Memes

Are you talking about capital gains tax?

First, let's be clear, the reason the rich pay little tax doesn't have much to do with the capital gains tax rate being lower.

Now the reason for the lower rate (at least ostensibly) is that while income is earned at a point in time, capital gains happens over large amounts of time. Therefore often a big part of the gain is inflation. Let's imagine you bought a house for $100k and 20 years later you sell the house for $140k. Over that time inflation has been a steady 2%.

Due to inflation $148k is now worth what $100k was worth 20 years ago. But when you sell you have to pay tax on the $40k profit even though you actually made a loss?

Lower capital gains rates are meant to adjust for this. Basically saying we understand part of the gain is inflation, so let's call it half inflation and half profit and we'll account for this by setting the capital gains rate at half the income tax rate.

Remember companies (that you might have shares in) or yourself as a land lord are (ostensibly) paying tax on profits as you go. Capital gains tax is in addition to this.

This comment is already long enough so I'll leave the conversation on whether this stuff is true in practice as an excercise for the reader, but it at least starts from a sensible place.

At least where I live (not the US), if you're day trading stocks or flipping houses you'll pay income tax not capital gains tax (ostensibly 😆).

Yup, and all of these are sold as benefitting the non-wealthy while glossing over how much more it benefits the wealthy.

Rich people can buy high end homes that they know will appreciate in value, and their interest rate will be lower because they are wealthy. So if they get a good enough rate they are basically getting a tax break for what they are paying for the house and then selling it for more profit. They can do this because they are wealthy enough to decide on when to make large transactions.

As a deduction it will have a far higher impact on their taxes because whatever the amount is paid in interest is coming out of their highest tax bracket.

So if they are paying 10k in interest on a more expensive house becsuse rheir interest rate is lower and the 10k reduced their income taxed at 20+% they will get a far bigger benefit out of it than someone paying 10k at a higher interest rate that might lower their income taxed at 10% and when they sell their house they will get less of an increase from it.

When wealth is concentrated because wages don't increase with productivity, the wealthy are paying less than their fair share of taxes to society with a flat percentage that has a cap.

Look at it this way, if there is 1 million dollars taxed at 3% and there is no cap it doesn't matter who gets what, $30k total is collected. If there is a 100k cap and one person takes in 500k and 10 people take in 50k in income apiece then only $9k is collected and the one taking in 500k is putting in the same amount as everyone else. They are also less in need for social security retirement savings because they can easily squirrel away more in savings.