What It Takes to Be in the 1% Around the World

[NPCampbell]

Originally Posted by GordMay

If You’re So Smart, Why Aren’t You Rich? Turns Out It’s Just Chance.
The most successful people are not the most talented, just the luckiest, a new computer model [1] of wealth creation confirms.
More about ➥ https://www.technologyreview.com/201...s-just-chance/

7 Myths About Millionaires

Myth #3: They're just lucky. Success requires some risk, and so in some sense self-employed millionaires have rolled the dice and come up winners. But most millionaires don’t win the lottery. They don’t take long-shot gambles. Instead, they examine opportunities and analyze risk, and often test out ideas before they invest a lot of time or money. They examine business opportunities and investment ideas realistically. Then if the odds look good, they aren’t afraid to go for the big win.

I posted this just as a contra. Most millionaires are saver-investors (60-70%) that have saved money over a term typically longer than 30 years. There are more than a million 401K, 403B and traditional IRAs with more than $1 million in them. Slow and steady saving. There's not a whole lot of luck involved in the normal 401K. Investments are typically limited to broad based mutual funds.

National Study of Millionaires

[NPCampbell]

Originally Posted by Mike OReilly

That's been noted by others NP. While Canada's overall effective tax rates aren't high compared to most developed nations, they aren't particularly favourable to the poor. In part this is because our federal tax brackets have shrunk considerably over recent decades. We are far less 'progressive' that we used to be.

That said, the basic deduction actually makes this bottom-bracket income more like $63,000. Nationally, our median income is $39,500, and the average is $51,300.

https://www150.statcan.gc.ca/t1/tbl1...101%2C20200101

I didn't pickup the $13,808 deduction. That lowers the Canadian rate considerably.

Are there social services taxes in Canada? I see reference to a roughly 5% Canada Pension Plan and a 2.2% unemployment plan. Does the employer pay this or is it split between employee and employer like the US?

[GordMay]

The top 1 percent of tax filers received 10.1% of the national total income in 2019, up by almost a tenth of a percentage point from a year earlier and the third straight year where the total income share of the top 1 percent tax filers rose.

Canadian tax filers spent, on average, 11.8% of their modified total income on federal, provincial/territorial income taxes and employee contributions to Employment Insurance and the Canada/Quebec Pension Plan (federal payroll taxes) in 2019, unchanged from 2018.

The effective tax rates for Canada's top 1 percent tax filers was unchanged from 2018 at 31.7%.

Total income consists of income from earnings, investments, pensions, spousal support payments and other taxable income plus government transfers and refundable tax credits.

Effective tax rate provides a measure of the size of certain government taxes relative to individual incomes. It is calculated by averaging every individual tax filer's ratio of taxes paid to modified total income.

Modified total income is used for purposes of calculating effective tax rates and is defined as total income plus capital gains and registered retirement savings plan withdrawals made by persons under 65 years, less social benefits repayments. Further adjustments to allocate elected split-pension amounts to the spouse claiming the amount were also made.

Excerpted from:
“Effective tax rates and high-income Canadians [2019]”
➥ https://www150.statcan.gc.ca/n1/dail...11112c-eng.htm

[Mike OReilly]

Originally Posted by NPCampbell

I didn't pickup the $13,808 deduction. That lowers the Canadian rate considerably.

Yeah, that's embedded in the tax filing forms. I just did my taxes, so it was on my radar .

Originally Posted by NPCampbell

Are there social services taxes in Canada? I see reference to a roughly 5% Canada Pension Plan and a 2.2% unemployment plan. Does the employer pay this or is it split between employee and employer like the US?

These are the mandatory deductions to the national pension plan (CPP), which I guess is like the USA's social security. Then there's the employment insurance program. These are paid equally by the employer and the employee. Of course, if you're a small business owner like me, you end up paying 100% of the CPP yourself (or can opt out if you like), and have no access to EI.

[valhalla360]

Originally Posted by GordMay

The top 1 percent of tax filers received 10.1% of the national total income in 2019,

And they pay over 40% of income taxes.

[Lake-Effect]

Originally Posted by valhalla360

And they pay over 40% of income taxes.

Oh the injustice. In a fairer system, they'd be paying more.

[Anders]

Originally Posted by Lake-Effect

Oh the injustice. In a fairer system, they'd be paying more.

In your "fairer" system they would have less money to pay tax on.

[GordMay]

Originally Posted by GordMay View Post
The top 1 percent of tax filers received 10.1% of the national total income in 2019

Originally Posted by valhalla360

And they pay over 40% of income taxes.

Evidently, not so.

In the USA:
According to an analysis [1], by the nonpartisan Tax Policy Center, the top 1% [those making over $783,300 ($2.4 million on average)[ will pay about an average federal tax rate of 30.2%, accounting for 26.7% of all taxes paid, in 2019.

Long-term capital gains, and dividends, which are taxed at a top rate of 20% (or 23.8% if including the Net Investment Income Tax). The corporate income tax is 21%.

According to the government’s nonpartisan Congressional Budget Office [2], the average effective tax rate of the top 1%, in 2016 [the latest year for which data is available, and before Trump’s tax cuts] was 33.3%, including all taxes and income.
The effective rate for the middle 20% income group was 13.9%.

The Tax Policy Center analysis included all federal taxes paid; including individual income taxes, corporate income taxes (which are distributed to workers and shareholders), payroll taxes, estate taxes, and excise taxes.

