After all, are taxes in the US unfair as Trump claims to avoid taxes?

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For many years, the president of U.S, Donald Trump, boasted that the fact that he pays little taxes shows that he is “smart”.

According to Trump, the American tax system itself benefits entrepreneurs like him with tax credits and exemptions.

“Like everyone else in the private sector, unless they are stupid, they use loopholes in the law,” Trump said in the presidential debate last month, when confronted with information published by the American newspaper The New York Times that he had paid only $ 750 in income tax for the federal government in 2016 and 2017.

The newspaper also revealed that Trump had not paid any income taxes for ten years, “mainly because he reported that he lost a lot more money than he earned.”

“This equation is a key element of Trump’s finance alchemy: using the profits of his fame to buy and sustain risky businesses and then use his losses to avoid taxes,” says the newspaper.

The current president’s tax payment strategies in recent years are currently under investigation by officials in New York. But how often is a story like his?

For Andy Summers, professor of law at the London School of Economics in the United Kingdom, Trump would have difficulties in adopting such strategies in other countries. The UK, for example, has rules that limit how much of a business loss can be used to offset gains elsewhere.

All of this suggests that Trump is a case in point, although some surveys have already found higher rates of tax evasion among the very wealthy.

But in some ways, the president is right, according to tax experts. In many parts of the world, the rich actually pay less than official taxes would require – and this without the need to resort to very complicated or illegal schemes.

“It’s actually relatively common,” says Arun Advani, a professor of economics at Warwick University, who examined taxes in the United Kingdom together with Summers.

Wage gains achieved more strongly

In the United Kingdom, a quarter of those earning between £ 5 million (R $ 36 million) and £ 10 million (R $ 72 million) in income and capital gains paid an average and effective tax rate of just 11% on recent years, as Advani and Summers demonstrated.

This is not only lower than the highest official rate, 47%, but also less than it affects someone who earns just 15,000 pounds.

In the United States, the wealthiest 400 billionaires paid an average tax rate of 23% in 2018 – less than the rate of 24% paid by the bottom half of families, economists at the University of California at Berkeley estimated in a 2019 study.

The difference between the main rates and what the governments actually collected was driven by laws that target salaries with higher tax rates than other types of income, such as property and investments in the stock market.

Former New York banker Morris Pearl, 60, who has said he has a “tens of millions” fortune, says his income tax rate is well below the United States’ official rate on the highest incomes of 37%. That’s despite his big gains in the stock market in recent years, in which he has invested since he retired from investment giant Blackrock in 2013.

“The whole system is fundamentally unfair,” says Pearl, now president of the Patriotic Millionaires, a group of wealthy Americans who support a higher incidence of taxes in their income bracket. “The amount of tax I pay in no way corresponds to the amount of money that any normal person would say I earned.”

Encouraging the economy or driving inequality?

Since the 1980s, official rates on the biggest winners have tended to fall in developed countries.

This fall was part of a context of turning to the right with Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom that greatly influenced politics and the global economy.

Although some countries have altered the level of income from which the maximum rate is activated, or increased rates after the global financial crisis, the general downward trend remains.

And most countries – even Denmark, known for its high taxes – have chosen to reward investments and property at lower rates.

Supporters of this stimulus say that it encourages investments, with positive results in economic growth and job creation. They also argue that the rich still account for a disproportionate share of government revenue.

At the same time, this is a configuration that is being increasingly blamed for fueling inequality and political instability.

Morris Pearl portrait indoors
Photo caption Morris Pearl says how much tax he pays doesn’t match his real earnings

A few months ago, Pearl helped organize a letter signed by some of the richest people in the world asking governments to raise taxes on people like them in order to help fight the coronavirus pandemic.

This demonstration influenced political debates in the United States, the United Kingdom and elsewhere.

