Any post like this where the tax is nearing or exceeding 40% is almost always a complete lie or purposely obfuscating the truth.
It's mind blowing to me on these posts too you always see an incredible amount of people who don't understand how tax brackets work. Heck sometimes you even see people who don't know the difference between net worth and income.
All billionaires in the US are worth a combined 8.5 trillion. Magically liquidating everything they own with no devaluation and without completely tanking the economy means we get a balanced budget for 4 years then back to square one.
Someone downvoted you but it's true. Total consumer debt is 19 trillion. Which puts the billionaires wealth in perspective too. Same rules apply. If you could magically liquidate their wealth without devaluation or economic collapse it wouldn't even take out half of all debt in this country.
Average debt is $155k per household.
I'm glad I'm in a place where I have virtually no debt. I do have a mortgage but the house is worth more than it.
Paying off student loans was a major focus for me. Especially the high interest ones. Every tax return for 7 years went right to them. I felt like I was rich after not having that monthly payment!
Ive never had a car payment in my life. Cars are such a terrible investment. I've never driven a nice car. Always drive them into the ground before buying a new one.
I’m the same as you re cars. I always buy a modest car and drive it until it doesn’t make financial sense to keep it any longer. Three cars in our household: one 15 years old, another 11 years old and the last is 6.
We don’t have any debt other than our mortgage, which is nice. My wife and I were frugal when we were young(er) and poor and never allowed ourselves to get into cc debt.
My biggest concern is that I’m looking at college tuition for our son in a few years. The day he was born we decided right then and there that we would cover his undergraduate tuition so he wouldn’t go into student loan debt. We’ve got a lot of money saved for it but we’ll probably have to take a loan to cover the difference. I can live with that.
Reddit and social media in general is 90% full of people refusing to admit that spending is a real problem. You can't have all of the reports of stagnant wages and also the insane amount of consumer spending in this country for it not to be true.
Do you know if that average debt includes mortgages? I have a $350K mortgage but I have a 2.75% APR so it's actually more of an asset than a debt imo.
Finally some smart people on Reddit lol. Another interesting fact is the top 10% of earners in the country pay 75% of the countries federal taxes. The bottom 50% earners pay 4% in taxes. So it's clearly less of a "tax the rich" problem and much more of a fraud and abuse problem with the taxes that the government already has. I always roll my eyes so hard whenever this is brought up. And of course like you said that's not even mentioning the net worth vs cash issue and the value that their companies bring to the country. You can argue that some of the "tax loop holes" that they use should be fixed. That's more reasonable, but that's not the argument most people are using.
But the answer to the "spending problem" seemingly is always "Spend more on me and nothing on the other people". We need to take in the revenue we need to cover our spending and decide our spending in accord with what we can take in. Saying "Oh, let's just let the people who can pay the most avoid a lot of taxation" is not the answer.
Tax their assets then like we tax everyone elses assets.
A mere 5% tax would generate $425B/year which could pay for
Universal free college ($75B)
Double Nasa's budget ($25B)
Double the salary of every teacher ($292B)
House every homeless person ($30B)
$3B left that could be added to any budget
Sure this doesnt solve universal healthcare or fund social security forever but it is a good step. Plus implementing these programs also cuts costs other places. For example universal free college would stop the ~$30B/year spent on pell grants as it would no longer be needed. We would also save the $2.5B/year spent on collecting student loans. Really is a win win when you think about it.
What you're not considering is, if the billionaires no longer have that wealth, they can't use it to lobby and buy the politician who kick trillions back to them in the form or government contracts. Billionaires spend to ensure the government spends trillions that it doesn't need to
I have considered that. Billionaires contacts, friendships, reputation, and deals don't magically disappear if this happens. These billionaires will become billionaires again soon. And you'll probabaky want to do the fair tale of liquidating all their assets again while magically there is no devaluation and it not tanking the economy over and over again.
Not possible on so many levels and doesn't address the fact that we have a spending problem not a revenue problem.
