7/4/2023 0 Comments Current tax bracketsThe six example families considered below include workers with different incomes, assets, and family situations: some who rent their home and some who own, some who have student loans, and some with child care expenses. The examples below illustrate how many typical middle-class Americans pay higher tax rates than the wealthiest 400 people in the country. Many typical middle-class families pay higher tax rates than the ultrawealthy This analysis considers a more comprehensive measure that includes forms of economic income that do not appear on tax returns, including tax-free employee benefits unrealized gains on assets such as homes and retirement accounts and, for homeowners, the value that they derive from living in the home they own. If one is using a broad measure of income for the very wealthy, then one should use a similarly broad measure of income for the nonwealthy. The congressional Joint Committee on Taxation has said that, “Economists generally agree that, in theory, a Haig-Simons measure of income is the best measure of economic well-being.”Ī similar approach can be extended to measuring the effective tax rates paid by typical nonwealthy Americans. This approach to measuring income comes close to the concept known as “Haig-Simons” income: consumption plus change in net wealth. The measure of income used in the White House study-one that includes unrealized gains-provides a broader perspective. In contrast to the White House analysis, many effective tax rate measures exclude unrealized gains, meaning they are incomplete when it comes to the very wealthy. As a result, much of the income of the wealthiest families in the country never appears on their income tax returns. Because of a tax code feature known as “ stepped-up basis,” unrealized gain on an asset is never subject to income tax if the asset is not sold during the owner’s lifetime. The main reason the top 400 pay such a low tax rate is that a very large share of their income is in the form of unrealized capital gains-appreciation in the value of their assets, mostly stocks and other business interests. The study, by economists Greg Leiserson of the Council of Economic Advisers and Danny Yagan of the Office of Management and Budget, used annual “Forbes 400” lists and public data to estimate the incomes and federal income taxes paid by members of that elite group. The Forbes 400 paid an average income tax rate of 8.2 percent from 2010 to 2018 ![]() Congress has a rare chance to fix these fundamental problems by passing the Build Back Better agenda, which would expand tax credits for working families and reform the tax treatment of income from wealth. It illustrates how wages are taxed at higher rates than income derived from wealth and demonstrates how this tiered rate system benefits the richest members of American society. This column examines how that low tax rate compares with what ordinary people pay, using six examples of typical workers and families. families paid an average income tax rate of just 8.2 percent from 2010 to 2018. A study by White House economists released on September 23 found that the 400 wealthiest U.S.
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