Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea(fair.org)
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Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea
https://fair.org/home/media-owned-by-wealthy-are-quick-to-tell-you-wealth-taxes-are-a-bad-idea/
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This is so hidden in the debate that it is almost like a "secret". The more taxes you have on corporate income, the higher the incentive for corporations to invest in the company, so they can avoid paying taxes. This is good for the economy.
On the other hand, lowering corporate taxes also generates a cascade of tax avoidance, since you have higher profits that generate the need for more complex tax avoidance schemes to reduce taxation on that large amount of money.
On the other hand, lowering corporate taxes also generates a cascade of tax avoidance, since you have higher profits that generate the need for more complex tax avoidance schemes to reduce taxation on that large amount of money.
I thought that this is common knowledge, every company I know is doing this. Spend their money in the end of the year to reduce taxable profit.
Tax evasion breaks this system. Profit is taken out of the system and stores offshore, where it doesn't create any value.
Tax evasion is bad. Investing is good.
Tax evasion breaks this system. Profit is taken out of the system and stores offshore, where it doesn't create any value.
Tax evasion is bad. Investing is good.
These arguments sound truthy, but economists generally agree that lowering corporate taxes is good for the economy: https://www.npr.org/sections/money/2012/07/19/157047211/six-...
With an extra hidden secret beneath it. That's true for effective taxes on corporate income - if loopholes exist to allow corporations to offshore their money easily and dodge those taxes they're going to do that so they can pull the money out (or, alternatively, temporarily stash their money abroad since the US has a tax holiday every decade).
Honestly, the tax holidays royally piss me off especially coming from a party that "embraces law and order" - it's essentially like pardoning a bunch of robbers - except the actual robbers stole far less money.
Honestly, the tax holidays royally piss me off especially coming from a party that "embraces law and order" - it's essentially like pardoning a bunch of robbers - except the actual robbers stole far less money.
This is obviously fallacious, just consider the extreme case of 100% taxation. At the macro level the only source of investment funds is income that does not go to consumption. Lower the expected rate of return through taxation, and the result is inevitably a shift from investment to consumption. At the individual firm level it's obvious that taxation lowers the NPV of the firm's available projects - they are obviously not going to respond by investing more.
Well starving could be considered just a 100% diet rate. Clearly that would be catastrophic so any claim that dieting is beneficial is obviously fallacious and in fact we would be better off eating more.
Looking at behavior in the extreme case is only valid if behavior scales smoothly up to that limit.
Looking at behavior in the extreme case is only valid if behavior scales smoothly up to that limit.
You're mixing corporate income taxes an personal income taxes. Corporate income taxes are good because the business wants to avoid paying taxes so it will devise more ways to invest in the company. This is where investment capital will be coming from.
Why is investing in mostly flat or negative return projects assumed to be a net-good?
It's generally assumed a corporation would be more interested in positive returns on it's investments. Seems like if a company stops investing in positive ROI projects, it won't grow, and then won't survive as long? I haven't thought about it much, but I think on a macro scale even a negative return project still circulates that money back out, in the form of salaries or materials or something, but that may be a naive thought.
Obviously there are ways to break that, like tax evasion, but hopefully there are other ways to deal with that.
Obviously there are ways to break that, like tax evasion, but hopefully there are other ways to deal with that.
But you're operating on the assumption that companies always have positive investment opportunities available.
This is not the case, and in the event such an opportunity is available, companies would pursue it regardless of the tax environment, because making some money net of tax is better than no money whatsoever.
What such a policy would actually do is incentivize a massive mis-allocation of capital while simultaneously resulting in lower tax revenues. I fail to see how this makes anyone better off.
This is not the case, and in the event such an opportunity is available, companies would pursue it regardless of the tax environment, because making some money net of tax is better than no money whatsoever.
What such a policy would actually do is incentivize a massive mis-allocation of capital while simultaneously resulting in lower tax revenues. I fail to see how this makes anyone better off.
Long ago someone pointed out that the lower and middle class make the mistake of confusing money and power. As often as the rich get caught in tax dodges, much of the 'currency' that flows is only loosely denominated in dollars. We don't tax the cost of changing someone's mind.
At 100% tax rate I would expect that pattern to be magnified. As a board member, I'd use my success to hire or partner with anybody I had the slightest positive feeling for, until there is just enough money left over that I don't have the biggest target painted on my forehead.
At 100% tax rate I would expect that pattern to be magnified. As a board member, I'd use my success to hire or partner with anybody I had the slightest positive feeling for, until there is just enough money left over that I don't have the biggest target painted on my forehead.
So basically a non-profit. That's why non-profit managers sometimes have huge wages.
The extreme case of drinking water is drowning, which gives us about as much guidance for health policy as "what if we went full Marx" does for tax policy.
It is only good for the economy if the reinvested money is more productive than what the the owner of the company would have done with it. This encourages vanity projects.
This conversation makes me wonder about how tax breaks to incentivize certain types of investments are perceived in the board room, especially over the long term.
It sounds like if taxes are high, I invest and play for time, waiting for some administration to offer me a tax break so I can take money out. Is a targeted tax break then also a chance to extract profit?
It sounds like if taxes are high, I invest and play for time, waiting for some administration to offer me a tax break so I can take money out. Is a targeted tax break then also a chance to extract profit?
Lower taxes means you have higher profit post-tax. You would not need to avoid paying taxes on post-tax money.
I think the GP is saying that one avoids taxes by investing in things that grow the company, jobs, R&D, etc.
I don’t know if this scales all the way up when all the big co’s move their HQ’s offshore. Perhaps we need diff positions for diff business sizes.
I don’t know if this scales all the way up when all the big co’s move their HQ’s offshore. Perhaps we need diff positions for diff business sizes.
If so, they are confused because they are thinking of expenses as paying for themselves with the taxes saved. A business with a lower tax rate would make the same investments and have more money left over, or make more investments with the same money.
The expenses do pay for themselves. Assume you have profits in Year 1.
If you pay for an expense with pre-tax income (i.e., in December, assuming a calendar tax year), that reduces your tax liability on your profits for the year, for an effective discount of X% on that expense (where X is your effective tax rate).
If you buy that same expense with post-tax income (i.e., in January of Year 2), you don't get the effective discount, and you won't know until the end of Year 2 if it will reduce your Year 2 taxes. Also, you have to wait a year to get any tax benefit out of the expense.
The cost of waiting just a few weeks can be huge. This is why many companies (or corporate departments) choose to blow the remainders of their budgets rushing through projects at year end rather than just taking the time to do things properly after the holidays.
If you pay for an expense with pre-tax income (i.e., in December, assuming a calendar tax year), that reduces your tax liability on your profits for the year, for an effective discount of X% on that expense (where X is your effective tax rate).
If you buy that same expense with post-tax income (i.e., in January of Year 2), you don't get the effective discount, and you won't know until the end of Year 2 if it will reduce your Year 2 taxes. Also, you have to wait a year to get any tax benefit out of the expense.
The cost of waiting just a few weeks can be huge. This is why many companies (or corporate departments) choose to blow the remainders of their budgets rushing through projects at year end rather than just taking the time to do things properly after the holidays.
A discount is of course not the same as paying for itself (e.g. a 100% discount.) Some people think of reduced taxes as being a dollar-for-dollar credit (not you, of course.)
The forced spending by the end of a fiscal tax year is often offset by delivery or implementation contracts to mitigate the damage of having to time the purchase for tax purchases.
The forced spending by the end of a fiscal tax year is often offset by delivery or implementation contracts to mitigate the damage of having to time the purchase for tax purchases.
Right, it's a deduction, not a credit, so it only partially pays for itself on a direct tax basis, but generally the expense is money the business would have spent anyways on its business.
But the point is that a business with a higher tax rate has a greater incentive to spend money, and to spend more of it.
And as a practical matter, history has demonstrated that businesses actually invest less during periods of low tax than they do during periods of high tax, even though they have more cash to spend. It's counterintuitive but multiple major tax cuts have borne this trend out.
But the point is that a business with a higher tax rate has a greater incentive to spend money, and to spend more of it.
And as a practical matter, history has demonstrated that businesses actually invest less during periods of low tax than they do during periods of high tax, even though they have more cash to spend. It's counterintuitive but multiple major tax cuts have borne this trend out.
We haven’t seen a protracted low tax period under modern economic circumstances.
Certainly considered in isolation this investment sounds attractive. In conjunction with the benefits of paychecks and dividends being spent elsewhere in the economy it’s less certain.
Certainly considered in isolation this investment sounds attractive. In conjunction with the benefits of paychecks and dividends being spent elsewhere in the economy it’s less certain.
Just to be clear, we're talking about 2 different types of taxes: you're talking about personal income taxes, and I'm talking about business income taxes (aka business profit taxes).
Changing personal income tax rates has a lagging effect on economic spending, because they're spread out over time so that effect ends up being very small on a monthly or bimonthly basis (i.e., the periods over which a person generally receives a paycheck). Generally, consumers don't even notice the change until the file the taxes for the year.
Businesses have had low taxes since the Reagan administration, albeit brief periods of higher taxes during the Clinton and Obama administrations. Notably, business investment was at its highest levels during those periods of high taxes, and the economy grew at its highest rates since the post-WWII reconstruction era. During the periods of low taxes, US businesses actually accelerated off-shoring labor to foreign facilities, and the decline of Detroit and the Rust Belt can be directly correlated with the Reagan tax cuts.
Changing personal income tax rates has a lagging effect on economic spending, because they're spread out over time so that effect ends up being very small on a monthly or bimonthly basis (i.e., the periods over which a person generally receives a paycheck). Generally, consumers don't even notice the change until the file the taxes for the year.
Businesses have had low taxes since the Reagan administration, albeit brief periods of higher taxes during the Clinton and Obama administrations. Notably, business investment was at its highest levels during those periods of high taxes, and the economy grew at its highest rates since the post-WWII reconstruction era. During the periods of low taxes, US businesses actually accelerated off-shoring labor to foreign facilities, and the decline of Detroit and the Rust Belt can be directly correlated with the Reagan tax cuts.
Why do you say it affects paychecks? My understanding is that these tax breaks almost never translate into bonuses or pay wages rising. Often times it goes to shareholders, which don’t represent a significant portion of the population, and only really benefit an even smaller group (because they have enough skin in the game to make a diff).
Most of that is financial engineering, not actually investing in the company to many any progress.
A better option would be to remove corporate incomes taxes entirely. Only tax the outflow instead, which would be simpler to implement and easier to deal with at all levels.
A better option would be to remove corporate incomes taxes entirely. Only tax the outflow instead, which would be simpler to implement and easier to deal with at all levels.
>The more taxes you have on corporate income, the higher the incentive for corporations to invest in the company, so they can avoid paying taxes.
And the lower the incentive to make new investments.
And the higher the incentive to engage in socially wasteful tax-avoidance accounting.
And the lower the incentive to make new investments.
And the higher the incentive to engage in socially wasteful tax-avoidance accounting.
Actually, history bears out that higher tax rates result in corporations re-investing more of their profits in the company and less in tax-avoidance accounting.
The difference being that the former is low risk and can grow the business, while the other has a good chance of triggering penalties that wipe out the savings and could even result in jail time for one or more executives.
Consider that the historically highest rates of tax fraud are during the current administration, despite historically low levels of tax on corporate income.
The difference being that the former is low risk and can grow the business, while the other has a good chance of triggering penalties that wipe out the savings and could even result in jail time for one or more executives.
Consider that the historically highest rates of tax fraud are during the current administration, despite historically low levels of tax on corporate income.
>...Actually, history bears out that higher tax rates result in corporations re-investing more of their profits in the company and less in tax-avoidance accounting.
Can't speak for all companies, but higher tax rates generally means more money invested in tax avoidance. If for example, your tax rate was 95% of your income it would be rational for you to put a lot more effort into finding ways to avoid those taxes than if the taxes were 1%.
>...The difference being that the former is low risk and can grow the business,
Low risk? Investing in your business can grow the business or it can be money that could have just as well be thrown away. Lots of businesses have failed because they did bad investments, tried to over-expand, etc.
>...while the other has a good chance of triggering penalties that wipe out the savings and could even result in jail time for one or more executives.
There are no penalties or jail time associated with tax-avoidance - you probably mean tax evasion which is a crime.
>...Consider that the historically highest rates of tax fraud are during the current administration, despite historically low levels of tax on corporate income.
How much tax fraud is there with corporations? According to the IRS:
>...The Internal Revenue Service (IRS) has identified small business and sole proprietorship employees as the largest contributors to the tax gap between what Americans owe in federal taxes and what the federal government receives. Small business and sole proprietorship employees contribute to the tax gap because there are few ways for the government to know about skimming or non-reporting of income without mounting more significant investigations.
https://en.wikipedia.org/wiki/Tax_evasion_in_the_United_Stat...
Another source says:
>... Even though corporate misdeeds grab a lot of press, corporate underreporting accounts for only $67 billion of the tax gap, or 14.8 percent.
https://money.howstuffworks.com/personal-finance/personal-in...
Can't speak for all companies, but higher tax rates generally means more money invested in tax avoidance. If for example, your tax rate was 95% of your income it would be rational for you to put a lot more effort into finding ways to avoid those taxes than if the taxes were 1%.
>...The difference being that the former is low risk and can grow the business,
Low risk? Investing in your business can grow the business or it can be money that could have just as well be thrown away. Lots of businesses have failed because they did bad investments, tried to over-expand, etc.
>...while the other has a good chance of triggering penalties that wipe out the savings and could even result in jail time for one or more executives.
There are no penalties or jail time associated with tax-avoidance - you probably mean tax evasion which is a crime.
>...Consider that the historically highest rates of tax fraud are during the current administration, despite historically low levels of tax on corporate income.
How much tax fraud is there with corporations? According to the IRS:
>...The Internal Revenue Service (IRS) has identified small business and sole proprietorship employees as the largest contributors to the tax gap between what Americans owe in federal taxes and what the federal government receives. Small business and sole proprietorship employees contribute to the tax gap because there are few ways for the government to know about skimming or non-reporting of income without mounting more significant investigations.
https://en.wikipedia.org/wiki/Tax_evasion_in_the_United_Stat...
