5 Democratic Talking Points Debunked

4. The Rich “Love Their Country Enough” to Pay More in Taxes

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This was something Martin O’Malley said during the CBS debate that even a lot of billionaires would agree with. Many of the wealthiest people in the world do tend to lean left, examples of this being George Soros, Bill Gates, and Warren Buffet, have said they don’t pay enough. Even Donald Trump thinks he should pay more in taxes. Here’s Governor O’Malley’s exact quote on the matter:

“…Under Ronald Raegan’s first term the highest marginal rate was 70%. And in talking to a lot of our neighbors who are in that super wealthy millionaire and billionaire category great numbers of them love their country enough to do more again in order to create more opportunity for America’s middle class.”

Before you applaud these individuals for selflessly taking the brunt of the IRS burden so you won’t have to, there is a reason they want taxes raised. It’s because they got rich by evading them and passing the bill onto others. What most of them won’t tell you is that most of their money doesn’t come from income that is taxable, but tax-deferred 1031 exchanges.

1031 of the US tax code is essentially loophole allows massive transfers of wealth (maybe Bernie’s onto something, eh?) in the form of like property. For example, if you were to sell a piece of land you owned that was worth $4 million, chances are you’d have to give half of that $4 million to Uncle Sam. However, under a 1031 exchange, you could trade that piece of land for $4 million worth of property that in a few years will double in value. This is where most of the wealth in America is. The high tax rates the rich billionaires like Soros and Trump call for are what allows this to happen. In order to avoid losing millions in taxes, which could be donated or put into the economy, people keep property for themselves with these exchanges.

In reality, people like Gates don’t actually “want” to pay more in taxes altogether. They don’t care if the government raises the income tax because they hardly collect money that could be hurt from it at all. In fact, salary only accounts for 15% of income for those making over 10 million. It’s all in capital gains, safe and sound from the IRS. Wouldn’t you want to raise taxes if it didn’t hurt your bottom line, but it hurt your competition?