A lot of non-wealthy people, too, make money on capital gains. That’s the great thing about this country – they’ll sell stock et al to anyone at all.
Except note that most of the gain ( generally $500000) on that house when you sell it will be tax-free, and the rest will be taxed at 15%. You can get a half-million dollar tax-free gain every coupe years or so. And the interest and taxes are deductions from your FIT, saving someone in the higher brackets some $15000 a year in FIt and also a good chunk in State Income tax.
Not to mention that I doubt if many buying a $1Mil house in this area has a *taxable *income in the 35% bracket- becuase they do have those Mort Int and RE Taxes to deduct, not to mention other stuff.
So it more goes like this- Buy a $500K house, and put $50K down- and pay 28% taxes on that 50K. After 5 years sell the house for $1Mil, the entire gain is tax-free. You’ve made $75K in payments, a good share of which are tax-deducatble.
Except that depends on the fact that the real estate rates are going up.
That is not a forever thing. Say I want to keep my house forever and never sell it. I’m attached to it. I like it. Say I intend to live forever. Do you propose that the abolition of ownership that the world is undergoing right now because of the population boom is a good thing?
I’m sick of things like that being used to justify property taxes and zoning laws. If I buy it, I should be able to keep it. Live on it in isolation if I so desire. Dig, hunt, grow and defend it.
It might not be hard to stay rich once you are, but getting there is getting harder and harder because of government expansion that is financed by the incessant taxation of the rich. But that’s GD territory.
The federal maximum tax rate is 35%. But most people have to pay sales tax, state tax, local property tax, fees etc. So a 50% rate isn’t impossible. Usually a wealthy person is going to pay proportionately less in sales tax, but more in property tax. Tax minimization plans reduce the rate as well as choosing where you live.
But no matter how you calculate it, Americans pay less than Europeans (as an example). I don’t know the US’s current spot in the top 50, but is used to be right in the middle.
<tangent> Those arguing about what tax systems are best may want to investigate the pros and cons of The Fair Tax at http://www.fairtax.org/ I am not advocating it, but as long as posters are already drifting into IMO, it’s an interesting idea that speaks to some of the difficulties that have already been mentioned here.
</tangent>
in some states. Louisiana charges sales tax on food and I believe medicine. It isn’t popular. Our current scandal is that they lowered sales taxes and increased property taxes. So few people expected any taxes to be lowered some stores just kept charging the old tax and pocketed the extra. Sigh.
Japan has a progress tax rate for national taxes which tops out at 37% for income (after deductions) over 18 mil yen (about US$162k). The amount of deductions is very limited, and most companies file tax returns for their employees! Local taxes are about 50% of the national taxes, so a person is looking at more than 50%. Ouch.
Note that much of this discussion centers around income. For those who have much more than they earn, you get more into the capital gains calculations than wage taxes.
IIRC, some people did an analysis of Theresa Heinz Kerry’s financial situation and calculated that she was paying a rate of around 15% on her earnings (capital gains taxes are low, plus an emphasis on tax-free bonds) (that 15% may have been a little higher or lower).
In fact, some speculated that she and John resisted releasing her tax records in part because it could be used against his campaign that his ultra-rich wife was paying well below the top income tax rate while Kerry was arguing that the rich should pay more than that top income rate.