Table of Contents
Capital gains tax is a levy placed on the growth in monetary value between the original purchase price and the eventual sale price of a capital asset (e.g. valuable/significant property such as homes, cars, stocks, bonds, collectible items, etc.).
A worker who has a good job with a salary of $500,000 per year. Their tax rate is often 51% to 59% with federal and local taxes. They often have $250k or less after taxes.
An investor who makes $500,000 every year in investor gains pays 10% to 20% taxes. This is magnified with deferred taxes with schemes such as stock buybacks. They often keep $400k to $450k after taxes.
Billionaires have most of their wealth in investments. If they don’t get taxed until they sell their assets, then a significant portion of the costs of the government gets foisted to workers. That means exceptionally high taxes for the average citizen, as well as those struggling to get by.
Questions to Consider
- Is capital gains tax high enough?
- How much of total government revenue (i.e. taxes) are being paid by the average American/workers?
- Do many of those who can afford to hold much of their wealth in business interests and capital assets enjoy tax privileges or exemptions that most citizens do not have access to?
Corporate taxes accounted for just 6.6% of the U.S. government’s revenue in FY 2019. Does that sound fair to you? Help your fellow citizens identify whether the current tax system is rigged….
What is Capital Gains Tax?
DEFINITION
Capital gains tax refers to a levy placed on the positive differential between the sale price of an asset and its purchase price (i.e. tax on net capital gains). Short-term capital gains tax (for assets held for up to a year) is taxed as ordinary income. Long-term capital gains tax rates (assets held over a year) come in at 0%, 15%, or 20% depending on the seller’s tax bracket.
You pay capital gains tax on an asset only when it is sold, or ‘realized.’ Even if you hold on to a painting or stocks for decades and it multiplies in value, you won’t have to pay capital gains tax until you sell it.
What is Net Capital Gain?
If a capital asset gets sold at a lower value than its purchase price, it is called a capital loss, and gets deducted from the capital gains made that fiscal year. The net capital gain (capital gains – capital losses) is what is taxed. Investors who either have no gains or losses are not obligated to pay capital gains tax.
History of capital gains, by the numbers
The following figures (in millions) come from the Treasury Department’s Tax Foundation.
The department has included short and long-term net positive gains. Long-term gains excluded prior to 1987 are included in realized capital gains. Data for each year has some prior year returns.
| Year | Realized Capital Gains | Taxes Paid on Capital Gains | Effective Capital Gains Tax Rate | Realized Gains as Percentage of GDP | Maximum Tax Rate on Long- Term Gains (a) |
|---|---|---|---|---|---|
| 1954 | $7,157 | $1,010 | 14.1% | 1.88% | 25% |
| 1955 | $9,881 | $1,465 | 14.8% | 2.38% | 25% |
| 1956 | $9,683 | $1,402 | 14.5% | 2.21% | 25% |
| 1957 | $8,110 | $1,115 | 13.7% | 1.76% | 25% |
| 1958 | $9,440 | $1,309 | 13.9% | 2.02% | 25% |
| 1959 | $13,137 | $1,920 | 14.6% | 2.59% | 25% |
| 1960 | $11,747 | $1,687 | 14.4% | 2.23% | 25% |
| 1961 | $16,001 | $2,481 | 15.5% | 2.94% | 25% |
| 1962 | $13,451 | $1,954 | 14.5% | 2.3% | 25% |
| 1963 | $14,579 | $2,143 | 14.7% | 2.36% | 25% |
| 1964 | $17,431 | $2,482 | 14.2% | 2.62% | 25% |
