The flood of wealth tax proposals by US Democrats since the start of the year has been described as a “misfocus” by Microsoft founder Bill Gates, who believes they are “missing the picture”.
In a recent podcast interview with The Verge’s Nilay Patel, the billionaire philanthropist claimed that in revenue collection terms, “you wouldn’t want to just focus on the ordinary income rate” because the super-rich often do not pay it anyway.
The problem, Gates explained, was that the country’s richest people generally have complex financial situations that the US tax system is not set up to recognise.
“They have income that just is the value of their stock, which, if they don’t sell it, doesn’t show up in income at all. Or if it does show up, it shows over in the capital gains side,” he said. “So the ability of hedge fund people, or various people – they aren’t paying that ordinary rate.”
Instead Internal Revenue Service (IRS) statistics showed that the top 400 earners in the US paid income tax at a rate of about 20% compared with a marginal ordinary income rate of 39.6%. “So it’s a misfocus,” Gates said. “If you focus on that, you’re missing the picture.”
According to Business Insider, the most recent data available from the IRS – from the 2014 tax year – showed that the average top tax rate for the country’s four wealthiest individuals was 23.13%.
Gates also pointed out that some of the proposals to impose higher tax rates on the super-rich, such as the one suggested by Alexandria Ocasio-Cortez, were “so extreme” that they would only encourage the wealthy to hide more of their income from the tax authorities, reported The Independent.
“You do start to create tax-dodging and disincentives, and incentive to have the income show up in other countries and things,” he said. “We can be more progressive without really threatening income generation.”
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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The flood of wealth tax proposals by US Democrats since the start of the year has been described as a “misfocus” by Microsoft founder Bill Gates, who believes they are “missing the picture”.
In a recent podcast interview with The Verge’s Nilay Patel, the billionaire philanthropist claimed that in revenue collection terms, “you wouldn’t want to just focus on the ordinary income rate” because the super-rich often do not pay it anyway.
The problem, Gates explained, was that the country’s richest people generally have complex financial situations that the US tax system is not set up to recognise.
“They have income that just is the value of their stock, which, if they don’t sell it, doesn’t show up in income at all. Or if it does show up, it shows over in the capital gains side,” he said. “So the ability of hedge fund people, or various people – they aren’t paying that ordinary rate.”
Instead Internal Revenue Service (IRS) statistics showed that the top 400 earners in the US paid income tax at a rate of about 20% compared with a marginal ordinary income rate of 39.6%. “So it’s a misfocus,” Gates said. “If you focus on that, you’re missing the picture.”
According to Business Insider, the most recent data available from the IRS – from the 2014 tax year – showed that the average top tax rate for the country’s four wealthiest individuals was 23.13%.
Gates also pointed out that some of the proposals to impose higher tax rates on the super-rich, such as the one suggested by Alexandria Ocasio-Cortez, were “so extreme” that they would only encourage the wealthy to hide more of their income from the tax authorities, reported The Independent.
“You do start to create tax-dodging and disincentives, and incentive to have the income show up in other countries and things,” he said. “We can be more progressive without really threatening income generation.”
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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