Another source says:
>... Even though corporate misdeeds grab a lot of press, corporate underreporting accounts for only $67 billion of the tax gap, or 14.8 percent.
https://money.howstuffworks.com/personal-finance/personal-in...
Can't speak for all companies, but higher tax rates generally means more money invested in tax avoidance. If for example, your tax rate was 95% of your income it would be rational for you to put a lot more effort into finding ways to avoid those taxes than if the taxes were 1%.
It's funny because I'm a tax consultant for a living, and that's simply not been my experience. Businesses want to avoid paying taxes when possible, but it's generally not worth their effort to play tax games. A business doesn't pay taxes unless it's making profits, and it would have to be making sufficient profits that the millions they'd spend on consultants and maintaining tax avoidance strategies every year exceeds the actual tax liability by a material amount. For most businesses, that's not worth it.
Tax rates don't drive business decisions. The only time they matter is when a business is choosing between multiple otherwise equal or similar options and tax issues are the primary differentiators.
There are no penalties or jail time associated with tax-avoidance - you probably mean tax evasion which is a crime.
There are penalties associated with numerous tax avoidance strategies if the tax authority disagrees with your position; it's not necessary for the position to rise to the level of tax evasion. But on that note, there have been a number of tax avoidance strategies that were legal for years but deemed to be tax evasion after the fact, resulting in hefty fines and criminal sentences for those involved.
The Internal Revenue Service (IRS) has identified small business and sole proprietorship employees as the largest contributors to the tax gap between what Americans owe in federal taxes and what the federal government receives.
No citation was provided for that statement in wikipedia. Additionally, that statement conflicts with what the IRS has actually said about the tax collection gap being approximately $500 billion. https://www.irs.gov/newsroom/the-tax-gap. Based on Propublica reporting, at least $100 billion of that $500 billion is wealthy individuals like the Sackler family.
Even though corporate misdeeds grab a lot of press, corporate underreporting accounts for only $67 billion of the tax gap, or 14.8 percent.
True, but I wasn't saying that corporate tax evasion is higher than other types of tax evasion. I was comparing corporate tax evasion now to corporate tax evasion in other times. Measured against itself it's at historically high rates.
It's funny because I'm a tax consultant for a living, and that's simply not been my experience. Businesses want to avoid paying taxes when possible, but it's generally not worth their effort to play tax games. A business doesn't pay taxes unless it's making profits, and it would have to be making sufficient profits that the millions they'd spend on consultants and maintaining tax avoidance strategies every year exceeds the actual tax liability by a material amount. For most businesses, that's not worth it.
Tax rates don't drive business decisions. The only time they matter is when a business is choosing between multiple otherwise equal or similar options and tax issues are the primary differentiators.
There are no penalties or jail time associated with tax-avoidance - you probably mean tax evasion which is a crime.
There are penalties associated with numerous tax avoidance strategies if the tax authority disagrees with your position; it's not necessary for the position to rise to the level of tax evasion. But on that note, there have been a number of tax avoidance strategies that were legal for years but deemed to be tax evasion after the fact, resulting in hefty fines and criminal sentences for those involved.
The Internal Revenue Service (IRS) has identified small business and sole proprietorship employees as the largest contributors to the tax gap between what Americans owe in federal taxes and what the federal government receives.
No citation was provided for that statement in wikipedia. Additionally, that statement conflicts with what the IRS has actually said about the tax collection gap being approximately $500 billion. https://www.irs.gov/newsroom/the-tax-gap. Based on Propublica reporting, at least $100 billion of that $500 billion is wealthy individuals like the Sackler family.
Even though corporate misdeeds grab a lot of press, corporate underreporting accounts for only $67 billion of the tax gap, or 14.8 percent.
True, but I wasn't saying that corporate tax evasion is higher than other types of tax evasion. I was comparing corporate tax evasion now to corporate tax evasion in other times. Measured against itself it's at historically high rates.
>...Businesses want to avoid paying taxes when possible, but it's generally not worth their effort to play tax games. A business doesn't pay taxes unless it's making profits, and it would have to be making sufficient profits that the millions they'd spend on consultants and maintaining tax avoidance strategies every year exceeds the actual tax liability by a material amount. For most businesses, that's not worth it.
Your original claim was "Actually, history bears out that higher tax rates result in corporations re-investing more of their profits in the company and less in tax-avoidance accounting."
To claim that as tax rates go up, companies are less concerned about the amount of tax they pay is an extraordinary claim and requires extraordinary evidence.
>...Tax rates don't drive business decisions.
I agree. If there are investment opportunities companies will make them.
>...I was comparing corporate tax evasion now to corporate tax evasion in other times. Measured against itself it's at historically high rates.
Where are the numbers for recent years? Your source says the tax gap and compliance has stayed pretty much the same since they started trying to estimate it:
>...The latest estimates for tax years 2011, 2012 and 2013 show the nation's tax compliance rate is substantially unchanged from prior years.
Your original claim was "Actually, history bears out that higher tax rates result in corporations re-investing more of their profits in the company and less in tax-avoidance accounting."
To claim that as tax rates go up, companies are less concerned about the amount of tax they pay is an extraordinary claim and requires extraordinary evidence.
>...Tax rates don't drive business decisions.
I agree. If there are investment opportunities companies will make them.
>...I was comparing corporate tax evasion now to corporate tax evasion in other times. Measured against itself it's at historically high rates.
Where are the numbers for recent years? Your source says the tax gap and compliance has stayed pretty much the same since they started trying to estimate it:
>...The latest estimates for tax years 2011, 2012 and 2013 show the nation's tax compliance rate is substantially unchanged from prior years.
>Actually, history bears out that higher tax rates result in corporations re-investing more of their profits in the company and less in tax-avoidance accounting.
I'm just imagining the 1950s cottage industry in compensating executives with a company car, personal assistant outside of work, etc before the IRS caught up?
And all the present day shenanigans with Amazon/Apple etc hiding profits in Ireland?
I'm just imagining the 1950s cottage industry in compensating executives with a company car, personal assistant outside of work, etc before the IRS caught up?
And all the present day shenanigans with Amazon/Apple etc hiding profits in Ireland?
In both of your 1950s examples, those expenditures flowed into the greater economy resulting in multiple additional taxable transactions while also supporting the livelihoods of one or more other economic participants. In other words, exactly what we want. But on a further note: these expenses never went away, many companies still do these kinds of things today.
The present day shenanigans were Apple and Amazon (note: Apple takes historical credit for being the first tech company to implement this structure) hiding profits in Ireland through the double dutch or similar structures. However, the EU has already attempted to crack down on the use of that structure and deemed it illegal. Companies that currently use the structure may be grandfathered in as a result of EU court decisions but no new companies can get implement the structure. Apple especially has been hoarding money overseas and not doing anything with it. In contrast, companies with higher tax rates have been very active about spending their overseas money rather than bringing it back to the US, precisely to avoid paying the higher taxes that repatriation would incur.
Yes, it's counterintutive. But it's how the world actually works.
The present day shenanigans were Apple and Amazon (note: Apple takes historical credit for being the first tech company to implement this structure) hiding profits in Ireland through the double dutch or similar structures. However, the EU has already attempted to crack down on the use of that structure and deemed it illegal. Companies that currently use the structure may be grandfathered in as a result of EU court decisions but no new companies can get implement the structure. Apple especially has been hoarding money overseas and not doing anything with it. In contrast, companies with higher tax rates have been very active about spending their overseas money rather than bringing it back to the US, precisely to avoid paying the higher taxes that repatriation would incur.
Yes, it's counterintutive. But it's how the world actually works.
>In both of your 1950s examples, those expenditures flowed into the greater economy resulting in multiple additional taxable transactions while also supporting the livelihoods of one or more other economic participants.
You're shifting the goalposts. First you were claiming that taxes don't generally spur avoidant behavior. Now you're claiming they do[1], and we want that.
Which is itself dubious. I'm pretty sure "we" don't want people to unilaterally exempt themselves from taxes by relabeling consumption as a business expense. (In the extreme case, imagine you can just pass on every desired purchase as a "wish list" to your employer and they buy it for you, "as a business expense" leaving you with no taxable income. Obviously the IRS has to crack down on that, and no one would call that "things working as intended".)
And we definitely don't want real resources going to gaming of the tax code, which is socially wasteful.
[1] and in the next paragraph, the tack of "but it's cool, they're gonna crack down on that later".
You're shifting the goalposts. First you were claiming that taxes don't generally spur avoidant behavior. Now you're claiming they do[1], and we want that.
Which is itself dubious. I'm pretty sure "we" don't want people to unilaterally exempt themselves from taxes by relabeling consumption as a business expense. (In the extreme case, imagine you can just pass on every desired purchase as a "wish list" to your employer and they buy it for you, "as a business expense" leaving you with no taxable income. Obviously the IRS has to crack down on that, and no one would call that "things working as intended".)
And we definitely don't want real resources going to gaming of the tax code, which is socially wasteful.
[1] and in the next paragraph, the tack of "but it's cool, they're gonna crack down on that later".
First you were claiming that taxes don't generally spur avoidant behavior. Now you're claiming they do[1], and we want that.
We're talking about different types of avoidance. I'm talking about real business spending, i.e., on facilities, equipment, employees, etc., as a means of tax avoidance. High taxes encourage this type of spending because (a) businesses that are growing are going to do this anyway and (b) they effectively get a discount for this anyway if they're making enough money to actually pay taxes.
But most people are referring to tax avoidance strategies like IP shifting, off-shoring, etc. I'm saying, that based on my professional experience as a tax advisor for a decade, that these activities are not motivated by high tax rates, and indeed were highest during periods of lower tax rates. (In the examples I mentioned above in the earlier comment, the companies weren't engaging in tax avoidance strategies, they were making business investments. The difference is that tax avoidance is entirely or primarily motivated by avoiding taxes and is pursued despite the lack of an actual business need; business investment may be motivated in part by avoiding taxes but is primarily driven by actual business needs and will not be pursued absent a business case for the spending.)
Which is itself dubious. I'm pretty sure "we" don't want people to unilaterally exempt themselves from taxes by relabeling consumption as a business expense
I don't understand where you're going with this. You brought up examples that are considered legitimate business expenses by the tax code, and have been for decades. Hell, they're the basis for all the in-office perks tech companies gave their employees pre-COVID. If you have an issue with whether they should be deductible on moral grounds, that's a separate discussion.
And again, my argument is based on how my clients, and US businesses in general, have actually responded to tax cuts and tax increases, and not to how they were theoretically expected to behave by people who aren't actually running successful businesses.
We're talking about different types of avoidance. I'm talking about real business spending, i.e., on facilities, equipment, employees, etc., as a means of tax avoidance. High taxes encourage this type of spending because (a) businesses that are growing are going to do this anyway and (b) they effectively get a discount for this anyway if they're making enough money to actually pay taxes.
But most people are referring to tax avoidance strategies like IP shifting, off-shoring, etc. I'm saying, that based on my professional experience as a tax advisor for a decade, that these activities are not motivated by high tax rates, and indeed were highest during periods of lower tax rates. (In the examples I mentioned above in the earlier comment, the companies weren't engaging in tax avoidance strategies, they were making business investments. The difference is that tax avoidance is entirely or primarily motivated by avoiding taxes and is pursued despite the lack of an actual business need; business investment may be motivated in part by avoiding taxes but is primarily driven by actual business needs and will not be pursued absent a business case for the spending.)
Which is itself dubious. I'm pretty sure "we" don't want people to unilaterally exempt themselves from taxes by relabeling consumption as a business expense
I don't understand where you're going with this. You brought up examples that are considered legitimate business expenses by the tax code, and have been for decades. Hell, they're the basis for all the in-office perks tech companies gave their employees pre-COVID. If you have an issue with whether they should be deductible on moral grounds, that's a separate discussion.
And again, my argument is based on how my clients, and US businesses in general, have actually responded to tax cuts and tax increases, and not to how they were theoretically expected to behave by people who aren't actually running successful businesses.
The devil's in the detail though - there are other ways to reduce taxable corporate income other than sensible investing. Examples - pay the money out to the directors - use iffy transfer pricing to have the profits appear to be made in some Irish company (see msft, appl) - set the company up offshore owned by a trust (see news corp) - pay the profits out as consultant fees to a company owned by your daughter (no idea who that could be) etc.
Would that explain why a lot of companies these days are doing stock buybacks?
Yes, it is considered more tax advantaged method of returning capitol to shareholders. Dividends get taxed as corporate profits, then again as income downstream. Buybacks are not taxed at either stage.
Buybacks are taxed as capital gains rates (0%, 15%, or 20%), while dividends are subject to special dividend rates (0%, 10%, or 20%).
Dividends are thus actually preferred by most investors, and buybacks generally only advantage the biggest investors.
Additionally, corporations don't get special capital gains rates but do get dividends received exemptions for dividends from related company, so in many cases corporate shareholders would prefer dividends over share buybacks.
Buybacks are big not for tax reasons (because in most cases, companies make buybacks out of borrowed funds, not profits), but because they artificially inflate the stock price, which increases the value of the executive compensation packages of the executives that authorized the buyback.
Dividends are thus actually preferred by most investors, and buybacks generally only advantage the biggest investors.
Additionally, corporations don't get special capital gains rates but do get dividends received exemptions for dividends from related company, so in many cases corporate shareholders would prefer dividends over share buybacks.
Buybacks are big not for tax reasons (because in most cases, companies make buybacks out of borrowed funds, not profits), but because they artificially inflate the stock price, which increases the value of the executive compensation packages of the executives that authorized the buyback.
Don't buybacks benefit long term investors, not bigger investors precisely for tax reasons.
Historical equities compound growth almost entirely comes from constantly reinvesting dividends to buy more shares which compounds to increase future dividends. So as an example, take a company that returns 5% of their share price and an investor pays a 20% tax rate allowing them to reinvest 4% after tax money to buy more shares. After 40 years, they'd have 1.04^40=4.8 times the proportion of the company. If the same company spent all of its money buying back shares, you'd have 1.05^40=7.039 times the company. Now you still have to pay that 20% on gains once you sell so after you'd have (1.05^40-1)*.8+1=5.83 after selling but that is still a 21% benefit for share buybacks in that example.
