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Surprise!!! The Rich Don’t Pay Taxes Like You And Me

Surprise!!! The Rich Don’t Pay Taxes Like You And Me

If you were surprised by the recent report that the richest billionaires in American do not pay high-income taxes – or any at all — you have not been paying attention for the past 100 years – about the time the early progressives instituted the income tax. 

Since that time, the tax rates have increased and lowered between appropriately named progressive (stick it to the rich) taxes and fair taxes.  But even then, the rich got benefits not available to the common worker.  Over time, Congress passed one loophole after another – until the tax code is thousands  of pages of complex computations that only high paid tax attorneys and accountants can decipher. 

I suppose it is part of human nature to resent the benefits enjoyed by those who have more.  Sometimes it is based on obvious unfairness and sometime just plain jealousy. 

Most of us recognize that rich people have advantages over us.  It is the one area in which racism, sexism, homophobia, xenophobia, etc. are not a factor.  Rich folks of every background have advantages.  President Obama has more in common with Jeff Bezos than he does with the black folks trapped in the urban segregated communities.

And why not?  Rich folks never worry about a mortgage or rent payment.  They get the best healthcare with or without insurance.  They have employees, aides and servants to handle life’s more mundane necessities.  And they get designated tables in a crowded restaurant and never have to go through the line at airports.

We might call it rich privilege.  But of all the advantages they enjoy, none angers the masses as much as the tax advantages. Some of that resentment is justified and some is just envy.

The issue is even more complicated because our political leaders who hate the rich – like Senators Bernie Sanders, Elizabeth Warren and others – lie to us about the reasons why the rich have extraordinary benefits.  Some of those tax policies are actually beneficial to society – others not so much.

If we are going to have a fairer tax system, we should understand the details.

The Income Tax

First there is the income tax, itself.  It is a progressive tax in that the more you make, the greater percentage you pay – theoretically.  We all use deductions to reduce the amount of our taxable income – child deductions, mortgage interest, medical expenses, charitable contributions, etc.

In a perfect world, everyone would get the same deductions and pay the same rate.  But this is not a perfect world – and our tax code is about as imperfect as anything can possibly be.

Small Business

If we run small businesses, we can set up as a C-Corp, an S-Corp, partnership or limited partnership. Each has different tax benefits, and even special benefits like capital depreciation deductions.  Many of those businesses are small – the mom-and-pop variety.  But they still get benefits not available to the working stiff. 

For example, I ran my very small business out of my home for more than 35 years.  I could deduct a portion of my mortgage and utility bills for my designated in-home office. Until the IRS limited those benefits.

Multinational Corporations

The big bamboozle we get from Democrats comes when they talk about taxing big corporations. The kind you patronize every day.  They claim that such businesses should “pay their fair share.”  Sounds good, but corporations rarely “pay” taxes at all.  They only collect them from the consumer – you and me –  when we pay for the goods and services. Then the money passes on to Uncle Sam.  Increase the gas tax and the price of gas goes up.  Get it?

The corporate tax is actually an indirect tax on your and my income. It is a regressive tax because it hits hardest on those with the least income, those who – above all – cannot afford even modest increase in the cost of goods and services.

For those who like to stick it to the rich corporate barons, you should notice that whenever a corporate tax is increased, you DO NOT see the salaries and benefits of the corporate officers being reduced.  If you think raising corporate taxes sticks it to the men and women in the oak-paneled offices, you are sorely mistaken.  You get stuck – not them.

Capital Gains

The theory of a capital gains tax is that the profits you derive from selling stock or real property should be taxed at a lower rate than your income tax.  The theory is that by taxing at a lower rate, it stimulates more investment – more business activity, more jobs and a growing economy. 

Obviously, the Capital Gains Tax works best for folks in higher tax brackets – but is beneficial to many homeowners and farmers.  Because so many Americans are retail stock purchasers these days, the capital gains tax rate can have increased importance for an increasing number of middle-income folks. 

Republicans and Democrats both agree that a capital gains tax rate lower than the income tax rate is a good idea.  They just argue about the rate.  It has fluctuated between 18 and 35 percent in modern times.

