Warm Southern Breeze

"… there is no such thing as nothing."

Guess Who Doesn’t Pay State Income Taxes?

Posted by Warm Southern Breeze on Friday, December 11, 2020

Let’s get some perspective on the unimaginably massive amount of wealth just ONE of these three men (in the article below) have.

Jeff Bezos, Founder, and CEO of Amazon dot com is, as of this writing, the wealthiest man in the world, bar none. With an estimated net worth of $183.3 billion it’s often difficult to get a grasp on the amount of money that is. So, lets give it the good ol’ college try.

$183,000,000,000 –– it’s sometimes good to simply see the number of zeros in the figure.

If, from this point forward Mr. Bezos NEVER MADE ANY MORE MONEY, and spent $100,000 every day, it would take 5013 years to spend it all.

So, let’s up the ante… SIGNIFICANTLY.

Again, using the same premise, NEVER MAKING ANY MORE MONEY, and spent $1,000,000 ($1 million) every day, it would take 50 years. Mr. Bezos is presently aged 56. And, given the current life expectancy for men in the United States – especially, and particularly men of wealth, who have the finest of everything, including health care – he could reasonably be expected to live to age 86, or 30 more years. That’s according to figures from the Social Security Administration. So clearly, spending at that rate – $1,000,000/day – he couldn’t spend it all in his lifetime.

But, let’s examine it one more way.

If he were to give it all away, all $183,000,000,000 of it in one fell swoop, to evenly distribute it to the 330,000,000 Americans residing in the land of the free, and home of the brave, every man, woman, and child would get $554.54.

But that’s just one man. There are two others – Elon Musk, and Bill Gates – who are each worth an estimated $140 billion, and $118.7 billion, respectively. Combined, that’s $258.7 billion.

If they both were to, as in the previous example, give it all away in one fell swoop, to evenly distribute it to the 330,000,000 Americans residing in the land of the free, and home of the brave, every man, woman, and child would get $783.93. Combined with the $554.54 from Mr. Bezos, that’d be $1338.48.

And that’s just three individuals. Forbes maintains a list of the 400 wealthiest individuals in the United States. All of them are billionaires. One source states there are 600 billionaires in the United States. Forbes reports there are 614 with a combined net worth of $2.9 TRILLION.

Now, to be certain, in no way do I begrudge those men and women the entrepreneurial success which they’ve enjoyed, to have eaten the sweet fruit of their labors, earned – if it could be called that – by the sweat of their brows.

But, it does bear witness to state the obvious, which is that, true to form as we have seen historically, the wealthy continue to keep their wealth – for there has NEVER been any wealthy person, or family that has become impoverished, including the families of du Pont, Vanderbilt, Rockefeller, Kennedy, Mellon, Scripps, Pulitzer, de Young, Busch, Coors, Strauss, Stroh, Carnegie, Cargill, Forbes, Bloomberg, Mars, Walton, S.C. Johnson, Lauder, Hearst, et al, many, if not most, of which are recognizable household names. They keep their money, in part, in at least two ways; by hiding their money, and not paying taxes – tax avoidance, legal, or not. And in this instance, the three men mentioned below are avoiding taxes legally, by relocating their primary residence (they doubtless have several) to states which have no personal income tax. To be certain, they’re avoiding state taxes, not Federal, because the states in which they reside do not have a state income tax.

Now, to be certain, there are a few other states that do not have a state income tax, Alaska, Nevada, South Dakota, and Wyoming, among them. Altogether, there are, or will be by 2025, 9 states in the Union that do not levy a personal income tax upon their residents. While New Hampshire and Tennessee do not tax income, per se, which is defined as salary or wages, they do tax investment income and interest. However, both states are phasing out those taxes.

The downside to not having a state income tax is that tax rates on other things are higher, notable among them, sales and property. And governments operate upon tax revenue, which is best characterized as a three-legged stool, and comprised of income taxes, property taxes, and sales taxes. So remove one of those “legs,” and the remaining two must be increased in order to equal out, or balance, the necessary operating revenue.

When it comes to discussion of tax theory, and tax policy and practice, higher sales tax and higher property tax rates harm the poor. Some claim that property tax rates have no effect upon renters, but that’s not so, because the rates are incorporated into the price of rent.

Yet all of this beggars the obvious: We are long overdue for a serious discussion of personal (and corporate) income tax rates. The evidence is overwhelming, and it comes from the most inauspicious sources – business and wealth reporters, and in some cases, the wealthy themselves.