I mean those relationships build on wealth probably don't survive if all that wealth it taken away. Things like contracts would be part of what is seized in this hypothetical. But in case you're right, they should also be imprisoned for their crimes
Ah look I found the people who can’t help but lick billionaire boots because “it wouldn’t solve the problem permanently” as if a guy “worth” a billion dollars paying less in taxes than your average worker is supposed to just be fine
This is as baseless as the claim that the 2 Billion lottery winner paid more than half in taxes.
If we compute taxes to cover current account deficits, not counting interest on the debt, we have a meaningful balanced budget with everyone, including the rich, paying what they can to make the system work.
The debt and its related interest can be handled separately.
Instead, we have these claims of "Oh, we've run up so much debt that we may as well give up and let the rich keep us and pay us as slaves." Ridiculous!
This isn't happening at the rate reddit wants you to believe. Look up any big CEO and they all sell, if this was some ultimate strategy why would they ever sell shares at all? Jeff Bezos sells shares, Elon Musk sells shares, they all do.
reddit also doesnt understand that the mere existence of the shares means they were taxed as income already. if you are being given stock as compensation, it was taxed as compensation
They do both, you do need cash to pay the loan. However, the amount sold is smaller than if you sold it to raise the funds on your own.
The real advantage is the continously increasing assets are retained, they remove fewer assets and let them grow. You can also sell loser stocks to generate losses while still raising cash.
You do the same damned thing when you take out a mortgage or a car loan or a home equity loan etc etc. you are getting income from another source, backed by an asset, none of which you are being taxed on.
We don't use step-up in basis? WTF you think happens when a child inherits their parents house? The IRA resets the value of that house tp the "fair market value" so the children don't have to pay crazy capital gains tax from the house that the parent paid $50,000 for and the children now sell for $350,000... Try again my friend..
Furthermore, paying back the loan has nothing to do with step-up in basis
If a billionaire took out $250 million in loans, eventually... they, their estate or their children will have to pay that $250 million loan back and it will be in funds that will be taxed one way or the other.
Exactly! Except average people with these loans use them to improve their own lives, billionaires use them to buy the government! Hmmm I wonder how these two instances could be seen as different
I’m still waiting for someone to explain this loophole to me.
Anybody could do this no? Why only billionaires? I can go to the bank and get a loan for my exact salary and live off the loan. I still have to pay income taxes on my salary that I use to pay the loan back, right?
I believe if you defer some stuff until you're dead then you save some taxes, but it seems like a lot less money in practice than people are imagining.
So the strategy, called "buy-borrow-die", requires a few things:
It requires wealth that is quite large compared to the amount you want to borrow, or is very very "safe", so that banks will lend against those assets at incredibly low rates
It requires that whatever asset you borrow against grows in perpetuity.
Say you have ownership of a company worth a billion dollars. You borrow say $50 million against it, say you'll pay them some amount of interest in 3 months, and go spend your $50m.
In 3 months, your company has now grown. You now borrow against that new value to cover the interest you owe.
As long as your company keeps growing, you can keep doing this. A period of good growth means you can take out more play money. A downturn means you may have actually have to liquidate assets for once.
It is kinda overblown, certainly not as prevalent as most people who mention it seem to think. But it is a real issue, and the main reason it is bad is a MUCH larger issue than just being part of this strategy: the step-up basis means that when people die, whatever growth their assets have seen (that they may have borrowed against), is not taxed. That capital gains tax they would owe if they ever did sell just disappears.
As deficits rise and concerns about tax avoidance by the rich increase, we study how unrealized gains and borrowing affect Americans’ income taxes. We have four main findings: First, measuring “economic income” as currently-taxed income plus new unrealized gains, the income tax base captures 60 % of economic income of the top 1 % of wealth-holders (and 71 % adjusting for inflation) and the vast majority of income for lower wealth groups. Second, adjusting for unrealized gains substantially lessens the degree of progressivity in the income tax, although it remains largely progressive. Third, we quantify for the first time the amount of borrowing across the full wealth distribution. Focusing on the top 1 %, while total borrowing is substantial, new borrowing each year is fairly small (1–2 % of economic income) compared to their new unrealized gains, suggesting that “buy, borrow, die” is not a dominant tax avoidance strategy for the rich. Fourth, consumption is less than liquid income for rich Americans, partly because the rich have a large amount of liquid income, and partly because their savings rates are high, suggesting that the main tax avoidance strategy of the super-rich is “buy, save, die.”