Wealth Tax

There is a lot of talk these days about a “wealth tax.”  It is NOT a tax on a person’s income, but a tax on what they own.  The Warren idea is to have a progressive tax essentially on a person’s net worth – starting at around $100,000.

This sort of tax would get no consideration if it were not for one fact.  The super rich are not paying.  Because of all the loopholes in the tax code, the richest people in America pay little to NO INCOME TAX.  A recent news report used illegally obtained tax returns to show that such mega-rich billionaires as Michael Bloomberg, Jeff Bezos, Warren Buffett, and Elon Musk – to name a few – paid no income tax.

That is because they had no reportable income.  That’s right … no income even though they had millions of dollars to spend on personal good and services.  How is that even possible?

There is only one way.  The tax code provides so many unique loopholes that they can literally deduct or shelter their entire income away.  No reportable personal income, no tax liability.

Many of our legislative leaders believe that what a person owns – and has already used post-tax dollars to acquire – should not be made to pay more taxes. At first blush, that seems reasonable.  And it would be if the millionaires and billionaires did not have all those accounting tricks to zero out their income. 

The rich are literally not paying their fair share of taxes.  It would not be unreasonable to believe that the big money folks are spending millions upon millions of dollars on personal items.  The fact that they can make all that personal income magically disappear for tax purposes is an obscenity.

On the other hand, a wealth tax has a lot of downside.  You get taxed based on what is an estimate of your wealth at a given time.  Think of it this way.  You own stock – and today the value is $1000 dollars.  You pay a tax based on that figure.  Next week your stock drops to $200 dollars.  You now have paid five times more tax than you should have. Such holdings only have a true value to you when you sell or liquidate them. And then you pay the capital gain tax on the amount you received.

The concept of a wealth tax is not new.  It has been around for years.  We call it a “property tax.”  If you own real property, your county assessor determines how much it is worth at any given time and taxes you accordingly.  Personally, I hate the property tax because it is an annual tax on the same property. It is also not likely to reflect the actual value when you sell the property. 

I think the proper course of action is not to impose a wealth tax, but to close the various loopholes that enable the rich to zero out their very, very, very large income and avoid paying taxes.

I have long been a proponent of abolishing the income tax in favor of a national sales tax.  Imagine no IRS to hassle people.  No audits. No loopholes.  I would make the tax slightly progressive – removing it from essentials, such as basic foods and medicines, and putting an excise tax on the top-level luxury items, such as Rolls Royces, designer clothes and Chivas Regal.   The rich would pay more than their fair share because they would do most of the big-time spending.  The economists who promote a national sales tax say it would be around 17 percent.

Tax policy is always a very complicated matter, but it does not have to be as complicated – and unfair – as it is today.

So, there ‘tis.

About The Author

Larry Horist

So,there‘tis… The opinions, perspectives and analyses of Larry HoristLarry Horist is a businessman, conservative writer and political strategist with an extensive background in economics and public policy. Clients of his consulting firm have included such conservative icons as Steve Forbes and Milton Friedman. He has served as a consultant to the Nixon White House and travelled the country as a spokesman for President Reagan’s economic reforms. He has testified as an expert witness before numerous legislative bodies, including the U. S. Congress. Horist has lectured and taught courses at numerous colleges and universities, including Harvard, Northwestern, DePaul universities, Hope College and his alma mater, Knox College. He has been a guest on hundreds of public affairs talk shows, and hosted his own program, “Chicago In Sight,” on WIND radio. Horist was a one-time candidate for mayor of Chicago and served as Executive Director of the City Club of Chicago, where he led a successful two-year campaign to save the historic Chicago Theatre from the wrecking ball. An award-winning debater, his insightful and sometimes controversial commentaries appear frequently on the editorial pages of newspapers across the nation. He is praised by readers for his style, substance and sense of humor. According to one reader, Horist is the “new Charles Krauthammer.” He is actively semi-retired in Boca Raton, Florida where he devotes his time to writing. So, there ‘tis is Horist’s signature sign off.


