Originally Posted by slapass

SS is only on the first 70k. If the person makes their money from investments, they don't pay SS or Medicare on that money. So high earners would not pay 50%.

Then do the Hedge fund trick and it all drops to 20%(was 15%) with no SS or Medicare. But even with lots of dividends or long term capital gains it is still then 20% without those other two taxes.

So California from what I could find Capital Gains tax rate with Federal tax is 31.2%.
Source - http://heartland.org/sites/default/f...ains_final.pdf

This is the reasoning behind tax the rich. But no one wants to really tax the rich so they raised the income tax which won't hardly effect anyone but high earners of the working class.

Originally Posted by slapass

First - The fees from hedge funds which would be salary are taxed as long term capital gains. That is the big loop hole. It would make sense to close just that loop hole.

Second - Warren Buffet, Bill Gates, etc did not pay 52.8% on their vast holdings. The majority of their holdings have never been taxed as they are still being held and growing tax free. They then make dividends which are taxed at the lower rate. I think this is the majority of people in the multi millions range and certainly is the case of those in the billions. Economists agree this rewards investment. Should long term capital gains tax keep being lowered to attract more investment? Maybe.

I don't disagree with the current system that much but the Hedge Fund thing is abuse. If you charge 2% of the capital and 20% of the profit to manage other people's money then some of that is fees and should be taxed as income not long term capital gains. As the Hedge Fund makes money even when the Fund does not so that is income to them. Then add in that people are using the structure to hold high cash flow investments to avoid the higher rates and it is just messy.