Kevin Bae

Non-Social in a Socially Networked World

BREAKING NEWS: ProPublica uncovers income tax taxes income

People think high income people don’t pay income tax. It’s absolutely untrue. People with high incomes pay high income taxes. Smart people who make a lot of money don’t make their money as “income.” If they even receive a paycheck they make it while making money in ways that don’t show up on a Form W2. ProPublica received a treasure trove of tax info on some of the richest Americans that prove this point.

ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years. The data provides an unprecedented look inside the financial lives of America’s titans, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg. It shows not just their income and taxes, but also their investments, stock trades, gambling winnings and even the results of audits.

Taken together, it demolishes the cornerstone myth of the American tax system: that everyone pays their fair share and the richest Americans pay the most. The IRS records show that the wealthiest can — perfectly legally — pay income taxes that are only a tiny fraction of the hundreds of millions, if not billions, their fortunes grow each year.

A tax reduces the economic activity being taxed. Therefore, taxing income reduces the number of people that make income. If we moved away from an income tax or at least a very low flat income tax while taxing consumption then wealthy people have no choice but to pay more tax. It’s well known that wealthy people consume more than everyone else. We should also remove all the loopholes and tax credits. Those policies only serve to make the tax code complex while providing breaks to special constituencies.