  1. Ben

    Damn Larry. How utterly progressive of you!
    You feeling ok?
    Just a side note, Warren’s wealth tax starts at $50,000,001.
    I am not well versed in tax policy, but Dan said in your IRS article that he didn’t know of a Secretary that paid a higher income tax than a millionaire. He obviously missed Vox’s story of the obscenity of these tricks.
    The New York Times podcast, The Daily did an excellent job explaining the way the mega rich get away with it. It’s really interesting. I think it was last week.

    I thought trump was gunna fix the tax mess so you could do your taxes on a post card?

    • Dan Tyree

      I admire anyone who can avoid taxes since baby murders are paid for by our tax dollars. I wouldn’t pay taxes either if I could get away with it If a woman uses her so called right to choose she should pay for it herself

      • Ben

        Dan, your comment is intellectually dishonest at its core

    • Hopiyer

      The President does not write tax code, he can only say this is what I want to happen. It is congress that enacts/writes the code, ask Nacy Pelosi why she refused to make the tax code simple, like a flat tax.
      Why should those who invest over time be punished for becoming a millionaire by being frugal? Took me from age 16 to 62 to achieve by not overspending, living modestly, and not maintaining debt to get there. I knew would not be enough for later life. I didn’t own a new car until 2011. All this crap about not fair, well life is not fair and it is what your decision make it. Hating the Irish because they figured out how to male money is based on covetousness and jealousy, which are not good looks and don’t create anything positive or happiness in a person’s life, both are emotional traps.

      I now can have a nice retirement due to my investments, and I paid plenty in taxes as investments are sold. Dividends are taxed as well. What is left out of the article is that most extremely wealthy, with exception of a few, are they give tremendous amounts of money to charitable organizations. A great example is Fred Hutchins…..billionaire…..built a cancer Hospital and changed how cancer patients and family, i’s are treated during chemo, etc. He gave millions away to liners etc. So as for me,

      I find it disposable of Biden, who has made millions in politics, as most of them do since they make the laws for investment. They have a type of insider trading and use rhetoric to inflame hatred to the rich, how much has Bernie Sanders given to charity, or Elizabeth Warren, or even Obama and Biden? Coming after my money set aside for my use based on the government overreach gives me serious chills. Punish me for my success because others didn’t make the same sacrifices to make millions and take the risks involved.

  2. phxgeo

    Of course they do not pay at the rate that real people pay. The laws were written for and by MILLIONAIES as a way to protect their nest egg and help it grow. The existing set of encyclopedias called the tax code needs to be burned in the public square. A new one that is3 pages long. One page for individuals and 2 pages for all the various forms of corporations and REAL charities (not money laundering machines). Any politician that does not support his needs to be thrown out of office replaced by someone who is not a millionaire.

  3. TLC

    I read an article recently that detailed how rich pay zero taxes. They claim no income. They borrow based on their wealth to afford their life styles. Then since interest is tax deductible, they pay the loan and claim the interest payments on their forms to cancel any income they must show. Neat trick! And there were many more tricks mentioned!

  4. Ben

    In the mean time, I’m down with Biden’s plan to beef up the IRS to catch the ultra rich manipulating the system!
    Bring on the wealth tax !

    • Dan Tyree

      Punishment for success is the right out of the communist doctrine. Good for you Ben. You win the prize for the best Marxist. You should move to Cuba and be with your comrades.

  5. Duane

    Two things, Larry.
    1. If the rich pay no taxes, why does the IRS report that the top 10% pay something like 80% of all income taxes and the top 1% pay something like 40%? I’m not going to take the time to look up the actual numbers, but you get the gist.
    2. People like Buffett don’t pay income taxes on most of their “wealth” because it is mostly just “on paper.” Like your example of taxing something that can decrease in value, they don’t pay taxes on stocks that could go down tomorrow. AND, they give their stocks away to foundations and other non-profits that their friends and allies control so that those resources can be used to further their political and social goals.
    Please write an article about what would happen if the government actually took everything that every billionaire owns; Most of it would be stocks or other investments and the gov would have to liquidate them to actually use the money. That would tank the market and in addition to “poor” people whose union or company retirement plan was invested in the market being screwed, the gov wouldn’t get what they expected out of the sales. It wouldn’t run the government for more than a few weeks.

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