| 1965 | $21,484 | $3,003 | 14.0% | 2.99% | 25% |
| 1966 | $21,348 | $2,905 | 13.6% | 2.71% | 25% |
| 1967 | $27,535 | $4,112 | 14.9% | 3.31% | 25% |
| 1968 | $35,607 | $5,943 | 16.7% | 3.91% | 26.9% |
| 1969 | $31,439 | $5,275 | 16.8% | 3.19% | 27.5% |
| 1970 | $20,848 | $3,161 | 15.2% | 2.01% | 32.21% |
| 1971 | $28,341 | $4,350 | 15.3% | 2.52% | 34.25% |
| 1972 | $35,869 | $5,708 | 15.9% | 2.9% | 36.5% |
| 1973 | $35,757 | $5,366 | 15.0% | 2.59% | 36.5% |
| 1974 | $30,217 | $4,253 | 14.1% | 2.02% | 36.5% |
| 1975 | $30,903 | $4,534 | 14.7% | 1.89% | 36.5% |
| 1976 | $39,492 | $6,621 | 16.8% | 2.16% | 39.875% |
| 1977 | $45,338 | $8,232 | 18.2% | 2.23% | 39.875% |
| 1978 | $50,526 | $9,104 | 18.0% | 2.2% | 39.875%/33.85% |
| 1979 | $73,443 | $11,753 | 16.0% | 2.87% | 28% |
| 1980 | $74,132 | $12,459 | 16.8% | 2.66% | 28% |
| 1981 | $80,938 | $12,852 | 15.9% | 2.59% | 28%/20% |
| 1982 | $90,153 | $12,900 | 14.3% | 2.77% | 20% |
| 1983 | $122,773 | $18,700 | 15.2% | 3.47% | 20% |
| 1984 | $140,500 | $21,453 | 15.3% | 3.57% | 20% |
| 1985 | $171,985 | $26,460 | 15.4% | 4.08% | 20% |
| 1986 | $327,725 | $52,914 | 16.1% | 7.35% | 20% |
| 1987 | $148,449 | $33,714 | 22.7% | 3.13% | 28% |
| 1988 | $162,592 | $38,866 | 23.9% | 3.19% | 28% |
| 1989 | $154,040 | $35,258 | 22.9% | 2.81% | 28% |
| 1990 | $123,783 | $27,829 | 22.5% | 2.13% | 28% |
| 1991 | $111,592 | $24,903 | 22.3% | 1.86% | 28.93% |
| 1992 | $126,692 | $28,983 | 22.9% | 2% | 28.93% |
| 1993 | $152,259 | $36,112 | 23.7% | 2.28% | 29.19% |
| 1994 | $152,727 | $36,243 | 23.7% | 2.16% | 29.19% |
| 1995 | $180,130 | $44,254 | 24.6% | 2.43% | 29.19% |
| 1996 | $260,696 | $66,396 | 25.5% | 3.33% | 29.19% |
| 1997 | $364,829 | $79,305 | 21.7% | 4.38% | 29.19%/21.19% |
| 1998 | $455,223 | $89,069 | 19.6% | 5.18% | 21.19% |
| 1999 | $552,608 | $111,821 | 20.2% | 5.91% | 21.19% |
| 2000 | $644,285 | $127,297 | 19.8% | 6.47% | 21.19% |
| 2001 | $349,441 | $65,668 | 18.8% | 3.4% | 21.17% |
| 2002 | $268,615 | $49,122 | 18.3% | 2.52% | 21.16% |
| 2003 | $323,306 | $51,340 | 15.9% | 2.9% | 21.05%/16.05% |
| 2004 | $499,154 | $73,213 | 14.7% | 4.21% | 16.05% |
| 2005 | $690,152 | $102,174 | 14.8% | 5.46% | 16.05% |
| 2006 | $798,214 | $117,793 | 14.8% | 5.96% | 15.7% |
| 2007 | $924,164 | $137,141 | 14.8% | 6.57% | 15.7% |
| 2008 | $497,841 | $68,791 | 13.8% | 3.46% | 15.35% |
| 2009 | $263,460 | $36,686 | 13.9% | 1.89% | 15.35% |
Join the movement to eliminate the rigged layer of the economy! Don’t believe you’re getting ripped off by crony capitalists and corrupt officials? Read the Total Theft Report…
Individual Income Tax Brackets vs. Corporate Tax vs. Capital Gains Tax
Individual Income Tax in 2020
| Single | Married Filing Jointly | Married Filing Separately | Head of Household | |
|---|---|---|---|---|
| 10% | $0 – $9,875 | $0 – $19,750 | $0 – $9,875 | $0 – $14,100 |
| 12% | $9,876 – $40,125 | $19,751 – $80,250 | $9,876 – $40,125 | $14,101 – $53,700 |
| 22% | $40,126 – $85,525 | $80,251 – $171,050 | $40,126 – $85,525 | $53,701 – $85,500 |
| 24% | $85,526 – $163,300 | $171,051 – $326,600 | $85,526 – $163,300 | $85,501 – $163,300 |
| 32% | $163,301 – $207,350 | $326,601 – $414,700 | $163,301 – $207,350 | $163,301 – $207,350 |
| 35% | $207,351 – $518,400 | $414,701 – $622,050 | $207,351 – $518,400 | $207,351 – $518,400 |
| 37% | $518,401+ | $622,051+ | $518,401+ | $517,401+ |
Corporate Tax
The United States levies a profit tax on US resident corporations at a rate of 21 percent (reduced from 35 percent by the 2017 Tax Cuts and Jobs Act).