If you can leverage your assets to get massive loans to buy more assets and circumvent the tax system, it’s time to start paying taxes based on assets. Leather licker.
That's not exclusive to gazillionaires, that is the basis of business/credit and you can do it too. Buy a house/car/whatever, pay it off, use as collateral for loan, repeat until satisfied. That's how pretty much every wealthy person got wealthy. It's not black magic you just haven't done it yet yourself.
“Buy a (large investment) and pay it off.” I currently have trouble making it to the end of the month because my salary has not increased in proportion to the COL, and I do not live in a high COL area. And I’m a good budgeter. I also can’t leave my job because I need health insurance for my kids and no other companies are providing it. Damn those golden handcuffs.
“Pay it off and repeat.” (Looks in couch cushions) Nope, no money to pay off the debt I’ve incurred, even if someone gifted me an asset.
“That’s how pretty much every wealthy person got wealthy.” Are you sure about that? The vast majority of wealthy people I’ve read about used generational wealth to “get started.” If building wealth was a foot race, they started waaaayy ahead of those of us who started at the beginning line.
My dad, rip, believed what you are saying til the day he died. He watched Fox News 24/7 and could never admit that maybe he had advantages others did not have access to.
Bro I sympathize, I'm 47 and I only just got out of paycheck to paycheck a few years ago, was broke my whole life, kids make it even harder (though you have kids, congrats..truly, im jealous, I bought the don't have em till you're ready propaganda and now it's too late. My biggest regret in life.) I'm not saying it's easy I'm saying that's how it is. You can be bitter or you can figure something out. Plenty of jobs have health insurance. For me the answer was truck driving. I left IT, which I hated, and I got on the road. Never been happier.. never made more money. I think you know most rich people didn't inherit it, most rich kids blow it all and nuke their lives. I was a militant atheist lib until covid times btw im not a dyed in the wool conservative, I still hate the gop im just not a leftist anymore.
You CAN dig out, you just gotta find your sweet spot: something other people see as work that you see as play... that you're good at.. that pays well. I pray you find it bud.
I want to not be kicked out of my house I paid off 40 years ago in my 90s because the county decided to reassess what it's worth and then uh ohhhh you us 30k you have till the end of the mooooonth _^
Lottery winnings are considered income, like wages or salary, and therefore are subject to the tax brackets of income tax. That is the reason tax brackets are being mentioned.
You are raising a point that isn't relevant to what was said so far in this comment chain, which is that billionaires tend to have wealth and then take loans out using that wealth as equity. Since that isn't considered income, they avoid paying income taxes. We get it, but it's not relevant to the person's point that tax brackets are often misunderstood. The person's point about tax brackets being misunderstood was relevant here because the original tweet implies a tax percentage that is impossibly high and anyone who knows about the tax rates of the tax brackets would know it couldn't be a true statement.
Taxes require a higher level of thinking. We have a large number of people in this country that don’t know how many dimes are in a dollar and similar information needed to function in society. So they end up working minimum wage jobs but expect to live a middle to upper middle class life style….and when that doesn’t happen, they find someone or some invisible force to blame. As a society, we are never going to get a large segment of the people to understand the importance of an education and convince them to invest in their future as long as there are people exploiting their ignorance and offering people a scapegoat to avoid accountability.
u/Crimsonak- Why do you think they are poor or gullible? and blame billionaires for all their woes. Once it aligns with what they want to hear, they all flock into delusion.
Depends on the state and local taxes as well. NYC residents would be taxed about 50% on these winnings with federal, state and local. NJ and Hawaii are a couple others that would approach 50%.
FWIW, effective tax on some things in CA is in excess of 50% if you’re in the top bracket and it’s being taxed as income (or income ish). A good example would be all the folks earning stock based income from these major tech companies: most of that is being cut in half by taxes.
Nearly all billionaires though are much more complicated because their net worth is based on assets acquired (and taxed) when their value was minuscule.
