Re:Let's Dial Down our Enthusiasm over the Billionare Giving...
by lubos on Friday December 17, 2010 @12:11PM
(#2016842)
income from dividends or when your money sits in the bank earning interest is not capital gain. capital gain is when you buy shares, real-estate etc and market price of these assets increases while they are on your balance sheet. then it's unrealized capital gain and you don't pay any tax on it until you sell it and make it realized capital gain. for simplicity reasons to explain my point, I didn't want to overcomplicate it with capital gains and losses.
Re:Let's Dial Down our Enthusiasm over the Billionare Giving...
by gnaritas on Friday December 17, 2010 @12:15PM
(#2016854)
Yes, but dividends are basically taxed at the same rate or slightly higher 20% as capital gains; they aren't taxed as earned income using the progressive bracket system. So while they aren't technically capital gains, my point stands.
Re:Let's Dial Down our Enthusiasm over the Billionare Giving...
by lubos on Friday December 17, 2010 @12:32PM
(#2016921)
In 1994 when Bill Gates started his private foundation, income from dividends was taxed like regular income.
You're right it's 15% right now but don't forget there is new tax law coming into effect pretty much in two weeks that will tax dividends again like regular income.
That doesn't seem to make sense, as a return on an investment is a capital gain.
> Half of that would normally need to be paid as income tax to government.
How exactly do you figure that? You don't pay income taxes on investments, you pay a flat 15% capital gains tax on investment income. I don't see how you think he'd lose half to taxes, it'd be far far less than half.
Beyond that, giving away 5% of 35 billion (total wealth) costs a lot more than paying 15% of 2.5 billion (investment income that year), so it's not saving him money on taxes which would only be in the range of 350 million a year given your example.
Choosing to spend a billion and a half a year on charity to avoid paying 350 million in taxes doesn't make much sense as a motivation. So I highly doubt that's why he's doing it.