To solve all this, it's pretty simple, and the U.S. actually used to do it: heavily tax the super rich. Heavy taxation and then appropriate use of those funds for education, R&D funding, infrastructure, etc. is actual trickle-down economics. And mega corporations should be heavily taxed instead of holding the country economically hostage. They jumpstart their companies off of government funding and R&D and then act abused when asked to help give back.
Right now, the middle class is getting slammed with taxes. They make almost all their money through salary and get taxed heavily, while the super rich pay either no tax or a maximum of capital gains, so almost 40% or less than upper middle class in terms of percentage.
Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
One thing I've noticed consistently, is when politicians talk about "taxing the wealthy", they almost always follow that with "earning more than $xxxk a year". This is conflating wealth with income.
Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and beyond the ~40% levels we're already facing...
As a practical matter, it is very difficult to tax wealth (and even harder to do it fairly.) I don't think the issue is lack of will but lack of plan that actually works in the face of assets with unclear value and/or difficult to liquidate.
And this doesn't just affect the ultra rich but people like SWE too. How much is the stock you have in the non-public company you work at really worth? SWE are probably one of the groups most likely to be "paper millionaires" and hence screwed by such a system.
It’s hard problem that can only be solved through attempts and iteration. The fact that a wealth tax is difficult is not a good enough reason to not try, because the problem of wealth inequality is so severe now.
The problem with this hollowing out of the regulations government used to have, is that people react by jumping for extreme, impractical things like "wealth tax". Nobody is going to go for the idea that the government comes around and explicitly collects a significant percentage of everything you own every year. (And they already do much of what they can get away with through inflation and real estate taxes).
Rather, to continue the spirit of the top level comment, what is also now missing is the estate tax, which is/was around 40% (it's graduated too, but it tops out quickly). IIUC, the federal threshold used to be around $1M a few decades ago, and is now $10M - this was the anti "death tax" political issue you might vaguely recall. Furthermore, due to wider use of trusts, it's been basically eliminated unless your family is extremely unlucky.
Fundamentally, I'd rather just tamp down the amount of money given away to the rich - stop the government giving trillions of dollars to the financial industry to prop up the fictitious asset bubble pyramid scheme, and either let natural technological deflation happen or at least spend the money deliberately ala MMT.
But either way, something is required - the system we have right now has the government continually giving away gobs of money to asset holders, while doing very little to collect it back. This is exactly why these personal wealth bubbles continue to grow.
> Nobody is going to go for the idea that the government comes around and explicitly collects a significant percentage of everything you own every year.
I think you'd be surprised. When the majority of people own nothing, it won't take much for the ruling class to convince them that taking everybody else's wealth for the greater good is the right and moral thing to do.
The rich buy stuff, do they not? Tax those things to force realization and thus tax of unrealized wealth. Buying a second, third, fourth home? Here's your increasingly high tax and interest rate penalty. Instead of throwing up our hands with "they don't have cash", force them to realize investments into cash and deincentivize being able to keep everything hidden being investments and purchasing things with unrealized wealth.
The rich don't buy much stuff relatively to their wealth.
When you're a billionaire all of life's basics are effectively free. And there are only so many houses, private jets, and super yachts you can buy.
In any case your first, second, third, and fourth home will be owned by a corporation based in the Cayman Islands and buried under an opaque list of shell companies, all of which you also own via cut-outs, one or two of which may be actual registered and regulated banks, which mortgage the properties back to you so you can play games with interest rate arbitrage.
And all of this will be handled by a small personal mini-corporation employing tens of tax experts, lawyers, creative accountants, and investment managers, so you probably aren't even interested in the details.
It's too easy for the ultra-rich to find loopholes in any rules. If there is a tax on homeownership, they will simply not own any home but will own some corporate entity that own the asset. See ? No secondary residence. Just an investment in a corporation that happens to home a bunch of houses.
I have a friend who buys apartment complexes and houses on the company for his employees to live in; that seems not to be reasonable. In fact, it became more reasonable with wfh; now his colleagues living farther away, who he wants in the office 3 months a year, can live for cheap for both sides and without any long term contracts. Definitely cheaper and more convenient than hotels in his area.
>I have a friend who buys apartment complexes and houses on the company for his employees to live in
When railroad and heavy industry did this exact thing in the 19th century we called them robber barons and broke up their obscenely powerful and corrupt monopolies via antitrust legislation.
Anything can be abused, but I don't know the history; I have heard of robber barons, but not in the context of housing and Google doesn't seem to give me more than just their own enormous mansions. It would depend on if it's abused or not, wouldn't it?
The TL;DR of why this is bad is that when employees are paying, or are indebted to, their employers, even in a roundabout way, it's really easy for that relationship to become very abusive.
The company towns also often payed in scrip, which was basically credit at the company store, and, gee, wouldn't you know it, the company owns all the land to the horizon, so there are no other stores in reasonable travel distance! And if you need a little credit because your pay's terrible after your rent (to the company) comes out, and the prices at the store are marked way up, why, they'll be happy to extend some....
That's the extreme version, but it's bad enough that even inching that direction is something worthy of concern. One ought be wary any time money's flowing from an employee to an employer.
The robber-baron version is basically the thing you see in capitalist-dystopia sci fi like The Outer Worlds, but it actually happened.
>The robber-baron version is basically the thing you see in capitalist-dystopia sci fi like The Outer Worlds, but it actually happened.
Also a significant portion of the country seems to be actively attempting to let it happen again. High school made them read The Great Gatsby and they all imagine themselves as Gatsby and the other obscenely wealthy people instead of the 99% of awful and perpetually dying lives most people experienced.
I am trying to imagine how such a proscription would work. Would there be a list of things corporations are disallowed ownership? Who would the seller be required to determine if the entity is appropriate? Or would the local property tax clerk just not allow registration by a non-human entity?
I am wondering about the details. Would you prohibit anything that could be used as a residence? Office buildings would be permitted? I live in an apartment unit in a 24 story tower. It is owned by a corporation and I lease it. Would only condos owned by humans be permitted?
Do you suppose laws and the legal system provide the social infrastructure to support the corporate ownership of housing as property? If so, that - outside of political will - can be modified, deleted even. Without legal support, it will collapse.
I currently lease my apartment unit in a 24 story tower from a corporation. My friend leases a single family home in a suburb from a corporation. Should both of these use cases be eliminated?
Does it matter that you lease it specifically from a corporation? I'm just going to guess that you are more interested in where any how you live than what the ownership model is of the place your living. For example given two properties in all ways equal except ownership models, you would take the corporate-owned one? I find that a bit far fetched.
Even then, because we typically lack experience with a variety of ownership models, it will be difficult to dis-entangle the familiarity bias from our conceptualizations.
No, I don’t want a corporation. I am trying to imagine how renting would work in dense cities with restrictions on ownership. It seems it would be a less liquid market.
Most of those are bad; at least if a landlord is only interested in money they’ll take your money. In the “decommodified” forms, you can’t live there unless the manager personally likes you.
With government public housing you can lose it if you break the law (hope you never smoke weed) or if the populace elects a racist government and you’re a minority.
Commodifying housing helped black people in the South because they could actually buy prefab houses from Sears.
The cost of hiring people to get around regulations so you don't have to waste your own time doing it is trivial to someone extremely wealthy. Those things really are not deterrents at all. They'd only work on the upper middle class, meaning we'd end up in the exact same situation we're in right now. If you can pay someone to make a problem go away then the very rich are going to do that almost 100% of the time.
> Just an investment in a corporation that happens to home a bunch of houses.
But what's the point? If they can't get money out then it doesn't matter. The only reason houses are worth holding as an asset is public bodies stopping the creation of more housing, driving the price up. You fix that with less state interference, not more.
That's the exact opposite of what happens in the real world.
In the world the state builds and owns a lot public housing and this depresses rents and property values.
Countries stop doing this when policy is captured by neoliberal dogma. The UK is a perfect example. Housing was relatively affordable before a disastrous "right to buy" policy in the 70s, with extra enforced restrictions on state house building, destroyed the national housing market.
Now most housing is unfeasibly expensive. And hundreds of thousands of properties stand empty because they're owned solely as investments.
This is excellent for private landlords, property speculators, and older home-owners. It's an utter disaster for everyone under the age of forty because rents are unaffordable and ownerships is unimaginable.
Right to Buy didn't destroy the housing market. The same people who lived in council housing bought it under Right to Buy.
The problem was not building more housing to cope with increased demand. That would've happened regardless of whether the Right to Buyers were renting off the council or had bought their property.
> In the world the state builds and owns a lot public housing and this depresses rents and property values.
Public housing, but not housing. The state controls what can be built where, which can drive up demand enough that property becomes a valuable enough asset to let it stand empty. Giving the state more power on top of that to correct that incompetent use of power seems worth questioning.
Would it not be possible to then tax them on their ownership on that corporate entity, which gets assessed based on its holdings (including, yes, property)?
Or prevent companies from holding real estate as an investment vehicle?
I'm not naive enough to argue that this is a definitively easy thing, but especially when it comes to housing, the poor and middle class are getting completely fucked right now; it's gotten to the point in the crisis where we absolutely need to do something urgently.
There's always the next trick. What if that corporation is also saddled with a bunch of debt, such that its net holdings is roughly zero? What if it bought those houses for very little money (from some other friendly corporation) so that, on paper, their value is very low? etc.
Taxing businesses which own residential property at the same rate as second homes stops that particular wheeze entirely. If you wish to exempt certain types of business you believe have valid reasons to own residential property at low/no property tax rates then that becomes an exemption they have to demonstrate eligibility for, not the default.
Second homes being misclassified as non-residential property might be trickier to deal with, but a lot of jurisdictions already have laws around what is and isn't residential...
The rich buy stuff, yes, but they spend a much lower percentage of their wealth (or income) on "buying stuff" than the middle-class or merely-well-off do.
I think we should add very steep taxes on second+ homes and "investment properties", but that's to address the housing problem, not to address the massive wealth disparity.
The real problem is their ability to buy things like "lawyers" and "newspaper coverage" and "senators", and it's much harder to effectively tax that sort of thing.
The tax/bankruptcy laws for homes, for example, are absolutely crazy. 2nd+ homes in the US can be written off but the first one cannot. Absolutely bizarre world policy that only makes sense if it were written by/for the wealthy.
Also corporate ownership of single-family residential property in the US should be forbidden.