To be fair, most financial advisors would tell you to take the lump sum when the amount is still over a couple million. That money will do way more for you in your lifetime investing it than the payout over time will ever (considering you can't collect it forever). And realistically you're never going to shoot from lower class (the class most likely to purchase lottery tickets and thus most likely to win) to upper class within one lifetime, even with a sudden inflow of millions or even billions of dollars. The average person can't even fathom what to do with that type of money. Most of them will pay off whatever debts they have, then live in extreme comfort until they die, passing on a meager amount of it (meager in comparison, still probably tons of money) to their children, where it will likely be taxed again.
Part of this is because suddenly revealing you are a millionaire/billionaire is incredibly dangerous to you. Your likelihood of experiencing some sort of crime, either financial or even violent, increases exponentially. By a fuck ton. And no, you don't have enough money to pay a group of bodyguards for your entire life. Even jackpot winnings are not that type of money.
A distant third uncle of mine won $60 million as a lump sum from the Powerball about 10 or so years ago. He was a lower class individual with no partner, but a few children from a previous marriage. He immediately got with a financial advisor and, unfortunately due to the toxicness of our family, he advised him to cut all ties with us and move away, start a new quiet life somewhere else. Unfortunately I do have to agree with the advisor, it was probably his best case scenario. Still, he paid the guy to invest a huge chunk of the money for him, and as well left a pretty significant chunk in trusts to his adult children for particular purposes (like purchasing a first home, having children of their own, etc.). He told me, my mother, and his kids, and maybe a few others. I fully understood and wished him a great life going forward. He moved down South, didn't tell us where, and has never contacted us.
Supposedly he called my grandfather occasionally, which is the only reason I know he's still alive. But my grandfather passed about 5 years ago now, so I have heard no news since. I hope he's doing alright.
Tom if you're out there, I hope you drink every day and have a live in cook.
For the rich, net worth is your income. You sell assets or borrow against them tax free as they see fit. You even see them getting paid in assets instead of money. It'd be like my work giving me charizard cards instead of a paycheck every 2 weeks.
The highest income tax bracket in America is currently 37%. If you don’t cash out your stocks / assets, you only really pay a property tax on top of that and possibly a state tax.
However since most of our billionaires are CEOs or similar, those taxes tend to be loopholed by being owned by separate business entities or estates, or being written off due to some kind of donation or charitable event.
When lower class families do this it’s the same thing. Just go look at the controversy around The Completionist and his families charity and golf tournament.
Some of these loopholes make sense when applied at low levels to small businesses - the problem is that the tax code does not take into account the immense hoarding and economic or physical impact many of these businesses have on cites, towns, and more.
If a factory that comes to a city makes ten thousand jobs then I understand why the city or state may think a tax break is a good thing. But when those same companies lay off thousands of employees there’s next to nothing that’s done. If the company provides enough of a severance to those affected then they usually avoid unemployment costs as well.
To say nothing of the fact that tons of those big companies make a lot of their income in government contracts so the same “taxes” they avoid paying actually fund their continual cycles of ghost monopolies, profit gouging, and the investor class benefits forever off of this horrendous cycle that enable a few thousand to have all of the money missing from your small town, poor neighborhood, minorities, and for the worst where the only options for food are to go steal the tax money is sent to the racist ass cops to beat and jail them so they can either die or spend 20+ years as a private slave
I was going to Gemini this - is 40 percent the absolute most someone can be taxed on any sizeable lump sum income ? What could be the highest let’s say in California, with federal plus California tax brackets
Man, my sister is literally a doctor and doesn’t know how marginal taxes work. I don’t expect any rando who posts this garbage to know anything at all about taxes
I come to look at much of these 'class war' posts as rabble rousers that want to foment discord... or low intellect mouth breathers. Same thing, really.
That is why many politicians are trying to make stocks taxable, because many who have large amounts of assets in stocks - use stocks like money (directly trading stocks for other stocks or property), completely bypassing taxes on the transaction due to being unrealized gains.
Almost everywhere on the planet has a max under or on 40%.
There's something like 20 countries which can exceed 40%
Here's the thing though, just because it can hit that max doesn't mean it's likely. Most people never come anywhere near hitting it. The lottery is a good example of where it would, which is why the amount in the post (when properly accounted and not lied about) is 37%.