Also, I wouldn't call that "artificially inflate the stock price". They are reducing the number of outstanding shares thereby increasing the earnings per share which increases the amount that can be returned to each share such as through higher dividends. It is effectively reinvesting the dividends for you back into the company.
Historical equities compound growth almost entirely comes from constantly reinvesting dividends to buy more shares which compounds to increase future dividends. So as an example, take a company that returns 5% of their share price and an investor pays a 20% tax rate allowing them to reinvest 4% after tax money to buy more shares. After 40 years, they'd have 1.04^40=4.8 times the proportion of the company. If the same company spent all of its money buying back shares, you'd have 1.05^40=7.039 times the company. Now you still have to pay that 20% on gains once you sell so after you'd have (1.05^40-1)*.8+1=5.83 after selling but that is still a 21% benefit for share buybacks in that example.
Also, I wouldn't call that "artificially inflate the stock price". They are reducing the number of outstanding shares thereby increasing the earnings per share which increases the amount that can be returned to each share such as through higher dividends. It is effectively reinvesting the dividends for you back into the company.
Your example doesn't make any sense.
With a buyback, you have fewer shares after the buyback. If you "reinvest" in the company you give up all the proceeds you received to buy back the shares that you just sold to the company. But you've paid taxes as a result of the initial buyback so you have less money than you received to reinvest, and now presumably the shares are all more expensive as well. Your position is economically worse off if you reinvest than when you started, because you have the same amount of shares (or fewer) but paid some tax to get there.
With a dividend, you can keep the dividend, or buy more shares of the company or some combination of both. Your economic position is improved either way regardless of the amount of tax you pay.
With a buyback, you have fewer shares after the buyback. If you "reinvest" in the company you give up all the proceeds you received to buy back the shares that you just sold to the company. But you've paid taxes as a result of the initial buyback so you have less money than you received to reinvest, and now presumably the shares are all more expensive as well. Your position is economically worse off if you reinvest than when you started, because you have the same amount of shares (or fewer) but paid some tax to get there.
With a dividend, you can keep the dividend, or buy more shares of the company or some combination of both. Your economic position is improved either way regardless of the amount of tax you pay.
> With a buyback, you have fewer shares after the buyback.
Not sure who "you" is but the company will have fewer shares outstanding, investors who don't sell will have the same and those investors will also now own a greater % of the company as well as a greater earnings per share.
> If you "reinvest" in the company you give up all the proceeds you received to buy back the shares that you just sold to the company
I am 100% not saying that as that would eliminate the benefit. The benefit is to long term investors who buy, hold and reinvest dividends and reinvesting dividends to buy more stock is key as that is where the historical exponential returns are because it increases your ownership share and future dividends.
That is where my example numbers come in because you can only reinvest to buy more shares and thus your ownership % the dividend amount minus tax amount whereas the company can spend the entirety of a dividend buying shares to remove them from the outstanding market. The difference between those two numbers (1.05 and 1.04 in my example) then compounds and effectively goes towards increasing share prices which do eventually get taxed but they get the benefit of compounding while the owner holds.
Also, while you need quite a few shares, you can estimate and sell the percentage of shares a company is buying back in order to keep the same % ownership thus acting like a dividend so I myself would prefer all companies I invest in to never give out dividends and only do buybacks unless their P/E ratio is truly absurd.
Not sure who "you" is but the company will have fewer shares outstanding, investors who don't sell will have the same and those investors will also now own a greater % of the company as well as a greater earnings per share.
> If you "reinvest" in the company you give up all the proceeds you received to buy back the shares that you just sold to the company
I am 100% not saying that as that would eliminate the benefit. The benefit is to long term investors who buy, hold and reinvest dividends and reinvesting dividends to buy more stock is key as that is where the historical exponential returns are because it increases your ownership share and future dividends.
That is where my example numbers come in because you can only reinvest to buy more shares and thus your ownership % the dividend amount minus tax amount whereas the company can spend the entirety of a dividend buying shares to remove them from the outstanding market. The difference between those two numbers (1.05 and 1.04 in my example) then compounds and effectively goes towards increasing share prices which do eventually get taxed but they get the benefit of compounding while the owner holds.
Also, while you need quite a few shares, you can estimate and sell the percentage of shares a company is buying back in order to keep the same % ownership thus acting like a dividend so I myself would prefer all companies I invest in to never give out dividends and only do buybacks unless their P/E ratio is truly absurd.
Oh in that case your numbers for the long-term investors in the buyback situation don't make sense. Their stock may be worth on an individual share basis, but their holdings are unchanged in value at best and usually worth less, because the company expended money in buying back the shares.
In most cases in the past decades, buybacks were accomplished using loans rather than profits, leaving the companies in worse financial positions. More than half of the companies that engaged in buybacks in the past decades are either bankrupt, declared bankruptcy in 2020, or are underperforming the market. Only a handful of companies that engaged in buybacks are doing okay, and those companies also issued dividends (see for example, Microsoft).
In most cases in the past decades, buybacks were accomplished using loans rather than profits, leaving the companies in worse financial positions. More than half of the companies that engaged in buybacks in the past decades are either bankrupt, declared bankruptcy in 2020, or are underperforming the market. Only a handful of companies that engaged in buybacks are doing okay, and those companies also issued dividends (see for example, Microsoft).
> This is good for the economy.
Some people think it is good for the economy, its not objectively true. If a company invests in itself instead of giving out dividends it's making a choice upon the shareholder, which in turn could mean the company invests in something less efficient than the shareholder could find.
> n the other hand, lowering corporate taxes also generates a cascade of tax avoidance
Unless corporate taxes are 0, and you save all of this issues plus get to fire a lot of corporate layers.
Some people think it is good for the economy, its not objectively true. If a company invests in itself instead of giving out dividends it's making a choice upon the shareholder, which in turn could mean the company invests in something less efficient than the shareholder could find.
> n the other hand, lowering corporate taxes also generates a cascade of tax avoidance
Unless corporate taxes are 0, and you save all of this issues plus get to fire a lot of corporate layers.
> This is good for the economy.
Not at all clear to me this is the case.
Not at all clear to me this is the case.
I think it's pretty clear that corporate re-investment going up is good for the economy, perhaps looking at the equivalent lengths countries go to draw excess investment money from the international market in is a decent example - or maybe the WPA in the US where the government artificially injected money into employment to restart the economy.
It's not like the money leaving the corporation doesn't get invested in something else. I could very easily see the how higher rate lead to less innovation since the money is all tied up in mega corps.
Often time it leaves corporations simply to inflate the price of assets, which is not productive. While we have been lowering taxes past many decades the velocity of money has gone down.
Consider the following:
If a firm eyeballs a project that is likely to have a good return, they will pursue it regardless of the corporation tax rate at present. Meaning that whether the corporate tax is high, low, or nonexistent, it's better to make money than not make money.
Given this, if a firm cannot see any good opportunities to pursue, incentivizing mass investment in zero or negative return projects, while coincidentally incentivizing lower government revenue is unlikely be a net good for society. That seems to me to be a encouraging massive destruction of wealth and also encourage enormous mis-allocation of capital.
If a firm eyeballs a project that is likely to have a good return, they will pursue it regardless of the corporation tax rate at present. Meaning that whether the corporate tax is high, low, or nonexistent, it's better to make money than not make money.
Given this, if a firm cannot see any good opportunities to pursue, incentivizing mass investment in zero or negative return projects, while coincidentally incentivizing lower government revenue is unlikely be a net good for society. That seems to me to be a encouraging massive destruction of wealth and also encourage enormous mis-allocation of capital.
You’re (edit: sorry, GP was) espousing the broken windows theory, though. Corporations already have a natural incentive to re-invest in themselves when it’s a profitable decision to do so.
I don't think so because the corporation isn't a person and no one actually has the corporation's best interests at heart. Everyone is invested or labour for the venture for money - some idealists may want to build a great thing - but those will be far in the minority compared to those that want to sell a great thing.
Reinvestment in a corporation is only naturally incentivized when that strategy appears to give the biggest RoI and not all money uninvested from markets, companies etc. will necessarily be reinvested in another venture.
Reinvestment in a corporation is only naturally incentivized when that strategy appears to give the biggest RoI and not all money uninvested from markets, companies etc. will necessarily be reinvested in another venture.
In theory sure, but there are many many counter-examples. Corporate management rarely makes decisions that are against their interests.
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Hoarding wealth is bad for the economy, as it lowers the velocity of money.
See: https://fred.stlouisfed.org/series/M2V
Our current policy is to paper over bank liquidity or other problems by printing money. Big institutions and the mega-rich are hoarding massive quantities of cash. The economy as a whole would be better off if billionaires were doing stuff with their money rather than hoarding shares.
See: https://fred.stlouisfed.org/series/M2V
Our current policy is to paper over bank liquidity or other problems by printing money. Big institutions and the mega-rich are hoarding massive quantities of cash. The economy as a whole would be better off if billionaires were doing stuff with their money rather than hoarding shares.
Do you think big corps convert their retained earnings to cash and stuff it under their mattress?
“BigCorp Ireland, Ltd” buys a bunch of treasuries.
So they're lending money to the government, who spends it.
All BigCorp Ireland LTD has is a brokerage account full of ISIN codes.
All BigCorp Ireland LTD has is a brokerage account full of ISIN codes.
That doesn’t sound like a typical business argument. We could more efficiently get the money in the government treasury by skipping the corporate middleman and taxing it.
How are those tbills delivering value to the shareholders?
How are those tbills delivering value to the shareholders?
Collecting and accounting for tax is far far more inefficient than buying electronic tbills.
And they pay interest to the holder...
The point is, the money isn't keeping out of the economy. It's loaned to the government who spends it.
And they pay interest to the holder...
The point is, the money isn't keeping out of the economy. It's loaned to the government who spends it.
You do realize that nobody keeps that cash on hand, right? It’s in banks where it gets lent out, thus participating and contributing to the economy.
"Hoarding" is nonsense.
"Hoarding" is nonsense.
It plowed into low productivity assets like real estate, in an endless cycle of increasing real estate costs.
The effect is almost identical.
The effect is almost identical.
How are the nearly $2 trillion of bank reserves at the Fed contributing? That’s a significant portion of the total money supply.
Most of the corporate cash isn’t in equity funds, it in US Treasury debt. Apple holds >$50B of treasury securities, for example.
The low inflation monetary policy has some benefits, but combined with our ass-backwards tax system also makes for strong disincentive to do anything with excess cash.
Most of the corporate cash isn’t in equity funds, it in US Treasury debt. Apple holds >$50B of treasury securities, for example.
The low inflation monetary policy has some benefits, but combined with our ass-backwards tax system also makes for strong disincentive to do anything with excess cash.
Money in the government coffers is spent and used by the government. Again, a good thing (as far as government spending can be called a good thing, of course).
> You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives.
It’d be insane to have it any other way for businesses. Whole swathes of low margin businesses would be impossible to operate. For example a super markets average margins are 3-5%.
Corporate tax is (generally) on profits because you can deduct costs. It allows for the flow of money to efficiently find a sub supplier for the parts of a good or service.
The real scam is when things like health insurance premiums are deductible for a company but not for an individual.
It’d be insane to have it any other way for businesses. Whole swathes of low margin businesses would be impossible to operate. For example a super markets average margins are 3-5%.
Corporate tax is (generally) on profits because you can deduct costs. It allows for the flow of money to efficiently find a sub supplier for the parts of a good or service.
The real scam is when things like health insurance premiums are deductible for a company but not for an individual.
> The real scam is when things like health insurance premiums are deductible for a company but not for an individual.
To be fair, that this "scam" is still alive today is mostly by accident.
It stems from WWII times, when stateside laborers were uniquely low in supply and high in demand, and when labor had ridiculous bargaining power.
Laborers couldn't really ask for higher wages, because that was politically impossible (appearing to be extorting wartime needs for money was/is a faux pas).
So companies began competing on "benefits": health, accidental death and disability insurance among them.
To help ease the burden on employers and employees, the IRS allowed businesses to "temporarily" deduct insurance premiums. (This relief came against the backdrop of unprecedented wartime tax hikes).
Postwar, it was unfeasible to remove this measure, as the majority of Americans who had insurance got it through their employers: it would upset both businesses who have to pay more, and employees who lose insurance.
Later, some government (I forget which...) signed this stopgap measure into the tax code, making it permanent.
Regardless of the interesting history, I agree with you, it should be universally deductible.
To be fair, that this "scam" is still alive today is mostly by accident.
It stems from WWII times, when stateside laborers were uniquely low in supply and high in demand, and when labor had ridiculous bargaining power.
Laborers couldn't really ask for higher wages, because that was politically impossible (appearing to be extorting wartime needs for money was/is a faux pas).
So companies began competing on "benefits": health, accidental death and disability insurance among them.
To help ease the burden on employers and employees, the IRS allowed businesses to "temporarily" deduct insurance premiums. (This relief came against the backdrop of unprecedented wartime tax hikes).
Postwar, it was unfeasible to remove this measure, as the majority of Americans who had insurance got it through their employers: it would upset both businesses who have to pay more, and employees who lose insurance.
Later, some government (I forget which...) signed this stopgap measure into the tax code, making it permanent.
Regardless of the interesting history, I agree with you, it should be universally deductible.
>> Laborers couldn't really ask for higher wages, because that was politically impossible
Not just politically impossible, illegal:
>> World War II disrupted those trends. As demand for everything — particularly labor — climbed, Congress passed the Stabilization Act of 1942, which allowed the president to freeze wages and salaries for all the nation's workers. A day after its passage, President Franklin Roosevelt issued an executive order invoking these powers, which applied to "all forms of direct or indirect remuneration to an employee," including but not limited to salaries and wages, as well as "bonuses, additional compensation, gifts, commissions, fees."
But there was an exemption of massive proportions slipped into a fateful clause: "insurance and pension benefits" could grow "in a reasonable amount" during the freeze."
- https://www.chicagotribune.com/opinion/commentary/ct-obamaca...
And, relevant to today's discussion:
>> By slapping corporations with tax rates of 80 or even up to 90 percent on any profits in excess of prewar revenue, Congress all but guaranteed a frenzied search for loopholes.
