Billionaires Pay Lower Tax Than WORKING CLASS
Summary
TLDRThe video script discusses the disparity in tax rates between the richest Americans and the working class. It highlights that in the 1960s, the wealthiest 400 Americans paid over half of their income in taxes, but by 2018, this had dropped to approximately 23%. In contrast, the bottom half of income earners pay about 24% of their income in taxes. The script also addresses the issue of tax avoidance by the ultra-wealthy, such as Elon Musk and Jeff Bezos, through mechanisms like stock holdings and loans against wealth, which allows them to minimize their tax liability. Furthermore, it criticizes the current tax system as being regressive and unfair, with significant implications for social inequality and the funding of public services. The discussion emphasizes the need for a more progressive tax code and the political challenges in achieving such reforms due to the influence of money in politics and the ideological divide.
Takeaways
- 📉 The wealthiest Americans are currently paying a lower tax rate than the working class, with the richest 400 paying approximately 23% of their income in taxes, compared to the bottom half of income earners who pay around 24%.
- 📈 There has been a significant drop in the effective tax rate for the richest Americans from over 50% in the 1960s to the current 23%.
- 💼 Despite claims that billionaires like Elon Musk and Jeff Bezos pay a lot in absolute terms, their effective tax rate is still notably low, highlighting the disparity in wealth.
- 💡 The script points out that the idea of a progressive tax code, where wealthier individuals are taxed at a higher rate, is largely a myth in the current American system.
- 🏦 The reduction in taxes, such as the corporate tax rate drop from 35% to 21% under Trump's administration, and the diminished estate tax, has led to a significant decrease in tax revenue.
- 💸 Billionaires often avoid paying taxes by not taking direct income from their companies and instead taking loans against their wealth, thus avoiding taxable events.
- 🔄 The estate tax is no longer effective in capturing tax revenue on the wealth of billionaires, as they can pass on their wealth to their heirs without significant taxation.
- 💔 The current tax system is seen as unfair, particularly to those who are the backbone of the economy, such as small business owners and wage earners.
- 🚫 There is a disconnect between public sentiment, which largely favors taxing the wealthy more, and the actual policies enacted, influenced by money in politics and the influence of the elite.
- 📉 The tax code has become increasingly regressive over the years, with both Republican and Democratic administrations contributing to the divide and loss of federal revenue.
- 🌐 The script suggests that the unfair tax burden and wealth disparity have significant implications for social discontent and the social contract, contributing to a growing divide in American society.
Q & A
What was the tax rate paid by the 400 richest Americans in the 1960s?
-In the 1960s, the 400 richest Americans paid more than half of their income in taxes.
What is the approximate tax rate paid by the wealthiest individuals in America as of 2018?
-By 2018, America's wealthiest individuals pay approximately 23% of their income in taxes.
What is the effective tax rate for the bottom half of income earners in the United States?
-The bottom half of income earners pay roughly 24% of their income in taxes.
How does the tax burden of the very richest Americans compare to lower income Americans?
-The effective tax rate for lower income Americans is now higher, and in some cases, orders of magnitude higher than the absolute richest Americans.
What is a common argument made in defense of the tax burden of billionaires like Elon Musk?
-A common argument is that individuals like Elon Musk pay more in taxes, in absolute terms, than any other American in history due to their significant wealth and capital gains.
How has the tax code changed over the years to affect the wealthy and the working class differently?
-The tax code has become less progressive, with the very wealthiest paying a lower effective tax rate, while the working class continues to pay a higher percentage of their income in taxes.
What is the significance of the estate tax in the context of wealth concentration?
-The estate tax has been significantly reduced, allowing billionaires to pass on their wealth to their heirs without a substantial tax burden, contributing to wealth concentration.
What is the current state of the corporate tax rate in the United States?
-The top corporate tax rate in the US was cut from 35% to 21% under the Trump administration.
