The timing of this leak, just before the G7 summit, is poignant and may provide further political traction, if any more was needed, for a comprehensive agreement on a global minimum corporate tax, but it tells us nothing new.
Super-rich Americans will typically have lower tax rates than many due to the way that investment returns are taxed at lower rates than earnings. Furthermore, Americans are able to take advantage of tax deductions, such as for charitable donations. They are also able to manage the timing of their investment returns and deductions to lower their taxes. Therefore, this news of lower tax rates is not unexpected.
The leaked information does not take into account the taxes that their corporations pay on their profits. Although we know they are coming under increased pressure as President Biden proposes reversing a portion of his predecessor’s corporate tax rate cut and the talk of a global minimum tax.
Raising the US tax rate on capital gains to ordinary income rates for the wealthy has already been proposed by President Biden. This would tax investment returns at the same rate as earnings (if not marginally higher) and go some way to closing the gap in tax rates paid by the super-rich and other Americans.
Of concern to all US taxpayers will be how private citizens’ tax information was leaked. The US places a large tax reporting burden on its citizens each year, and they will be keen to figure out how this happened and ensure trust in the system is not eroded.
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