Most adults recently surveyed in a recent Pew Research Center survey feel that the wealthy and corporations aren’t paying their fair share in taxes.
Sixty percent of those surveyed recently said they were bothered that some wealthy people aren’t paying their fair share in taxes; 61% felt that way about corporations.
Not all advisors agree.
Bruce Primeau, a CPA and president of Summit Wealth Advocates in Prior Lake, Minn., said he thinks the survey is accurate if you assume those being surveyed “are not wealthy folks.” Asked if he thinks wealthy clients would agree with the survey’s conclustions, he said, “Not at all.”
“Let’s say I’m a wealthy, married person, living in Minnesota, and our taxable income is over $700,000,” Primeau said. “I receive $100 of interest income on my savings account and I pay the following taxes on that $100 of income, based on 2023 income tax rates: 37% federal tax; 9.85% Minnesota tax; and 3.8% Medicare surtax. So over 50% of my interest income—50.65% to be exact—is confiscated for taxes. Seems very unreasonable to me.”
He posed another scenario.
Or, “I’m a small-business owner selling the business, which I’ve built the last 20 years, for $1.5 million dollars,” Primeau said. “A chunk of that gain is likely to be [federally] taxed at ordinary income tax rates—37% in this case—and a chunk will be taxed at 20% long-term capital gains tax. Minnesota’s tax is 9.85%. The Medicare surtax is 3.8%. So some of my gain on the business I built will likely be taxed at over 50% while the balance will be taxed at 33.65%. One-third to one-half of the gain goes to the government. I take all the risk of starting and building the business, while the government reaps a substantial amount of the rewards.”
Only about one in 10 Americans are “bothered a lot” by a sense that lower-income people don’t pay their fair share of taxes, according to the Pew survey. Democrats surveyed are more likely than Republicans to be bothered by the rich and corporations paying too little in taxes.
“When people are asked if the rich pay their fair share, they always answer no. When the same people are asked if they are rich, they also always answer no,” said Ed Cofrancesco, CEO of International Assets Advisory, Orlando, Fla. “Yet when you show the participants in such surveys what constitutes rich and that they themselves might very well fall into this category, their opinion on taxes changes quickly.”
Jeff Mattonelli, financial advisor at Van Leeuwen & Company in Princeton, N.J., noted that, according to the IRS, in 2020 the top 1% of taxpayers accounted for over 42% of all income taxes paid. That’s “an indication that the wealthy are paying a far greater share of the tax burden than the general population,” he said.
“We certainly believe that these types of surveys and the data they generate are used to the political advantage of elected officials, even though the real statistics tell a different story,” Mattonelli added.
In the end, however, Cofrancesco said middle-class taxpayers have the most to complain about.
“The reality is that only about half the nation are net payers of taxes and although the ‘rich’ pay a disproportionate amount of the total taxes paid annually, generally taxes are really the burden of the upper middle class, mass affluent and the barely rich. They all make enough income to pay taxes and [don’t] have the opportunities or the means to utilize legal tax mitigation strategies.”