How do billionaires often avoid paying taxes on their wealth?
-They often take loans against their wealth to fund living expenses, avoiding taxable events, and rely on stock value increases, which are not taxed until sold.
What are the implications of the current tax system on the social contract and public services?
-The current tax system has significant implications for the funding and financing of society, potentially depriving the public of services like universal healthcare and contributing to social discontent.
What is the general public sentiment towards taxing the wealthy more?
-There is a populist and popular majority sentiment in favor of shifting the tax code back towards a more progressive direction where the wealthy are taxed more.
How does the current tax system affect the perception of fairness among the American public?
-The current tax system is seen as unfair by many Americans, contributing to a sense of social discontent and a perception that the system is not set up to serve the average citizen.
Outlines
📉 Declining Tax Rates for America's Richest
This paragraph discusses how the tax rates for the wealthiest Americans have significantly decreased over time. In the 1960s, the 400 richest Americans paid over half of their income in taxes. By 2018, they paid only about 23%. Meanwhile, the bottom half of income earners pay around 24% of their income in taxes. The effective tax rate for lower-income Americans is now higher than for the richest individuals. The speaker also refutes the common argument that the wealthy pay more in absolute tax dollars by pointing out their low effective tax rates despite their vast wealth.
💰 The Unfairness of the Current Tax System
This paragraph highlights the unfairness of the current tax system, where the 400 richest Americans have a lower effective tax rate than the average citizen. The speaker argues that the wealthy have access to tax loopholes and can structure their income to avoid taxes. In contrast, small business owners and wage earners face higher tax burdens. The paragraph also discusses the role of money in politics and how the wealthy use their influence to maintain a tax system that benefits them at the expense of the majority.
📈 Inflation and the Struggling Middle Class
This paragraph focuses on the impact of inflation on the middle class, who are struggling to keep up with rising costs in areas like housing, education, and healthcare. The speaker points out that despite modest wage growth, the take-home pay for many Americans has not kept pace with inflation. The paragraph also discusses how recent policy changes, such as the expiration of COVID relief measures, have contributed to a sense of falling behind. The speaker emphasizes the need for a fairer tax system that does not disproportionately burden the middle class.
Mindmap
Keywords
💡Taxes
💡Effective Tax Rate
💡Wealth Inequality
💡Capital Gains
💡Tax Avoidance
💡Estate Tax
💡Tax Deduction
💡Progressive Tax Code
💡Tax Revenue
💡Social Contract
💡Inflation
Highlights
The richest Americans are now paying less tax than the working class, with the 400 richest Americans paying approximately 23% of their income in taxes, compared to the bottom half of income earners who pay roughly 24%.
In the 1960s, the 400 richest Americans paid more than half of their income in taxes, indicating a significant drop in their effective tax rate over the decades.
The effective tax rate for lower-income Americans is now higher than that of the richest Americans, highlighting a disparity in the tax system.
Despite the low effective tax rate, individuals like Elon Musk and Jeff Bezos pay significant amounts in taxes due to their enormous wealth.
The tax code in the U.S. is no longer progressive in terms of wealthier individuals paying a higher effective rate.
Trump's tax reforms, potentially exploiting loopholes, have led to a significant reduction in tax rates for the richest Americans.
America's richest people control a greater share of the country's wealth than during the Gilded Age, a period known for unprecedented wealth concentration.
The top corporate tax rate in the U.S. was cut from 35% to 21% under the Trump administration.
The estate tax now generates only a quarter of the revenue it did in the 1970s, allowing for wealth to be passed down to heirs without significant taxation.
Billionaires often take loans against their wealth to avoid taxable events, contributing to the lack of tax revenue from their massive accumulation of wealth.
The tax system's unfairness has significant implications for the funding and financing of society and the social contract.
The tax burden on the working class has increased over the last 25 years, while the tax rate on the richest Americans has been lowered.