Also interesting to note that the change in question wasn't a switch from workers paying for their own health insurance to it being paid for by employers. Prior to WW2 less than 10% of Americans had any form of health insurance, by the end of the war it was close to 30%.
Not just politically impossible, illegal:
>> World War II disrupted those trends. As demand for everything — particularly labor — climbed, Congress passed the Stabilization Act of 1942, which allowed the president to freeze wages and salaries for all the nation's workers. A day after its passage, President Franklin Roosevelt issued an executive order invoking these powers, which applied to "all forms of direct or indirect remuneration to an employee," including but not limited to salaries and wages, as well as "bonuses, additional compensation, gifts, commissions, fees."
But there was an exemption of massive proportions slipped into a fateful clause: "insurance and pension benefits" could grow "in a reasonable amount" during the freeze."
- https://www.chicagotribune.com/opinion/commentary/ct-obamaca...
And, relevant to today's discussion:
>> By slapping corporations with tax rates of 80 or even up to 90 percent on any profits in excess of prewar revenue, Congress all but guaranteed a frenzied search for loopholes.
Also interesting to note that the change in question wasn't a switch from workers paying for their own health insurance to it being paid for by employers. Prior to WW2 less than 10% of Americans had any form of health insurance, by the end of the war it was close to 30%.
> Regardless of the interesting history, I agree with you, it should be universally deductible.
I’m for it being universally not deductible. Or at least not deductible for corporations.
The idea is that it forces everyone onto a common public individual market as there would be no tax or cost advantage of corporations to self-insure or provide insurance.
Longer term this gives better mobility to workers and lowers costs of the individual market by bringing in 100M+ healthy people (which lowers the average risk weight cost of insurance).
I’m for it being universally not deductible. Or at least not deductible for corporations.
The idea is that it forces everyone onto a common public individual market as there would be no tax or cost advantage of corporations to self-insure or provide insurance.
Longer term this gives better mobility to workers and lowers costs of the individual market by bringing in 100M+ healthy people (which lowers the average risk weight cost of insurance).
Interesting idea.
If it were not deductible for anybody, fewer people would have health insurance. If you're in that pool, it's good for you, because it would probably be cheaper. But fewer people would be insured, so it's overall bad, right?
Am I'm missing some part of your argument?
The idea of making it universally deductible/subsidized for individuals seems to be the path that we're on right now.
Case 1: If you purchase health insurance on the exchange, and are very poor, you can get fully-subsidized plans. (Not to mention if you qualify for medicare).
Case 2: The most plausible proposals of "Medicare for All" are basically expanding the pool of people who qualify for zero-premium medicare advantage plans. This keeps insurance individualized and operated by private companies to maintain quality improvements driven by capitalistic-competition, although the government is the ultimate payer.
Case 3: the government (yes, even the current administration) has taken several steps to encourage employers to subsidize the costs of employees purchasing insurance individually, rather than as a group [see https://www.takecommandhealth.com/ichra-guide].
If it were not deductible for anybody, fewer people would have health insurance. If you're in that pool, it's good for you, because it would probably be cheaper. But fewer people would be insured, so it's overall bad, right?
Am I'm missing some part of your argument?
The idea of making it universally deductible/subsidized for individuals seems to be the path that we're on right now.
Case 1: If you purchase health insurance on the exchange, and are very poor, you can get fully-subsidized plans. (Not to mention if you qualify for medicare).
Case 2: The most plausible proposals of "Medicare for All" are basically expanding the pool of people who qualify for zero-premium medicare advantage plans. This keeps insurance individualized and operated by private companies to maintain quality improvements driven by capitalistic-competition, although the government is the ultimate payer.
Case 3: the government (yes, even the current administration) has taken several steps to encourage employers to subsidize the costs of employees purchasing insurance individually, rather than as a group [see https://www.takecommandhealth.com/ichra-guide].
Aren't health insurance premiums deductible for individuals too?
"If you bought medical insurance policies on your own for yourself or your family, you might qualify for a self-employment tax deduction on the premiums." [1]
"If you are enrolled in an employer-sponsored health insurance plan, your premiums may already be tax-free. If your premiums are made through a payroll deduction plan, they are likely made with pre-tax dollars, so you would not be allowed to claim a year-end tax deduction." [2]
[1]: https://www.nerdwallet.com/article/taxes/self-employment-tax... [2]: https://www.investopedia.com/are-health-insurance-premiums-t...
"If you are enrolled in an employer-sponsored health insurance plan, your premiums may already be tax-free. If your premiums are made through a payroll deduction plan, they are likely made with pre-tax dollars, so you would not be allowed to claim a year-end tax deduction." [2]
[1]: https://www.nerdwallet.com/article/taxes/self-employment-tax... [2]: https://www.investopedia.com/are-health-insurance-premiums-t...
I'm confused. What's the difference between a "tax deduction" and paying with "pre-tax dollars"?
Do they mean if for example a company pays $5000/year in employee insurance, they can subtract $5000 from their tax bill? If so, that's a tax credit right?
As I understand it, a "tax deduction" is a deduction on taxable income (in the case of an individual) or profit (in the case of a company).
Do they mean if for example a company pays $5000/year in employee insurance, they can subtract $5000 from their tax bill? If so, that's a tax credit right?
As I understand it, a "tax deduction" is a deduction on taxable income (in the case of an individual) or profit (in the case of a company).
You are right, pre-tax dollars is the same as tax deduction. But for self-employment (the first point), there are more conditions, and people might be out of luck. For example if you could be insured by your spouse's employee based insurance, and you choose to buy your own insurance.
Strange. Business owner friends of mine have taken the opposite approach over the years.
Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Maybe it is largely the type of business that behavior changes. Their last venture was starting up an aquaponics farm in a borderline urban / suburban area, though I haven't kept in touch and it appears to have been sold off to another family.
Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Maybe it is largely the type of business that behavior changes. Their last venture was starting up an aquaponics farm in a borderline urban / suburban area, though I haven't kept in touch and it appears to have been sold off to another family.
I think the OP is talking about investing within the business. The business is a separate legal entity with its own income, expenditures, and assets that is under the control of its owner. Assuming that you want to continue owning the business as a going concern, it makes sense to maximize expenditures (by investing in the future) and minimize profits when tax rates are high. But if you're happy entering and exiting the business as a whole, it makes sense to sell it (transferring money equal to its value to your personal balance sheet) when taxes are low and about to go up, and then just not work while taxes are high.
Inflation can put a bit of a wrinkle in this, since if you get $20M for your business and then you find that that's worth the equivalent of $2M in 5-10 years it can crimp your early retirement.
Inflation can put a bit of a wrinkle in this, since if you get $20M for your business and then you find that that's worth the equivalent of $2M in 5-10 years it can crimp your early retirement.
Exactly. Corporate taxes are an incentive for businesses investing in themselves but, as I understand it, an disincentive for investors to invest in businesses. I'm mostly just bothered by how simplistic the debate is and how most people don't even understand this detail.
Interesting. This also implies a shift from financial capital (VCs, hedge funds, private equity) to production capital (reinvested profits) when corporate tax rates go up. In the Carlota Perez model, this is the shift from the "frenzy" phase (of huge valuations, founders entering and exiting startups, bubble mentality) to the "deployment" phase (where the technology diffuses through the economy and is adopted as part of the fabric of many companies). I never thought of tax policy as helping drive that, but it seems to correspond pretty well.
My other big question is how this interacts with monetary policy. Inflation tends to preference financial capital by a.) lowering the real cost of outside credit and b.) causing dislocations within the economy that create opportunities for new startups. That could offset higher corporate taxes to some extent, while if combined with low corporate taxes it could spark a mania.
My other big question is how this interacts with monetary policy. Inflation tends to preference financial capital by a.) lowering the real cost of outside credit and b.) causing dislocations within the economy that create opportunities for new startups. That could offset higher corporate taxes to some extent, while if combined with low corporate taxes it could spark a mania.
> but, as I understand it, an disincentive for investors to invest in businesses
I don't see this holding true. Can you explain how?
Like, yes as a personal investor you now have less to invest, because you are taxed more on your income. But of the money you have left after tax, investment is still investment. There's no other way to make money of your money then to invest it. So as long as you don't spend all the money immediately, the incentive to invest it is there.
Also, the companies you invest in will be incentivized to reinvest in themselves, thus their stock growth potential will be higher, so a good time to invest in them.
Finally, the biggest investors arn't individuals, but investment firms, and because they themselves are a company, they themselves are like all others more incentivized to reinvest into their business, thus they are more likely to want to take their profit and invest it some more, instead of cashing it out as revenue.
I don't see this holding true. Can you explain how?
Like, yes as a personal investor you now have less to invest, because you are taxed more on your income. But of the money you have left after tax, investment is still investment. There's no other way to make money of your money then to invest it. So as long as you don't spend all the money immediately, the incentive to invest it is there.
Also, the companies you invest in will be incentivized to reinvest in themselves, thus their stock growth potential will be higher, so a good time to invest in them.
Finally, the biggest investors arn't individuals, but investment firms, and because they themselves are a company, they themselves are like all others more incentivized to reinvest into their business, thus they are more likely to want to take their profit and invest it some more, instead of cashing it out as revenue.
> I don't see this holding true. Can you explain how?
Suppose you have $40,000. You can buy some stock in a domestic corporation, or buy some stock in a foreign corporation, or put a down payment on a house, or buy a new car, or invest in government bonds, or ten other things.
If you raise the domestic corporate tax rate, option one becomes less attractive compared to all the other ones.
Suppose you have $40,000. You can buy some stock in a domestic corporation, or buy some stock in a foreign corporation, or put a down payment on a house, or buy a new car, or invest in government bonds, or ten other things.
If you raise the domestic corporate tax rate, option one becomes less attractive compared to all the other ones.
Oh I was talking about personal income tax in my previous comment.
For corporate tax rate, I think it depends if you're planning a growth investment or a dividend based one. For growth, capital tax rate shouldn't affect you at all, since you'll mostly target companies running at close to no revenue or even declaring losses, but growing very fast.
For dividend investment, it would, since the companies will have less profit post tax, but if you think about it holistically, that's like the best thing to tax. You have a well established business, that's no longer growing or doing so very slowly, and it is making excess money even after paying all its employees and expenses. It seems a very good place to take from and redistribute.
Think about the alternative sources of revenue for the government here? What could be better then that?
For corporate tax rate, I think it depends if you're planning a growth investment or a dividend based one. For growth, capital tax rate shouldn't affect you at all, since you'll mostly target companies running at close to no revenue or even declaring losses, but growing very fast.
For dividend investment, it would, since the companies will have less profit post tax, but if you think about it holistically, that's like the best thing to tax. You have a well established business, that's no longer growing or doing so very slowly, and it is making excess money even after paying all its employees and expenses. It seems a very good place to take from and redistribute.
Think about the alternative sources of revenue for the government here? What could be better then that?
> For dividend investment, it would, since the companies will have less profit post tax, but if you think about it holistically, that's like the best thing to tax. You have a well established business, that's no longer growing or doing so very slowly, and it is making excess money even after paying all its employees and expenses. It seems a very good place to take from and redistribute.
There are two issues there. The first is that it's a long-term fail, because the "cash cow" stage is where investors make back their money that was invested during the growth stage in a company that wasn't then paying dividends. If you tax them away, the market value of the company crashes as soon as it hits the cash cow stage, and then who is going to invest at the growth stage when that's their ultimate outcome? So you destroy investment in new companies.
And the second is that it promotes malinvestment, because rather than paying dividends to investors who reinvest them in promising new companies, you create the incentive for the corporation to remain in the growth state indefinitely and use all of its profits to continually expand, even into markets outside of its competency. Then you get huge inefficient conglomerates, which is much as we've seen.
What you really want is to make dividends a tax deduction from corporate income tax, but still taxable to the shareholder. Then they cancel out from a government revenue perspective but you lose the perverse incentive to grow the corporation without bound.
> Think about the alternative sources of revenue for the government here? What could be better then that?
VAT actually works really well. You get to a similar result from the other side: VAT and corporate income tax are really almost the same thing, but instead of deducting dividends from corporate income tax, the corporation has to collect VAT but there is no income tax on the dividends. And it has the further advantage that it's paid to the jurisdiction of final sale rather than wherever a multinational corporation contrives its "profits" to be declared.
There are two issues there. The first is that it's a long-term fail, because the "cash cow" stage is where investors make back their money that was invested during the growth stage in a company that wasn't then paying dividends. If you tax them away, the market value of the company crashes as soon as it hits the cash cow stage, and then who is going to invest at the growth stage when that's their ultimate outcome? So you destroy investment in new companies.
And the second is that it promotes malinvestment, because rather than paying dividends to investors who reinvest them in promising new companies, you create the incentive for the corporation to remain in the growth state indefinitely and use all of its profits to continually expand, even into markets outside of its competency. Then you get huge inefficient conglomerates, which is much as we've seen.
What you really want is to make dividends a tax deduction from corporate income tax, but still taxable to the shareholder. Then they cancel out from a government revenue perspective but you lose the perverse incentive to grow the corporation without bound.
> Think about the alternative sources of revenue for the government here? What could be better then that?
VAT actually works really well. You get to a similar result from the other side: VAT and corporate income tax are really almost the same thing, but instead of deducting dividends from corporate income tax, the corporation has to collect VAT but there is no income tax on the dividends. And it has the further advantage that it's paid to the jurisdiction of final sale rather than wherever a multinational corporation contrives its "profits" to be declared.
> But if you're happy entering and exiting the business as a whole, it makes sense to sell it (transferring money equal to its value to your personal balance sheet) when taxes are low and about to go up, and then just not work while taxes are high.
Not quite. The fact that taxes are about to go up has already taken a huge chunk out of the sale value of the business. You want to sell it when taxes are low and not about to go up.
Not quite. The fact that taxes are about to go up has already taken a huge chunk out of the sale value of the business. You want to sell it when taxes are low and not about to go up.
Ah yes, I did miss that, thank you.
> Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Sure — if you're already wealthy enough to get by without any income, that might make sense. But for most business owners the alternative is "work for someone else", not "return to early retirement".
Sure — if you're already wealthy enough to get by without any income, that might make sense. But for most business owners the alternative is "work for someone else", not "return to early retirement".
