Amid a heated debate over the property tax cut in Korea, ripples are spreading as data on the income tax payment of the 25 richest people in the United States, which is pushing for a tax increase, has been exposed.
According to an analysis of the Federal Internal Revenue Service (IRS) data on the 8th, Propublica, a US investigative news media, reported that the wealth of the 25 richest people in the United States totaled $41 billion (about 448 trillion won) from 2014 to 2018. ), but the federal income tax paid by them during the same period was only $13.6 billion (about 15 trillion won), making the effective tax rate only 3.4%.
A median-income family in the United States earning $70,000 a year pays 14% of their annual income to the federal government in full taxes, and a combined income of $628,300 or more Compared to married couples paying income tax at the highest rate of 37% annually, the income tax paid by presidents with fortunes of hundreds of billions of dollars is literally just a dust.
Amazon founder Jeff Bezos, the world's richest man, grew his fortune by $99 billion (about 110 trillion won) in five years from 2014 to 2018, but the federal income tax paid during the same period was 970 million, less than 1% of the increase. It was 13 million dollars (about 1 trillion won).
Tesla CEO Elon Musk, who ranks second in the richest list, raised $13.9 billion (about 16 trillion won) in assets during this period, and $455 million (about 500 billion won), which is 3.27% of the increase in wealth. paid income tax of Warren Buffett, chairman of Berkshire Hathaway, who is called the 'sage of Omaha' as an 'investment genius', paid only $23.7 million in income tax during this period when his assets increased by $24.3 billion (about 26.4 billion won). The tax rate was only 0.1%. Former New York City Mayor Michael Bloomberg, founder of Bloomberg News, also paid only 1.3 percent of federal income taxes on wealth growth.
Billionaire George Soros did not pay income tax for three consecutive years from 2016 to 2018 due to investment losses, and Carl Icahn, an American hedge fund investor famous as a 'corporate hunter', also benefited from tax deductions for large loans and interest payments. year to avoid federal taxes. Bezos paid no income tax in 2007 and 2011, and Musk didn't pay a dime in 2018, respectively.
Over the five years 2014 to 21018, a typical American middle-class in their 40s increased their after-tax wealth by $65,000, and their income tax paid reached $62,000 during the same period. It pays an income tax equivalent to the increase in property.
In 2007, when Jeff Bezos paid no income tax, Amazon's stock price rose, increasing his fortune by $3.8 billion. How did Bezos pay no income tax despite his fortune soaring?
In 2007, Bezos reported that he and his wife Mackenzie Scott earned $46 million in interest and dividends. In addition, all income was deducted for investment, interest payment on debt, and other expenses. In 2011, Jeff Bezos, who owned a fortune worth $18 billion, filed a tax refund claiming he had lost his investment, and received a $4,000 tax refund to pay for his children's education.
While his fortune grew by $127 billion from 2006 to 2018, Jeff Bezos reported that he earned $6.5 billion and paid $1.4 billion in taxes. That's 1.1% of the increase in wealth over 13 years. During the same period, the typical American family increased their wealth by $89,000 and paid $142,000 in taxes. They paid much more in taxes than the increase in their wealth.
As of the end of 2018, the 25 richest people in the United States had fortunes of $1.1 trillion, equivalent to the combined fortunes of 14.3 million American workers. In 2018, the top 25 richest people paid $1.9 billion in taxes, while the 14.3 million wage earners paid $143 billion in taxes, ProPublica said.
The fact that even if you have a lot of wealth, you can pay less income tax is according to a 1920 US Supreme Court ruling (Eisner v. Macomber) that 'income comes from profits'. Since this judgment, income has been interpreted as meaning only realized profits in US taxation.
Probublica said that the method billionaires use to avoid taxes is not illegal, but within the framework of the law, and introduced the wealthy's 'tax cut' method that minimizes income realization and maximizes debt. Most workers work and receive wages immediately to live, and when they receive wages, taxes are immediately deducted from their wages. But billionaires like Bezos don't need to get paid right away.
Bezos has long earned an annual salary of $80,000. When Steve Jobs returned to Apple in the 1990s, he was paid only $1 a year. Founders and CEOs such as Facebook's Mark Zuckerberg and Google's Larry Page and Oracle's Larry Ellison have also joined the ranks of the rich and poor.