[1] “Baseline Distribution of Income and Federal Taxes, All Tax Units, by Expanded Cash Income Percentile, 2019"
➥ https://www.taxpolicycenter.org/mode...-0066-baseline

[2] “The Distribution of Household Income, 2016"
➥ https://www.cbo.gov/publication/55413

And for another [editorial] take, on the subject:
“No, the Richest One Percent Don’t Pay 40 Percent of the Taxes” ~ by Jonathan Chait, Sept. 2021
"... The actual truth about the American tax system is that it is slightly progressive. The richest one percent earn about 21 percent of the income, and pay 24 percent of the taxes ..."
More ➥ https://nymag.com/intelligencer/arti...the-taxes.html

[GordMay]

Meanwhile, richer or poorer, if you didn’t get [at least] a 6.7 per cent raise this year, then inflation is going to hurt.
Inflation jumped by a whole percentage point last month, in Canada; up from 5.7% in February, to 6.7% [per anum] in March [the largest monthly increase since January 1991, when the goods and services tax was introduced].
Canada isn't the only country grappling with high inflation. In the U.S., the inflation rate hit a 40-year high of 8.5 per cent, last month.
The problem is that wage [or other income] increases, that don't keep up with inflation, have the same effect on your personal finances, as an actual cut in income.

[goboatingnow]

Yes living standards will most likely fall this year.

[valhalla360]

Originally Posted by GordMay

Originally Posted by GordMay View Post
The top 1 percent of tax filers received 10.1% of the national total income in 2019

Evidently, not so.

In the USA:
According to an analysis [1], by the nonpartisan Tax Policy Center, the top 1% [those making over $783,300 ($2.4 million on average)[ will pay about an average federal tax rate of 30.2%, accounting for 26.7% of all taxes paid, in 2019.

Long-term capital gains, and dividends, which are taxed at a top rate of 20% (or 23.8% if including the Net Investment Income Tax). The corporate income tax is 21%.

According to the government’s nonpartisan Congressional Budget Office [2], the average effective tax rate of the top 1%, in 2016 [the latest year for which data is available, and before Trump’s tax cuts] was 33.3%, including all taxes and income.
The effective rate for the middle 20% income group was 13.9%.

The Tax Policy Center analysis included all federal taxes paid; including individual income taxes, corporate income taxes (which are distributed to workers and shareholders), payroll taxes, estate taxes, and excise taxes.

[1] “Baseline Distribution of Income and Federal Taxes, All Tax Units, by Expanded Cash Income Percentile, 2019"
➥ https://www.taxpolicycenter.org/mode...-0066-baseline

[2] “The Distribution of Household Income, 2016"
➥ https://www.cbo.gov/publication/55413

And for another [editorial] take, on the subject:
“No, the Richest One Percent Don’t Pay 40 Percent of the Taxes” ~ by Jonathan Chait, Sept. 2021
"... The actual truth about the American tax system is that it is slightly progressive. The richest one percent earn about 21 percent of the income, and pay 24 percent of the taxes ..."
More ➥ https://nymag.com/intelligencer/arti...the-taxes.html

Without getting into dueling "editorials" searches, even your posts suggest they pay drastically larger percentage compared to their earnings.

[valhalla360]

Originally Posted by Lake-Effect

Oh the injustice. In a fairer system, they'd be paying more.

In your fairer system, they would use their lawyers and accountants to simply move more money overseas and hide it.

Far better to keep it simple and fair so they aren't incentivized to move their taxable income overseas and do other silly unproductive things to avoid onerous class warfare attacks.

[GordMay]

Originally Posted by valhalla360

Without getting into dueling "editorials" searches, even your posts suggest they pay drastically larger percentage compared to their earnings.

Despite these horrendously high tax rates [NOT 40%], the richest are still getting richer, faster, than the rest of us.

Both income and wealth continue to concentrate at the top.

The wealthiest families are also the only ones to have experienced gains in wealth, in the years after the start of the Great Recession, in 2007.

As a result, the wealth gap between America’s richest, and poorer families. more than doubled, from 1989 to 2016.

In 1989, the richest 5% of families had 114 times as much wealth, as families in the second quintile*, $2.3 million compared with $20,300.
By 2016, this ratio had increased to 248, a much sharper rise than the widening gap in income.

* The wealth of the poorest [lowest quintile] families is either zero, or negative, in most years.

The Gini coefficient [wealth inequality], in the U.S., stood at 0.434 in 2017. This was higher than in any other of the G-7 countries, in which the Gini ranged from 0.326 in France, to 0.392 in the UK, and inching closer to the level of inequality observed in India (0.495). More globally, the Gini coefficient of inequality ranges from lows of about 0.25 in Eastern European countries, to highs in the range of 0.5 to 0.6 in countries in southern Africa
➥ https://www.pewresearch.org/social-t...nequality_1-6/

[Lake-Effect]

Originally Posted by valhalla360

In your fairer system, they would use their lawyers and accountants to simply move more money overseas and hide it.

Yes, stealing a page from the world's best kleptocrats, the Russian oligarchs. But people are working on the problem of finding the hidden money. Pandora papers, etc.

Far better to keep it simple and fair so they aren't incentivized to move their taxable income overseas and do other silly unproductive things to avoid onerous class warfare attacks.

I've been convinced by others that a simpler, flatter tax system could be fairer and more efficient. Guess what? In a fair flat-tax system, the well off would end up paying more than they do now. So this is why such a system won't see the light of day any time soon in the US.

It's also been demonstrated to me that in the majority of prosperous nations, the social health, "happiness", quality of life, and citizen satisfaction depends less on the political system, and correlates more closely with the percentage of tax collected relative to GDP. So regardless of a country's ideology, it seems it costs ~30+% of GDP to build and maintain an advanced modern society. There is no free lunch, I've heard it said...

[Muaddib1116]

Originally Posted by Lake-Effect

Guess what? In a fair flat-tax system, the well off would end up paying more than they do now.

How so?