Well, you have to remember that taxes affect the expected outcome, as they reduce the upside of a positive outcome. Taxes do not mitigate the losses from a failure, and most people do not have the resources to sustain failures (without severe negative consequences).
By reducing the expected outcome of a new venture, taxes discourage marginal entrepreneurs from starting businesses.
By reducing the expected outcome of a new venture, taxes discourage marginal entrepreneurs from starting businesses.
OP's point is that corporate taxes don't work like that. As a business owner, you can avoid taxes by reinvesting in your business, capturing the positive outcome by way of valuation. If corporate taxes are lower, owners are incentivized to extract profits rather than reinvesting them.
Well, OP is very bad at finance, and his points only apply to certain investments. For instance, most jurisdictions treat capital equipment as retained earnings (it gets more complicated when you get to devaluation and re-sale, but those only matter if the business survives).
Disagree. Agree with 100% with OP. Taxes are high, reinvest in your company. Taxes are low, transfer wealth to yourself. As an aside, just to make some peoples blood flow perk up. In 2020, if you have paid any taxes in the last 5 years, you can expense up the wazoo, and carryback taxes. See cares act. In theory this nets out 5 years of no actual company taxes being paid.
If it's easy to sell the business off then there must be plenty of buyers. Which sounds to me like a good indicator that their response isn't a strong majority.
There is always going to be someone who will buy your business so they can sell your trucks and equipment and real estate.
I'm assuming they got a reasonable price, because they could easily do that themselves!
But that's work, and might be done more efficiently by someone in the business of doing that, who has contacts with potential buyers or is selling off the properties of multiple different companies etc.
> Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Sure, they may feel that way. But the person who bought the business off them is still incentivized to behave in the way that the GP post describes.
Sure, they may feel that way. But the person who bought the business off them is still incentivized to behave in the way that the GP post describes.
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Where have taxes been oscillating so much that you've seen multiple cycles of this?
I don't understand the logic. If corporate taxes are high but capital gains are low, that may make sense. In a general sense, you spend money to avoid showing profit.
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That must be business specific. At first blush, selling when taxes go up sounds like a good way to maximize your losses. But I'm in the tech industry. So aquaponics must be significantly different.
Yeah citation needed, other then tariffs taxes have only gone down in the past 30 years...
Federal receipts as a percentage of GDP haven't meaningfully changed since WWII. (Which means that they've only gone up in real dollars per capita, because GDP per capita has increased.)
Yeah so taxes have gone down. If you measure taxes with real metrics they've gone down to their lowest level ever.
What are you talking about? As a percentage of GDP, federal taxes have been the same since the 1940s. But real GDP per capita has increased, so real taxes per capita have increased.
And before the 1940s, federal taxes were dramatically lower.
And before the 1940s, federal taxes were dramatically lower.
Federal taxes have been going down my whole life (born 1990 in the US). What era/region are you referring to where taxes go up?
Think state and local taxes. Depending on where you live and the type of business you run, they can add up quickly.
Also, the people I am speaking about were most definitely born before the 90's. More like 50's or 60's.
Also, the people I am speaking about were most definitely born before the 90's. More like 50's or 60's.
State and local taxes have been going up in many places. Often in response to decreased federal support.
This is a wealth tax that would apply to the valuation of the business, not the profits that it makes.
I was posting a tangent. It resonated, but it's probably a mistake that this is the top comment since I'm not talking about the article specifically, just how wealth is taxed and a way in which the public debate is misinformed.
>And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them.
I know you aren't arguing against higher taxes, but my response to that is... and? Does Target benefit more from some random hedge fund buying up $20 million of their shares? Or from consumers buying $20 million in goods from them? Once a company has gone public, unless they're trying to do another round of funding, the share price is almost meaningless beyond the ghost of being taken over by another entity.
This belief that institutional investors mean more to the health of a business than ACTUAL SALES is baffling to me (not saying that's your stance).
I know you aren't arguing against higher taxes, but my response to that is... and? Does Target benefit more from some random hedge fund buying up $20 million of their shares? Or from consumers buying $20 million in goods from them? Once a company has gone public, unless they're trying to do another round of funding, the share price is almost meaningless beyond the ghost of being taken over by another entity.
This belief that institutional investors mean more to the health of a business than ACTUAL SALES is baffling to me (not saying that's your stance).
> This belief that institutional investors mean more to the health of a business than ACTUAL SALES is baffling to me (not saying that's your stance).
Investors making money means more money to invest, which creates more companies and services.
Investors making money means more money to invest, which creates more companies and services.
The problem is when you start making money and want to grow the business without funding. You need to build a war chest. Once you've burnt through any carried loss, which happened pretty quickly in our case, we are taxed on the profit we are retaining in order to build up a cash reserve.
That cash reserve is needed if we're to self fund big projects and in case of down-turn, lawsuit or other unforeseen event if we are to avoid immediately laying people off.
The alternative is to raise money which dilutes founders and employees who own stock or vested options.
You won't encounter this issue if you're early stage or if you are "going for growth" by running at a loss and raising money in successive rounds. But it is a huge problem if you are a self funding small or medium sized business.
That cash reserve is needed if we're to self fund big projects and in case of down-turn, lawsuit or other unforeseen event if we are to avoid immediately laying people off.
The alternative is to raise money which dilutes founders and employees who own stock or vested options.
You won't encounter this issue if you're early stage or if you are "going for growth" by running at a loss and raising money in successive rounds. But it is a huge problem if you are a self funding small or medium sized business.
That's actually an example of why wealth taxes aren't a great idea. If you invest money back into the business, that might reduce your profits, and therefore any corporate or income taxes. But that investment it will increase the long-term value of the company. Under a wealth tax, that would cause taxes for everyone who holds the stock to go up! In fact, if investing in say a new line of business causes the value of the stock to go up by more than just parking the money in the corporate treasury, a wealth tax creates a perverse incentive to not invest back in the company.
I generally agree with the opposition to wealth taxes (and no, I'm not wealthy), but I'll try to engage with this by providing what I believe is the strongest good-faith counterargument:
> a wealth tax creates a perverse incentive to not invest back in the company.
This is arguably a "good thing" because one could argue that it's "unfair" that large, high revenue / high income corporations allocate so much capital in our economy. It would arguably be better for them to pay the taxes and instead have that capital be allocated by a democratically accountable body: the government.
> a wealth tax creates a perverse incentive to not invest back in the company.
This is arguably a "good thing" because one could argue that it's "unfair" that large, high revenue / high income corporations allocate so much capital in our economy. It would arguably be better for them to pay the taxes and instead have that capital be allocated by a democratically accountable body: the government.
> This is arguably a "good thing" because one could argue that it's "unfair" that large, high revenue / high income corporations allocate so much capital in our economy. It would arguably be better for them to pay the taxes and instead have that capital be allocated by a democratically accountable body: the government.
This is certainly "arguable." One of the very few things economists agree on is the market's are better at allocating capital than governments. That's one of the core functions of markets.
This is certainly "arguable." One of the very few things economists agree on is the market's are better at allocating capital than governments. That's one of the core functions of markets.
Yep, I don't disagree.
> But when taxes are high, I see that as an incentive to hide the profits by investing in the future.
That isn't really the societal win you're making it out to be though. If you "pocket" profits, i.e. pay them to investors, the investors just go out and invest them again in something else. Which is actually better, because it reduces concentration of wealth inside of corporations. Instead of one corporation growing ever larger because they have to invest internally or be subject to punitive taxes, you get many new independent companies being formed as investors seek out new opportunities for the money they receive as dividends.
The other problem is that there are many forms of investment that are taxed differently. Government bond interest typically isn't taxed. Real estate appreciation typically isn't taxed until sale, which means they can be deferred indefinitely. Investing in foreign corporations will be subject to the tax rates in those other countries. So if you increase the domestic corporate tax rate, investment moves from domestic companies to things like real estate speculation and foreign companies, which may not be desirable.
Moreover, multinational corporations arrange for profits to be declared in whichever jurisdiction has the lowest taxes, so increasing the tax rate on domestic corporations disadvantages them against multinationals that won't be paying those taxes.
That isn't really the societal win you're making it out to be though. If you "pocket" profits, i.e. pay them to investors, the investors just go out and invest them again in something else. Which is actually better, because it reduces concentration of wealth inside of corporations. Instead of one corporation growing ever larger because they have to invest internally or be subject to punitive taxes, you get many new independent companies being formed as investors seek out new opportunities for the money they receive as dividends.
The other problem is that there are many forms of investment that are taxed differently. Government bond interest typically isn't taxed. Real estate appreciation typically isn't taxed until sale, which means they can be deferred indefinitely. Investing in foreign corporations will be subject to the tax rates in those other countries. So if you increase the domestic corporate tax rate, investment moves from domestic companies to things like real estate speculation and foreign companies, which may not be desirable.
Moreover, multinational corporations arrange for profits to be declared in whichever jurisdiction has the lowest taxes, so increasing the tax rate on domestic corporations disadvantages them against multinationals that won't be paying those taxes.
So if you increase the domestic corporate tax rate, investment moves from domestic companies to things like real estate speculation and foreign companies, which may not be desirable.
The reverse is actually true. Historically, the lower the tax rate, the more investment you get in real estate speculation and other passive income streams because it's now more efficient to simply not invest in productive activities when you can just get effectively free money without doing any work.
The higher the tax rate, the more businesses invest in actual business activities, because they get more expenses they can use to offset income they may earn, and because passive activities generally don't generate enough of a return to be worth the investment compared to (re)investing in an actual business.
The reverse is actually true. Historically, the lower the tax rate, the more investment you get in real estate speculation and other passive income streams because it's now more efficient to simply not invest in productive activities when you can just get effectively free money without doing any work.
The higher the tax rate, the more businesses invest in actual business activities, because they get more expenses they can use to offset income they may earn, and because passive activities generally don't generate enough of a return to be worth the investment compared to (re)investing in an actual business.
> The higher the tax rate, the more businesses invest in actual business activities, because they get more expenses they can use to offset income they may earn
The purchase price of real estate is ultimately deductible as depreciation, as is mortgage interest, and any profits from rents get reinvested into buying more real estate which becomes deductible as depreciation again. Also, real estate speculation is commonly done using LLCs (passthrough, no corporate income tax anyway).
The purchase price of real estate is ultimately deductible as depreciation, as is mortgage interest, and any profits from rents get reinvested into buying more real estate which becomes deductible as depreciation again. Also, real estate speculation is commonly done using LLCs (passthrough, no corporate income tax anyway).
Land doesn't depreciate, only structures and improvements to the land. Mortgage interest is not included in the basis of real property or in depreciation. It's just another deductible expense.
Most real estate companies are partnerships or REITs due to special tax provisions. But most of their investors are corporate entities.
Generally, profits from rent are not reinvested in buying more real estate because they simply aren't sufficient for that. Real estate is a cash flow game: real properties are purchased through commercial mortgages, and rental income services the debt. Generally, profits arise when real properties are sold for appreciated values. Because of this, real estate investment flourishes in low tax years: as a result of depreciation, the cost basis of the real property has been reduced, so the taxable income from the sale has increased.
Most real estate companies are partnerships or REITs due to special tax provisions. But most of their investors are corporate entities.
Generally, profits from rent are not reinvested in buying more real estate because they simply aren't sufficient for that. Real estate is a cash flow game: real properties are purchased through commercial mortgages, and rental income services the debt. Generally, profits arise when real properties are sold for appreciated values. Because of this, real estate investment flourishes in low tax years: as a result of depreciation, the cost basis of the real property has been reduced, so the taxable income from the sale has increased.
> Land doesn't depreciate, only structures and improvements to the land.
The structures are generally the majority of the value of the property.
> Mortgage interest is not included in the basis of real property or in depreciation. It's just another deductible expense.
Nonetheless it's a major expense and fully deductible. They also get to deduct property maintenance etc.
> Most real estate companies are partnerships or REITs due to special tax provisions. But most of their investors are corporate entities.
A group of ten individuals who get together to buy an apartment complex are not a corporation. Moreover, if the investors are a corporation, it's still one less layer of indirection -- for a corporate investor, if the real estate holding company were an S Corp you would be paying corporate income tax twice.
> Real estate is a cash flow game: real properties are purchased through commercial mortgages, and rental income services the debt.
This is true until the debt is paid, but then isn't that the point? They get to deduct the interest and depreciation and maintenance, and wipe out their rental income.
> Because of this, real estate investment flourishes in low tax years: as a result of depreciation, the cost basis of the real property has been reduced, so the taxable income from the sale has increased.
That would result in real estate sales in low tax years, i.e. willingness to divest rather than willingness to invest. During the high tax years people would want to buy/hold and continue speculating to continue to defer paying the high taxes on the appreciation.
The structures are generally the majority of the value of the property.
> Mortgage interest is not included in the basis of real property or in depreciation. It's just another deductible expense.
Nonetheless it's a major expense and fully deductible. They also get to deduct property maintenance etc.
> Most real estate companies are partnerships or REITs due to special tax provisions. But most of their investors are corporate entities.
A group of ten individuals who get together to buy an apartment complex are not a corporation. Moreover, if the investors are a corporation, it's still one less layer of indirection -- for a corporate investor, if the real estate holding company were an S Corp you would be paying corporate income tax twice.
> Real estate is a cash flow game: real properties are purchased through commercial mortgages, and rental income services the debt.
This is true until the debt is paid, but then isn't that the point? They get to deduct the interest and depreciation and maintenance, and wipe out their rental income.
> Because of this, real estate investment flourishes in low tax years: as a result of depreciation, the cost basis of the real property has been reduced, so the taxable income from the sale has increased.
That would result in real estate sales in low tax years, i.e. willingness to divest rather than willingness to invest. During the high tax years people would want to buy/hold and continue speculating to continue to defer paying the high taxes on the appreciation.
The structures are generally the majority of the value of the property.
Depends, unless you're talking about very large structures like office buildings, factories, or malls in which case the structures are definitely worth more than the land. For most residential and small-to-midsize commercial plots, it depends on where the land is. In states like HI, CA, NY, and NJ, the land is worth more than the structures on top of it, and that is triply true in cities like LA and SF.
Nonetheless it's a major expense and fully deductible.
