There have been so many insane statements made about taxes and the rich over the last couple of years. In fact, a lot of attention has been allocated towards the wealthy and how they “game the system”.
Many people have heard stories about Donald Trump not paying any taxes at all and demanded he share his tax returns with the world. Some of those same people are pushing to tax anyone who makes over $10 million yearly at a 70% income tax rate.
This isn’t a political support statement or an opinion on whether or not Trump should share his tax returns, it’s just a fact. With this fact comes controversy, and we love controversial topics here at Incite Wealth.
So…it’s time we addressed everyone’s lingering question, “do rich people pay more taxes than your average Joe”?
To clarify, the rich blatantly pay out more in taxes on a dollar for dollar basis. For example, if a wealthy individual has $1 million in income for the year, and their effective tax rate is 25%, they pay out $250,000 in taxes that year. If a normal, every day salaried employee makes $100,000 in a year with the same tax rate they will only pay $25,000.
This concept is relatively straightforward.
More often than not, the wealthy, if also a salaried employee, would be in a much higher tax bracket at this income level. However, wealthy people are intelligent. Wealthy people also understand their finances and have taken the time to either hire someone who knows tax law or learn it their self. When you are educated on taxes you are typically able to make smarter decisions throughout the course of the year that can actually REDUCE your effective tax rate. The bottom line is, wealthy people pay less taxes from a percentage standpoint than the average salaried employee.