The argument that the wealthiest are job creators is challenged by the fact that many have far fewer employees than a typical small business.
Tax loophole exploitation and capital gain strategies are used by the very wealthy to avoid taxation.
The Social Security FICA cap of $150,000 is considered unfair, especially for those with incomes in the millions.
There is a disconnect between public sentiment, which favors taxing the wealthy more, and the actual policy direction, which has moved in the opposite direction.
The influence of money in politics and the ideological alignment of the merchant class with the billionaire class has contributed to the current tax situation.
The Biden Administration's policies, including the uptick in inflation and the removal of certain safety nets, have contributed to a sense of falling behind for many Americans.
The tax code's unfairness and the growing inequality are cited as reasons for the rise in populist movements and public distrust of institutions.
The transcript discusses the need for a shift in the tax code to be more equitable and to better serve the majority of Americans.
Transcripts
at the same time I wanted to take a
little bit of a look at what are taxes
look like in America right now uh for
most people pretty high for Reb
billionaires apparently pretty low let's
go and put this up there on the screen
for the very first time actually ever uh
richest Americans are now paying less
tax than the working class so in the
1960s the 400 richest Americans paid
more than half of their income in taxes
by 2018 America's wealthiest individuals
pay approximately 23% of income in taxes
meanwhile the bottom half of income
earners pay roughly 24% of their income
in taxes the effective tax rate now on
lower income Americans is now higher and
in me in some cases orders of magnitude
higher than the absolute richest
Americans so not just the 400 richest
but actually people like Jeff Bezos Elon
Musk the counter that I often get uh
crystal is like well Elon Musk is paid
more in or tax than any other American
in history uh because of uh how much
money actually has and because of some
capital gain so in absolute terms they
often defend what their overall tax
burden is but what I think is very clear
here is that the often you know it's
almost like a trump or Romney esque
talking point about the 47% simply no
pay no taxes I mean we know this is just
simply not true and that in many cases
the effective tax rate when you consider
Medicare Social Security and others and
their effect especially with inflation
is that the dwindling in income of a lot
of wage earners as they are right now
with taxes has made it so that they have
been totally screwed now over the last
25 years or so and you've had that
combined as we can see with all the data
in the world with a massive lowering of
the overall tax rate on the richest
Americans in the country yeah that's
exactly right the idea that we have a a
progressive uh tax code not in terms of
like Progressive ideology but in terms
of the wealthier you are getting taxed
more your effective rate being higher is
just at this point it's a a fantasy
especially when you look at the very
very wealthiest actually this ties into
the Trump story we were doing earlier
about the loopholes that he exploited
potentially illegally to take an extra
hundred million tax deduction that he
likely was not entitled to and so to
flip it around the rationalization of
like oh the Elon Musk or the je basos is
of the world they pay so much in terms
of absolute numbers well that's
extraordinary in and of itself because
that shows you even with such a low
effective tax rate they have so much
money and so much wealth like that's the
reason why they're paying a significant
amount that's how much the scales are
unbalanced and um this new data which
comes from uh Gabe zuckman who's a
economist who's done a lot of great work
with regard to inequality both here in
the US and around the world he points
out today America's richest people
control a greater share of the country's
wealth than during the Gilded Age of the
carnegies and the Rockefellers um
referring of course to a period of
unprecedented wealth concentration late
20 19th and early 20th centuries however
these taxes have been significantly
reduced in recent years the top
corporate tax rate in the US was cut
from 35 to 21% that was under Trump the
estate tax and this is a really
significant one now generates only a
quarter of the tax revenues that it
raised in the 1970s um the estate tax
piece is really important because what
billionaires like Elon Musk and others
do is they number one um they don't take
that much in terms of direct income from
their companies um instead it's all you
know held in terms of stock and as long
as they don't sell the stock then they
don't have a taxable event and so in
order to fund their living expenses
they'll take loans against their wealth
so that they can avoid that taxable
event basically forever and then because
you don't really even have an estate tax