Yes, it's generally a real property company's biggest expense. But as far as business expenses go, it's not that big compared to the expenses another business would face. (My real estate clients included a number of REITs, including a major mall chain, and the owners of a number of LA, NY, SF office towers.)
They also get to deduct property maintenance etc.
Generally, no. Under a triple-net lease, they would not get to deduct these costs because they're not paying them. Most commercial properties are leased on a triple-net basis, so the tenant is paying maintenance costs.
A group of ten individuals who get together to buy an apartment complex are not a corporation. Moreover, if the investors are a corporation, it's still one less layer of indirection -- for a corporate investor, if the real estate holding company were an S Corp you would be paying corporate income tax twice.
My statement was directed to the real world, in which most investors in REITs and real estate partnerships are corporate entities, not to a hypothetical situation.
Also, I'm not sure if you are aware of this but an S-Corp does not pay corporate income taxes, so there's only a single layer of tax whether they use an S-Corp, LLC, REIT, or LP, or GP. They're all flow-through entities for tax purposes that are differentiated primarily by their legal/compliance burdens.
This is true until the debt is paid, but then isn't that the point? They get to deduct the interest and depreciation and maintenance, and wipe out their rental income.
Yes, that's the point, but more to the point, that's the entire point of real estate investing. You make your money selling the real estate, but it's a holding game until then; you just care that you make enough in rental income to pay your debt service costs (it's not that you wipe out your rental income with expenses, it's that your expenses are covered by the rental income). This is why property owners can let storefronts remain vacant for years, so long as their rental income from the building is otherwise covering debt service.
That would result in real estate sales in low tax years, i.e. willingness to divest rather than willingness to invest. During the high tax years people would want to buy/hold and continue speculating to continue to defer paying the high taxes on the appreciation.
Right, but the flip side of you divesting is someone else investing, at appreciated costs from you paid.
The exception of course is those real property companies that are not engaged in speculation but are primarily in the business of being landlords. They have actual businesses, and correspondingly tend to spend more on upgrades during periods of higher taxes. (See, e.g., LA's or SF's office markets: prior to the TCJA tax cuts, billions or hundreds of millions spent on improving existing office buildings but since then essentially zilch.)
Depends, unless you're talking about very large structures like office buildings, factories, or malls in which case the structures are definitely worth more than the land. For most residential and small-to-midsize commercial plots, it depends on where the land is. In states like HI, CA, NY, and NJ, the land is worth more than the structures on top of it, and that is triply true in cities like LA and SF.
Nonetheless it's a major expense and fully deductible.
Yes, it's generally a real property company's biggest expense. But as far as business expenses go, it's not that big compared to the expenses another business would face. (My real estate clients included a number of REITs, including a major mall chain, and the owners of a number of LA, NY, SF office towers.)
They also get to deduct property maintenance etc.
Generally, no. Under a triple-net lease, they would not get to deduct these costs because they're not paying them. Most commercial properties are leased on a triple-net basis, so the tenant is paying maintenance costs.
A group of ten individuals who get together to buy an apartment complex are not a corporation. Moreover, if the investors are a corporation, it's still one less layer of indirection -- for a corporate investor, if the real estate holding company were an S Corp you would be paying corporate income tax twice.
My statement was directed to the real world, in which most investors in REITs and real estate partnerships are corporate entities, not to a hypothetical situation.
Also, I'm not sure if you are aware of this but an S-Corp does not pay corporate income taxes, so there's only a single layer of tax whether they use an S-Corp, LLC, REIT, or LP, or GP. They're all flow-through entities for tax purposes that are differentiated primarily by their legal/compliance burdens.
This is true until the debt is paid, but then isn't that the point? They get to deduct the interest and depreciation and maintenance, and wipe out their rental income.
Yes, that's the point, but more to the point, that's the entire point of real estate investing. You make your money selling the real estate, but it's a holding game until then; you just care that you make enough in rental income to pay your debt service costs (it's not that you wipe out your rental income with expenses, it's that your expenses are covered by the rental income). This is why property owners can let storefronts remain vacant for years, so long as their rental income from the building is otherwise covering debt service.
That would result in real estate sales in low tax years, i.e. willingness to divest rather than willingness to invest. During the high tax years people would want to buy/hold and continue speculating to continue to defer paying the high taxes on the appreciation.
Right, but the flip side of you divesting is someone else investing, at appreciated costs from you paid.
The exception of course is those real property companies that are not engaged in speculation but are primarily in the business of being landlords. They have actual businesses, and correspondingly tend to spend more on upgrades during periods of higher taxes. (See, e.g., LA's or SF's office markets: prior to the TCJA tax cuts, billions or hundreds of millions spent on improving existing office buildings but since then essentially zilch.)
> Depends, unless you're talking about very large structures like office buildings, factories, or malls in which case the structures are definitely worth more than the land.
Or large apartment complexes. But isn't that where most real estate investing goes? Detached single family homes are mostly owner-occupied.
> Generally, no. Under a triple-net lease, they would not get to deduct these costs because they're not paying them. Most commercial properties are leased on a triple-net basis, so the tenant is paying maintenance costs.
But then the tenant is paying correspondingly less rent, which means less taxable income to the property owner. It's a wash either way.
> Also, I'm not sure if you are aware of this but an S-Corp does not pay corporate income taxes
You're right, I meant C-Corp.
My point being that if the investor is a "corporation" in the sense that it's paying corporate income tax itself, that has little to do with the thing it's investing in. If it buys ownership of a REIT and the REIT itself doesn't pay corporate income tax, and the corporate tax rate is high, that's more advantageous than the same corporate investor buying shares of Union Pacific, whether or not the entity doing the investing then pays corporate income tax on the income it receives from the investment.
> Yes, that's the point, but more to the point, that's the entire point of real estate investing.
It's one of the two options. Option one, you zero out your taxable income while building equity, and then sell to liquidate. Option two, you zero out your taxable income while building equity, then once the loan is paid off you get to keep the rental income, which can be used as down payment on additional properties if you prefer to invest further rather than pay the tax and spend the money.
> Right, but the flip side of you divesting is someone else investing, at appreciated costs from you paid.
The point being that high turnover during periods of low taxation isn't a result of people wanting to get into the real estate market, it's a result of people wanting to get out. So it tends to cause housing to become more affordable rather than inflating a bubble because people hold who would rather sell if not for selling incurring a major tax bill.
> They have actual businesses, and correspondingly tend to spend more on upgrades during periods of higher taxes.
That's evidence of what I'm saying -- when corporate taxes are high, people move investment from businesses to real estate. Making improvements to real estate is investing in real estate. Lower taxes and they stop because they make more to invest the same money in other businesses.
Or large apartment complexes. But isn't that where most real estate investing goes? Detached single family homes are mostly owner-occupied.
> Generally, no. Under a triple-net lease, they would not get to deduct these costs because they're not paying them. Most commercial properties are leased on a triple-net basis, so the tenant is paying maintenance costs.
But then the tenant is paying correspondingly less rent, which means less taxable income to the property owner. It's a wash either way.
> Also, I'm not sure if you are aware of this but an S-Corp does not pay corporate income taxes
You're right, I meant C-Corp.
My point being that if the investor is a "corporation" in the sense that it's paying corporate income tax itself, that has little to do with the thing it's investing in. If it buys ownership of a REIT and the REIT itself doesn't pay corporate income tax, and the corporate tax rate is high, that's more advantageous than the same corporate investor buying shares of Union Pacific, whether or not the entity doing the investing then pays corporate income tax on the income it receives from the investment.
> Yes, that's the point, but more to the point, that's the entire point of real estate investing.
It's one of the two options. Option one, you zero out your taxable income while building equity, and then sell to liquidate. Option two, you zero out your taxable income while building equity, then once the loan is paid off you get to keep the rental income, which can be used as down payment on additional properties if you prefer to invest further rather than pay the tax and spend the money.
> Right, but the flip side of you divesting is someone else investing, at appreciated costs from you paid.
The point being that high turnover during periods of low taxation isn't a result of people wanting to get into the real estate market, it's a result of people wanting to get out. So it tends to cause housing to become more affordable rather than inflating a bubble because people hold who would rather sell if not for selling incurring a major tax bill.
> They have actual businesses, and correspondingly tend to spend more on upgrades during periods of higher taxes.
That's evidence of what I'm saying -- when corporate taxes are high, people move investment from businesses to real estate. Making improvements to real estate is investing in real estate. Lower taxes and they stop because they make more to invest the same money in other businesses.
Or large apartment complexes. But isn't that where most real estate investing goes? Detached single family homes are mostly owner-occupied.
In terms of absolute deals? Yes. In terms of dollar value? Not even close, commercial property far exceeds residential property.
But then the tenant is paying correspondingly less rent, which means less taxable income to the property owner. It's a wash either way.
Generally, no. That's not how triple-net leases work. Tenant pays market value, and maintenance costs on top of that.
It's one of the two options.
In your hypothetical, sure. But in the real world, you don't make enough money in rent from one property to use to pay a down payment on the other, and actual real estate investment companies don't pay down the loans; they take out balloon mortgages and just pay interest on the loans until they sell (or refinance before the balloon). I've done this for enough real property investor clients to know how they actually think.
That's evidence of what I'm saying -- when corporate taxes are high, people move investment from businesses to real estate. Making improvements to real estate is investing in real estate. Lower taxes and they stop because they make more to invest the same money in other businesses.
No, it's not. Because all businesses make more investments in their businesses during periods of high taxes. And specifically in my example, I wasn't referring to real estate investors, but companies that actually manage buildings with the intent of being landlords and making their money from commercial leases, not from selling their buildings.
In terms of absolute deals? Yes. In terms of dollar value? Not even close, commercial property far exceeds residential property.
But then the tenant is paying correspondingly less rent, which means less taxable income to the property owner. It's a wash either way.
Generally, no. That's not how triple-net leases work. Tenant pays market value, and maintenance costs on top of that.
It's one of the two options.
In your hypothetical, sure. But in the real world, you don't make enough money in rent from one property to use to pay a down payment on the other, and actual real estate investment companies don't pay down the loans; they take out balloon mortgages and just pay interest on the loans until they sell (or refinance before the balloon). I've done this for enough real property investor clients to know how they actually think.
That's evidence of what I'm saying -- when corporate taxes are high, people move investment from businesses to real estate. Making improvements to real estate is investing in real estate. Lower taxes and they stop because they make more to invest the same money in other businesses.
No, it's not. Because all businesses make more investments in their businesses during periods of high taxes. And specifically in my example, I wasn't referring to real estate investors, but companies that actually manage buildings with the intent of being landlords and making their money from commercial leases, not from selling their buildings.
Yes. The op assumes that malinvestment / inefficient use of capital is not a thing.
You can only invest so much into a grocery store. The entire point of us having free markets is so that capital can move around. Locking it down into once place is the exact opposite of what you want to do.
You can only invest so much into a grocery store. The entire point of us having free markets is so that capital can move around. Locking it down into once place is the exact opposite of what you want to do.
This is something that I have not seen very much research about (not saying it doesn't exist.) When taxes are high, then "wealthy" people will search for a method to reduce their tax burden. For business owners and employers, there are two large options for reducing tax burden - increasing employee salary, and increasing re-investment (R&D, infrastructure, etc). Both of which are commonly cited as deficient in modern business practices.
For sufficiently large companies, a third option is to create a global corporate structure that minimizes the tax burden. If lawyers + accountants + other fees is considerably less than the tax (which is probably the case for most mid-sized or larger companies), becomes a no-brainer for them.
See https://en.wikipedia.org/wiki/Double_Irish_arrangement for a historic example.
See https://en.wikipedia.org/wiki/Double_Irish_arrangement for a historic example.
It used to be a no-brainer to go overseas.
But the Double Irish (and similar structuring) is no longer permitted and would be treated as an illegal tax scheme today. (It's grandfathered in for companies already using the structure.)
Generally, between BEAT, GILTI, global transfer pricing policies, and the rise of nationalist economic policies, it's now riskier and more expensive to switch to a global corporate structure than to just keep everything in the US.
I used to do a lot of outbound structuring work, and now (post TCJA) almost everything is inbound, compliance, or restructuring existing foreign operations to more tax-friendly foreign jurisdictions (i.e., moving out of China to Vietname, etc.)
But the Double Irish (and similar structuring) is no longer permitted and would be treated as an illegal tax scheme today. (It's grandfathered in for companies already using the structure.)
Generally, between BEAT, GILTI, global transfer pricing policies, and the rise of nationalist economic policies, it's now riskier and more expensive to switch to a global corporate structure than to just keep everything in the US.
I used to do a lot of outbound structuring work, and now (post TCJA) almost everything is inbound, compliance, or restructuring existing foreign operations to more tax-friendly foreign jurisdictions (i.e., moving out of China to Vietname, etc.)
That seems like the way the incentive is supposed to work no? Motivate the economy by furthering investment back into it.
If we tax wealth, people will be incentivized to generate non-wealth things.
Why buy a stock if Biden will take 1% of it annually? May as well just buy rapidly depreciating status symbols instead.
Why buy a stock if Biden will take 1% of it annually? May as well just buy rapidly depreciating status symbols instead.
I agree and disagree. I do think people would be incentivized to find a store of value that doesn't meet whatever definition of wealth the IRS uses. I think no matter what your definition is, there will be a way to game the system and the wealthy will do so aggressively.
I don't necessarily think it leads to purchasing status symbols. Depreciation already kind of incentivizes that, so I don't think there's anything fundamentally game-changing there.
I don't necessarily think it leads to purchasing status symbols. Depreciation already kind of incentivizes that, so I don't think there's anything fundamentally game-changing there.
Interesting thought. It also means that there is a continued pressure to sell stocks/buy less. So stock values will be negatively affected.
Because the stock may still appreciate at 6% annually.
And, depending on what is actually done with the money that Congress has decided to appropriate, it may be redistributed to consumers who will buy more of whatever that publicly traded company produces, or pay off the national debt, or do other things that can increase the health and growth of the economy. (Or not.)
And, depending on what is actually done with the money that Congress has decided to appropriate, it may be redistributed to consumers who will buy more of whatever that publicly traded company produces, or pay off the national debt, or do other things that can increase the health and growth of the economy. (Or not.)
