If you buy dividend paying stocks one of the benefits is dividends are treated with less tax than interest income, which means you are keeping more of your money, that is a good thing. Many people would like to be a billionaire, the reality is the overwhelming will not make it and that is ok. However after we look at a billionaire’s lifestyle the more important thing is to examine how they keep their money working for them and not give it away.
In an article by Alan Rappeport of the New York Times News Service, an IRS report noted the top 25 billionaires between the years of 2014 and 2018, paid little in taxes. They all paid something $13.6 billion but they had $401 billion in wealth. The average person working for a company or having a paycheck because of the income they receive on a percentage comparison paid more tax than the billionaires. The billionaires paid 15.6% compared to the 37% tax bracket they are in.
The bias towards the tax system is on labor income versus wealth tax, it is the difference in assets which have risen and there would be a tax when the asset is sold, but not maintaining it. This is understandable because it is easier to deduct tax on labor than it is on wealth, which is why payroll taxes are in place and can easily be changed.
It should be noted most of the billionaires do not have elaborate tax avoidance schemes, they are relatively simple and much of it evolves not receive a large income. There are investment losses, borrowing against the value of stocks and deducting the costs of borrowing, making large charitable donations, having their companies pay for expenses, etc.
Linking to dividend paying stocks, we all have an idea of what is fair and what the tax system allows people to have. The same measures a relatively small shareholder uses are the same measures a large shareholder uses, should there be a cap? that is for politicians to decide but for now understand owing dividend paying stocks means your income is treated more favorably to you.
There are more questions than answers, till the next time – to raising questions.