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So when Kobe sees his measly millions in taxable income he pays 39.6% on federal income tax, plus the state taxes of California. And Cali loves that entertainment money.
Meanwhile, Mr Gates will pay either 15% or 20% tax on the capital gains he makes from stock or dividends (it would not surprise me if he claims $0 income from Microsoft just to pay no capital gains) assuming they qualify as "long term."
That's how I understand it. I am wrong? If not then that's an issue for me.
edit: Like Lincoln said, A dollar from labor should be valued higher than one from capital.
He he he. Yes. You can own a C corporation such as Microsoft and work for absolutely free. If you have enough control of the company you can elect to not pay out dividends. You can choose not to sell any of your stock. You can live off of money that you saved up last year. Guess what? You have $0.00 taxable income for that year. Your net worth could increase by trillions of dollars and none of it is taxed until you cash in.
Does that make sense? People have complained about this loophole so I don't know if it works this way any more.