I agree. Taxing unrealized capital gains is just not a good idea at all. What's more problematic than people having huge sums of unrealized book value, is that in the current system they're allowed to live a lavish lifestyle by taking out loans against those assets (which effectively is an income for them) without paying any taxes at all. That is what should be taxed in some form.
We tax property without realizing a gain. We even tax bonds on deferred interest (eg zero coupon bonds). We can and should do this for stocks. The ultra-rich already borrow money to avoid realizing gains (and thus paying taxes). If they want to keep their stocks let them borrow to pay their tax bills.
Not only do we do that which dis-proportionally hurts the less wealthy more, but property taxes are assessed upon assessed valuations of which the homeowner who does not sell or gets loans upon that valuation obtains zero benefit from. So the insurance company (which also uses the valuation) and the property tax jurisdiction(s) obtain yield from the valuations that year, and do not endure a clawback when the valuations ever decline.
Property taxes are pretty bad! Everyone hates paying them, retirees can’t afford them, and they tax building improvement which motivates owners to tear down their buildings.
LVT is a much better related tax.
Anyway, wealth taxes are probably bad because taxes are supposed to be deflationary, but wealth taxes are inflationary if you collect them in USD, since taxpayers have to sell assets first. Unless the IRS is willing to take a % interest in a collectible painting as the tax.
I guess LVT is better, though I find it almost a pendantic thing at this point given that in so many places where property is expensive the property tax is effectively a land value tax already as the land dominates the assessed value so strongly.
That means rich people can accumulate generational wealth without ever even paying capital gains taxes. And during one's lifetime, one can get liquidity out of assets by borrowing against them without selling them.
The rule also seems strange from an outside perspective. Either the book value of assets should be kept the same when inheriting (I believe Germany does this), or the book value should be changed to current market value but the difference be taxed as gains (I believe Canada does this).
Step 1. The country creates a law forbidding any financial interactions with "offshore" countries (list is populated manually by lawmakers) and also with companies working with such offshore companies (shell intermediaries) in "good" countries.
Step 2. Country forbids its citizens from owning any assets or be incorporated in the same "offshore" countries.
Step 3. Blanket ban of cryptotokens.
Step 4. Huge inheritance taxes.
Step 5. Incremental tax hikes for second and more houses/apartments owned. Restrictions for corporations owning a lot of residential properties and huge taxation.
Step 6. Ban or restrictions of airbnb-like activities to discourage parking money in the housing market.
Basically look where rich hide money go for that. When they switch tactics you follow.
Step 0. Big independent financial auditor structure, independent from law and judicial branched both (or almost independent). From experience - you can dismantle a lot billionaires even with existing laws, if only someone looked close enough and punished them. This is a huge problem in eastern europe for example.
You lost me at step 1. Punishing people because their families live in what some people deem "offshore" is heartless. Also, forget modern technology like smartphones if you only can do trade with "good" countries.
I should have clarified - I don't propose to "ban" half the planet because they the not optimal with their laws or prosecution. Offshore usually means tax heavens, usually the tiny island countries with small native population and incredibly lax financial regulation or none at all. Those are the primary targets.
Well that's a different argument than saying it's heartless. The point I'm making is that it being heartless is not an argument against an evidence-based policy that would help more people.
Step 4 does little but hurt upper middle families. They effectively lose the ability to pass on anything of value to their children while the truly rich we’ll still be able to pass on something of value to their children. And the cycle continues, and inequality increases.
what's to prevent a wealthy parent from gifting wealth to their children while alive? This seems like the easiest thing of all for someone with a competent accountant to circumvent.
Bad for families building generational wealth who don't have it yet though, and boy do I hate the idea as a result.
Some people have legitiment business interests in tax-haven type countries that are not about avoiding taxes. No country is just purely a tax haven with no other ecconomic activity after all.
In theory a blanket ban on crypto could harm innovation. This was much easier to believe at the beggining of the hype cycle when it seemed like someone might actually do something useful with blockchain tech. Kind of hard to believe at this stage.
I feel like inheritence tax is kind of pointless by itself. Most people dont just suddenly die and have time to distribute their assets pre-death.
Limiting housing investment might make cost of living go up. Its not like houses just appear out of nowhere. lots of people cant afford to just buy/build a house. Rich people buying houses and renting them out helps fill that gap. It doesn't always work out as ideally at that, but the other extreme of severely restricting real estate ownership would probably screw over poor people too who do not have sufficient resources to get a mortgage. They still need somewhere to live.
I dont really know what independent auditors means precisely. IRS/CRA/etc are already pretty independent. They could be better funded though.
If any single country will try this alone - devastating. For the country :) . If USA alone will try it - maybe it will work, idk. If USA plus EU plus major Asian economies will do it collectively - it will work.
For independent financial auditor - none that I can think of.
For offshore restrictions - you as a country lose all existing assets already there. A lot of people will move their business to a better countries, providing less restrictions and eventually taxes for them. Probably election loss and further dismantling of all these laws by disgrunted businessmen using their pocket political forces. If will hugely depend on the collective size of economies doing the ban.
For housing - its tourists plus rent seekers vs. regular citizens. You hurt one group and you benefit another and vice versa. There is no win win scenario here, balance must be found. I personally vote for regular citizens, even if tourism industry will be hurt a little bit.
I think inheritance tax has huge downsides. Past a certain age, if you've done reasonably well, and are thus most likely to make a huge impact for the better in your latter working years, why do that most useful useful work if you can't pass it on?
We can do it incrementally, so that majority op population is not affected much. And if a billionaire is discouraged from earning additional billions and retire - well, that was the point? He stops working (hypothetically) but his place will be immediately replaced by less wealthy successor (or by more wealthy opponent, but that problem need be analyzed separately). His kids won't become billionaires, but will be a mere millionaires, requiring them to contribute if they want to keep up expenses. All in all I think it is possible to set up such inheritance taxes so that majority will have positive result.
If you're thinking about billionaires, I think you're doing it wrong. Billionaires don't have billions in the bank. They generally have shares in companies which need to be sold to get money out. And the price changes the more you sell. Billionaire "net worth"s are almost useless because they assume each share they sell is worth the same as the last share traded, which would not be the case if they were all dumped on the market, and even less so if the government made a habit of seizing your shares when you die.
Perhaps - I would think in many cases, an equilibrium would be reached. Comparatively few people in any industry are wholly irreplaceable. Still, should something like this just pop into law tomorrow, one could expect a large group of experienced specialists at the top of a wide array of fields to decide to retire, to disasterous effect. Given time to settle in though, I'd wager it likely that talent would filter up to replace any losses at an equivalent rate.
Ultimately, people as a whole like to work. They dislike working under poor conditions or doing jobs that don't feel rewarding. A law like this would generate a lot of change, but I just don't see that change being disasterous given sufficient adjustment time.
Talent won't filter up. You can't replace doctors with 40 years' experience with doctors with 30 years' experience (and keep going - who do you replace them with?) without losing a huge amount of value.
We have that today. For some people it's not worth working, and they might as well retire and stop contributing. As we raise the inheritance tax rate, that number will drastically increase, and we get to raid some one-off money in exchange for much less productive work.
Offshore is common term. Its collectively all those small countries which have minuscule corporate tax, zero financial rules and refusal to cooperate with big countries about financial tax evasion. Basically everyone from Ireland, Switzerland (sorry guys, just business) to Bahamas and Panama (and ban flags of convenience while we are at it). Definitely all countries refusing to disclose financial records for international law enforcement.
If I were planning such effort, I would propose do bans in waves, with multiyear intervals. E.g. ban of top10 worst offender countries - Cayman islands, British Virgin islands, Seychelles, etc. Then make a list of 10 next and warn them that they have 2-3 years to adjust or be banned too. Rinse and repeat.
I'm aware that there are a lot of legal frameworks about this issue. So what? In the end they are either impotent or not sufficient. The problem is global and doesn't show any signs of abating.
This is in Dickens - Bleak House, I think, when he refers to all the under-taxed industrialists promising to 'pitch' their acumen into the Atlantic (i.e., move to the United States) if any government dares to restrict their income through increased taxation.
> Of making all your modestly rich people close shop and leave
Switzerland has a wealth tax, yet it also has some very rich residents (wealth tax is applied to your worldwide assets/cash, and it includes companies you own, so you have no way to avoid it.)
What if, while grappling with these complex issues, we institute a land tax as the obvious easy part? That is easy, hard to dodge and all but breaks inter-generational wealth transfers as a matter of practice. It is hard to get wealth from grandparent to grandchild in anything other than land; everything decays and you just need one idiot in the chain to lose everything with no chance to recover. The way the market intended.
You pay a (progressive) % of your wealth in tax every year, based on your declaration.
Financial institutions report your wealth (to some extent), and the development of wealth is checked against your income, making tax evasion non-trivial. You could hide the money in a shoebox but you'll lose more in opportunity cost (missed investment gains) than you'll save on tax.
The other side of the coin though is that capital gains generally aren't taxed.
Mainly, I don't agree that "it is very difficult to tax wealth". It's basically a box "your wealth: <enter number here>" on the tax declaration, with an extra spreadsheet/list to fill out showing what the wealth consists of, plus proof (e.g. bank/stock account statements).
You declare all the assets you own* in your tax declaration (bank accounts, properties, art, cars, equity, ...), even if abroad. You also declare your debts.
I don't know how they enforce/check that, especially for foreign-based assets though.
* except for household and personal common usage goods
OK, cool, but you didn't explain how does that fix wealth inequality in Switzerland or make wealth taxation fair? You just described a tax declaration system, not a taxation system.
Anyone can declare assets anywhere but if they're not taxed, or taxed very little, then inequality grows. So does Switzerland do this better or fairer than other countries?
Because you pay a percentage of your total wealth in annual taxes every year (in addition to your usual income taxes).
It differs between cantons (states, kinda) and has progressive banding. Someone with 100k in wealth will pay maybe 100-200 or so. If you have 100 million CHF, in Geneva you would pay around 1 million per year in taxes on that wealth.
As the OP stated, it is global assets and wealth, so foreign/offshored investments still attract the tax. Plenty of people choose to be resident in Switzerland even with these taxes.
Well, you asked how it worked, not whether it was effective at fighting inequality.
My understanding is that it's not very effective, because any foreign-held asset is pretty much hidden from Switzerland, unless there's an agreement with the country for this kind of information.
I mean... you could start by taxing realized capital gains at >20%
It's hard for me to give an argument like "this is difficult" credence when we already have a capital gains tax that's lower than most income taxes. I will buy this is difficult when you raise that number to 50% and we still have the same issues.