ProPublica points out that while the behavior of low-paying CEOs appears to be "self-humility," it is actually because of the high income tax rate on wages. According to data from the IRS, the 25th-richest reported only $158 million in wage income in 2018, or 1.1% of their total income. The remaining income was income from dividends, stock sales, bonds, or other investments, which were taxed less than wages.
21st-century American billionaires rarely sell stock in the companies they start. Of the US billionaires' wealth of $4.25 trillion, $2.7 trillion is in unrealized gains, according to University of Berkeley's Emmanuel Saez and Gabriel Zucman.
Berkshire Hathaway founder Warren Buffett, who has a fortune of $110 billion as of May 2021, is famous for not turning his fortune into income. From 2015 to 2018, Buffett reported earnings from $11.6 million to $25 million per year, with more than 14,000 Americans reporting more than Buffett in 2015 alone.
Buffett's company is also famous for not paying dividends. Buffett argues that reinvesting profits without paying dividends is a way to maximize the value of a company, but if he paid dividends like other companies do, Buffett's dividend income would exceed $1 billion a year, and he would have paid hundreds of millions of dollars in taxes.
At one time, most Silicon Valley information technology companies didn't pay dividends. In the 1980s and 1990s, Microsoft and Oracle grew with astronomical profits, but did not pay dividends. Google, Facebook, Amazon and Tesla also did not pay dividends.
In ProPublica, billionaires have to pay 37% income tax when they receive their wages and 20% capital gains tax as well as a lower stake when they sell stocks, but if they borrow money using stocks as collateral, they pay only interest and pay taxes. I was told that I didn't have to pay.
In 2014, Oracle CEO Ellison borrowed money with $10 billion of stock as collateral, and Tesla's Elon Musk also received a tax deduction by borrowing 92 million of his own stock as collateral.
Excluding the year in which he exercised more than $1 billion of stock options, Musk's income tax payments are comparable to those of ordinary workers. Musk paid $68,000 in taxes in 2015 and $65,000 in 2017, and paid no federal income tax in 2018.
The 40th richest man in the United States, Carl Icahn, did not pay a penny of federal income taxes, including interest and investment losses, after reporting $544 million in 2016 and 2017. Icahn's debt is $1.2 billion.
Warren Buffett said the rich should pay more in taxes and that he would donate 99.5% of his fortune to charities. There is also an objection that the burden of corporate tax ultimately falls on the workers. Some argue that if you die, you will eventually pay taxes on all your property.
However, ProPublica said U.S. corporate tax revenues have declined sharply as many companies have shifted their profits to tax havens with no or lower tax rates, and attempts to inherit tax-free inheritance through charities and trusts have also declined, according to ProPublica. pointed out that it continues. Although the Joe Biden administration is seeking to raise the top income tax rate from 37% to 39.6%, it is reported that the same increase will not increase the taxes billionaires pay.
Emmanuel Saez and Gabriel Zucman, in their 2019 book, The Triumph of Injustice, argue that the U.S. tax system is a regressive He argued that lowering the tax rate and tax evasion are the main causes of the widening gap between the rich and the poor.
The U.S. tax consists of a federal individual income tax, which is highly progressive, in which a higher tax rate is applied to higher income, a payroll tax, a consumption tax, and a capital income tax. As the proportion of federal income tax decreases and the proportion of regressive wage income tax and consumption tax increases, the phenomenon of the poor and the rich is accelerating.
In 2019, the U.S. gross domestic product (GDP) was $21.4 trillion, and the per capita income of 245 million people aged 25 and over was $90,000. After taking into account depreciation and transfer income, the gross domestic product is $18.5 trillion, and the average real income per adult is estimated at 75,000.
By class, the average per capita income of the 122 million workers in the bottom 50% of income bracket is $18,500, the average income of the 100 million people in the middle 40% is $75,000, and the average income of the top 9% is $75,000. The 22 million people have an average annual income of $220,000, and the top 1% 2.4 million people have an average annual income of $1.5 million. The average income of the top 1% income bracket is 81 times that of the bottom 50% income bracket.
Saez and Zukman say that the income gap began to widen rapidly after the presidency of Ronald Reagan, who carried out tax reforms aimed at a small government amid full-fledged globalization.