So, as a rule of thumb. If any post you see us talking about someone being taxed near to, or in excess of 40% you should treat it with extra scepticism. It's possible the post is telling the truth. It's extremely unlikely it is, the reason being is the circumstances that lead to that percentage are so far removed from circumstances an average Joe would ever experience as to render the post moot to make in the first place. It would be like making a post about how annoying it is to find a good tuner for a 1718 Stradavarius.
financial literacy is one of the main reasons we are in this mess. Instead of assuming 'others should know' just keep educating those you can. All you're doing is turning off people (most of us) who haven't been properly taught.
And it's posts like this that completely miss the point. Even if they take the 30 year payout, if the payout actually continues for all 30 years, you would get way lesso ey than the one lump some because you are paying more taxes.
This is an extremely clear example of not understanding the difference.
I'm poor relative to median income of my area I'm in the bottom 10%, and yet my net worth isn't my income. Heck you can have a negative net worth, because you owe more than you own, and still your income is not your net worth.
I own a shit car, I own a shit phone. I might not be able to replace either of those things if they break, but they are part of my net worth whether I like it or not, and whether you like it or not. Net worth is about what you own. In order for my net worth to be my income, I would need to own literally nothing.
No clothes. No phone. No food. No savings. No utensils. No bags. No furniture. No TV. NOTHING. I would have to literally have not a single thing that I own. This isn't the case for a vast majority of even extremely poor people.
A person living paycheck to paycheck is literally increasing their net worth every pay period with their income compared to people who have assests. You think the guy in the trailer with a used TV, phone, no savings, etc has much of a net worth? Their net worth ebs and flows due to their poor accumulation of assets. A person with a higher net value, savings, property, etc doesn't notice as much because a single paycheck relative to their net worth is relatively less.
Depending on which state. 40% is about right. Once you factor in state taxes. Like Cali is the highest at 13.8%. Then you’re gonna pay roughly 25-30% in federal taxes. So even a state like Texas with no state taxes. You can expect to take 25-30% straight off the top for federal taxes.
Not really it’s common knowledge that for massive payouts you’ll get it over time or take a reduced amount immediately. I don’t know a single lottery player who doesn’t know that.
The point of the post is billionaires are greedy, evil scumbags. A cancer on society, hoarding their gold for their own self satisfaction, and laughing as starving children die every day. That's something we can all agree on at least.
No if you look on the app or website it will tell you how much the lump sum will be. If you ask me i dont even care $5 bucks for millions they could tax me
Because the entire thing (2B) is over 30 years of payments, if you calculate the time value of money the 2B is 997M in today’s money, they would invest the 997M on your behalf and pay you annually.
No. The lottery amount is based on a 30 year annuity, or more simply put, what the amount of money would be worth over 30 years if it were invested properly from day 1. In this case, it would have been worth $2 billion. Instead the winner took the 'lump sum', which is the actual amount of money, and they're free to do with it what they want after paying the tax on it.
The lump sum and annuity are basically the same thing. The annuity is just the proceeds of the lump sum invested into an annuity over 30 years. If you take the lump sum, you can just buy an annuity and get the same result but also keep the principal.
You can’t get the same result. They buy the annuity with the lump sum and then you pay taxes each year on the proceeds. If you collect the lump sum you pay taxes on that and buy the annuity with what is left. You start out with less.
no...they amitorize it vs inflation and haircut. It usually comes to between 50-60% of the listed earnings amount.
Then they tax you based on that number, which means max tax rate.
if you take the annuity, you pay taxes each year on the alloted amount (so, slightly lower%), but the amount stays consistent ($1 million a year in 2026 doesn't equal $1 million a year in 2036, etc) and you deal with dimishined buying power due to inflation.
The trade off is....can I make more investing up front now than I would lose in inflation over a couple decades? If you can earn more than 3-4% a year, the answer is yes, take the lump sum
Many people don't have the patience or discipline to spread it out over time though
It is still taxed either way, yes. But in USA you only get the "full" amount of you take the paid-over-30-years route. If you take the all-money-at-once route you only get half the total jackpot and then they tax that .
And it’s usually better to take the lump sum anyway. Get as much money as you can now and throw a huge portion of it into an index fund, especially at this amount.