I don't think it's very difficult at all. We already have an elaborate system to measure and tax wealth with our system of property taxes on real estate. That's already in place.
It would be trivially easy as well to track and tax the wealth of people hold public equities.
Those two things there are an enormous bulk (majority?) of wealth.
It only gets a bit more complicated with privately held equities this I will grant.
If you start to get into the nitty gritty of assessing assets like ming vases and such it gets complex as well and likely diminishing returns, but at this point, with this stuff, you might as well not even bother because few are going to hold their wealth in ming vases.
What about a tax such that you can only use assets as collateral for a loan if you've paid any outstanding capital gains on them? Would affect normal people through HELOCs but otherwise would mostly affect the very wealthy.
But as far as I understand, the stocks, and other difficult to liquidate assets, as log as you hold them in that form, are worth "nothing". You can't go buy bread with that, not even a house.
At some point, you need to sell and get your local currency in exchange. That can be considered income, and taxed at that value. It doesn't matter whether you had 1M which melted to 1000 or if you bought it for peanuts and got lucky.
> you need to sell and get your local currency in exchange.
This isn't exactly true. For things like bread, yes it _is_ true, nobody will let you take out an asset backed loan. For someone with significant assets, large purchases can be funded by asset backed loan. These are available from high street banks, e.g. [0].
> That can be considered income
No, here's where you're wrong. It's considered capital gains and you're taxed on the difference between what you liquated the asset for, and the value of the asset when you were given it. Here in the UK, capital gains rates are tied to your income level, so if you make under £50,000/year you will pay 10% capital gains, or 20% if you make more. In the US the bands are similar (0, 15, 20%), but I'm not sure how they're calculated sorry.
If we ignore the lowest band of income tax for comparison purposes, someone who makes 1 million in salary here in the UK will pay 45% roughly of that in tax. Someone who makes it all in capital gains will pay 10%
That's how it works in France, too. But my point is that maybe this could be changed to be more in tune with income taxes. In France, however, they have instituted a "flat tax" at 30% on capital gains. Before, it was taxed as income after an abatement.
So changes can be made, they just did it the wrong way.
So we get to pay 40%+ tax on our income on a yearly basis while they get to pay a mystery amount that may or may not be factored into debt costs that can also be deferred for a while? Yeah that sounds fair.
> debt costs will adjust accordingly and pass on to wealthy still
Let’s think about some the factors that may influence this imaginary debt cost:
- whether asset is an appreciating asset
- risk management strategy of the bank
- whether account manager wants to have competitive terms so that the wealthy customer won’t find a better deal
And so on.
How is this not a mystery cost? Sure the bank in some distant future might some tax when it decides to liquidate it. But by that time, the assets would have been in pools for such a long time that we’d never know exactly how much “tax” was paid.
I’m not going to say I know the solution to this problem because I honestly don’t think there is a way to fix this. Tax avoidance will always be there.
They do not have to be. For instance, it is common to never completely pay off the mortgage in Switzerland to avoid one-off taxation. Instead, the eventual taxes are included in the cost of the debt.
An interest only loan doesn't suddenly mean there's no repayments. The hint is in the name, you still have to repeat the interest on the loan. Payment terms may vary but if you think that banks across the US are sitting on interest only, asset backed mortgages for the ultra wealthy's most expensive purchases, and taking no payment from them then I don't think we're going to be able to come to an agreement on this topic.
Why is it hard? Tax capital gains, tax inheritance, tax corporate super profits, tax consumption (vat), tax FX / currency / speculative securities trading (Tobin tax), etc. It’s not hard, our politicians just lack the will and would rather drive a race to the bottom (“tax reforms”).
I see you have a bottomless appetite for taxing more and lots of imagination on how to do so. Do you have any answers on how that taxed money will be spent? How we can ensure that it's not just lining the pockets of the politicians and bureaucrats in charge of disbursing the money? How we measure the successes and failures of any taxpayer-funded program, so that we can be reasonably confident that the money is being put to good use? How all of this would play out over generations, knowing that the less money (and therefore power) the people have and the more money (and therefore power) the politicians have, the more likely it is that we will slip into authoritarianism?
There is a fairly simple way to tax wealth: inflation.
There are downsides to inflation of course, lower economic growth is a big one. But we are entering a higher inflation, higher interest rate environment whether we like it or not, and that will result in lower wealth inequality. Money will have less direct purchasing power, and assets like housing or company equity will decline in value due to higher borrowing costs.
There are many people who will retort that 'inflation hurts the poor'. Yes, it hurts everyone, but it disproportionately hurts the rich. It is no coincidence that wealth inequality increased dramatically during the low inflation, low interest rate period we have experienced over the last two decades.
Is this really... true? I get that there's this idea in people's heads that you couldn't tax for example some incredible rare art collection, because who is to say it's true value and you damage the owner by applying such a tax burden they actually have to sell the art. But let's take a step back. Where is the real money? Bezos, Gates, Buffett, Page, Brin, Ellison, Ballmer, Bloomberg, Zuckerberg. Further down the list the same thing is true - the people with wealth actually have the vast majority of their wealths in companies. It's not difficul to liquidate, it's not difficult to value them, it's actually quite comically easy. Even the guys who actually do have enormous art collections are almost all art dealers, they can and do liquidate their investments all the time.
On to the core question: how much is the stock in the non-public company you work at really worth? I don't know, sell it and we'll find out. A SWE with illiquid stock probably actually has a much shorter timeframe of when they want a liquidity event than the US government has.
The truth is that the reason it's difficult to tax rich people is because the first thing anyone does in this conversation is talk about how hard it would be, without thinking for a second if it actually would be hard. Let's lay aside any talk of real wealth taxes, and just stick to our current tax system, Elon Musk borrowing against his Tesla stock is not a taxable event. Let's change that today. It's specific, easy, would immediately drive revenue, and doesn't require any innovation around true wealth taxes. But... we won't, because it's not difficult, the government just doesn't want to do it. What does that mean? The burden of tax is primarily put on income not wealth, meaning your SWE with non-public stock is already getting absolutely pounded with taxes on their income instead.
No, but it is an avoidance mechanism specifically designed to avoid tax on income.
If an independent third party has deemed your stock sufficiently valuable (and stable) to lend money against, then you should be taxed on that loan. You can get a credit when you repay the loan (to offset tax on the income you used to repay).
Not familiar with the US tax code, but if Musk borrows $1b with a portion of his Tesla stocks as collateral, will he be charged capital gains tax by assuming that these stocks are now worth $1b?
When you die, the value of the stock at time of death gets whacked by inheritance tax, which is 40% at the federal level and 20% at the state (in Washington) level.
> I don't think the issue is lack of will but lack of plan that actually works in the face of assets with unclear value and/or difficult to liquidate.
At least in the world of stocks, dark pools help solve exactly this sort of problem.
Once you have enough assets there are many tricks available that are simply inaccessible and unusable by regular salaried employees.
Many of the tricks employed by the wealthiest forcefully remove transparency by a combination of legal and practical methods (e.g., Canada and Delaware share a lot in common).
Disallow opaqueness first, then the solutions will emerge.
Apparently Islamic principles have found a balance for this, so why can't we apply it directly?
Short term stock holdings - pay on the net gain of the sale.
Long term stock holdings - pay on the net value at that point in time. Non public companies are charged based on the last valuation round. Companies without funding aren't charged because the intrinsic value is zero.
And I forgot: outlaw BEPS (base erosion profit shifting), so all corporations pay tax where they originate revenue. There’s way too much tax leakage via double Dutch sandwiches.
It's only very difficult within the constraints of western capitalist democracies.
China has seen how Capitalists have overrun government and have moved to quickly re-educate anyone that steps out of line.
I'm not advocating this, I'm just saying...
Corporations and the wealthy play games and have more resources than our tax departments, and so have found strategies to win that are not available to people who earn an income and work for a living.
You mean the shockingly civilized society that is a drug trafficking capital of the world with a recent spate of mafia murders? The one with 1.55 births per woman?
I always laugh at dying European societies that consider themselves "civilized" vis-a-vis the rest of the world and can't help but lecture everyone else about how to structure their society. It reminds of Borrell's "Europe is a garden, the rest of the world is a jungle" remarks, which went live before his recent bribery scandal.
The politicians make money via insider trading, so of course they propose a income tax as opposed to a capital gains tax to "tax the rich". Many of them have been in power for 40+ years, if they were going to tax themselves it would've already been done.
Only the super-rich in America feel wealthy. Everyone else is trapped in an unwinnable game of keeping up with the Jonses. I can almost guarantee that if you actually listed the concrete reasons that you don’t think of yourself as wealthy, they would seem ridiculous to the majority of middle class Americans. (Although obviously I don’t know your personal circumstances. I am thinking of the general case of a seniorish software engineer working for a big tech company in SF.)
> Only the super-rich in America feel wealthy. Everyone else is trapped in an unwinnable game of keeping up with the Jonses.
Tbh even the super-rich feel poor. If you own 10 million, you might have a social network in which there is a guy who owns 100. If you own 100 million, you might know a billionaire. And the billionaire might have met someone like Bezos or Musk. Usually the richer you get, the higher is the wealth differential you are exposed to. You might be proud of your 3 supercar collection, but a guy you know has a hangar full with 200 supercars.
FYI, if you make several hundred thousand dollars a year, because you are a SFBay SWE, you are SIGNIFICANTLY different from an average american, and you should realize that. You ARE the wealthy that would and possibly should get taxed. It's not poor people's fault California refuses to do anything about having enough housing. It's not poor people's fault that google and facebook require you to live in california for no reason. Making hundreds of thousands of dollars in salary per year is a very privileged position.
Don't get mad at average americans trying to make the world a better and more fair place, get mad at google and facebook that make several million dollars off the code that you write and kick back a pittance of a salary, and coordinate with each other to keep your compensation low. Even at $400k a year, you are literally being underpaid.
Exactly, this is going on every single day. They run stock reels of Bezos and mega yachts and private jets and then introduce their plan to raise taxes on people who have enough income to renting a 1 bedroom apartment without roommates and have a reasonable chance at saving up enough to buy a home someday.
The people who vote are indeed more likely the ones to be taxed. It's not the business and homeowners who are the 80%+ skipping every single primary election since they were established. But then considering the ideas I'm seeing on this page, that isn't necessarily a bad idea.
For the majority of the time there has been a Federal Income Tax, there have been top brackets in the 70% range. This was a burden begrudgingly borne by the wealthy for many generations. It funded the US leaving an agrarian lifestyle and becoming a superpower.
