Those guys are fund managers and I bet their funds themselves are are registered off shore. Taxes make compounding your winnings doubly hard and like paying too much in commissions they kill a lot of positive edges. Risky stuff like selling premium becomes nonsensical if a trader is forced to cough up a third to a half of his profits. It's like the rake at the track or poker table-taxes are a de facto odds reducer.
If you establish a SEP-IRA, you can shield up to 25% of your income from taxes, to a limit of 46000. If you're not independent, but an employee of a larger corp, you get up to 15000 off for your 401(k), an additional 5k if you're 50 or over, you can shield an additional 5k through a Health Care Spending Account, and if you have a child, another 5k through a Dependent Care Spending Account. Commutation can shield another 2k, more or less. A larger corp will probably pay a substantial share of your health insurance, tax free. Finally, if you've got a house, then mortgage interest and property taxes would be deductible. Mortgage interest isn't in the UK, I believe. Also, we have no VAT. All in all, it should be reasonably easy to shield quite a bit of income from taxes. Oh yeah, I trade to make money. Silly.
Actually the total tax is about 50% (in California.) 34% highest tax rate - that's just the Federal tax (may be increased) 9.3% California income tax 15% Self employment tax (the Social Security portion has a cap of about $100k, the Medicate portion does not have a cap and it's at 2.9%) 34 + 9.3 + 15 = 58.3% 34 + 9.3 + 2.9 = 46.2% And... Not to mention that you need to pay 8.xx% sales tax on almost everything you buy. But... Making $200k before tax, you still have $100k in your pocket. Flipping hamburger, making $30k before tax, you still have maybe $20k to spend. How to live your life. Your choice. P.S.: And why are there so many illegal immigrant kept coming to this country? They are stupid!
I don't think the actual number of traders is as high as you think. Most people invest or just take risks here and there. Traders are a very small percentage of the people who deal in the markets, including brokers, market makers, information providers, platform developers, etc. During the past few years, the number of people providing services to traders has grown so much that it is now much larger than the number of traders.
I still marvel at the fact that with Bush's 80% approval rating he didn't conquer the Capital Gains tax...
Let's see... I can strive to continue making 6 figures and pay the dayam taxes or I can spend my days drinking beer and watching soap operas. Hmmmm. Tough choice.
If you're in the 35% tax bracket you're making 6 figure and up income. I've never made more than $36K/year salary in my life, so I'll be very happy if I end up in the 35% tax bracket as a result of my trading.
If you have a $50k / year income your paying around $6500 / year in taxes. If you supplement your income with $10k / year from trading taxed at 35% your ending up with $6500 which brings your net back to $50k. Any way you slice it you increased your net earnings for the year after tax by 13% which beats the market average. Taking inflation into account your still up 11% over the year which is better than any mutual fund these days. That's why we trade!
Why don't you have to pay taxes? What do you trade? Don't you have be taxed in your respective country for trading income? I want to be a citizen of your country.
Its in the UK we dont have to pay tax on trading income. Although you do pay alot higher spreads for some markets. But if you swing trade or only make a few trades per week you save ALOT.