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Why The Rich Pay Lower Taxes

2012-08-31 · Hank · watch on YouTube · US politics & society · explainer learning

Hank explains ordinary income, marginal tax brackets and the flat 15% capital gains tax, then argues, as a self-declared non-expert, that taxing investment gains less than earned income seems unfair and bad ethics; he closes by celebrating Nerdfighteria's $1 million for Kiva.

What is said

00:00:00 — Greeting; why Warren Buffett pays a lower rate than his secretary; the three ways to make money: inheritance, ordinary income, capital gains

  • ★★★ Hank opens a special edition on the basics of US tax policy and why Warren Buffett pays a lower tax rate than his secretary. — 00:00:00 · United States
  • ★★ Hank says that according to the US government there are basically three ways to make money: inheriting it, working (ordinary income) and capital gains. — 00:00:07 · United States
  • ★ Examples of ordinary income: YouTube ad money, pay for a job, and turning raw materials like yarn into something worth more, like a TFiOS hat. — 00:00:20 · YouTube

00:00:31 — How the ordinary income tax brackets work: the misconception about jumping brackets; married-couple examples

  • ★★★ Hank corrects a misconception: entering a new tax bracket does not move all your income into it, so there's no need to stay below a bracket; the real system is significantly better. — 00:00:35
  • ★★ In Hank's chart of the four lowest brackets for a married couple, earning $10,000 a year means a 10% tax rate. — 00:00:47
  • ★★ A married couple earning $50,000 is in the second bracket, but their first $17,000 is still taxed in the first bracket and only the rest in the second. — 00:01:00
  • ★★ Even someone making $500,000, which spans all the brackets, still pays into all the lower brackets before the high ones. — 00:01:11

00:01:25 — What capital gains are and the flat 15% capital gains tax; how the rich make most of their money

  • ★★ Capital gains are money made by buying something, waiting and selling it later for more; most come from the stock market, but also real estate. — 00:01:25
  • ★★★ Hank says that above roughly $30,000 a year in income, capital gains tax is a flat 15% for everybody. (hedged) — 00:01:37
  • ★★★ Hank says capital gains are how really rich people make most of their money: they invest, the asset gains value, they sell. — 00:01:46

00:01:53 — Hank's opinion: income seems worth more than stock gains, little data for the investment rationale, advisers' self-interest; unfair that a waitress pays a higher rate than a billionaire

  • ★★ In Hank's opinion, money in the stock market isn't doing anything: companies can't use it to build cars, go to Mars or make video games. — 00:01:53
  • ★★★ Investment matters, Hank grants, but income seems worth more to him, so he asks why we tax money earned by providing actual value more heavily. (hedged) — 00:02:06
  • ★★★ The rationale is that investment is very good for the economy and should be taxed less to encourage it; Hank says there isn't much good data supporting that claim. — 00:02:18
  • ★★ Hank is concerned that tax-policy advisers make their money this way; maybe they overvalue their impact, maybe they're greedy, or maybe they're right. (hedged) — 00:02:28
  • ★★★ Hank feels it is tremendously unfair that an Applebee's waitress pays a higher tax rate than a billionaire; unsure whether it's good policy, it seems like bad ethics. (hedged) — 00:02:46 > «it's tremendously unfair that a waitress at Applebee's pays a higher tax rate than a billionaire»
  • ★★ Hank stresses he is not an expert and is completely willing to be convinced he is wrong. — 00:02:58

00:03:02 — Nerdfighteria raised $1 million for Kiva, beating John's goal; keep lending; sign-off

  • ★★★ Nerdfighteria blew past John's goal: a million dollars raised for Kiva before Hank even made his first video promoting it. — 00:03:02 · Nerdfighteria, Kiva, Bank of Nerdfighteria
  • ★★ Hank asks Nerdfighters to keep lending through Kiva.org, saying it is proven economically that microfinance is a really great way to help the developing world. — 00:03:12 · Kiva, microfinance

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