Whether the corporate tax rate is high enough is an issue worthy of debate, as well. Granted, businesses can be subject to state and local taxes depending on their operating location. It’s also important to realize that corporations can hold capital assets. This means they have the debatably unethical advantage of a low income tax rate and low capital gains tax rate.
Quick Comparison
To return to the example scenario outlined in the introduction, the worker with a great job makes around $500,000 (before taxes). Federal income tax alone extracts 35% of that profit. Combine that with their state’s income tax (if applicable), and 40%-45% could be going to income taxes.
Investors or companies that can afford to have much of their wealth invested in capital assets, can make $500,000 on the stock market and pay 10% to 20% in capital gains taxes if and when they decide to sell.
KEY QUESTION
- With the effective capital gains rate hovering around 15%-25%, do you think it is high enough?
How Much of the Federal Tax are Workers Paying?
But income tax accounts for only a portion (admittedly large) of the total tax individuals pay to the government. When you take the sum of income taxes, payroll taxes, sales and excise taxes, and property taxes, you get a better picture of how much of the total tax revenue the American public pays.
2017 Tax Revenue
Total Tax Revenue: $4.87 trillion
Individual taxes: $1.97 trillion (income taxes) + $1.18 trillion (payroll taxes) + $658.08 billion (sales and excise taxes) + $525.9 billion (property taxes) = $4,334 billion, or 4.334 trillion
Corporate income tax: $349.85 billion
Workers paid 88.9% ($4.334 trillion/$4.87 trillion) of the total tax revenue in 2017.
Corporations paid 7.2% ($349.85 billion/$4.87 trillion).
The Office of Management and Budget (OBM) published ‘A Budget for America’s Future,’ a report outlining the nation’s financial information for FY 2021. income taxes will account for 50%, payroll taxes make up 36%, and corporate taxes supply 7%. The rest is made up of estate taxes, excise and custom duties, and interest on the Federal Reserve’s holdings of the U.S. Treasurys.
DID YOU KNOW?
Some corporations, beyond paying only 7% of total taxes, sometimes take it a step further and practice tax evasion by depositing profits into accounts in offshore tax havens. In 2017, the U.S. Public Interest Research Group (USPIRG) estimated that “Fortune 500 companies [were] holding more than $2.6 trillion in accumulated profits offshore for tax purposes.”
When it comes to individual investors, though, you might assume that millionaires and billionaires have immense salaries, which in turn gets heavily taxed. That might be true, to an extent. However, there are many ways to be compensated, including stock options.
The reality, in short, might be quite different.
KEY QUESTION
- Should American workers have to pay such a significant portion of total tax revenue?
The Panama and Paradise Papers provides evidence on a money laundering network involving tax havens all over the globe. Megacorporations and the super-rich could be evading taxes by stashing some of their money overseas. Find out what your fellow citizens have found through the Zero Theft voting platform…
Where do Billionaires Keep Their Money?