Did a 70% top-tax bracket force any of the uber-high earners to stop earning money because they didn't want to give 70% to Uncle Sam? No, the super rich will always want more money/property/dividends/etc no matter how burdensome the tax bracket they fall in might be.
I think it's more that the upper middle class gets hammered while those above do not, so it feels like punishment and adversarial. The way things are right now, everyone has to play the "get as much capital as possible" game because it's the only way to support your family and progeny, but as soon as you hit a relatively low threshold, you start receiving a huge amount of tax pressure. If we redistribute wealth, we redistribute infrastructure, homes, education, medical care, etc. this pressure could be relieved by not forcing personal capital to be deployed and responsible for such support structures.
At a certain point, a high enough income IS wealth. How many american's become millionaires? How many SF software developers can become a millionaire in just a few years?
If you make $400k a year, you are rich/wealthy. If you don't feel it, re-examine your lifestyle and whether you are actually spending your money well, maybe you're buying too much avocado toast /s
For folks without significant generational wealth or hitting the startup jackpot, feeling rich <=> having lots of disposable income. Before we even talk about personal finances, here are some hurdles I could see:
1. TC numbers (hypothetically ~$400k as you quoted, which generally agrees with levels.fyi) are not real income. We know what happened to (tech) equity this year --- this (unfavorable) gap between grant price/share and vesting price/share has deflated a lot of the TC, much more so if the grant date happens to be right before the onslaught. (Personally I landed almost square in this territory due to a somewhat forced job switch but that's another can of worms I'm not opening today).
2. Whatever is left from that TC number, tax man takes ~40% of it period. Deductions are for most cases a rounding error.
3. TL;DR housing costs scales with salary over here too. Long version: The kind of housing that (transplanted) SWEs and their families would reasonably consider in SFBay has generally been priced (by "the market") right up to the limit of their income-derived affordability, most of which is calculated (by the underwriters) straight from SWE base salary, which we know is constrained by BigTech paybands (which propagates to startups too).
4. Okay, now an inevitable personal finances bullet point: Educated responsible adults as we are, a significant savings (incl. investments) rate surely sounds prudent eh? Say (temporary) goodbye to another xx% of whatever's left at this point.
5. Adding insult to injury, avocado toasts are now about 1.5x to 2x their price compared to early 2020. I feel compelled to add that this agrees with the larger trend of any kind of prepared food.
6. Elephant in the room: Kids.
-----
I can go on and on, but hopefully I am getting the point across. The "salary man" of today has not only his theoretically big TC "pie" shrink over time, but an increasingly larger slice of it becomes marked as non-disposable. Assuming reasonable (not necessarily optimal) personal finances management and maintaining a reasonably high QotL (nothing excessive), I don't see me or my similarly positioned peers feeling rich / upper-middle-class-y any time soon.
How do you tax someone buying favorable press coverage?
How do you tax someone buying a Congressperson?
How do you tax someone using their wealth as a threat, as a shield, so that they don't have to participate in the same kind of society as the rest of us, and can enjoy "privilege" (lit. "private law")?
Wealth at rest is not immaterial, and taxing profits or consumption will never work to reduce wealth inequality or the disproportionate power the wealthy have over the rest of us.
I think it's fair to complain when the "tax the rich" schemes that are actually implemented all still end up placing most of the new tax burden on people who get paid for working (even if it's a lot more than the average worker), and not on their bosses who get most of their money from economic rents.
Basically, I'm fine with paying more taxes, but only if those wealthier than me pay more still.
OK, but does that include Rowling's Harry Potter sales, or Persson selling Minecraft to Microsoft?
> There's no conceivable reason
How about "someone is offering me a billion to take over the company I founded regardless of if I actually agree to sell"? Or worse, "someone wants to offer me a million for 0.1% of my shares, but if I sold all my shares the market price would crash by 95%, therefore I get all the blame for being rich with only a handful of the benefits"?
I appreciate there are other economic systems besides one-dollar-one-vote, and we may wish to make mega corporations more democratic and less plutocratic-authoritarian, but that kind of change deserves a book rather than a single comment.
I'm not saying I agree or disagree with this stance but at a practical level it's interesting to think about.
Let's say life is a computer game, and once you max out at $1bn in earned wealth (presumably this includes liquid and illiquid assets such as properties, cars etc), you cannot accumulate more wealth.
How does a government enforce this stance? You cannot stop say Bill Gates shorting Tesla and earning millions from the trade, can you?
Can you stop a landlord renting out their properties to block further income from them?
What about interest generated from bonds or savings accounts?
Do you simply tax the shit out of people if they have over £1bn in wealth?
The big challenge I see for all of this is that rich people have the best (and most expensive) accountants/lawyers money can buy. If you try to tax the shit out of them, their accountants and lawyers will find a way around it.
Also, if one government is too heavy handed, they'll just move assets to another more lenient government.
You make "almost illegal" financial activities really illegal in the law, prosecute people, and I suspect that 90% of the problems will disappear automagically. Number of people who can become billionaires without committing borderline illegal and completely illegal activities are vanishingly small I suspect, probably only founders of megacorporations and those are often doing illegal stuff too to stay ahead. USA is an outlier probably as far as honest successful corporations go, but in other countries if you are a top100 Fortune person you are likely a criminal too. In my country for sure. Energy - illegal oligopoly, metallurgy - illegal oligopoly, animal farming - illegal oligopoly, etc. The number of illegal schemes happening in the big corps in my country is staggering.
Not to defend corruption, and I'll agree absolutely that there's a lot if room for improvement, but far too many people break far too many laws for full enforcement of any of them; and even outside egregious violations, law itself is too esoteric for most people to understand either their obligations or their rights.
With regard to the first part, the normal examples I give of this are road traffic offences (which if fully enforced would mean the only people allowed to drive would be those who didn't); and drug laws — ignore weed for now, nobody defends heroin, full enforcement of UK heroin laws would treble the UK prison population all by itself, while enforcing the laws on cocaine would more than double the US prison population and increase the British one by a factor of 20.
With regard to the second, look at how confused people get about copyright, trademarks, how they work, what the penalties are for violating them, what counts as "fair use", and so on.
We should focus on the large scale offenses by big entities of course. E.g. if you have 50% market share of chicken production in the country (and another 50% is also a single corporation) then I'm sure that both of the corporations are breaking a lot of laws and utilising a lot of barely legal schemes to launder profits. Same for all sectors of economy. Examples closer to us - ISPs, Cell operators, providers of cloud computing, search, communications etc. All of that must be carefully examined, and then partitioned where monopolies or conflicts of interests arise.
> Do you simply tax the shit out of people if they have over £1bn in wealth?
Seems like the obvious answer, though you're probably right in that people will move assets around and do elaborate things to avoid the tax but they already do that now.
Make a hard cap wealth cap at $1B. Oh you made a great investment that made you $400M dollars? oops looks like you're $200M over the cap. You now owe the government $200M. But good news you hit the $1B cap. You "win" capitalism. Have a nice medal maybe.
Seems reasonable to me.
I suppose the argument against it is that you'd be dissuading near billionaires from investing their money in things (eg. starting new companies) though I'm not entirely sure if money is a real motivator for people who have ~$900M. Is it? I don't know any 900 millionaires to ask.
A better attitude would be to say that billionaires need to share more of their wealth. If you make them pay a let's say 5% wealth tax for having excessive wealth, then they're not strongly discouraged from trying to increase their wealth, while everyone else benefits. And in due time they will cease to be billionaires.
Because spending money on education doesn't equate to better outcomes. It creates more bureaucracy, bigger councils, etc.
Teacher pay is still abysmal, especially considering the fact they are expected to act as guardians and even security these days. And you'll never get better outcomes if you can't attract smart people to actually teach, no matter how much you pay the superintendent.
US public education should be called what it is, a government sponsored day care.
School budgets are set by your local school board(s). If you want to pay teachers more, vote for school board members that promise to do that exact thing.
School board elections are one of the best examples of a local election being able to enact meaningful, visible change in your community.
My partner is a teacher, and the money certainly does not reach educators or kids in need. It mostly gets stuck at the administrative level or is spent for expensive football teams. Hell, there is still a national debate about kids going into debt to pay for lunch
I'm not for sure I agree, but that's a separate issue than de-concentrating wealth. What to do with tax funds, how to appropriately distribute them, etc. is another discussion. Just because those problems exist, we should allow more and more wealth to be concentrated?
It would be good to fix that before we start funneling even more money in that direction, yes. Or at least have a workable plan. If you have a leak in a pipe, you fix the leak before shunting even more into that pipe.
You’d expect education costs to be rising, though, as people are expected to have a higher level of education before entering the workforce than they were previously, and because career changes and reskilling are far more common than previously. It’s a bit like healthcare. You can be spending far more than you were when there was a younger population and fewer sophisticated and expensive treatments, and yet still not be spending enough.
There is no evidence that people have a higher overall level of education before entering the workforce over time.
Rather, people know a different set of skills and accumulate a different body of knowledge. It is only if we define "education" as the degree of knowledge in the body of subjects we teach today that one can say people in the past had less of it. But that's only because we have discarded the many bodies of knowledge an educated person needed to have in the past.
For example, one can laugh and say that to earn a doctorate in mathematics during the renaissance you'd need to know algebra only to the level of solving a cubic equation. However you are missing all the archaic geometric ruler and compass constructions, evaluation of various infinite series, and deep knowledge of Latin, Greek, French, German texts, mastery of rhetoric, music theory, and other topics that few learn today. So it is not true that a mathematician of the present could waltz in and get a Doctorate in Philosophy in medieval Paris. He would probably get quickly thrown out for failing to master the many various scholastic topics that were required of a PhD in that time period, and which no one learns today.
As another example, a new worker in 1800 might be expected to know how to deliver a calf, fix a fence, shod a horse, make homemade preserves, skin a rabbit, set a broken bone, paint a barn, as well as know Greek, geography, history, recite the speeches of Cicero, translate the Odes of Horace, navigate the seas by an astrolabe, stain a bookcase, identify the key flood valleys of Europe and know which animals could be hunted in which part of the year in various European forests, or know the biographies of German princes, etc. But you are correct, they wouldn't have MS Office skills or know how to create a webapp.