Erica York, an Economist with The Tax Foundation’s Center for Federal Tax Policy, an “independent tax policy nonprofit since 1937” which focuses on ways “to improve lives through tax policies that lead to greater economic growth and opportunity,” on February 25, 2020 wrote a update entitled “Summary of the Latest Federal Income Tax Data, 2020 Update,” which stated in part that, “U.S. individual income tax continues to be very progressive, borne primarily by the highest income earners.” And yet, that simple observation, and associated findings, is inadequate to fully describe the nature or scope of the problem. And as we’ll see further on, the claim of being “very progressive” isn’t quite what it’s cracked up to be, and is very different in how it all pans out.

• The share of reported income earned by the top 1 percent of taxpayers rose to 21%, from 19.7% in 2016. Their share of federal individual income taxes rose to 38.5%, from to 37.3% in 2016.
• In 2017, the top 50% of all taxpayers paid 97% of all individual income taxes, while the bottom 50% paid the remaining 3%.
• The top 1 percent paid a greater share of individual income taxes (38.5%) than the bottom 90% combined (29.9%).
• The bottom 50% of taxpayers (taxpayers with AGIs below $41,740) faced an average income tax rate of 4.0%. As household income increases, the IRS data shows that average income tax rates rise. For example, taxpayers with AGIs between the 10th and 5th percentiles ($145,135 and $208,053) paid an average effective rate of 14.3%.

Erik Sherman, Senior Contributor with Forbes, cited a MarketWatch report, and wrote on May 26, 2019 in part, that, “The richest tenth of households hold 70% of the wealth in the country as of 2018. In 1989, it was 60%. The share of the top 1% shifted from 23% to 32%. The figures come from a new Federal Reserve report that examines income and wealth.”

But he also acknowledged the extent and scope of the problem isn’t exclusively based upon, or about personal income taxation, per se, by writing that, “The bottom half of households face major challenges. They don’t make much. Forty percent couldn’t cover an unexpected $400 expense with cash. There’s too little money spread over too many people.” The greater matter, as he wrote, is that “they don’t make enough.”

The stark reality becomes even more grim when examined closely.

He had earlier written in March 28, 2020 about how little a share of America’s wealth the bottom half have.

Share of Total U.S. Wealth, 2019:Q4

Source: Federal Reserve Board of Governors

Economic Group Combined Wealth (in trillions) % of Total Wealth
90-99% 41.69 37.3%
Top 1% $36.8 32.9%
50-90% $31.63 28.3%
Bottom 50% $1.66 1.5%

In October 2019 Noah Smith wrote an article for Bloomberg entitled “The Case for Higher Taxes at the Very Top” and examining the motion gif/infographic below stated in part that:

“First of all, the graph zooms in on the top brackets – it shows the tax rate at the 90th income percentile, then the 99th, then the 99.99th, and finally the top 400 people. If it had stopped at the 99th percentile, it would have shown roughly constant top tax rates over time; what looks like a dramatic fall in tax progressivity comes entirely from the tiny sliver of earners at the very top of the income scale.
“Second, the graph doesn’t include transfers – the money that the government pays out. Overall, these have risen. This, along with rising taxes for the upper-middle class, is the main reason why the U.S. fiscal system as a whole has become steadily more progressive since 1950. Most of the country simply isn’t affected very much by what the government does to the 400 highest earners.

“A final caveat is that the tax rate of top earners is very hard to measure because they earn their income in non-standard ways, and they try very hard to hide it from the tax collectors.

“But despite all these caveats, it’s clear that tax rates for the richest handful of Americans have gone down a lot since the mid-20th century. And the country is starting to feel increasingly uncomfortable about that fact. The share of Americans who believe that high earners pay too little in taxes has come down a bit over the years, but it’s still a substantial majority.”

And, as can be clearly seen, the nation’s personal income tax rate is practically flat – equal throughout the income range spectrum, and in the final result in 2018, is only slightly lower for the very wealthy than for the impoverished. Again, that’s a total combined tax rate – Federal, State, and Local – of which the Federal would most likely comprise the greater portion.

There are numerous types of taxes, of course, and even a personal income tax rate is apart from other types of taxes upon wealth, notably estate taxes, which have been significantly reduced in recent years, by monikering it as a “death tax,” when in reality, it’s a “Paris Hilton tax” – heiress to Conrad Hilton, founder of the hotel chain, who is also a “trust fund baby.”