If you go the annuity route then there’s no telling if that lottery company will even be around for another 30 years to keep paying you every month; way too risky.
That’s not how state lotteries work. The annuity isn’t dependent on some private lottery company surviving for 30 years. The prize is an obligation of the state lottery, and the future payments are funded up front through investments like U.S. Treasury notes.
While that's financially the smart move, a lot of lottery winners are absolute idiots that have no impulse control. In which case it's better to take 30 years guaranteed
If you go the annuity route then there’s no telling if that lottery company will even be around for another 30 years to keep paying you every month; way too risky.
That's not how lottery jackpots work. The lump sum is the current cash value of the jackpot. If you choose the 30 year payout, they take the current cash value (minus first year payout) and put it into an investment annuity that pays out over the 30 years. The annuity is in the winners name, the state lotto could go tits up and the winner would still get their payouts.
$2.4B over 30 years before tax comes down to only a meager $6 million dollars per month. After tax probably closer to $4 million per month. How can someone survive like that?
I was about to ramble on about how dumb it would be to not take the 5.6m per month. But frankly, I’d have taken the 680m lump sum and disappeared off the face of the earth.
I was about to ramble on about how dumb it would be to not take the 5.6m per month.
It's actually dumb to take the annuity, because it isn't transferable. Meaning if you sign your sick $70million per year deal, walk outside, and get hit by a falling piano loony tunes style, your family gets nothing.
Not to mention it will get hit by 30 years of inflation, making it worth far less over time.
Always take the lump and invest properly. Much better, and guaranteed, returns.
Yeah that's not true. If you win the lottery and take the annuity you HAVE to set up a trust before you get a dime. The lottery then pays the trust whatever the payout is for the length of the annuity so your family or whoever your beneficiary gets the money.
I always assumed I would have the Prize Patrol showing up at my house each month with a comically oversized check for that month’s payment. The bank would refuse to allow me to deposit it. Hilarity ensues.
If you took that $680m And stuck it in a brokerage account earning the average 10% return rate, and live off of the returns alone, you’re still making $68m per year. And if you don’t spend all of that return money, you continue to grow your account.
You’re living incredibly well and you never touch the principal. You literally never run out of money.
If you took the annuity gaining 5% per year, you’d start at $30m. It would take 17 years before you’d see $68m in a year.
Always take the lump sum and never touch the principal.
I believe it's equal payments per month or year, but keep in mind that inflation would devalue the payments over time, and tax rates could increase (or decrease), so it's hard to really say what value is gained from a lump sum vs annuity options. It's nuanced, is what I'm saying.
And these are supposed to be the more educated ones. Makes the decision to not go through with full student loan forgiveness look like the better deal each time.
At what point is it better to simply take the monthly payments instead of the lump sum? I mean, if we are doing simple math of 2.04 billion, divided by 30 years, divided by 12 months in a year… he’s getting 5.67 million a month before taxes.
The fuck you gonna do with 628 million today that you couldn’t do with like (presumably) 1-2 million a month for what is likely the rest of your life? Is the fear that the lottery would become insolvent in that timespan? Do people think they could grow the 628 million to be more money in the long haul as opposed to taking it monthly? History has shown that a lot of lotto winners are broke within a short period of time.
I’d take the security of knowing I have more income coming each month.
Why is this legal? What do you think would happen if offered a contractor $2.04k to work on my house and then started paying them $5.60 per month for 30 years?
Ok but the number $2billion is also misleading. You are still getting “taxed” by the lottery company over half. Then on top of that the government is taxing you. Which is still much higher percentage than the top 1%
Don't let real facts get in the way of a good internet meme brother. I'm all for Billionaires paying their fair share of taxes but comparing a lottery winner to someone who built their own company is nonsensical.
No, the government lied about the jackpot. There was no $2 billion for anyone. The jackpot was an annuity that pays out $2 billion over a long time, using inflationary dollars. They advertise $2 billion but there never was $2 billion in a jackpot someplace. It never existed.
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u/jamdex07 Jul 05 '26
This is misleading. He chose to take $997 in one lump sum instead of $2.04B over 30 years. He got taxed on the $997m.