It seems houses are not liquid assets, but are they regarded as such???
This business of paying zero or a very low tax rate on a very large income is a bit misunderstood I believe. I think the misunderstanding may stem from a Pro Publica or Forbes Story. (I can always count on Forbes for a story about something that isn't.) Unrealized gains were counted as income when computing ones overall tax rate. On the same basis some of us who have done very well in the market but are very far from being billionaires also paid a very low tax rate on "overall wealth."
Also there is the often repeated claim that billionaires are living on borrowed money secured with their assets and "paying zero income taxes". Carl Icon claims to have actually done this because he had a huge interest deductible business loan (loans are not income) despite millions in taxable income. Here again there seems to be much more going on than would meet the average eye. Since the interest rates on secured loans is much lower than tax rates, at first blush we think " Aha, huge tax savings." But consider that loans must be paid back and the money for that must come from somewhere. Also consider that interest on loans used to pay for personnel living expenses is not deductible. Yes there are schemes for reducing your effective tax rate, but the less common ones are apparently not fully explainable in a sentence or two.
To illustrate the gap between wealth and taxes paid by the ultrawealthy, ProPublica created what it called a "true tax rate." ProPublica defined this as the total federal income tax a person paid ... compared to how much new wealth they acquired in that same time period.
America's 25 wealthiest individuals saw their net worth grow by $401 billion from 2014 to 2018, according to Forbes. But they paid a total of $13.6 billion in federal income taxes in that same period, amounting to 3.4% of that newly acquired wealth, ProPublica found.
America's 25 wealthiest individuals saw their net worth grow by $401 billion from 2014 to 2018, according to Forbes. But they paid a total of $13.6 billion in federal income taxes in that same period, amounting to 3.4% of that newly acquired wealth, ProPublica found.
This is an example of where some of those gee whiz, eye popping, low tax rates come from:
From 2014 to 2018, Musk paid $455 million in taxes on a reported income of $1.52 billion, resulting in an effective tax rate of 29.9%. But his wealth grew by $13.9 billion during that time, meaning his "true tax rate," according to ProPublica's methodology, was just 3.27%.
Bottom line, this business of eye poppingly low taxes on billionaires is, it seems, mostly a result of the U.S. having no tax on unrealized gains in wealth, whereas in Europe wealth taxes are not uncommon. I personally am not in favor of taxing unrealized gains, but nor am I unalterably opposed to it, assuming it can be done fairly without undue complexities. Neither am I in favor of unlimited basis step-up on transfer of estates. I think the problem of accelerated wealth disparity is best tackled by returning the progressiveness to the income tax brackets. Most of it has been taken out, and we have seen what the result of that has been.
[the quotes in italics are all from: https://www.businessinsider.com/ame...-income-wealth-borrow-money-propublica-2021-6 ]
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