Djaffar Shalchi smiles looking to the side outdoors
Photo caption, Danish millionaire Djaffar Shalchi is part of a group that asks for higher fortune rates

Another letter organizer, Djaffar Shalchi, a Danish construction tycoon, says that even his country has seen his approach with progressive fame diminish over time. Shalchi wants to see the restoration of a wealth tax to combat economic inequality.

“If we don’t solve this problem, we will have a situation like that of the United States, perhaps in 20 years,” he says. “We are moving in that direction.”

Entrepreneur Gemma McGough, who works in the technology sector in the United Kingdom, agrees and says that, last year, she paid taxes of about 40% on a revenue generated mainly by savings and investments.

But when she and her husband sold their first company in 2014, Product Compliance Specialists, they were favored by benefits for entrepreneurs who shielded the levy of some taxes on the sale of their companies.

Gemma McGough poses smiling in the garden
Photo caption, ‘I feel a little guilty about getting so rich’, says McGough, who says she has benefited from measures that make it easier to sell companies with less taxes

“I feel a little guilty about getting so rich,” says McGough. “When I ran the company, I didn’t feel that way, because I believed I was working hard.”

“It was only later, after we sold the company, that I saw that there are many people working hard, and most are not millionaires.”

Change in tax policy?

McGough, Pearl and Shalchi remain a minority among the wealthiest.

But since the Patriotic Millionaires emerged in 2010, their guidelines have gained important support, such as that of billionaire Warren Buffett. In 2016, he advocated raising taxes on the wealthiest, noting that his 16% federal tax rate was lower than his secretary’s.

Pearl, whose $ 100,000 in taxes paid recently was still far more voluminous than that paid by Trump, says he is hopeful that outrage over stories like that of the American president will force the tax policy pendulum to swing in another direction.

“It was kind of abstract in the past, but I think (…) that people are realizing that most are paying a much higher share than some of our wealthiest citizens,” he says. “Many people have decided that this is not fair.”

Source: BBC

The post After all, are taxes in the US unfair as Trump claims to avoid taxes? first appeared in BizNews Brasil :: News of Mergers and Acquisitions of companies.

For many years, the president of U.S, Donald Trump, boasted that the fact that he pays little taxes shows that he is “smart”.

According to Trump, the American tax system itself benefits entrepreneurs like him with tax credits and exemptions.

“Like everyone else in the private sector, unless they are stupid, they use loopholes in the law,” Trump said in the presidential debate last month, when confronted with information published by the American newspaper The New York Times that he had paid only $ 750 in income tax for the federal government in 2016 and 2017.

The newspaper also revealed that Trump had not paid any income taxes for ten years, “mainly because he reported that he lost a lot more money than he earned.”

“This equation is a key element of Trump’s finance alchemy: using the profits of his fame to buy and sustain risky businesses and then use his losses to avoid taxes,” says the newspaper.

The current president’s tax payment strategies in recent years are currently under investigation by officials in New York. But how often is a story like his?

For Andy Summers, professor of law at the London School of Economics in the United Kingdom, Trump would have difficulties in adopting such strategies in other countries. The UK, for example, has rules that limit how much of a business loss can be used to offset gains elsewhere.

All of this suggests that Trump is a case in point, although some surveys have already found higher rates of tax evasion among the very wealthy.

But in some ways, the president is right, according to tax experts. In many parts of the world, the rich actually pay less than official taxes would require – and this without the need to resort to very complicated or illegal schemes.

“It’s actually relatively common,” says Arun Advani, a professor of economics at Warwick University, who examined taxes in the United Kingdom together with Summers.

Wage gains achieved more strongly

In the United Kingdom, a quarter of those earning between £ 5 million (R $ 36 million) and £ 10 million (R $ 72 million) in income and capital gains paid an average and effective tax rate of just 11% on recent years, as Advani and Summers demonstrated.

This is not only lower than the highest official rate, 47%, but also less than it affects someone who earns just 15,000 pounds.