Major news outlet CNBC published an article in early 2018 called ‘Here’s where the super rich keep their money.’ The chart below, taken from the piece, shows how each net worth tier’s ‘wealth’ is distributed.
Here are some of the trends we find noteworthy:
- The percentage of liquidity (i.e. cash) drops the higher up the net worth tiers you go;
- Individuals with a net value of $1 million and under hold a considerable portion of their wealth in their primary residence;
- As the net worth tier increases, the percentage of wealth held in business interests markedly increases.
The misconception about billionaires
Providing extra evidence for the third takeaway/trend, Rafael Badziag, author of The Billion Dollar Secret: 20 Principles of Billionaire Wealth and Success, conducted interviews with 21 billionaires over a five-year period. In the book, he states that people “think billionaires sit on mountains of money and don’t do anything but invent new ways of spending it…Nothing could be further from the truth.” The idea is that money lying around is money that could go to investing in more promising opportunities.
News website Business Insider states, “Consider Jeff Bezos: His annual salary is reportedly only $81,840, but most of his $156 billion net worth comes from his Amazon shares. Likewise, Mark Zuckerberg lives off an annual salary of $1 — a huge chunk of his $70.6 billion net worth is tied to Facebook stock.”
This is to say, we should not assume that millionaires and billionaires are contributing as much as we might believe to individual income taxes, for one. Furthermore, capital gains tax will kick in only at the point of sale. Meaning, their assets just continue to appreciate, without injecting money back into an economy already riddled with national debt and underpaid workers.
KEY QUESTION
- Has capital gains tax rates created unfair privileges for those who can afford to hold much of their wealth in business interests and capital assets?
Is the Capital Gains Tax Rate Theft?
With all of the evidence put forth in this article, it’s now up to you to decide on whether capital gains tax rips off most Americans.
Does the American public at large have to pay an inordinate amount of the nation’s taxes while wealthy investors/corporations profit by holding appreciating assets indefinitely? Do you consider that theft?
Your vote helps citizens figure out how much is getting ripped off and by whom. That gives us the power, based on strong evidence, to start holding those gaming the system accountable for profiting unethically. All of us must decide democratically, by a vote.
If you are still undecided, your fellow citizens have investigated the issue and presented their own cases for why they believe or don’t believe capital gains tax should be viewed as rigged economy theft.
Eradicate the Rigged Layer with the Zero Theft Movement
Crony capitalists and corrupt officials have created a rigged layer of the economy that enables them to unethically profit off of the everyday American. This corruption has led to 50 years of wage suppression, 50 years of price fixing and anti-competitive markets, and 50 years of legislators and regulators who work to satisfy moneyed interests, not our interests.
It’s about time we fought for what’s ours. We cannot do it without you.
View how much is being stolen, according to the public
Investigate your areas of interest
All areas of our economy could be experiencing rigging by crony capitalists and corrupt officials. We need to systematically investigate each instance in order to find out if best evidence suggests it is truly rigged.
Find out whether the pharmaceutical industry rigs drug prices, even for old antibiotics such as Penicillin.
Learn about pork barrel or wasteful spending in government contracts and the Big Dig.
Alternatively, find an area that interests you most.
Serve your fellow citizens as a citizen investigator
The success of our movement rests in your hands, the leaders willing to dedicate time to conduct investigations into potentially rigged areas of the economy. With your valuable work, the movement has no solid ground to stand on, no foundations, no proof, to actually hold those corrupting our system accountable for their actions.
Commitment to nonpartisanship
The rigged layer causes all of us to suffer, regardless of our political allegiances. If we are to eliminate rigged economy theft, we have to set aside our differences and band together against crony capitalists and corrupt officials.
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We regularly publish informative articles on ZeroTheft.net that teach you all about the rigged layer of the economy in short, digestible pieces. You can better protect yourself and others from the schemes of crony capitalists by reading our articles.
Standard Disclaimer
The ZeroTheft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. ZeroTheft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.