The more money you make, the more you have to pay in taxes, right? Not always. The ultra-wealthy typically take advantage of rules in the tax code which enable them to lower their effective tax rate. Warren Buffet has often pointed out that he pays less taxes than his secretary and Amazon famously paid zero taxes in 2018. So how exactly are the country’s biggest earners using the tax code to avoid paying taxes?As I've written many times on this blog, I am an officer of the Coffee Party, which has tax reform as one of its goals. Here are the specific reforms the organization is pursuing.
Citizen-Oriented Taxes: Pass or repeal tax laws to reduce our debt, enhance society, and create economic growth. Equitable Taxation: The burden of taxation must be applied fairly to businesses and people. Simplified Tax Code: The Tax Code should be reformed for simplicity.As Sheneya Wilson, founder of Fola Financial, pointed out, the current tax code exists to enhance society and create economic growth, but it doesn't seem to support the rest of the Coffee Party's goals, particularly simplicity and fairness. CNBC highlighted closing loopholes as the main reform to achieve those two goals. The issue is that those loopholes ideally exist to enhance society and create economic growth and loopholes should be targeted only if they don't support those goals. Let's see if Joe Biden's attempt to close some loopholes meets that criterion and succeeds.
Yesterday's video addressed federal taxes. Three weeks ago, CNBC examined the effects of state and local tax rates when it asked Are Rich People Fleeing Places With High Taxes?
To balance their budgets during the coronavirus pandemic, states including New Jersey and New York have raised taxes on the wealthy. Conservatives warn that it will cause many of those who left at the onset of the pandemic make those moves permanent since they’re no longer bound to the physical locations of their offices or their children’s schools. But available data from 2020 show that the so-called exodus wasn’t as pronounced as initially projected, and the urban exit that did happen, was to suburbs rather than low tax states.CNBC's answer is no, at least about rich people moving from high-tax to low-tax states. Instead, well-off people are moving from the cities to the suburbs, while poorer people are moving from high-cost states to low-cost states, which tend also tend to be high-tax and low-tax states, respectively. My interpretation is that cost drives taxes more than the other way around, but I'm not an economist. As for moving to the suburbs or exurbs, I agree with CNBC that it's a move to safety. Also, if people are working from home, they might want a better home, something I pointed out last July, when I wrote "If one has to shelter in place, then one might find a better place to find shelter" and "If one is looking for an economic silver lining to the pandemic, here it is."
I'm getting farther afield from taxes, so I'm stopping before I wander off the subject entirely to something more suited to one of my driving updates during the pandemic. In the meantime, I hope all my American readers filed their taxes by yesterday!