Do the rich pay their fair share in taxes?

Billionaire Bill Gates said he has paid $10 billion in taxes, and he believes that rich guys like himself should pay more.

However, he advocates increasing taxes in two ways that will really target the wealthiest individuals and avoid methods that really put more stress on the poor.

Do the rich pay their fair share in taxes? Billionaire Bill Gates said on Monday that even though he has paid $10 billion in taxes, he thinks his taxes could and should be higher, especially for capital gains.

When a Reddit user asked Gates what he thinks he personally should be paying in taxes, Gates said during a Reddit "ask me anything" session that he thinks the rich should be paying more. Gates wrote:

"I think our system can be a lot more progressive (that is richer people paying a higher share).

"A key element is making capital gains taxation more like ordinary income (some have suggested making them the same) and having an estate tax more like we had in the past (55% above $3.5M). European countries collect a lot more taxes but through consumption taxes but those are not progressive.

"If people want the government to do more it needs to be funded and I see us needing to improve our education and health services. So yes I have paid $10B but I should have had to pay more on my capital gains."

That's not exactly a stamp of approval on Rep. Alexandria Ocasio-Cortez's proposal of a 70% tax rate on income over $10 million. But it is a more targeted approach.

Short-term capital gains, for assets held less than a year, are taxed at the ordinary income bracket. So if you flip houses or cars as your side gig, it counts on your taxes the same as your main job. But long-term capital gains, for assets held for more than a year, max out at 20% for rich people. So if you make money by investing in stocks, real estate, or other valuables, like many rich people do, you pay less taxes.

Read more: Melinda Gates has some great advice on how working parents can reduce stress

Gates is also suggesting a hefty tax when the richest people inherent great wealth.

That's a call back to one of the most famous defenses of the estate tax, which was offered by the steel magnate and philanthropist Andrew Carnegie. In 1889, Carnegie said the rich people who leave all their money to their children are "hoarding" their wealth, rather than using it to the public's benefit during their lifetimes. So a tax at death reverses the impact of the "selfish millionaire's unworthy life," Carnegie said.

That's clearly an argument Gates could understand. He runs one of the biggest, most influential charity organizations, the Bill and Melinda Gates Foundation, and funds projects that help the world's poor.

Read more: I spent an uplifting day at the Bill & Melinda Gates Foundation and discovered what it's really like to work there

And Gates made another big distinction in how he thinks the rich be taxed: when they sell their assets, not when they spend their money.

He doesn't want the US to increase its taxes through consumption taxes. Consumption taxes such as sales taxes actually hit the poor and the middle class more than they do the rich, researchers say.

It's not clear what period of time, or to which governments, the $10 billion in taxes that Gates said he's paid refers to. By any standard, that's a lot of money — although Gates can afford it.

Gates has an estimated net worth of $98.2 billion. That's just a ballpark because Gate's wealth is more than a little bit secretive. Most of his money is managed by Cascade Investments LLC, which doesn't have to publicly report its fiscal holdings or results, except in cases where it's got a huge stake in a particular company. Cascade has, for instance, disclosed large, long-term stakes in companies such as Berkshire Hathaway, Waste Management, and AutoNation. But it also owns real estate. And Gates is involved various venture investments.

He's also been publicly pushing our government to spend on foreign aid, healthcare, education, and scientific research. So his response says that he's willing to put his money where his mouth is.

For more context, the richest 1% of Americans pay about one-fifth of all the taxes the nation collects (22.9%), but they also receive about one-fifth of the nation's income 20.3%. And contrary to public thinking, the richest 1% are perhaps not as rich as you might think: The 1% are those that make over $480,000 a year, as of 2016, the latest available data from the IRS.

While a half-million dollars in income a year is a lot of money, Gates is advocating for ways to target the millionaires and billionaires who make much of their money from their investments, rather than their salaries, in ways that are subject to the lowest tax brackets.