In the United States, the wealthiest 400 billionaires paid an average tax rate of 23% in 2018 – less than the rate of 24% paid by the bottom half of families, economists at the University of California at Berkeley estimated in a 2019 study.

The difference between the main rates and what the governments actually collected was driven by laws that target salaries with higher tax rates than other types of income, such as property and investments in the stock market.

Former New York banker Morris Pearl, 60, who has said he has a “tens of millions” fortune, says his income tax rate is well below the United States’ official rate on the highest incomes of 37%. That’s despite his big gains in the stock market in recent years, in which he has invested since he retired from investment giant Blackrock in 2013.

“The whole system is fundamentally unfair,” says Pearl, now president of the Patriotic Millionaires, a group of wealthy Americans who support a higher incidence of taxes in their income bracket. “The amount of tax I pay in no way corresponds to the amount of money that any normal person would say I earned.”

Encouraging the economy or driving inequality?

Since the 1980s, official rates on the biggest winners have tended to fall in developed countries.

This fall was part of a context of turning to the right with Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom that greatly influenced politics and the global economy.

Although some countries have altered the level of income from which the maximum rate is activated, or increased rates after the global financial crisis, the general downward trend remains.

And most countries – even Denmark, known for its high taxes – have chosen to reward investments and property at lower rates.

Supporters of this stimulus say that it encourages investments, with positive results in economic growth and job creation. They also argue that the rich still account for a disproportionate share of government revenue.

At the same time, this is a configuration that is being increasingly blamed for fueling inequality and political instability.

Morris Pearl portrait indoors
Photo caption Morris Pearl says how much tax he pays doesn’t match his real earnings

A few months ago, Pearl helped organize a letter signed by some of the richest people in the world asking governments to raise taxes on people like them in order to help fight the coronavirus pandemic.

This demonstration influenced political debates in the United States, the United Kingdom and elsewhere.

Djaffar Shalchi smiles looking to the side outdoors
Photo caption, Danish millionaire Djaffar Shalchi is part of a group that asks for higher fortune rates

Another letter organizer, Djaffar Shalchi, a Danish construction tycoon, says that even his country has seen his approach with progressive fame diminish over time. Shalchi wants to see the restoration of a wealth tax to combat economic inequality.

“If we don’t solve this problem, we will have a situation like that of the United States, perhaps in 20 years,” he says. “We are moving in that direction.”

Entrepreneur Gemma McGough, who works in the technology sector in the United Kingdom, agrees and says that, last year, she paid taxes of about 40% on a revenue generated mainly by savings and investments.

But when she and her husband sold their first company in 2014, Product Compliance Specialists, they were favored by benefits for entrepreneurs who shielded the levy of some taxes on the sale of their companies.

Gemma McGough poses smiling in the garden
Photo caption, ‘I feel a little guilty about getting so rich’, says McGough, who says she has benefited from measures that make it easier to sell companies with less taxes

“I feel a little guilty about getting so rich,” says McGough. “When I ran the company, I didn’t feel that way, because I believed I was working hard.”

“It was only later, after we sold the company, that I saw that there are many people working hard, and most are not millionaires.”

Change in tax policy?

McGough, Pearl and Shalchi remain a minority among the wealthiest.

But since the Patriotic Millionaires emerged in 2010, their guidelines have gained important support, such as that of billionaire Warren Buffett. In 2016, he advocated raising taxes on the wealthiest, noting that his 16% federal tax rate was lower than his secretary’s.

Pearl, whose $ 100,000 in taxes paid recently was still far more voluminous than that paid by Trump, says he is hopeful that outrage over stories like that of the American president will force the tax policy pendulum to swing in another direction.

“It was kind of abstract in the past, but I think (…) that people are realizing that most are paying a much higher share than some of our wealthiest citizens,” he says. “Many people have decided that this is not fair.”

Source: BBC

The post After all, are taxes in the US unfair as Trump claims to avoid taxes? first appeared in BizNews Brasil :: News of Mergers and Acquisitions of companies.

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