Once you move past "hunter-gatherer", you very quickly run into complex societies with their own historically developed bodies of knowledge that require lifetime learning, whether that means learning the seasons and details about planting crops and irrigating fields, dealing with pests, where to dig a well, how to tan leather, etc - or whether that means something else, it is still a vast body of knowledge that takes decades to master. The point is, wherever a society is technologically, it will choose different areas to train its workers, and omit other areas that are no longer needed. But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
>Rather, people [nowadays] know a different set of skills and accumulate a different body of knowledge.
Yes, but this is increasingly knowledge that needs to be imparted through formal education (for a variety of reasons). Hence it costs more.
>But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
I don't see the logic here. It's fine as long as you can afford it.
>as well as know Greek
Only a tiny minority of the working population could read Ancient Greek in Europe in 1800. In England, around 50% of the population were still entirely illiterate at that point in time.
>Only a tiny minority of the working population could read Ancient Greek in Europe in 1800. In England, around 50% of the population were still entirely illiterate at that point in time.
Surely that can't be true? Here in Sweden literacy was made mandatory for adults in 1686. It was not permitted to get married without being able to read.
Surely England can't have been that far behind, as late as 1800ed?
The data you've cited is wrong though. It lists Sweden's literacy rate in 1800 at 21%.
People were interviewed by their local priests to see whether they could read and the results were noted down. From this we know that in the middle of the 1700eds the 70-90% of all people could read.
The law was also clear. You couldn't get married unless you could read. To be married you had to be confirmed, and to be confirmed you had to be able to read.
I don’t particularly care about the specific case of Sweden. Every source I can find for England or Europe in general shows low literacy rates in around 1800. Do you have any sources that disagree? (Note that the map I linked to shows a higher rate for Sweden, if that’s important to you, but still around 50% for England and many other European countries.)
The funny thing is, you don't even need to tax the rich all that much. The money is there. It's just spent on ludicrous stuff. The US annual defense budget is 800 billion dollars a year. Even when you argue that national defense and a well equipped military are necessary (which I believe them to be), I've seen military cost receipts. They're outrageous. You don't need 50 dollar rolls of toilet paper.
Your assumption is that the state will apply that money optimally (or at least more optimally than the super rich - also, notice you didn’t define what super rich are).
Looking at historical and present data, I can be absolutely sure that the state will mismanage that money in almost every country.
I’m Portuguese, my government is collecting more ~ 25% taxes than it collected 6 years ago when the current ruling party got into power. Almost everyone (left and right) agrees that public services and administration are much worst. So, it begs the question: why giving the government even more money, will solve anything?
To be honest I think this is strawman argument. I think it is absolutely true that the government will mismanage some of that money. The question is whether that money used with not 100% efficiency is better than a billionaire who may spend that money on anything. I certainly agree there are rich people who donate their money effectively but even then they decide what to spend the money on. So in my opinion some government mismanagement is not the reason to have some redistribution, but rather a reason to ensure that governments are properly accountable etc. And even if that is a government spending it can be still tendered to private companies depending on what's being done.
That implies that privately owned organizations manage money well, which is not the case either. The larger an organization is, the more inefficiencies it accumulates. Plus, don't forget that states usually provide a lot of subsidies to companies and also pay businesses/consultants to do some of their work.
The idea of the “middle class” is propaganda. The whole point of this as well as any number of wedge social issues is to sow division and direct your anger at marginalized groups instead of the wealthy and powerful.
There are only two groups when it comes to economic status: labor and the capital-owning class. Labor is anyone who derives their income from their labor and goes all the way from the janitor to doctors and professional athletes.
Th idea of the middle class was invented to sow division with the “lower classes”. I mean look at your comment. You assert the “middle class” is getting slammed with taxes. Some (not necessarily you) imply the lower classes are somehow getting a free ride or are lazy. This is the propaganda.
We live in the wealthiest nation on earth. People without housing or food security is completely unnecessary. Charging people $1000/month for insulin, without which they would die, is only that way for corporate profits. Think about that.
I don't think it was *invented* to sow division, but I agree with you that it can definitely be used for it.
There's different ways to categorize things - lower-class, middle-class and upper-class is a sort of intuitive way which throughout history has made some sense, somewhat, with different names. However, I get that maybe it's not the most useful currently, because there's such a ridiculous divide between upper-class (rich) and the other two, that we, belonging to the bottom 2, should band together to bring change favorable to us.
You're right, but this misdirection goes both ways. Logically, it would make more sence for the "lower" and the "middle" class to present a unified political front to tax the capital-owning class. But with the division in place, politicians backed by capital can sell a tax plan that is mostly, in fact, about raising taxes on the middle class but not the capital (most proposals that focus on personal income tax rates are in this category) to the "lower" class.
I find it really frustrating that the discourse around taxing the super rich does not emphasize how absurdly rich the super rich are. Even if you are worth 500 million dollars, own a mansion, fancy cars, etc., you are still extremely poor compared to a billionaire. And even among billionaires, someone like Bill Gates is massively more wealthy. On /r/nba some people were remarking about how even among NBA owners, not exactly a poor group, Steve Ballmer is so absurdly rich that he could probably buy the entire NBA (obviously not with his liquid cash, although he did literally buy the Clippers in cash).
Like the phrase "tax the rich" makes people think of their neighbor George who as a nice house or even themselves if they make six figures. Nah man, tax the person who can literally buy the NBA and still be a billionaire.
I have already covered this elsewhere, but that's an excuse and actually only points to how concentrated the wealth is. Too bad they pay more money than others. Tax them more.
It's not created by those people. It's created by some worker somewhere, and those people collect most of that created wealth as economic rent, solely because they own the capital used in the process.
Without their capital the whole organization where workers are creating would not exist in the first place. So the market is rightly rewarding capital owners for risking it in the first place.
Do you think that is easy and just "collecting rent"? What is your experience investing?
Both capital owners and workers are paid according to the prices set by the free market for their input. Most of the generated wealth however is captured by the society (ie we each derive more value from the stuff we buy than the cost we pay for it) and by the government - taxes on work, consumption and profit are usually much larger than other costs in a company operation.
Capital tends to concentrate, indeed - but that is also a good thing as it allows bigger enterprises. However the cost to build a new business has been steadily decreasing over the year together with the cost of capital while its availability has been increasing. Today's most productive people can easily open their own practices and set their price on their own contracts. The "rent" they pay is hugely outweighs by their future profits.
If you want to rail agains something, rail against the fact that financial education and investing is not more widespread so people do not understand that they can participate and invest in capital markets from very low amounts of money. Capitalism is powerful and empowering but requires work and education.
Top 1% of salary earners. The CEOs, highly paid doctors, engineers. The real capitalists - those who hold the assets and pay for their yachts with stock-backed loans - they don't pay 40% of the federal tax revenue. Their salary is $1/year.
Alternatively, loans are income today coupled with an expense over some future period.
Including loan proceeds in taxed income (and deducting repayment) is certainly a potential policy choice.
OTOH, treating pledging an asset as security for a loan as a realization event at FMV, making it both taxable if a gain and a basis value update, while taxing capital gains as normal income would also be a way to shutdown the “use secured loans to fund your lifestyle to avoid realizing gains and being taxed” hack.
I'm not an expert, but my reading of the IRS's FAQ [1] is that the cost basis of inherited assets gets reset to the fair market value of the assets on the date of death.
> > And then you pay the 40% federal inheritance tax and the 20% state inheritance tax on the total value at the date of death.
After the $12 million (nearly $13 million next year) exemption, the unused portion of which passes to the surviving spouse and increases their tax-free estate exemption.
But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.
“But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.”
The estate gets a stepped up cost basis on the date of death. And then you pay the 40% federal inheritance tax and the 20% state inheritance tax on the total value at the date of death.
To which the common retort is "but nobody actually paid that because prior to the tax code simplifications of the 70s you could trivially reduce your burden in all sorts of ways"
Not only that, the tax avoidance schemes required investing in tax shelters, which were usually very poorly performing investments. When Reagan exchanged the lowered tax rates for elimination of those tax shelters, it allowed capital to flow instead to productive investments, which helped the economic growth.
Then surely, they would have no problem returning to that exact system right? No they want to avoid that by all means necessary? Sounds like they know how much it truly effects things.
As a purely theoretical concept I don't think it's a big deal. It wouldn't have a large effect on me personally. That said, society might hurt a bit from the tax shelter vs productive allocation of capital problem another commenter above mentioned. As a practical matter I have zero faith that the usual scumbags would not corrupt the process leaving everybody with higher taxes than either system and then gaslight everybody into thinking they're paying less. Look at how healthcare turned out.
While interesting data points, I'm not seeing an argument that they are paying enough, which seems to be your implication. Maybe it should be 90%. Maybe it should be even more.
Most business revenue in America is still from small to medium sized businesses, so this investment you speak of doesn't sound too important. So yes, I agree that business produces wealth, but the business that matters isn't going anywhere because they're largely local. The larger corporations are still going to do business here as well because of the market power.
As for wealth flight, it's overblown. First fleeing to another state is very different than fleeing the country. Second people aren't staying in America only because the taxes are lower, there's plenty more to offer.
Edit: I forgot to add that the actual evidence for wealth flight is pretty thin.
And for those corporations or wealthy people that do leave, fuck 'em. They're not special, irreplaceable snowflakes. They beat out their competitors by luck, and local competitors will immediately spring up to fill the void they leave.
Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.
> local competitors will immediately spring up
What is your experience starting new businesses? It is a highly difficult and risky endeavor and few people find it more attractive than simply getting a job. It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
Good luck with that! The most authoritarianists have ever managed to do was make it illegal for people to leave their inhuman regime: guns on borders, pointing inside. Not surprisingly, those countries were quickly outcompeted by free countries.
Europe is divided between countries deeply infiltrated by Russia and countries who can’t wait to escape and write their own futures. UK, Poland, Hungary will welcome fleeing capital. Brexit wasn’t the last exit.
With its anti-business attitude, tiny high-tech industry and lacking innovation and creativity, Europe’s importance in the world is vanishing fast.
The future is in Asia and Eastern Europe. And US, of course.
> Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.
No, mainly because of the risk of capital flight.
> It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
I disagree. If a good or service is truly valuable, someone will provide it. The value of an unmet need will increase until it becomes attractive, and if it never meets that bar, then by definition it wasn't valuable enough.
The only exceptions are goods or services that capitalism isn't effective at solving anyway, either because they are common goods that capitalism would exploit to exhaustion, or because they would yield only natural monopolies that are rife with abuse. A state-run corporation is a good option here, and wealth flight isn't an issue.
