Last month, freshman Congresswoman Alexandria Ocasio-Cortez’s bold proposal to hike income taxes on America’s super-rich to as high as 70 percent brought tax policy back to the public debate for the first time since the GOP tax reform. Since then, a handful from the top 0.1 percent Ocasio-Cortez targeted have weighed in on the issue, most opposing her idea.
But Bill Gates, the world’s second richest person, is so far an exception.
“I think our system can be a lot more progressive—that is richer people paying a higher share,” Gates wrote on Reddit during an “Ask Me Anything” session on Monday when asked how much tax he thinks he should pay each year.
“A key element is making capital gains taxation more like ordinary income (some have suggested making them the same),” Gates continued, “and having an estate tax more like we had in the past (55 percent above $3.5 million)… I have paid $10 billion [in total taxes], but I should have had to pay more on my capital gains.”
Intuitively, capital gains account for the vast majority of wealth for capitalists like Gates. Gates’ net worth currently stands around $97.7 billion. Assume he makes a five percent annualized return on his assets, he would be making about $155 every second, which may shed some light on the famous hypothetical question of whether or not it’s worth Bill Gates’ time to pick up a $100 bill if he drops one.
Under the current federal tax law, short-term capital gains—earnings from assets held for less than a year—are subject to the same tax rates as regular income. Tax rates on long-term capital gains vary depending on your income bracket. The top rate for the highest-earning group is 20 percent.
As for estate taxes, the effective rate has been declining since 2001 as a result of rising exemption amounts and falling top-bracket rates. For example, in 2001, estates that exceed the per-person tax-exempt amount of $675,000 would be taxed up to 55 percent; today, only the amount in excess of $11.18 million will be taxed, for up to 40 percent.
Because of the increasingly generous exemption level, fewer than 0.1 percent of estates actually pay any estate tax, according to the Center on Budget and Policy Priorities, a nonpartisan think tank in Washington, D.C.
“As far as I know most billionaires (and other people) comply with tax laws,” Gates wrote. “There should be more transparency so it is clear who owns what and how loopholes are reducing tax collection.”
Gates noted that tax collection is essentially a way for the government to carry out public programs in needed areas, particularly in “education and health services.” He seems ready to push for these efforts regardless of what Washington eventually agrees on.
In 2010, Gates and Warren Buffett started the Giving Pledge, a commitment to donate at least half of their wealth to philanthropy. As of today, the Giving Pledge has been signed by 189 billionaires from 22 countries, including household names such as Elon Musk and Ray Dalio, according to its website.