There are very few topics that are sure to get a heated debate going across the dinner table like the topic about taxes; especially when it comes to how much the rich and ultra-rich are supposedly entitled to pay.
A huge part of acquiring wealth and keeping it lies in knowing how to considerably reduce the amount of taxes you pay or legally avoiding paying them altogether.
The key word here is legally.
In a 1789 letter talking about the American constitution, Benjamin Franklin made a startling remark: …in this world nothing can be said to be certain, except death and taxes.
While we still shake our heads in grim acceptance when it comes to death, the same can no longer be said when it comes to taxes. Over the years several individuals and businesses have made an end of taking advantage of the many loopholes that exist in tax laws-and sometimes this has gone on with the explicit involvement and outright encouragement of government itself.
Granted there is need to encourage businesses and high-income individuals with certain incentives so that they can expand, create jobs, and ultimately drive the economy forward. That notwithstanding, there is a need to take a second look at the numbers on the discrepancies between the tax burdens of the various income brackets and then, maybe, ask ourselves whether these incentives and tax breaks may have been taken a step or two too far.
The numbers show that:
- The wealthiest 1% of Americans is in possession of 35% of the nation’s wealth. By contrast, the bottom 80% has to make do with 11%.
- In the 1950s and also the 1960s during the rolling economy, the richest Americans paid a top income tax rate of 91%. Today that number sits at 43.4%.
- The wealthiest 1% pay an effective federal income tax rate of 24.7% as of 2014. By contrast, those making an average of $75,000 pay a rate of 19.7%.
- In 2009 the average federal income tax of the 400 richest Americans was just 20%.
- According to the Internal Revenue Service in 2009, 1,470 households reported income of more than $1 million but paid no federal income taxes on it.
- 30% of income inequality is due to the discrepancies in payment of taxes and budget cuts to benefits and services.
- CEOs of major corporations earn almost 300 times than the average worker.
- The largest contributor to income inequality has been the constant changes in income from capital gains and dividends.
- Taxing income from investments at a lower rate than active income like salaries and wages are taxed has resulted in lost income that amounts to about $1.3 trillion over the course of 10 years.
The discrepancy and its impact to the national economy cannot be disputed. The legal avoidance of tax payments is significantly high among businesses and the wealthy today.
The correct way for multi-millionaires and the ultra-rich to view tax payment is as a form of social responsibility or a social contract with the government. Indeed, many high-income individuals agree that paying their taxes to the government is a great way to ensure that they are guaranteed a safe working environment, an educated workforce, a viable transport system-in short, all the necessary parts of a viable business atmosphere.
Difficult as it may seem on the surface, paying taxes is good for everyone both rich, poor and the government and thus the right and noble thing to do.
Many multi-millionaires share this view. Contrary to what most people think, a significant part of the super-rich believe they should be taxed more rather than less and are actually lobbying for that end.
In a first-ever Millionaire Survey done by CNBC, it was revealed that 51% of American millionaires were of the opinion that fiscal inequality was a major problem for the US.
Just so you do not get confused by what this means let’s get the elephant out of the way in the first place. The super-rich are unapologetic about their wealth, and a significant majority credit hard work, smart investments and savings as the top three criteria for growing rich. They also believe that other Americans can achieve similar financial success if they work hard.
However, many of them were quick to accept that cultural issues and family situations play a big part in hindering the movement of many people up the wealth chain. Their proposed solutions for this apparent impasse are: better education, better and increased incentives for the poor and middle class, and higher taxes on the wealthy.
This feeling of social responsibility to the community around them also cut through political and social allegiances. The poll took stock of 514 individuals, Republicans, Democrats and Independent who were scattered across the country and were among from the wealthiest 8% of American society.
Many of the rich go beyond giving opinions. They actively lobby for the cause.
Patriotic Millionaires is a coalition of about 200 millionaires from around the United States who are actively against the idea of trickle-down economics. Contrary to all conventional capitalist views, they want higher minimum wage, less money in politics, and, yes, higher taxes on the rich.
Far from being altruistic, their reasons are business motivated and border on common sense. “Businesspeople, investors, want to make money—that’s how they got to be at the top,” according to Morris Pearl, a chair of the group, “If we live in a nation with a lot of people that can’t participate, we can’t make money from these people.”
In other words, what good is having a business if you are surrounded by people who cannot afford your goods and services?
Another reason for this burst of social responsibility on the part of these multi-millionaires is deeply personal. Contrary to the popular notion of the self-made man, they acknowledge the role of the society-good infrastructure, educated workforce and so on-in bringing about their success. Nobody literally makes it on their own. So many of these millionaires see paying increased amounts of taxes and investing more in public services as a way of promoting and safeguarding prosperity. Says Pearl, “What I’m talking about is what policies will not just help me personally, but that I think will be good for our country and my kids’ generation,” he then went on to say, “I don’t want to live in a country where a few people do amazingly well and everyone else does poorly, because anyone, including me and my kids, may end up not being one of the winners.”
And that is the correct way to look at the payment of taxes in our modern society-as a duty, rather than a burden. An upstanding multimillionaire businessman pays their taxes.
Do you think multi-millionaires should pay more in taxes? Share your thoughts below!