I lived in a country lacking capital (first because it was robbed by communists and then due to the risk of the transition managed by a deeply corrupt political elite) and I can tell you existing demand was only met through imports.
It sucked for everybody - without local capital the entrepreneurship was very limited, jobs remained scarce, specialists emigrated and the trade deficit became unmanageable. In the end multinational corporations slowly entered and bought various state-granted monopolies (the only real monopoly entrepreneurship can't solve) on the cheap. But that tiny capital started a snowball effect that eventually raised the living standard to unhoped-for levels. Now we have both billionaires and a wealthy middle-class. It took a long time though.
Careful what you wish for - a country without successful entrepreneurs and local capital(ists) is an easy prey on the international markets.
Billionaires should not exist. When one gets to a certain amount of wealth, TBD, there they should get a golden plate saying "Congratulations, you won capitalism" and from them on, tax rate is 100%.
Ah, the mythical "super-rich" who could fund all of our solutions, if only we could prise their money out of their clutching hands!
It's funny how they always exist, even in countries like the UK and France which in reality have taxed them out of existence, and payscales are absurdly compressed compared to the US.
Careful what you wish for, you are someone else's "super rich".
>the UK and France which in reality have taxed them out of existence
You're making it sound like billionaires are an endangered species there. :) Last time I checked there's more than enough billionaires living in the UK and France[1].
That's the problem. The wealth of billionaires isn't tied to any particular country, so they always have the means to move their wealth to a tax haven. Calls to tax the rich always end up falling to the upper-middle/lower-upper classes (e.g. FAANG engineers who read HN).
> you mean you want an easy way to sort and aggregate the information in order to dispute this.
For a start, I need the list to include the country of origin of each person.
>he burden is on you to do this as you’re the one questioning the accuracy of the widely cited Hurun list.
I've pointed out that Hurun don't make public their list of billionaires per country, unlike the other providers of that data. As no-one yet has been able to show otherwise, my point stands.
The solution is to cut the size of government first. The inefficiency and outright grift happening in all federal agencies would make any entrepreneur’s head spin. Imagine if Congress had to answer to VCs for their spending. They would all be blackballed from the investor community overnight.
The “tax the rich more” line is a little naive. The world is a different place after the Rothschilds figured out how to shield their wealth from monarchies. It’s easier than ever to offshore wealth, remember the Panama papers that promptly disappeared from the news?
The “solution” of global governments is a cure that’s likely far worse than the disease.
It’s a complicated situation. A progressive VAT tax that is consistent across jurisdictions would be a good start. The tax code (at least in the US) needs to be thrown out and replaced. Monetary policy and taxation via inflation is also primitive and in dire need of reform.
The problem with this live of thinking is that in reality most taxes are paid by wealthy people. The majority of people actually pay 0 taxes and in fact receive credits above their burden of 0.
Whine there’s certainly room to address fair taxation rates we should seriously consider how we spend tax revenues today. A 1.5 trillion omnibus is being rushed through Congress that’s full of pork and special interests. We just sent however many billions to a country to fight a war that has nothing to do with us.
So we spend all this money and of course it’s not enough. People say “more! Tax the rich!” Without considering the reality.
That's not a problem at all. The concern is not the absolute dollars paid. The concern are the percentages and the concentration of wealth. That the rich pay a lot of tax is basically immaterial except that it points out just how skewed the wealth distribution is.
The "rich pay the majority of taxes" is an excuse.
This all presupposes that the government is an efficient user of capital, when its pretty clear its not. Heavy taxes on the rich, means that capital investments that a rich person might finance, become government programmes and bureaucracies. Theres obviously a sweet spot here - but rich folks are good at creating capital and governments are notorious for wasting it.
Now in the US I probably don’t have to tell you where most of the money goes - hint military - so more rich folks money into the governments coffers - what industry do you think benefits the most from a policy like this?
> but rich folks are good at creating capital and governments are notorious for wasting it.
There is more than a little nuance here:
- governments are notorious for being called out on supposed inefficiencies.
Too often, it turns out that there were very good reasons for those inefficiencies, but the criticasters forgot the lesson.
- "rich folks are good..."
I wouldn't know. Superrich folks are good at manipulating the system and extracting wealth from others, that I can believe. We see that happen often enough - the superrich lose money if they were to pick up a 100 dollar bill (they make more money in that time if they work), while their employees have to pee in water bottles or are exploited in other ways.
I strongly doubt that the superrich are better than governments at creating capital for anyone else but themselves in an ethical, human-respecting manner.
I've never understood the argument. I've worked in several different private companies, and calling them "Efficient" is so off base as to be laughable. Remember, a private company will happily let an import engineer go instead of giving them a small raise.
Go work for the government then? Or wait, the government is way stingier with raises than private companies are! Engineers fight over jobs at private companies and shun government jobs because governments don't reward good work.
Most of our money does not go to the military. Defense spending is about 700b per year, while the budget is over 4t.
The government doesn't need to handle capitol allocation. We can simply shift the tax burden upwards. Poorer people get reduced tax, rich people get more.
Poor people already pay next to nothing in taxes - the bottom 60% of society, making less than $50k only contributes 7% of total tax revenue from income taxes, while 0.3% of those making more than $1M per year contributes 27%. [1]
I think the US has pretty good revenue structure in that regard. In my country 62% of federal budget comes from sales taxes (e.g. 23% VAT), which disproportionately affects poor people.
Your first sentence ignores what you say in the second. In the US, poor people pay a significant portion of their income in sales tax which is regressive.
Yes, I kind of missed that. On the other hand, sales tax in the US is very low compared to European VAT (0-7% vs 18-25% VAT), so it's much smaller issue.
I would suggest to think of this not in terms of contribution to the whole, but percentage of ($income - $housing - $food - $stdxpenses). With $stdxpenses covering standard living expenses including energy, water, basic insurance, basic commute.
I would be somewhat surprised (rather flabbergasted) if rich folks paid anywhere close to the percentage that poor people do.
In other words: if you want to compare by measuring contribution, measure tax rate to what's left for that individual's personal use.
The working poor pay into FICA which is a greater percentage of their cash flow. They get it back upon annual tax reconciliation. The same entitlement programs nonetheless have lots of unfunded liabilities so the money has already been allocated even if it's not currently "there" -- 'The Rich' are beneficiaries of entitlement spending too.
It's a simpler situation than that. Regardless of proportions of payment, we already have a percentage of the population whose public services are paid for by someone else, either directly through income or divided tax or indirectly through higher prices from corporation tax, or more indirectly through inflationary monetary policy.
In other words: we don't need to invent taxing people with more money more. We have that. Millions of people are partly or fully paid for by others. We might want to adjust it, but we don't need to pretend we're doing something revolutionary in doing so.
> This all presupposes that the government is an efficient user of capital, when its pretty clear its not.
It's not a presupposition. That's a separate discussion and should also be improved. We shouldn't say, "oh, we're bad at redistribution, so let's not".
You’re assuming an infinite perfectibility of human nature. The problem with government planning is that it’s removed from the best, local information and inherently has broken incentives.
By the best, local information I mean that in the market, the people with the need for the good or service, and the people who bear the cost of providing it, are the people with the best information and also the ones making the decision to purchase and produce and at what price. The market automatically aggregates this information and produces a price level, which creates the incentive to produce and purchase the appropriate amount of something.
By broken incentives I mean the entire body of work that is public choice theory. Don’t think about government agents as benevolent actors. They are on the whole not good or bad, just about as self-interested as anyone else. They don’t make decisions based on what produces the best outcomes for the public. They make decisions based on what advances their own immediate and long term interests as individuals and social groups. Democracy tries to align those but it doesn’t do a very good job since most decisions do not rise to public political issues, the public can only have a limited understanding of, and elections are too blunt an instrument for adjudicating, the propriety of thousands or millions of public sector decisions.
Broken incentives? What about Boeing with their 737 MAX? That is a prime example of broken incentives costing human lives. What about stock trading causing famines? Our current way of doing "economy" is massively broken and affects everything.
Who said anything about people being infallible? Amusing to nitpick market failures when planned economies have all led to mass poverty and famine. And market economies have created, in the last 200 years, unparalleled prosperity.
And if they’re poorly run, the company goes bankrupt or gets bought out by a stronger company. The government isn’t subject to that kind of check, except in the most catastrophic case.
The Yard sale model in this post demonstrates that rich people are not necessarily better at allocating capital even if/as they accumulate and compound it faster.
The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.
It does not demonstrate that at all. It assumes everyone, rich and poor, is exactly equal at allocating capital because they all have a flat 50% chance to make money on every investment.
In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.
What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Presumably you could update this model to give some people “better investing skills” and others worse skills. (In practice you’d just bias the coin flip against the ‘worse’ investors.) I suspect that once inequality has crept into the game then even having “better investing skills” is outweighed by the advantage of being already-rich. But I haven’t run the simulation to see how much investing advantage gets wiped out by wealth inequality: seems like it would be a fun project to code up with my 15y/o.
> What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth.
Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work.
What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?
TFA talks about all of this. The point of the article is that in a system with a finite amount of wealth, even a society that starts equal will eventually become highly unequal: as long as there is continued betting/competition where all parties have an equal risk tolerance corresponding to their income. The concentrating effects of these bets is the important lesson. TFA describes some ways to avoid this outcome.
But TFA article is completely unrelated to the real world.
There is not a finite amount of wealth. People create new wealth through innovation.
People do not mindlessly continue the same investing strategy when incentives change. If you reduce the expected return from an investment, they stop investing in it.
So any strategies that might be useful for the contrived game described in the article are not relevant to the real world.
Nearly every economic action you take can be viewed as an investment or bet. Getting up in the morning and going to work represents a bet that your compensation will be worth the time spent. Sending your kids to school/college is an even more obvious example. For self-employed people all of this gets much more literal: every job involves a tradeoff of time and resources that could be spent on different projects. Even open-source hobby projects are can be a time-investment in building your resume. These "bets" have counterparties as well: for example, your employer can afford to negotiate much harder than you can on salary, because you need a job and health insurance more than they need you.
I also agree that this is a simplified model. But its simplicity is what makes it elegant: you can see the effect in a model that lacks all of the complexity of real-world economic activity. In the real world the "bets" are more complicated and the odds more variable, but you can't just claim "this effect must go away" without articulating a clear reason that it would.
The reasonable point you do make is that in our current economy the "pie" isn't fixed: new wealth is being created all the time, and this is one reason we don't collapse into permanent inequality the way this model does. This doesn't negate the model, however, it just means there is something counteracting it. Unfortunately the fear is that in the future (or perhaps even the present) new wealth creation will no longer keep up with this underlying concentrating effect, and we'd better think hard about what to do then.
