Thursday, February 18, 2016

Real tax rates

Something to remember when people cite tax rates on the rich.

Feb. 16, 2016


income reported by the rich is a “castrated” income, compared to a true economic income, because it deducts all kinds of “expenses” that no economist would consider as such but which the fiscal system allows. Vacations, travels, lunches, are treated as “business expenses” with which to offset income, so that the ultimately reported fiscal or political income may be significantly lower than a real income as defined by economists. Many of us have heard of business trips to France in July, entirely written off (thus reducing the fiscal or “political” income). Such expenses should normally be classified as any other consumption item and not as an income deduction. Similar examples abound. The most important thing is that such loopholes (as they are I think mistakenly called) are really designed and used only by the rich. Majority of people whose income is in wages do not have incentive or wherewithal or rationale to create false companies or consultancies whose main objective is to reduce their fiscal income. So, for the top income group, we are faced here too with a significant underestimate of income.
[Also, some companies provide goods and services such as big houses & private plains which are owned by the company, and not counted as income.]


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