In the United States, the share of income in the top 1% of the income bracket rose from about 10% in 1980 to around 20% in 2018, but the share of total income in the bottom 50% of the income bracket in GDP increased from 20% to 12% during the same period. said to have been lowered to As the top 1%'s share increased, the bottom 50%'s share decreased. The income of the bottom 50% of the income bracket has been transferred to the income of the top 1%, and the root cause is tax cuts for the rich.
Saez and Zukman argue that raising the tax rate will narrow the income gap, claiming that a confiscation-level income tax will force the rich to either stop working to make less money, reduce their high wages, and pay ordinary workers. .
From 1930 to 1980, the income tax rate for the highest income earners in the United States averaged 78%. From 1951 to 1963, after World War II, the income tax rate for the top class averaged 90%. In 1960, 308 people earned more than $6.8 million a year and paid 91% of their income in taxes.
However, as tax cuts and tax reduction techniques spread, the average tax rate for the 400 richest people in the United States dropped from 47% in 1980 to 23% in 2018. On the other hand, the average effective tax rate of the bottom 50% of income earners was almost unchanged from 25% to 24%. In 2018, for the first time ever, the average tax rate for the bottom 50% of income earners in the United States was higher than the average rate for the 400 richest people.
The gap between the rich and the poor among American adults narrowed after World War II and widened again in the 1980s. The ratio of net assets excluding debt of the richest 1% in the United States has doubled from 20% in the 1970s to 40% today. On the other hand, the proportion of net assets of the bottom 90% of income earners, which had risen to the 40% level, decreased to the 25% level.
Saez and Zukman argued that 'the gap between the rich and the poor' means 'the gap in power'. Super high income is obtained through social sacrifice, and the monopoly of resources and power undermines fair competition as much as possible to resolve inequality and maximize tax revenue. He argues that a higher level of tax rate is necessary.
Although the two argue that raising taxes will reduce their motivation to work and do business, there will be fewer jobs. They say there is no relationship between tax rate increases and capital accumulation. As the utility of an increase in the income of the low-income group by one unit is much greater than the utility of an increase in the income of the wealthy by one unit, bridging the income gap also increases the utility of society as a whole. Therefore, it is necessary to increase taxes to expand support for the low-income class and to reduce the gap between the rich and the poor.
Saez and Zukman argue that a high level of education, health insurance, and old-age pension are necessary for human life. To this end, they argue that 10% of GDP should be secured through income tax, corporate tax, and wealth tax hike.
The two men raised the corporate tax rate, which President Trump had lowered from 21%, back to 36% from 2018, and set the global minimum corporate tax to 25% to prevent tax evasion by global companies, while raising the top income tax rate from 37% to 60%. Say you need to adjust. He advocates a 2% annual income tax on wealth over $50 million, a 3.5% wealth tax on wealth over $1 billion, and a new 6% domestic income tax on all types of earned income, business income, and interest income.
Countries around the world are starting tax increases to recover national finances that had been loosened on an astronomical scale to resolve the COVID-19 crisis, with seven advanced Western countries agreeing to a global minimum corporate tax rate of 15%. As the gap between the rich and the poor widens like never before, polarization and resolution of inequality have become global topics, and the pressure on tax increases is stronger than ever.
The Internet site 'Taxjusticenow.org', an Internet site run by an American private organization, estimated that if the wealth tax had been implemented since 1982, the proportion of assets of the 400 richest people in the United States would have dropped from 3.3% in 2018 to 1.6%. Jeff Bezos' fortune reached $160 billion in 2018, and Bill Gates' fortune was $59.1 billion and $97 billion.
In the United States, even when the national economy grows, the income of the top 1% only increases, and the income of most households does not increase, while the social class is divided into 99% to 1%. U.S. President Joe Biden also said that there was no trickledown effect that when the rich earn a lot of money, the effect spreads throughout society, and is pushing for tax increases for the rich with annual incomes exceeding $400,000.
"Taxes are the price of civilization," said Oliver Wendell Holmes, former U.S. Supreme Court Justice in the early 1900s. This is the slogan of every U.S. IRS. As the inequality and polarization between the rich and the poor widens and conflicts between classes spread, the pressure to raise taxes on the super-rich should be increased to resolve the wealth imbalance in order to maintain a civilized life.
The controversy over the tax increase in the United States has great implications for Korea, where the controversy over the reduction or exemption of the property tax, which was sharply raised to curb the rise in real estate prices, is on the rise. In this regard, it is a matter to systematically review whether the tax system of the Republic of Korea is fair. <End>