Noah Smith enumerated some of the types of changes that should occur to the tax system in order to make it more just. Among them, raising the rates, which has been advocated by Bill Gates and Warren Buffett, as well as Democratic Presidential candidate and billionaire Tom Steyer, while Facebook Founder Mark Zuckerberg has said that “no one deserves” the amount of wealth that he and other billionaires have.

Capital gains tax rates should be raised, and doing so would neither harm businesses, nor individuals. Economic research has proven that reducing dividend tax rates have no effect upon growth, or investment, and it would seem reasonable for that reason to suppose they would have no negative effect upon the economy.

Next, the Trump tax cuts should be repealed, which have created so-called “loop holes” which a convoy of Mack trucks could be driven through. The worst being “pass through” deductions for business income, which allows profits to be pushed through a ‘S’ corporation, thereby lowering the rate.

Next, expand the tax brackets. The present brackets are compressed, and lump many earners into a common bracket, when instead, they should be in separate brackets. In 1920, there were over 50 federal income tax brackets, with the very top rate on income over $1 million – which is $12.8 million in value today – established at 73%. In 2019, there were only 7 tax brackets, with the top set at $500,000.

Finally, from a sociological perspective, taxing the uber-wealthy establishes and increases social cohesion, creating and reinforcing the idea that in America, it’s not “every man for himself,” and that the wealthy are expected to return to society from the abundance which society has given them, which has enabled them to succeed.

Elon Musk, Jeff Bezos, Bill Gates – LEFT to RIGHT


America’s Three Richest People Are Now Positioned To Pay Zero State Income Tax
December 9, 2020, 2:20PM EST
By Lisette Voytko, Forbes Staff
Business Wealth Reporter

Tesla CEO Elon Musk has moved his primary residence from California to Texas, according to reports on Tuesday, which means the three richest people in American—Musk, Amazon CEO Jeff Bezos and Microsoft cofounder Bill Gates—now all reside in states that don’t collect income tax.

Musk’s move was anticipated, following reported rumors from his friends and associates that the Lone Star State would become his next home. This summer, he relocated his private foundation to the city of Austin. Musk, who is worth just shy of $140 billion, previously clashed with California officials over the state’s coronavirus restrictions, going so far as to sue Alameda County in May and threaten to move his company out of the state after its factory wasn’t allowed to reopen.

Bezos (worth an estimated $183.3 billion) and Gates (worth an estimated $118.7 billion) both reside in Washington State, the birthplace of their companies. Washington and Texas are two of nine U.S. states that don’t collect income tax. The rest are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee and Wyoming. The Tax Foundation, a leading nonprofit, notes that Tennessee and New Hampshire still tax interest and dividends, but the latter is scheduled to phase out this tax in 2025.

Musk is far from the only billionaire to decamp for income tax havens, however. Donald Trump switched his official residence to Florida in October 2019, after decades of living in his namesake Manhattan tower. Wall Street titans Carl Icahn and Paul Singer moved their hedge funds to the Sunshine State in 2019 and 2020, respectively. Using public records, Forbes confirmed Icahn resides on the private Indian Creek Island near Miami—where Jared Kushner and Ivanka Trump reportedly recently bought a $30 million plot of land—therefore making him exempt from state income tax. Tom Golisano, the billionaire founder of Paychex, says he saves “$13,800 a day” in taxes just because he relocated from New York to Florida in 2009.

These moves can dent state coffers, given the immense income some billionaires generate. When hedge fund manager David Tepper moved from New Jersey to Florida in 2016, the decision looks to have cost the Garden State hundreds of millions of dollars in revenue and upended its income tax forecasts, raising concerns for state officials. American hedge fund billionaire John Arnold pointed out another concern in a Wednesday morning tweet, noting that California’s 13.3% capital gains tax, the country’s highest, effectively falls to zero the moment high earners like Musk simply decide to leave the state for lower-tax locales.

It’s quite possible CA is on the wrong side of the Laffer Curve with respect to capital gains taxes,” Arnold wrote in part on Twitter, referencing the economic theory that supposes tax revenues will fall if governments set rates too high and can increase if rates are lowered. Arnold lives in Texas, where he pays—you guessed it—no state income tax.

https://www.forbes.com/sites/lisettevoytko/2020/12/09/americas-three-richest-people-are-now-positioned-to-pay-zero-state-income-tax/

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