anymore they can just pass everything
down to their errors to their heirs that
was a real interesting slip there to
their heirs and um then you never are
able to capture any of the tax revenue
that would rightly be owned on this
massive accumulation of wealth and
obviously this has huge implications I
mean has huge implications for the
funding and financing of society it has
huge implications in terms of the basic
sort of social contract you know people
don't feel like this is a fair situation
and that breeds all kinds of Justified
social discontent when you see this
massive Gulf that continues to grow
larger and larger and larger so um
that's why this is really significant
and why you know you can see the way
that policy changes over the years under
really both Republican and Democratic
administrations more on the Republican
side but really this has been a
bipartisan effort have helped to grow
this divide and helped to rob the
treasury of the sort of revenues that
could be used to you know give us a
universal healthare system or do other
things to help bolster the entire
American public well it's also just
incredibly unfair to the people who
really you know fuel the economy so for
example let's put this up there on the
screen right uh what you guys can see
from the data is very clearly the
overall effective tax rate for the 400
richest Americans from 1960 to 1970 now
to be clear I think pre 1960s was crazy
it was like 90 some perc and whatever
hap what happened with that is that we
just had a ton of tax avoidance but if
we go to the next part here you can see
the consistent drop off off from the
1960 1970s period of 56% which peaked
then down to 23% where it is today now
the 23% of where it is today is
incredibly unfair because what you will
also see is that the way that we talk
about highest income earners in America
is totally wrong these 3,000 wealthiest
individuals of the hundred million or so
approximately more in net worth have
totally different taxable and income
streams than a lot of other folks who
Maybe considered like Community Rich the
famous person would be like a car dealer
well a car dealer is actually making
real income they have a lot of dollars
that are coming in so their tax rate is
something like 50 sometimes even 60%
depending on where they're living it's
almost three times now the argument is
that these people are job creators and
all that but in the internet age it's
just not really not true right it's like
Henry Ford you know he used to argue he
like well I employ tens and tens of
millions and thousands of people it's
like well if you're a hedge fund manager
and you're worth two billion you maybe
have like 25 guys who work for you are
you really like a big job Creator I mean
honestly they employ like the same level
as like a YouTube show something like
that we employ a lot of people but
compare then the two um you know the two
and then how people are taxed
specifically so there's been a major
loophole exploitation as you said of
drawing down income making sure
everything is capital gain in many cases
using the stepup basis to your advantage
everything is to avoid taxation and it
actually is not fair to the people who
make real income and to create
businesses cash flowing as opposed to
people who are just inflating their net
worth through stock and through all
these other events and a lot of it is a
design of the government system so if
you flipped that and you made it you
know Progressive and you actually went
after the people who are the wealthiest
in the country it would it would reduce
the burden possibly let's say on the
people who are small business owners and
even then amongst the 47% or whatever
it's also is you know think it's crazy
whenever we can consider Social Security
tax like the Social Security FICA cap on
150 Grand that's insane whenever you
think about people who are you know two
300 million and their incomes Jeff
Basil's income for example is like
$999,000 because his real wealth is tied
up everywhere else he actually pays less
than a huge amount of the rest of us
into the Social Security System it's not
defensible yeah and you may ask yourself
you probably don't cuz you probably
understand how this works like okay if
you ask people should the wealthy be
taxed more they overwhelmingly say yes
many Republicans say yes majority of
Independents certainly majority of
Democrats say yes and yet we keep going
in the opposite direction and the reason
that's the case you'll be unsurprised to
learn I mean a lot of it does have to do
with money in politics and who is
influential and the fact that there has
been an ideological effort to tie
together the sort of like like the
merchant class like the small business
owners you're talking about and even the
like upper middle class of wage earners
who do not have available to them all of
the extraordinary loopholes that the
very wealthiest do and yet there's been
an ideological effort to convince those
individuals that they have common cause
with the billionaire class and the Very