> but you can't just claim "this effect must go away" without articulating a clear reason that it would.
If the effect is that, all else being equal, people with a lot of money can make more money in an absolute sense than people without a lot of money, then of course it doesn't go away. It's not that that isn't real (it's simply how percentages work) it's that it's not actually a problem because the model is so far removed from reality as to be irrelevant.
The real world is not a 1v1 adversarial game where people are betting against each other. More often they are collaboratively betting together and both benefit if they succeed.
Young, poor* entrepreneur brings an idea, maybe specialized domain knowledge, and time and energy
old, rich investor brings capital, maybe business experience and network, and gives it to entrepreneur to execute.
If all goes well old, rich investor and young, poor entrepreneur both make a lot of money. Young, poor entrepreneur becomes old, rich investor for the next generation.
If the venture fails, old, rich investor loses money (which went to pay some number of employees and vendors, who get to benefit from it), but old, rich investor expects this to happen for some or most investments. Young, poor entrepreneur loses time but gains experience and connections.
Nobody tricked anybody or stole anything from anyone or "lost a bet" like they are playing a rigged game in Vegas.
If you tell old, rich investor they aren't allowed to make any money by investing in young, poor entrepreneur any more, they don't just keep on doing it and allow you to redistribute their profits. They buy T-Bills instead. Young, poor entrepreneur goes to work for some other company (that old, rich investor probably funded in the past and owns) and gets a mediocre salary instead of getting rich and the world is deprived of whatever innovation they might have had.
This is pretty much fine for the old, rich investors, they're already rich. But it screws over the possibility of getting rich for anyone who isn't already. Which, if you were trying to reduce inequality, is the opposite of what you'd want.
* - or more realistically, middle or upper-middle class
Another unrealistic part about the model is that people keep betting a fixed percentage of their net worth. If you have a million dollars, maybe you can invest $100,000 into the seed round of a startup. If you have a billion dollars, it's unlikely you can invest $100 million into one investment. You spread it across multiple investments, maybe hundreds, and the average return is less than what you would get from succeeding on one big investment, because there simply isn't an opportunity that can make use of that much capital at once.
Again, you are talking about a world where the economy is not static: where there is room for overall economic growth that exceeds the wealth-concentrating effect. That’s the world we’ve lived in for at least the past few decades. But there’s no immutable law that says we’ll be able to maintain 3-10% GDP growth forever. There have been many periods of economic stagnation in the recent past where wealth concentrated exactly the way this model suggests. And there will be similar periods in the future, whether that’s the near future (demographic decline) or slightly more distant future (exponential growth can’t continue forever.)
In either case it is useful to understand the underlying concentrating effect even if one believes it is tolerable because other effects dominate.
Rich folks are only so seemingly "efficient" and good at creating capital because they decline to do what the government does.
The ultra wealthy property developer only builds what is profitable, and so slices off to serve only the most profitable part of the market to serve, and accordingly only builds luxury condos.
Meanwhile the government is obliged to serve everyone, the disabled, the poor, etc, and so with its housing whatever profits are gained by its market priced rents to the middle class are leveraged toward sustaining the unprofitable housing it is obliged to create, and the whole enterprise isn't profitable and needs outside subsidy to continue. We disparage this as "inefficient" government yada yada.
These two different groups aren't working on the same problems.
Adding on to this, we absolutely know how to tax assets. We do it all the time: property (i.e. house) taxes. The unfortunate thing for middle class home owners is that houses are a type of wealth that is taxed just for having it whereas art, corporate shares, bonds, and trust funds are not.
Another contributor is dividends getting taxes lower than earned income (like from a job). Why would money you got from sitting on your ass doing nothing be taxed less than money you got by working a job?
As if the wealthy have never thought of ways to hide their money... The best you'll do is tax those who are actually turning up to get a salary. Ie you will tax people who arguably might be producing something, as opposed to the inter-generational, rent-seeking families that own so much of our world.
If you ask me, and you accept overt governmental control of everything, the best thing to do would be a system of openess about ownership, so that ownership of everything can be seen by everyone - with no murky legal instruments.
If you have the information about who owns what - and everything is owned by people, individuals, even if they hide behind legal and corporate instruments - you can then consider addressing what would be an equitable may to proceed.
My guess would be that something ludicrously minor like a 10% wealth tax on the top 0.01% of wealth owners, would cover us indefinitely.
Which is why I don't think it's very simple, you have to convince a lot of powerful people they should pay more tax to achieve said goal, that's not easy.
Simple and easy are not antonyms here -- something can be simple but difficult to accomplish depending on the time and place at the same time. For example, "respect women" is a simple enough phrase but getting the Taliban to follow it is anything but simple.
The problem is that at the other end there is also dysfunction. With high taxes and regulations keeping companies and profits in line the result is also a combination of structural inflation and stagnation resulting from the high cost of almost any kind of investment or operations. This is what triggered the fundamental changes which occurred from the late 70s through the 80s with Thatcher and Reagan.
It might be helpful if we could construct metrics for social function that more clearly showed when we approach extremes that interfere with business or social functions.
Yes, let the enlightened bureaucrats and their Ivy League-educated advisors make the decisions for the great unwashed masses who clearly cannot think for themselves.
The overly simplistic takes on wealth on this page and the 80%+ who don't bother to vote in the primaries when it counts makes a good case for that.
None of the proposed wealth distribution solutions on this page do anything to address the real problems of lack of housing, poor working conditions, and reducing poverty. Punishing the wealthy doesn't actually fix anything. Wealth redistribution could well be the result of implementing policies that make people's lives better. It could be they may become even wealthier. I don't care either way if the actual problems get addressed.
Nothing gets fixed by punishing the winners after the fact. The real solution is to make the conditions of winning dependent upon providing the solutions to poverty and scarcity in the first place. Which they already do a decent job of in many cases.
So this redistribution... How will this ever be fair? If I work harder and smarter, save/invest instead of spending recklessly - how is it fair that the fruits of my effort are taken by the government (who incidentally created all the laws and loopholes we have now) to redistribute as THEY see fit (also known as Buying Votes).
How do you redistribute my house (expensive due to location) to others living in less expensive places? How about my car (expensive and fast). It costs more, drinks more fuel, and looks nearly new. Never mind that I paid a gasguzzler tax on purchase, sales tax, smog inspection since new(another tax in disguise). It looks new. But I care for it, handwash it, polish it, seal it, personally - my labor. I roundtrip it 90miles a day, so it as 135k miles. But it looks new. MY LABOR. Nobody offered to wash/wax it for me and make some cash. Just like I shovel snow off my driveway. And rake leaves. Nobody wants to do that work. They just want their part of the redistribution.
Y'all worry about these millionaires and their money, yet here you are, hoping to learn the secrets of success from Y-Combi companies... and become wealthy yourselves.
The problem with this plan is that modern economies need a lot of capital.
There are three places that capital can come from:
* the state, but we have voted year in and year out for tax cuts and spending rises, so the state is bankrupt. Not only is it not a source of capital, it is a major customer for it
* normal individuals saving and those small amounts being aggregated by banks etc. But rampant (and government supported) consumerism means most people are also consumers of capital not sources of it. Incidentally an example of the opposite of this is Germany where ordinary people save a lot more and don't have OTT mortgages and credit card debt. Mysteriously they have very few billionares...
* Billionaires. Which given the US (and UK where I live need their capital AND cannot get it elsewhere are able to charge a premium for it and cannot really be taxed etc without pain spreading all over the rest of the economy.
But if you try and tell people to spend less, save more, pay their taxes and accept less services in order to have a better, fairer, more equal, ultimately richer life they bulk...
This focus on super-rich individuals is totally misguided. What's important is the economic system. Rich individuals are simply a nauseating side-effect of capitalism. Nobody really likes it, but there simply isn't anything better. The burden of proof is on the complainers. Even Marxist-sympathetic Peter Singer gets it.
>Look, I think it would be better if you had an economic system in which we didn’t have billionaires—but the productivity that billionaires have generated was still there, and that money was more equitably distributed. But, really, there hasn’t been a system that has had equity in its distribution and the productivity that capitalism has had. I don’t see that happening anytime soon.
> This focus on super-rich individuals is totally misguided. What's important is the economic system. Rich individuals are simply a nauseating side-effect of capitalism. Nobody really likes it, but there simply isn't anything better. The burden of proof is on the complainers.
Serious critics aren't suggesting we do away with capitalism, they're suggesting that it has negative externalities that can be corrected by better taxation. The focus on billionaires is exactly right, because as the model in the article shows, taxation can suppress the extreme inequality that results.
I don't get the productivity argument. What productivity is enabled by billionaires or even individuals? Noam Chomsky has covered this, but most corporations benefit extensively from decades of government funded research and development. The socialist driven productivity is there, it's just that we slap capitalism on it at the end and think it was that that got us here.
I think this is referring to a widely used mental model in economics whereby you look at the allocation of resources "other than money". So if you look at a piece of farmland, you look at how many people it feeds and not so much at the fact that person X owns it and person Y needs to pay X for food. The fact that X becomes richer as a side-effect of Y not having to starve triggers our sense of injustice, but at the end, what really matters is that everyone gets fed. If, trying to right such injustices, you end up with an economic system where that piece of land feeds fewer people, you might have done yourself a disservice.
R&D is just one aspect. Productivity refers to general competent management incentivized by market pressure.
Anti-capitalists apparently can't even run lemonade stands these days:
Well, what is "economy"? Economy exists because we split work, and we do that to optimize taking care of our needs. I make tools for more efficient hunting, you do more efficient hunting with that in order to get food not just for you, but for others, including me, with these. It also means if machines do most of that work there will actually be less economy, but more free time for humans.
If you look at what is commonly called "economy", more and more of what is done there actually has a negative real economic value, it effectively hurts humans. The reason behind that is how we measure this economic value: It is completely broken. But as long as people strongly believe in this garbage, everything is focused on that, even it is trailed by chaos and destruction.
So capitalism, at least in its current form (neo-liberalism), fails as hard as socialism or communism, for that matter. Reason for that: Humans.
I also don't think anyone expects completely equal distribution of everything, but things are so far off in the other corner by now that something needs to be done, fast.
Or alternatively realise that there isn't a fixed amount of money and therefore if 'rich people' want to count their coins let them do so.
