefficient, bloated or underfunded. And the politicians in charge of who/how much/where it goes, suck. Maybe we need to shrink the actual responsibilities of the federal government and hand some of it over to the State(s). The problem isn’t at the worker level. It’s with PAC’s and our elected officials, which is why drain the swamp was an attractive promise to some. (and likely still is) No one in charge of any division of government has ever said, “that’s too much money to do our jobs”, ever. But at some point people fiscally responsible have to determine what is needed and what is not. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [October 5, 2020, 2:35pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/92 "2020-10-05T14:35:02Z")
So, what, specifically, would you cut, and by how much? And I assume that when you said > [@Kearsen1](#): > > Too much of government activity today is either, inefficient, bloated or _underfunded_ My emphasis I assume you meant _overfunded_? > [@Kearsen1](#): > > Maybe we need to shrink the actual responsibilities of the federal government and hand some of it over to the State(s). Which parts? > [@Kearsen1](#): > > But at some point people fiscally responsible have to determine what is needed and what is not. So, what is not needed? ---
**Author:** ![Kearsen1](https://avatars.discourse-cdn.com/v4/letter/k/3d9bf3/32.png) [@Kearsen1](https://boards.straightdope.com/u/Kearsen1)\ **Post date:** [October 5, 2020, 2:37pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/93 "2020-10-05T14:37:15Z")
No i meant underfunded. I can imagine there are some services that don’t get the funding they need because other departments are overfunded. I don’t know what I would cut without diving into budgets and what the supposed departments are supposed to be doing. I would assume there are people out there that already know these things (or could be brought up to speed much quicker), I do not. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [October 5, 2020, 2:40pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/94 "2020-10-05T14:40:45Z")
One obviously underfunded agency is the enforcement arm of the IRS. There aren’t enough people to audit and pursue tax cheats, so billions goes uncollected. I’m fairly sure that every additional dollar spent on enforcement would return multiples in additional revenue. ---
**Author:** ![Kearsen1](https://avatars.discourse-cdn.com/v4/letter/k/3d9bf3/32.png) [@Kearsen1](https://boards.straightdope.com/u/Kearsen1)\ **Post date:** [October 5, 2020, 2:54pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/95 "2020-10-05T14:54:28Z")
Which could be countered by simplifying the tax code … ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [October 5, 2020, 3:07pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/96 "2020-10-05T15:07:06Z")
> [@Kearsen1](#): > > No i meant underfunded. I can imagine there are some services that don’t get the funding they need because other departments are overfunded. I’ll agree that there are some things that could use more funding, but the problem is not a matter of not having enough money, it is a matter of them not being funded for political reasons. > [@Kearsen1](#): > > I don’t know what I would cut without diving into budgets and what the supposed departments are supposed to be doing. I would assume there are people out there that already know these things (or could be brought up to speed much quicker), I do not. I don’t see how you can be for cutting budgets without knowing what budgets you want to cut. At least in general. There are those who are out there that know what _they_ want to cut, you may want to be sure that you agree with them before you give them your support. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [October 5, 2020, 3:14pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/97 "2020-10-05T15:14:47Z")
Easier said than done. For the vast majority of people, the tax code is pretty simple. For others, it is not. I am not sure how I would run my business were it not for a more complicated tax code that allows me to write off the costs of doing business. There are certainly some specifics, like capital gains and pass through corporations that could be eliminated or drastically altered, as those allow people to pay much less than their fair share. There are sometimes some tax incentives or reliefs that are intended for a purpose that get abused by another entity that was not considered. But, the big problem is, as @Dewey_Finn says, there is not enough to pursue bad actors. I write off hundreds of thousands of dollars every year, and keep all my receipts. If someone wanted to audit me, I’m pretty sure that I can justify all of my write-offs. But no one has ever audited me, I just have giant envelopes (and since many invoices are electronic now, large files) of receipts that no one has ever looked at. I _could_ sneak a whole bunch more personal expenses or other deferments into there, with a minuscule chance of being caught. The problem is not that I can write off my business expenses, it is that no one is making sure that that is all I am writing off. ---
**Author:** ![Red\_Wiggler](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/red_wiggler/32/13190_2.png) [@Red\_Wiggler](https://boards.straightdope.com/u/Red_Wiggler)\ **Post date:** [October 5, 2020, 3:15pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/98 "2020-10-05T15:15:19Z")
> [@Dewey\_Finn](#): > > One obviously underfunded agency is the enforcement arm of the IRS. There aren’t enough people to audit and pursue tax cheats, so billions goes uncollected. I’m fairly sure that every additional dollar spent on enforcement would return multiples in additional revenue. A startling fact which came to light a little while ago was that the most heavily audited area in the country was five poor counties in Mississippi. When asked, an IRS spokesman shrugged and said along the lines of “we don’t really have the money to go after more complicated cases.” ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [October 5, 2020, 3:20pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/99 "2020-10-05T15:20:19Z")
They should listen to Willie Sutton, who said when asked why he robbed banks, “Because that’s where the money is” and audit wealthy people and corporations. ---
**Author:** ![Kearsen1](https://avatars.discourse-cdn.com/v4/letter/k/3d9bf3/32.png) [@Kearsen1](https://boards.straightdope.com/u/Kearsen1)\ **Post date:** [October 5, 2020, 8:41pm UTC](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817/100 "2020-10-05T20:41:20Z")
We know where the money is, the real question is how do you get the rich to pay their fair share when tax law is created to shelter them …for various reason I suppose. [Previous page](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817.md?page=4) [Next page](https://boards.straightdope.com/t/do-the-rich-pay-their-fair-share/921817.md?page=6)