wealthiest among us and that their tax
interests are the same and so since
there is still some significant tax
burden on that group of like wealthy but
not extraordinary wealthy people you and
those are the individuals who locally
are like the car dealership these SE are
people who are you know they know their
State Rep they hold the local
fundraisers they're very influential in
terms of congressional races Etc theyve
disproportionate impact in terms of the
you know policies that are enacted at
the federal level I mean this is also
consequential in terms of uh thinking
about the the presidential election some
of the Trump tax cuts are temporary and
set to expire um in the next term of
office and we played for you you know we
we uh reported on the fact that when he
was doing a Mara Lago fundraiser with a
bunch billionaires he's like don't worry
I got your back I want to make sure you
keep your tax guts and I think that's a
promise that he's very likely to keep
because we saw the priorities during his
first Administration so you know
sometimes these things can feel like
nothing that happens in DC matters like
it's not consequential to your life but
when you look at the numbers you can
really see the way that these discrete
policy choices made over decades at this
point have fueled this massive Gap have
been incredibly consequential in terms
of the revenues that are being collected
at the Federal level and who is bearing
that tax burden and Saga I like the way
you put it that like you know the people
vet I think the whole country understood
during Co were the ones actually doing
the labor and like making the country
work they're the ones that are getting
the most screwed both both in terms of
their tax burden and also in terms of
getting audited too which is continues
to be absolutely outrageous so um you
know there there certainly populist and
popular majority sentiment in favor of
Shifting the tax ta code back towards
the direction that it was in before but
because of the political capture of
Elites in Washington it's very unlikely
to happen yeah so one of my friends puts
it this way the reason inflation is
still an issue is simple taxes after
health insurance 401K SS Medicare fed
State a top 10% earner is actually
bringing home approximately 54 to 58% of
their gross pay Rising wages need a 46
to 42% discount rate versus inflation
which compounds over time really math
speak and all that is it may not 4 54 to
58 depending on which bracket you're in
but they what people do is like oh well
wage growth is X Y and Z but they don't
factor in like I just said all of the
taxable items that get written off
before you even get your paycheck if
you're even lucky enough to save for
retirement so when you do Factor those
things in your overall take home pay is
very low and then if you compare your
modest 2 to 3% you know increase
compared to a 10 to 11% increase in rent
and grocery store prices you tell me how
that works out in terms of your balance
sheet it's just very obvious the reason
people say they have less money is
because they have less money whenever
they go and they're living their lives
instead of trying to lecture people
constantly it just drives me crazy when
we're always trying to change the way
that people feel about the economy as
opposed to how they're actually
experiencing the economy ask anybody
trying to rent right now and you know
exactly what I'm talking about yeah
that's exactly right it's gaslighting
and um you know we there's been a spike
in inflation across the board but the
things that make up a stable middle
class life housing education and
Healthcare there has been just
astronomic ill inflation for years and
years um that has put those things out
of reach and then you know if we just
look at the micro the story of the Biden
Administration is not only this uptick
in inflation which we're learning more
and more what a large percentage of that
was just directly caused by like
corporations and gas companies robbing
you directly because they thought
correctly they could get away with it
but you've also had you know the covid
safety net being Stripped Away and no
more child tax credits no more of the
super dull no more of the um you know
certainly direct checks that were
hitting people's bank accounts and were
really helping them and so that has
contributed to this real sense that of
falling behind of going in the wrong
direction and as I said before you know
if we look at these um numbers on both
inequality and the wild unfairness of
the tax code um you can see why you've
had you know this populist movement
after populist movement and people are
disgusted with washing and disgusted
with these institutions cuz they see
it's not fair to them they see it's not
set up to serve them and so I I think
many Americans looking at these numbers
they're not going to be shocked to learn
that billionaires are paying less in
taxes um you know in terms of effective
tax rate than they are hey guys if you
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