On Jun 29, 2016, at 4:19 AM, Marc James Hugh Robson <firstname.lastname@example.org> wrote:
Warren Buffett pointed out a while ago that he paid less tax than his secretary, as a percentage of income. This he claimed is a feature of US tax breaks for the rich.
It is. Many people in the US are unaware of the many tax breaks available only to the wealthy and denied to the non-wealthy.
Here's just one of them:
"Why investment managers pay lower tax rates than their secretaries.
"Some of the wealthiest people in America manage hedge funds, private equity funds, or real estate partnerships, and typically, these investment managers receive a very small salary, relative to their total compensation. But don't feel too sorry for them—they're not working for free. Instead, most of their compensation comes in the form of a share of the fund or project they manage. This ownership share is called a "carried interest." And currently, it's usually taxed as a capital gain instead of ordinary income.
Okay, why does this matter, and what does it mean in plain English? It means that when the manager's tax bill comes due, he owes the federal government 20 percent in taxes– the current tax rate on long-term capital gains– rather than the 39.6 percent rate that applies to ordinary income. This dodge halves his effective tax rate on these earnings. It's just this loophole that Mitt Romney used to pay less than 15 percent— based on the legal capital gains tax rate at the time—on the millions he cleared while head of Bain Capital. This compares to the nearly 40 percent in federal income tax that a top surgeon, or anyone else whose earnings are defined as ordinary income, pays on his money.
"Congress has been trying to eliminate this loophole since 2007, but every time they get close to a fix, lobbyists beat them back. After all, no one likes to pay more taxes. But some of us pay more than the favored few."
Search the Internet for "tax breaks available only to the wealthy."
The tax code is heavily influenced by wealthy people. They and the politicians who are in their pocket know how to write the code to favor themselves and make ordinary wage earners pay more. They have influence over the tax code that ordinary people can only dream of.