More drones, more likely than not.
Why work as an average american is the government will take 22% of it?
Probably because trading stocks will still leave you with a lot more money than if you threw a tantrum, took your toys home and hid your money under your mattress - no plan that I've seen has investors paying capital gains at the level of their equivalent income - investment is still heavily subsidized.
Probably because trading stocks will still leave you with a lot more money than if you threw a tantrum, took your toys home and hid your money under your mattress - no plan that I've seen has investors paying capital gains at the level of their equivalent income - investment is still heavily subsidized.
> capital gains
Capital gains happen on money that has already been taxed as income. Capital Gains tax is less because it's round 2 of the taxation game.
Also taxing assets on their capital means people will not invest in capitally intensive projects. For example building a new housing complex returning 3% per year (after inflation) is 33% less interesting with an additional 1% wealth tax (on the capital) ...
Capital gains happen on money that has already been taxed as income. Capital Gains tax is less because it's round 2 of the taxation game.
Also taxing assets on their capital means people will not invest in capitally intensive projects. For example building a new housing complex returning 3% per year (after inflation) is 33% less interesting with an additional 1% wealth tax (on the capital) ...
It's very possible to get capital gains on something that has not been already taxed as income.
For example: say you purchased 100 shares of Tesla stock a decade ago and sold it today for lots of capital gains. But Tesla has never posted an annual profit on a tax basis, and thus the "income" underlying the shares you sold was not taxed.
In fact, the capital gains rates were never about avoiding double taxation. It was simply a giveaway to Republican donors by the Reagan administration.
You probably mixed up capital gains and dividends. The logic behind giving dividends special rates (including a 0% rate for certain inter-corporate dividends) is that the corporation paying the dividend has already paid an income tax on those profits, so the shareholders should not be subject to full tax on the shares of the profits they receive, but should still pay some tax to account for the benefits of using the corporate form.
For example: say you purchased 100 shares of Tesla stock a decade ago and sold it today for lots of capital gains. But Tesla has never posted an annual profit on a tax basis, and thus the "income" underlying the shares you sold was not taxed.
In fact, the capital gains rates were never about avoiding double taxation. It was simply a giveaway to Republican donors by the Reagan administration.
You probably mixed up capital gains and dividends. The logic behind giving dividends special rates (including a 0% rate for certain inter-corporate dividends) is that the corporation paying the dividend has already paid an income tax on those profits, so the shareholders should not be subject to full tax on the shares of the profits they receive, but should still pay some tax to account for the benefits of using the corporate form.
Capital gains is not a wealth tax. The money in your mattress will also be taxed. Why stay in America if the government not only take 22% of what you earned, but also 2% of what you have.
You’re confusing wealth with income. A wealth tax means it the government is taking a cut even when you’re assets are declining.
Why buy a house if the city will take 1% of its value annually?
We already have wealth taxes, only very narrowly targeted.
We already have wealth taxes, only very narrowly targeted.
> Why buy a stock if Biden will take 1% of it annually? May as well just buy rapidly depreciating status symbols instead
Because the stock will allow you to avoid paying taxes. By investing revenue in investment, as a company, you can avoid paying tax on the money. So if you're a small or medium sized business, you have two choices:
1) Cash out and buy a rapidly depreciating status symbol with the money, but get taxed on it at a higher rate.
2) Reinvest the money in growing your business.
At least that's what I understood from OPs reasoning.
Edit: Also spending money in depreciating status symbols is also a contributor to the economy.
Because the stock will allow you to avoid paying taxes. By investing revenue in investment, as a company, you can avoid paying tax on the money. So if you're a small or medium sized business, you have two choices:
1) Cash out and buy a rapidly depreciating status symbol with the money, but get taxed on it at a higher rate.
2) Reinvest the money in growing your business.
At least that's what I understood from OPs reasoning.
Edit: Also spending money in depreciating status symbols is also a contributor to the economy.
> depreciating status symbols is also a contributor to the economy
Yes, for a single iteration, but it's a vicious cycle of shrinking the pie.
versus creation of new (true) assets makes the pie bigger. A bigger pie means the tax slice grows and there is more to go around. I agree that, for example, Bezos having $300Bn locked up in non-taxable is not ideal too. Ideally that would have been taxes as an "income" as it grew.
Maybe something like the required minimum distribution from 401k would be a good solution?
Yes, for a single iteration, but it's a vicious cycle of shrinking the pie.
versus creation of new (true) assets makes the pie bigger. A bigger pie means the tax slice grows and there is more to go around. I agree that, for example, Bezos having $300Bn locked up in non-taxable is not ideal too. Ideally that would have been taxes as an "income" as it grew.
Maybe something like the required minimum distribution from 401k would be a good solution?
And also, if in an emergency you need to sell some of the equity you built up it is taxed as capital gains, which happens to be a lower tax rate then even middle income people pay on their wages. And, you can also avoid the capital gains by harvesting capital losses.
And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them.
A business that is not making a profit does not pay income taxes. I don't have a single client that has voluntarily turned down making a profit because they'd had to pay some income tax on it.
The only time business income tax rates make a difference is when the business is choosing between multiple profit-generating activities and wants to maximize the net (post-tax) income by minimizing its tax burden.
A business that is not making a profit does not pay income taxes. I don't have a single client that has voluntarily turned down making a profit because they'd had to pay some income tax on it.
The only time business income tax rates make a difference is when the business is choosing between multiple profit-generating activities and wants to maximize the net (post-tax) income by minimizing its tax burden.
This depends a lot on the accounting and tax treatment though. In many industries, that "investment" would be accounted for as capex, and in many countries you don't get an immediate write off against tax for capex but you get it over some approximation of useful life of the assets you've invested in.
There is a strong case for allowing immediate, or faster, write-offs for capex spending in preference to lowering corporate tax rates because of this effect.
There is a strong case for allowing immediate, or faster, write-offs for capex spending in preference to lowering corporate tax rates because of this effect.
> But businesses only pay taxes on their profit.
Except in Washington State.
Except in Washington State.
And Hawaii. See the general excise tax. Fun fact: it's a recursive tax on business revenue (not profit), so if you gross up prices to pass along the tax to customers on a transactional basis, you also need to pay GET on the gross up, ad infinitum. For example, on Oahu this results in a final grossup of approximately 4.7120% (starting from a base GET of 4.5%).
Are you referring to the B&O taxes (seems to be based on industry) or are there others around as well?
I could imagine some reasonable arguments for having a low tax like that around.
I could imagine some reasonable arguments for having a low tax like that around.
> I can only assume that the vast majority of people think businesses are taxed like people. You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives.
People are taxed the same way. There are all kinds of ways to spend your money before paying income tax on it. Most obviously, on health "insurance".
People are taxed the same way. There are all kinds of ways to spend your money before paying income tax on it. Most obviously, on health "insurance".
> As a business owner
You're already a business owner. You're faced with decisions on what to do with an already existing business, not whether to start a new business, and in what state or country to do that.
You're already a business owner. You're faced with decisions on what to do with an already existing business, not whether to start a new business, and in what state or country to do that.
But why invest instead of just taking the tax hit unless you’re waiting for a lower tax rate in the future? It seems this scheme of incentives is dependent on some future expectation of taxes dropping.
Let's say that I own a 5 million dollar business that makes 1 million per year in profit, and the corporate tax rate is 40%. I could take my profit and pay my taxes, leaving me with a 5 million dollar company and $600k cash. Alternatively I could "spend" that $600k to get 1 million dollars in cash interest free to invest in my company, raising its valuation to 6 million. Assuming with the investment that that the company continues to generate 20% profit, even if the tax rate stays the same, I make $720k per year after taxes. Considering I invested 1 million and I'm making an extra $120k per year, that's a 12% ROI/yr - not bad, not great. But since it only cost me $600k to make that investment, I'm really getting 20% ROI/yr. If taxes drop in the future, the ROI further increases, but they don't need to for it to be advantageous. Even if I never actually take profits, my net worth is still going up, and I can cash that in by selling the business or some of its assets at some future point.
That presumes that $600k spent on something increases the value by that much and it also assumes that you can easily scale up revenue with the same profit margin based on the value of the company increasing.
The latter is absolutely not a given and the former is only really safe if you invest the money in something that isn’t really an investment in the business.
Phrased differently, if you had a magic cash printing business like this that can safely scale up with more money you would be absolutely stupid to not do it regardless of the tax rates.
The latter is absolutely not a given and the former is only really safe if you invest the money in something that isn’t really an investment in the business.
Phrased differently, if you had a magic cash printing business like this that can safely scale up with more money you would be absolutely stupid to not do it regardless of the tax rates.
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In the US? Because in many countries I'm aware of there are business profit taxes...
>As a business owner, when taxes are low, I see that as an incentive to pocket profits. But when taxes are high
Where do you live that taxes are as volatile as petrol prices? Taxes change in Ireland but in terms of decades.
Where do you live that taxes are as volatile as petrol prices? Taxes change in Ireland but in terms of decades.
The United States. Corporate tax rate dropped from 35 to 21 in 2016. There is talk of reraising them and so I'm mostly projecting my behavior if they do get raised.
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In the US income tax rarely changes. But tax deductions are fair game and change year to year and administration to administration. Last year, Trump bragged about lowering taxes. He lowered it by increasing the standard deduction for some. But it increased for others, such as myself, who take advantage of other deductions that were cut back or removed.
It’s very clear that you are a small business owner and don’t really understand how taxes work in a large company.
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That's a misconception worth clearing up, but the article is about taxes on wealth (i.e. assets), not profit.
I agree that is what the article is about.
I'm convinced the best strategy is a tax system where net worth is capped and heavily taxed based on average net worth of all Americans.
There is simply no other way to align interests of the wealthy.
https://anacyclosis.org/2020/05/25/how-do-we-save-democracy
There is simply no other way to align interests of the wealthy.
https://anacyclosis.org/2020/05/25/how-do-we-save-democracy
I'm in favor of astronomical marginal tax rates. But that post of comically bad at making the argument.
The founding fathers, including a handful of those quoted in the linked post, were highly critical of democracy and even of men who didn't own multiple house like they did.
We just narrowly missed out on having a constitution which only allowed land owners to vote. There were even years long debates on whether votes should be proportional to the amount of land owned.
Using the founding fathers to argue for state enforced equalization of outcomes is plainly absurd.
The founding fathers, including a handful of those quoted in the linked post, were highly critical of democracy and even of men who didn't own multiple house like they did.
We just narrowly missed out on having a constitution which only allowed land owners to vote. There were even years long debates on whether votes should be proportional to the amount of land owned.
Using the founding fathers to argue for state enforced equalization of outcomes is plainly absurd.
I still think it's a good idea and worth studying.
Frankly, I don't care what the plan is. I just want to see a less inequality and a stronger middle class.
Frankly, I don't care what the plan is. I just want to see a less inequality and a stronger middle class.
> I see that as an incentive to hide the profits by investing in the future.
Can it be also an incentive to work less, since most of the results of your hard work will be taken from you in form of taxes, or you would need to 'hide the profits' potentially forever?
Can it be also an incentive to work less, since most of the results of your hard work will be taken from you in form of taxes, or you would need to 'hide the profits' potentially forever?
That would be true if the owner of the business was doing most of the work. But in a large corporation the workers are doing the brunt of the work, so it makes no difference for the shareholders.
Author of the comment I replied to identified himself as "business owner", probably not an owner of "large corporation".
As a business owner, when taxes are low, I see that as an incentive to pocket profits. But when taxes are high, I see that as an incentive to hide the profits by investing in the future.
Let me introduce you to how private equity works. They have figured out how to hide the profits by buying out the original owners!
They buy companies by having them borrow heavily to "invest" in buying out the previous owners. And then try to keep the corpse of the company looking good enough that they can flip to someone else. The trick is that debt payments count against profits so the new owner saves on taxes.
The people who set up the deal get paid in a variety of ways. But in the end what they get paid tends to be roughly proportional to how much money no longer goes to Uncle Sam. So when you see someone who got rich in private equity, like Mitt Romney, it isn't a bad approximation that their personal wealth reflects how much money the US no longer receives in taxes due to the deals that they structured.
Note, if you're over 50 you may remember the "junk bond kinds" of the 1980s. That's the same thing as private equity. They just rebranded themselves after their actions gave them a bad name.
Let me introduce you to how private equity works. They have figured out how to hide the profits by buying out the original owners!
They buy companies by having them borrow heavily to "invest" in buying out the previous owners. And then try to keep the corpse of the company looking good enough that they can flip to someone else. The trick is that debt payments count against profits so the new owner saves on taxes.
The people who set up the deal get paid in a variety of ways. But in the end what they get paid tends to be roughly proportional to how much money no longer goes to Uncle Sam. So when you see someone who got rich in private equity, like Mitt Romney, it isn't a bad approximation that their personal wealth reflects how much money the US no longer receives in taxes due to the deals that they structured.
Note, if you're over 50 you may remember the "junk bond kinds" of the 1980s. That's the same thing as private equity. They just rebranded themselves after their actions gave them a bad name.
I'm not wealthy enough for a wealth tax to apply, but a wealth tax is a colossal privacy and administrative burden on _every single taxpayer_. Assets must be accounted for when calculating wealth, so the tax service will be required to track and value assets including vehicles, homes, and material good etc. for every citizen to see if the wealth tax would apply to them -- if we didn't report material goods, the wealthy could sock money away in expensive cars, artworks, jewelry and other material non-real-estate assets as they already do for investment.
This creates a surveillance society on every possession and purchase, and facilitates confiscation and intimidation, an encroachment on our liberty. In fact, that the IRS and the government have a view on every single financial transaction due to the Patriot Act already has a chilling effect on freedom (consider donations). A wealth tax would absolutely be a massive and unnecessary further encroachment upon liberty as the majority of Americans would ultimately have to detail and report their assets to show they do not qualify, while the wealthy would very likely be able to largely anyway cheat on their wealth tax by manipulating valuations of their assets.
This creates a surveillance society on every possession and purchase, and facilitates confiscation and intimidation, an encroachment on our liberty. In fact, that the IRS and the government have a view on every single financial transaction due to the Patriot Act already has a chilling effect on freedom (consider donations). A wealth tax would absolutely be a massive and unnecessary further encroachment upon liberty as the majority of Americans would ultimately have to detail and report their assets to show they do not qualify, while the wealthy would very likely be able to largely anyway cheat on their wealth tax by manipulating valuations of their assets.
