Economists are fairly split on this to be honest. It's not as clear cut as being made out because it's a tax on profits, not revenues.

Not every company has the same profit margins -> increasing corporation tax is a tax on profits -> not every company has the same room to maintain profit margins without losing market share. So not every company can remain as profitable by increasing prices to match the pre-corporation-tax profit margin. Certain goods are more elastic than others and that affects the level of room they have to adjust prices to maintain profit margins.

I think increasing corporation tax is nonsense though. It's one of the policies I don't particularly like as a Biden voter. Corporation taxes should be fairly low because it's a really bad tax - it's a really inefficient tax and doesn't raise the money it should.

Wealth does earn dividends though in many cases, which you could argue is a form of income. You can also borrow on portfolios through asset-backed financing, which acts as a form of income. I have an account with a private bank with a significant amount and they let me borrow money off my investments, which is theoretically income that isn't taxed.

Jeff Bezos can borrow a significant level of his wealth through asset-backed financing, which would be an income. It's a very clever way of getting money without needing to pay capital gains tax. If anyone has over $2-3M in stocks, I highly recommend you go to a private bank of a bulge bracket like JP Morgan and get asset-backed loans/financing. It's really convenient to make money without needing to sell stocks and interest rates are so low. Jeff Bezos uses asset-backed financing so his wealth does act as an income to an extent.

However, yeah, it's annoying when people don't get the difference between realized income and stock value. There are clever ways to avoid paying Capital Gains Tax though, which is the tax on wealth.

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Posted by NC_Tigah

Carolinas

Member since Sep 2003

124688 posts

Posted on 9/16/21 at 5:32 am to AlterEgo89

quote:
Jeff Bezos can borrow a significant level of his wealth through asset-backed financing, which would be an income. It's a very clever way of getting money without needing to pay capital gains tax. If anyone has over $2-3M in stocks, I highly recommend you go to a private bank of a bulge bracket like JP Morgan and get asset-backed loans/financing. It's really convenient to make money without needing to sell stocks and interest rates are so low.

Right.
An ABL is most useful where interest is deductible. E.g., If you're capped out on the Mortgage Interest Deduction in an expensive home, an ABL is useful for financing the rest. Rates are low. Interest is deductible against portfolio gains. Meanwhile collateral assets remain invested.

For other purchases car, boat, plane, etc. ABL's function similarly to standard nondeductible loans, albeit with lower rate and an indefinite payoff schedule.

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Posted by jrobic4

Baton Rouge

Member since Aug 2011

7373 posts

Posted on 9/16/21 at 8:48 am to AlterEgo89

quote:
Biden voter

Your argument will not hold sway with me, as you argue that economists are fairly split on the issue. Half of the economists in our country have never held an actual job!

There is no room for "split on the issue" if you have a flat or at least fairer tax system (different discussion for another day). Even if people aren't paying capital gains, the companies that they own equity in are paying taxes.

If don't like the way the wealthy use loopholes, you can try to close the loopholes, but don't raise taxes willy-nilly on corporations and people above a certain bracket. It will disproportionately affect the mass affluent, in the ultra wealthy will continue to use tax dodges--fact

This post was edited on 9/16/21 at 8:50 am

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