Billionaires Pay Lower Tax Than WORKING CLASS

Summary

The 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

00:00

📉 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.

05:01

💰 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.

10:01

📈 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.

Keywords

💡Taxes

Taxes are mandatory financial charges imposed by a government on a person or entity to fund public expenditures. In the video, it discusses how the tax rates have changed over time in America, with a focus on the disparity between what the richest individuals pay compared to the working class.

💡Effective Tax Rate

The effective tax rate is the percentage of an individual's taxable income that is actually paid in taxes. The video highlights that the effective tax rate for the richest Americans is lower than that of the working class, which is a key point of contention in the discussion.

💡Wealth Inequality

Wealth inequality refers to the uneven distribution of assets among different social classes or individuals within a society. The video script emphasizes the growing wealth inequality in America, where the richest people control a greater share of the country's wealth than in the past.

💡Capital Gains

Capital gains are the profits that result from the sale of an asset, such as stocks or real estate, for more than it was purchased. The script discusses how wealthy individuals, like Elon Musk, often have a significant portion of their income in the form of capital gains, which can be taxed at a lower rate.

💡Tax Avoidance

Tax avoidance is the use of legal methods to reduce the amount of income subject to tax. The video mentions instances of tax avoidance by the very wealthy, such as exploiting loopholes and using mechanisms like loans against wealth to avoid taxable events.

💡Estate Tax

The estate tax is a levy on the transfer of a deceased person's wealth to their heirs. The video script points out that the estate tax has been significantly reduced in recent years, allowing the ultra-wealthy to pass on their wealth to their heirs with minimal tax implications.

💡Tax Deduction

A tax deduction is an amount that can be subtracted from an individual's taxable income, thereby reducing the total tax owed. The video discusses how certain wealthy individuals, such as Donald Trump, have potentially exploited loopholes to take extra tax deductions.

💡Progressive Tax Code

A progressive tax code is a system where the tax rate increases as the taxable amount increases. The video argues that the current tax code in the U.S. is not truly progressive, as the wealthiest individuals often pay a lower effective tax rate than the middle class.

💡Tax Revenue

Tax revenue is the money collected by the government through various taxes. The video script discusses how changes in tax policy have implications for the amount of tax revenue collected and how it can impact the funding of social programs and public services.

💡Social Contract

The social contract is the unwritten agreement that exists between citizens and their government, where citizens agree to abide by the government's rules in return for protection and the provision of services. The video suggests that the perceived unfairness in the tax system is breaking this social contract, leading to social discontent.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The video script connects the issue of inflation to the tax system, suggesting that the rising cost of living is exacerbating the financial struggles of the working class.

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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