How the rich avoid paying taxes

[Music] this is warren buffett one of the richest people in the world thanks to the company he runs berkshire hathaway basically it's a holding company that just owns a bunch of other companies geico dairy queen a huge railroad as well as a lot of stock in other companies like apple and coca-cola so when those companies do well and their stock goes up berkshire hathaway stock goes up when buffett took over the company in 1965 a single share was worth nineteen dollars today it's worth nearly half a million dollars buffett owns nearly 240 000 of these

shares this is where his wealth is but as he's been known for pointing out warren buffett still pays a lower tax rate than his secretary she pays at twice the rate i pay i think that's outrageous that's because they pay different types of taxes his secretary pays income taxes on her salary but buffett mainly pays capital gains taxes on his sold stock and that's taxed at nearly half the rate the wealthy are definitely under tax in the u.s the disparity between the richest americans and everyone else has been growing and in the last 40 years

the after-tax income of the richest has risen more than 400 while middle-class income has only risen 50. the way these people make money is very different than the way these people make money and they're not taxed the same [Music] i pay less in taxes than people that work for a living and make as much money as i do this is morris he used to work on wall street now he's retired and lives off his many stock market investments i own stock in companies i mean berkshire hathaway and amazon and apple he's a pretty typical one

percenter except that he spends his money advocating for rich people like him to be taxed more i want to live in a country filled with a middle class of people who can all afford to shop in our businesses most people have a normal job they get a paycheck and pay income tax ranging from 10 to 37 percent but people like morris they make a lot of their income from investments generally stocks in real estate these investments are taxed as capital gains and things like long-term stock have a maximum tax rate of just 20 percent i

sold some stock recently for four hundred thousand dollars and my taxes on that's around fifty thousand dollars but that fifty thousand dollars is far less tax than anyone who has a job making four hundred thousand dollars a year would pay and most of his wealth well isn't even taxable people like morris or buffett are worth so much money because of the stock that they hold but it's not tangible spendable taxable money i can look at my stock portfolio and i can say oh you know i made a million dollars this year but it doesn't have

to be anything in taxes because our system is based on only paying taxes when you actually sell something amazon's jeff bezos the richest man in america thanks mostly to his amazon stock pays almost nothing in taxes we value his worth here but it's never taxed unless it's turned into real money when he sells the stock and it's taxed as a capital gain this is one way billionaires are able to be technically worth so much money but pay so little in taxes some billionaires like elon musk are able to get loans against their stocks and live

off of that they don't even need to sell the stock to turn it into spendable money no sale no taxes the fact is if you're a billionaire you don't need any income there's also a big loophole in capital gains taxes that the rich exploit called the stepped-up basis if hypothetically warren buffett were to sell his stock he'd have to pay capital gains taxes based on his profit so the cost of the stock minus the original investment but if he holds off selling his entire life when he dies whoever inherits the stock and then sells it

would only have to pay taxes on what they earned after they inherited it leaving all those original gains untaxed it's part of what's called buy borrow die and it's one way the richest families avoid paying taxes it's this system and the fact that most taxable capital gains are going to the top one percent that lawmakers see changing the capital gains tax as an easy way to tax the rich president biden has proposed closing that stepped up loophole and increasing the maximum tax rate from 20 to 39.6 but just for people making more than a million

dollars a year critics argue that it may discourage people from investing in the stock market or that current millionaires would just sell less stock but it would bring in more tax revenue from more conservative estimates of 200 billion over 10 years to double that it would also mean buffett would pay a closer tax rate to a secretary but this pile of unrealized money still goes untaxed there's a lot of things we could do to make the system more fair we could have taxes on wealth we could have taxes on gains in the stock market most

americans are bothered that wealthy people don't pay their fair share and changing capital gains taxes wouldn't be the whole solution but advocates argue it would be an easy place to start our system is making the rich get richer and richer and richer and everyone else just not [Music] you