According to a report by ProPublica, the top one percent of the world population consisting of the wealthiest executives like Jeff Bezos, Warren Buffet, and Elon Musk, pay very little taxes compared to their wealth.
So how do they do it?
Most Americans earn money through salaries and wages for which they pay income taxes. However, the top one percent don’t earn income from wages instead, they earn through dividends, stock investments, and capital gains. They get charged with capital sales tax which is half the amount of income tax paid by most Americans.
The United States extracts only 20% of capital sales tax compared to the whopping 37% of income tax.
Recently, President Joe Biden’s law increased the capital sales tax from 20% to 39.6%. However, this amount would be paid when the stocks are sold.
In this case, what can be a better way to tax the wealthy population?
Many policymakers believe in a “mark-to-market” system. This system sought to tax asset growth every year. Nonetheless, considering the downsides of this method, lawmakers now believe in the Progressive Consumption tax. This tax applies to the consumption of high earners including borrowed funds without determining asset value.
Having said that, taxing the wealthy will only make the world a better place by putting the money into eradicating hunger and poverty.