(i) it solves the capital accumulation problem
(ii) you can accommodate the hoarding by guaranteeing people a job at the living wage, which then injects the right amount of new money, both temporally and spatially, to offset the hoarding.
Tax has nothing to do with raising money. Tax is about reducing the capacity of the private sector to hire people so the public sector can hire them instead. If there is unemployment then the public sector hasn't hired enough people or taxes are too high/ineffective.
There isn't a fixed amount of money. And taxes are only incidentally about public sector hiring.
There is (more or less) a fixed amount of power.
Taxes doesn't raise money, but they do redistribute and decentralise power, making it harder for the very rich to dominate economic and social strategy for their own ends.
This model does not resemble a free economy at all. Not only it doesn't consider the wealth-creation aspect of a free economy, but it assumes people "wagers" their wealth. No society does this and is a terrible model of how an economy works. Most people earn their wages, if they have some money left they may save that, but long term saving is not comparable with a bet on a coin flip, if you think it is, then you should not save at all because you will go broke with probability one. Again, that is not what happens in our societies.
Jumping to the conclusion that "taxing the rich" could solve anything is completely wrong. You would just make things more expensive and add extra incentives to take jobs abroad. It doesn't matter that the model is too simplistic, the problem is that this model is too far from reality.
There a thing called the Laffer Curve. It’s not as though politicians, whose job it is to spend money, and whom can easily get more popular votes by spending ever larger sums of money rather than budgeting in such a way that defers immediate gratification, have never thought of just taxing more (read history).
I think this time we should go above and beyond regular heavy taxation.
We should seek to extend republican norms within the corporate sphere and downright prohibit rent-seeking.
A country whose inhabitants have no say in its internal politics is called a tyranny. It's more than time to see the current workplace the same way.
> Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
Oh yes, the "they don't know what's good for them" argument.
How does this "solve" anything? Do you actually think that if rich people start paying more, then that will result in a reduction in what poor/middle class people pay?
You are treating the government as if it had even the tiniest bit of fiscal discipline, as if it says, ok, we only have $x coming in, therefore we can only spend $x this year (or alternatively, we plan to spend x, therefore we're obliged to collect x in revenue, but no more than that.)
US government hasn't worked like this in decades. Our debt is out of control and growing exponentially. The government has the green light to spend spend spend without any caution whatsoever. Joe Biden has a 4000-page, $1.7 trillion spending bill working it's way through Congress right now that nobody has read. Do you think any politician actually cares how it's going to be paid for? Do you think there are enough ultra rich people in this country, that even if taxed at 99.9%, will dig us out from a 30+ trillion hole?
It sure does, which is why we should tax land instead. :) No level of taxation on land value will prevent the land from materializing and being usable.
What is "that" that you're referring to? Tax rates have absolutely fallen. If you're referring the article's claim that the rich pay much more taxes in terms of dollar amount, that doesn't necessarily mean anything because the rich are wealthier and more concentrated than every before.
For example:
> According to investment bank Credit Suisse, the fraction of global household wealth held by the richest 1 percent of the world's population increased from 42.5 to 47.2 percent between the financial crisis of 2008 and 2018. To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
Looking at the total world population is completely meaningless. This is because fertility rate in virtually every developed country is below 2, however there are extremely poor countries where the population is exploding with fertility rates above 8.
> To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
This is also completely meaningless, because that figure is largely imaginery and super illiquid. Rest assured, Jeff Bezos can't cash out of Amazon and expect to be paid the current market rate for all of his shares.
It's also completely meaningless because the world's bottom 3.5 billion people control virtually no wealth whatsoever. Makes for a good headline though
For the U.S. alone, I think the stat is something like out of every 10,000 people, it's something ridiculous like either 40 or even 4 people that own as much wealth as the bottom 6,000 combined. It may honestly be something worse like 1. I remember calculating this from a research paper I read, and I feel like 10,000 was the sample population needed to get a non-fractional rich person or persons. This is absurd.
Bezos may not be able to sell his shares in significant amounts, but he can sure use them for collateral. This is a very basic strategy for the super rich...
It'll be interesting to see if that strategy continues to work in a rising-rates environment, where the value of AMZN or TSLA may not be infinitely appreciating.
It's even worse that that. As interest rates rise, equities generally fall as they have been as they need to compete with interest bearing assets so their costs are skyrocketing and their collateral is collapsing risking them for a margin call and loosing everything.
Yes, I mentioned it above. There’s no way of stopping it, because the modern financial system is extremely dependent on such collaterization.
Bezos uses it to spend his pile of money, but for one Bezos there are 100 businesses who use the same exact instrument as a perfectly legitimate way to borrow money.
It’ll be extremely hard to draw the line between both use cases in a way Bezos couldn’t exploit it.
Your source doesn't address the amount of tax collected from the ultra wealthy in relative proportion to their wealth. It only addresses the amount as a percentage of the federal budget.
The point is that the source you cited to claim they didn't doesn't actually prove that, so what reason do us random HNers have to believe you over the initial claim that the higher tax rate in the past actually addressed this problem?
The model clearly shows that while heavy taxation does not fully eliminate unequal distribution, it does dramatically suppress the inequality. Completely eliminating inequality is not necessarily a goal.
If the government is not bound by a balanced budget amendment (can spend more than it takes in), and can print money whenever it wants, why do I pay taxes?
If the entire monetary system is fake, why do they need 40+% of my paycheck?
> Because without an income stream no one loans to the government
The government prints whatever money it needs to pay its bills, and does so already with impunity. It also pays interest on money loaned to it (bonds) with printed fiat.
Also, you completely missed the point. Of course taxes “do things”, and ending them would also “do something”. That wasn’t the question.
The question is simple, why pay taxes at all when the government has the ability to print an endless supply of money?
Why so should people answer or respond if the responses are ignored in order to repeat posting the same wrong preconceptions… preconceptions that were already addressed and even provided a contemporary example that was also ignored.
Fair taxation doesn't work with regulatory capture. The US is a gross-unequal mafia colonial power. If it wasn't, campaign finance reform not only would've passed decades ago, it wouldn't be necessary. Instead, it's easy to be super rich and pay almost no taxes like Trump or Buffett.
> Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
This is known since at least Marx, and still it doesn't change. This makes me very sad.
But tell me, how are you going to tax the super rich? It's incredibly difficult to tax someone who's actually poor on paper. Most super rich people actually don't seem to have much wealth officially declared, all of their wealth is sort of like "pseudo" in that it's all tied up in assets, and sometimes assets that aren't directly owned by them but their companies etc. and they have a lot of shortcuts for tax breaks on the stuff that can be taxed. With the current system in place then it's impossible to actually tax the rich.
> It's incredibly difficult to tax someone who's actually poor on paper
You think this because the super rich want you to think this. Actually, it's not hard and there are some good ideas floating around (e.g. more inheritance tax, don't let them get loans without taxes againt their illiquid wealth). Does it require a change of laws? Yes, but that's the whole point of democracy.
> don't let them get loans without taxes againt their illiquid wealth
You don't want to fix this. It would kill repurchasing agreements as a collateral damage, making access to credit more difficult and expensive for everyone. Not to mention HELOCs. You might say, "ok, exempt HELOCs", but that's just an arbitrary goalpost.
The economy is organic, you can just use a wrench and have a go at a couple of cogs and expect there to be no knock-on effect.
> The economy is organic, you can just use a wrench and have a go at a couple of cogs and expect there to be no knock-on effect.
What do you even mean by "organic"? Of course governments can, do and should intervene in the economy. And yes, there should be a range of experts evaluating policies before they are encated. I never stated the opposite.
It isn't difficult at all. This is an oft repeated excuse. The rich use their wealth as collateral to purchase things, like homes, companies, investments, etc. and transfer wealth to inheritors with basically no tax. So stop worrying about trying to figure out how to tax unrealized wealth and start taxing the things that unrealized wealth helps secure and purchases. This is one way to force realization of that wealth and thus tax it as well and get it back into circulation.
Right now, the rich are extremely incentivized to remain "poor on paper", so we should remove those incentives.
All the money they’ve made has been taxed. When they sell assets they pay taxes. Yes there are sone areas to address but wealthy people pay the majority of taxes.
Gifts eliminate estate tax up to $12m. You can exceed even that limit by purchasing a property and placing it in a QPRT.
Life insurance trusts also have no limit.
Finally, even if it were true that it's merely deferring taxes, that means you can essentially time the market to pay less in tax when the rules are more favourable, and you can realize more gains in the interim.
Except there are abuses of Roth IRAs and other cases where tax can be completely avoided. I think it was only recent that some limitations of Roth IRAs were put in place for heirs, but such investment vehicles do exist that do not get hit by the normal estate taxation processes.
Some rich person says “teehee, I actually have no money! It’s all in (some country)!” and the US gov says “oops! Guess you really are poor!”
They take a letter of the law instead of a spirit of the law approach with taxes. If they start seizing mansions because clearly they have no money and the only way they could afford it is through ill-gotten means, people will start paying. Police already take cash from the wallets of random people because they assume it’s illegal—meanwhile the IRS knows full well where your money comes from but they pretend to believe the tricks of the mega rich.
Plus the IRS literally have access to banks around the world. You’re required to give them proof of foreign bank accounts or face imprisonment and other countries comply with IRS requests. They can literally seize wealth and know it’s yours. They choose not to.
Of course you can track down de facto ownership and streams of income regardless of de jure separation. This is a question of political will, not economical (im)possibilities.
Whenever you try making rich people responsible, they move abroad. In Norway, the super rich are becoming Swiss citizens after a recent change in taxation. Unless Switzerland takes social responsibility, they're getting away with it. But if Switzerland does the right thing, the rich will find another safe haven.
However, this is a short term issue. The long term changes require a historical change in culture and policy. Otherwise we're still very much catering to the will of old money and power structures that resembles autocracy.
(I'm just an armchair socialist and no expert by any measure, ymmv.)
What's wrong with saying good riddance to the super rich moving abroad? I'm tired of these threats of the rich and corporations saying they'll just go elsewhere. I say go for it and call their bluff.
They still need to interact with developed countries economic systems, so still punish them there.
If the billionaires are net negative and worse than the value they provide, ie billionaires are harmful to society, it seems the easiest way to reduce inequality is just to have them leave.
That's win/win for everyone, they keep their money, you get a society without billionires.
Right now, the middle class is getting slammed with taxes. They make almost all their money through salary and get taxed heavily, while the super rich pay either no tax or a maximum of capital gains, so almost 40% or less than upper middle class in terms of percentage.
Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.