The important thing to remember is that AGI (which the article discusses) and how much money you "make" are not very correlated once you make above, say, 200K a year. A key reason is unrealized capital gains - I guarantee you that if a billionaire makes $77 million, most of that isn't going to appear as AGI. In a sense, realizing capital gains means something went wrong, not to mention income which is very wrong. Other factors that keep money out of AGI include tax-exempt bonds, business expenses, and capital loss harvesting. (And these are just some of the legal ways.)
Please, when you read an article discussing AGI, keep in mind that it is a semi-random number. Unfortunately since it's the number available, it's what gets used.
Comments
The important thing to remember is that AGI (which the article discusses) and how much money you "make" are not very correlated once you make above, say, 200K a year. A key reason is unrealized capital gains - I guarantee you that if a billionaire makes $77 million, most of that isn't going to appear as AGI. In a sense, realizing capital gains means something went wrong, not to mention income which is very wrong. Other factors that keep money out of AGI include tax-exempt bonds, business expenses, and capital loss harvesting. (And these are just some of the legal ways.)
Please, when you read an article discussing AGI, keep in mind that it is a semi-random number. Unfortunately since it's the number available, it's what gets used.
Thank you. Good point.
This also serves to demonstrate the artificiality and awkwardness of taxing capital gains v.s. simply taxing wealth directly.