One way to mitigate that is to not tax “wealth” arbitrarily. Instead imagine something more targeted like a land value tax. Property rights could be changed so that some assets that are in limited supply and posses capital value such as land, simply can’t just be owned, but are instead leased.
I mean wealth per se isn’t an issue. In the grand scheme of things what material goods you have matter little. It’s the unreasonable and unbalanced command over actual capital that create issues.
I mean wealth per se isn’t an issue. In the grand scheme of things what material goods you have matter little. It’s the unreasonable and unbalanced command over actual capital that create issues.
If property (land + building) taxes are significant, then property is already leased.
E.g. in NZ you buy property, but the local government taxes it, so you are essentially paying a small lease. Enough so that some retirees with no income have to downsize because the rates are a significant burden.
E.g. in NZ you buy property, but the local government taxes it, so you are essentially paying a small lease. Enough so that some retirees with no income have to downsize because the rates are a significant burden.
That would be the general idea. I think calling it a lease instead of tax has some benefits from an ideological perspective. But for this discussion suffice it to say that it should not just be an arbitrary tax.
I also think a substantial amount of the revenue from such lease should be tunneled back into the economy as a public dividend. Also for ideological reasons. But in practice to allow for higher prices (100% of market value would be ideal) while not impacting the retirees you mention quite as much.
I also think a substantial amount of the revenue from such lease should be tunneled back into the economy as a public dividend. Also for ideological reasons. But in practice to allow for higher prices (100% of market value would be ideal) while not impacting the retirees you mention quite as much.
I love that you brought up the surveillance aspect; I have not seen that discussed much elsewhere.
A wealth tax seems impractical on many levels, including the increased burden of trying to document the value of your items for people of modest wealth levels. Unique or thinly traded luxury items have value that can't really be known until they are sold, which is why capital gains are taxed at the time of a sale. I'm thinking of a rare coin that might be $75,000 or $100,000.... you can't know the value until it goes up on the auction block. Same thing applies to real estate, antique cars, artwork, etc.
A wealth tax seems impractical on many levels, including the increased burden of trying to document the value of your items for people of modest wealth levels. Unique or thinly traded luxury items have value that can't really be known until they are sold, which is why capital gains are taxed at the time of a sale. I'm thinking of a rare coin that might be $75,000 or $100,000.... you can't know the value until it goes up on the auction block. Same thing applies to real estate, antique cars, artwork, etc.
It is arguable whether wealth should be within right to privacy or not. As for items inheritably with illiquid market value, it is also arguable whether we should assess their ongoing market value at all. Real-estate on the other hand, would hardly be illiquid and the United States do have a reasonable assessment program for real-estate. The same cannot say for antique cars or artwork.
However, to combat the side-effect of wealth tax requires global governance, which in today's day and age, seems like a pipe dream.
However, to combat the side-effect of wealth tax requires global governance, which in today's day and age, seems like a pipe dream.
Like another person said, you look at potential enforcement and assume perfect adherence to a philosophy, or that everyone will be audited the same. They will not.
Just like a small business is less regulated than a large one (often), or how smaller incomes are taxed simply while those with more money/more complex assets get audited more - the ultra-wealthy will certainly have more of their assets audited, and yes, they will have side channels to evade taxes. That doesn't mean we don't try to tax them.
When someone out in the open owns 75 cars, a private jet, and a $250,000,000 townhouse in Manhattan and another $5 billion in stock, it's pretty damned simple and not wholly intrusive to look at that and say "alright..."
I'm not defending the entire concept of a wealth tax, but I am saying it isn't as dire for _everybody_ that you say it is.
Just like a small business is less regulated than a large one (often), or how smaller incomes are taxed simply while those with more money/more complex assets get audited more - the ultra-wealthy will certainly have more of their assets audited, and yes, they will have side channels to evade taxes. That doesn't mean we don't try to tax them.
When someone out in the open owns 75 cars, a private jet, and a $250,000,000 townhouse in Manhattan and another $5 billion in stock, it's pretty damned simple and not wholly intrusive to look at that and say "alright..."
I'm not defending the entire concept of a wealth tax, but I am saying it isn't as dire for _everybody_ that you say it is.
That's right. We had a wealth tax in France from 1989 until 2018. Most people by far never had to declare or justify anything related to this, because they were so obviously below the threshold. It didn't have any impact for the vast majority of taxpayers.
By the way it was replaced 2 years ago on a tax on real estate wealth only.
By the way it was replaced 2 years ago on a tax on real estate wealth only.
What about a startup enthusiast who's started my-hot-startup.com. No revenue yet but might be the next big thing. What's that worth? $0? $10bn? That sort of thing could get messy.
Another chilling effect may be in motivating barter rather than currency trade so that assets may undervalued. Consider real estate trades or corporate mergers instead of cash purchases that are executed at deflated valuations to lower wealth valuations of the underlying asset. This devalues the dollar in relation to assets.
This was my thought as well. If you discourage holding stocks and things over other assets as stores of value, I think that could have some deflationary effects. Not only that, but companies are then somewhat disincentivized from growing in valuation, but finding ways to grow in their reach/authority/power etc. The end result seems deflationary... i.e. companies worth more for less dollars.
One time wealth taxes on things like expensive cars, art, and houses can be levied at the time of purchase. That's just sales tax and already is recorded. Annual wealth tax on land/property is easy, we already do it it's just not done in a progressive manner. Again that's already recorded. Annual wealth taxes on things like securities, stocks, bonds, can be accounted easily by any broker and reported. Again this is already recorded and goes to the IRS. So there's not really any new privacy concern.
Your first proposal is just a standard luxury sales tax, which functions entirely differently from the recurring wealth taxes that are being discussed.
You'd be incentivizing the accumulation (and importation) of the sales-taxed goods as long term stores of wealth, and dis-incentivizing domestic investments in businesses and construction. I think that's a bad idea.
The majority of wealth are financial instruments, land and real estate, maybe vehicles, maybe precious metals/stones, for all of which this problem is already solved or mostly solved.
Really the only area of significance I can think of where the problem is not solved is having to report your artworks, I guess? Something that doesn't affect most people.
Really the only area of significance I can think of where the problem is not solved is having to report your artworks, I guess? Something that doesn't affect most people.
I still don't even see how it works. I can understand with something that is fairly liquid like stocks, but if you own a farm it's not like you could always easily sell off 3% of your farm every year to keep the government happy. Aren't property taxes enough? They're relatively low compared to 3% a year that various democrats call for. Land really doesn't "make" money for you like say a physical factory unless you're using it. I imagine these types of issues happen with other sorts of businesses. I mean I don't have a problem with higher taxes on "annual wealth increase" or profit, but to continuously tax the same thing over and over and over is ludicrous in my opinion at least not at these levels. Property taxes are already high in most states.
I stopped reading when I hit:
> wealth tax is a colossal privacy and administrative burden on _every single taxpayer_
I have not seen a single wealth tax proposal that doesn't have a gigantic cutoff where it would do nothing for 99%+ of the taxpayer base. Most proposals have a floor in the tens of millions.
> wealth tax is a colossal privacy and administrative burden on _every single taxpayer_
I have not seen a single wealth tax proposal that doesn't have a gigantic cutoff where it would do nothing for 99%+ of the taxpayer base. Most proposals have a floor in the tens of millions.
You could've read the very next sentence, which makes the point the first sentence set up:
> Assets must be accounted for when calculating wealth, so the tax service will be required to track and value assets including vehicles, homes, and material good etc. for every citizen to see if the wealth tax would apply to them -- if we didn't report material goods, the wealthy could sock money away in expensive cars, artworks, jewelry and other material non-real-estate assets as they already do for investment.
> Assets must be accounted for when calculating wealth, so the tax service will be required to track and value assets including vehicles, homes, and material good etc. for every citizen to see if the wealth tax would apply to them -- if we didn't report material goods, the wealthy could sock money away in expensive cars, artworks, jewelry and other material non-real-estate assets as they already do for investment.
What you are describing is tax fraud and is already possible in the current system.
The burden is showing that you have under $XM in assets. You'll need to show your net worth somehow, so that the IRS (or equivalent) knows not to tax you. Otherwise I could assure you that I totally only have $1M in assets, with definitely no Swiss bank account or yachts.
I will admit to not knowing much about a wealth tax, so maybe there is an established solution here. But it seems like the default would be a privacy and administrative burden even on those people not paying the tax.
I will admit to not knowing much about a wealth tax, so maybe there is an established solution here. But it seems like the default would be a privacy and administrative burden even on those people not paying the tax.
It wouldn't be a burden for most people; it would just be a yes/no checkbox alongside the many other checkboxes when you're filling out your taxes.
"Do you have assets in excess of $X million?"
If you claim you don't, and the IRS has reason to suspect you do, you're opening yourself to a brutal audit and potential jail time.
Most people would not have to deal with this.
"Do you have assets in excess of $X million?"
If you claim you don't, and the IRS has reason to suspect you do, you're opening yourself to a brutal audit and potential jail time.
Most people would not have to deal with this.
Yes, and then the IRS would say, well, to check that, we need more access to all the data in the world. And people will sell it with "so that we can find the criminal rich people". But they will have the data for everybody.
You stopped reading...and missed the whole point. The idea was, to say if a tax doesn't apply to someone you still need to do a deep valuation of their assets. Someone could hide 10M in a painting and live in a regular house, have regular "income".
Different issue. What you are describing is tax fraud and is already possible in the current system.
Perhaps you should have continued reading because then you would have understood his point.
It doesn’t matter what the floor is, you still have to report all your assets to the IRS to prove you don’t meet it.
It doesn’t matter what the floor is, you still have to report all your assets to the IRS to prove you don’t meet it.
In many countries, reporting high value assets is already part of their tax reporting and is not an added step. For countries that don't, the added step could be as simple as a single checkbox: Do you have over 25M in assets? I'd imagine most people can confidently leave that unchecked.
You need to track every single taxpayer continuously just to know if that cutoff was reached.
lol ya tracking everyone would be really dumb but you don't need to do it.
Many countries already have self reported high value assets as part of their tax filing process. Pretty easy to add a self-reporting step "Do you have over $25M in assets"? Most people can confidently leave that unchecked so they don't even need to waste any ink. Lying would be tax fraud and is already possible in the current system anyways.
Many countries already have self reported high value assets as part of their tax filing process. Pretty easy to add a self-reporting step "Do you have over $25M in assets"? Most people can confidently leave that unchecked so they don't even need to waste any ink. Lying would be tax fraud and is already possible in the current system anyways.
I do pay a wealth tax in Europe. It's fine. Claims here that it is impractical are overstated.
Income tax is already an administrative burden on every single taxpayer, and it works fine.
Do you imagine that people don't already track and value their vehicles and homes and other high value material wealth? That strikes me as unusual.
Income tax is already an administrative burden on every single taxpayer, and it works fine.
Do you imagine that people don't already track and value their vehicles and homes and other high value material wealth? That strikes me as unusual.
I don't think that matches reality. Wealth tax is supposedly for the rich, people with high assets already -- not the everyday taxpayer. Getting Joe or Susan to itemize their assets and report it yearly (including depreciation) seems like a lot of extra work -- albeit perhaps you already have to do this for insurance purposes for some house items, not sure, I am Canadian.
I just did some quick research and it looks like the tax failed in Europe [0]. Thousands of millionaires in France just left the country and eventually it was just axed and declared a failure.
Which seems interesting -- the measure of success of a wealth tax seems to be how many rich people stay.
[0] https://www.npr.org/sections/money/2019/02/26/698057356/if-a...
I just did some quick research and it looks like the tax failed in Europe [0]. Thousands of millionaires in France just left the country and eventually it was just axed and declared a failure.
Which seems interesting -- the measure of success of a wealth tax seems to be how many rich people stay.
[0] https://www.npr.org/sections/money/2019/02/26/698057356/if-a...
France's wealth tax has gone back and forth with the government changes over a period of 40 years.
As such, I wouldn't call it a failure. France remains one of the richest countries in the world.
It seems to be presented here in such a way solely to critique Elizabeth Warren's politics.
Multi-millionaires who are motivated to leave over such a small percentage of their wealth don't strike me as people who are [good for/investing in] the local economy, anyway.
As such, I wouldn't call it a failure. France remains one of the richest countries in the world.
It seems to be presented here in such a way solely to critique Elizabeth Warren's politics.
Multi-millionaires who are motivated to leave over such a small percentage of their wealth don't strike me as people who are [good for/investing in] the local economy, anyway.
Wow.
Only in the US would non-wealthy people actively and aggressively advocate on behalf of the ultra-wealthy.
Only in the US would non-wealthy people actively and aggressively advocate on behalf of the ultra-wealthy.
The good thing about accounting for wealth is ofc that we can measure inequality much more precisely. That's good right?
What frustrates me about this whole argument over wealth taxes is that the arguments aren't grounded in facts. The reality is that we "pay" for inequality with reduced productivity. A great example of this is "single family home neighborhoods" in urban areas. They have no societal benefit, they are essentially subsidized land use patterns for the well off, and it makes it harder for less well of folks to move to areas where they can get a better job/improve their lot in life and grow the economy. There is a very strong case that one reason for sluggish economic growth is the concentration of assets and wealth in so few hands, and the continuing stagnation/decline in wealth/living standards/etc of bottom 40% of the US when measured in things like "healthcare", "education" etc. A redistributive wealth tax that was well structured could be a huge boon to GDP growth.
> What frustrates me about this whole argument over wealth taxes is that the arguments aren't grounded in facts.
You say this, yet you don't provide a single citation for any of your arguments.
> There is a very strong case that one reason for sluggish economic growth is the concentration of assets and wealth in so few hands, and the continuing stagnation/decline in wealth/living standards/etc of bottom 40% of the US when measured in things like "healthcare", "education" etc. A redistributive wealth tax that was well structured could be a huge boon to GDP growth.
This seems plausible, but not self-evident. Give us evidence.
You say this, yet you don't provide a single citation for any of your arguments.
> There is a very strong case that one reason for sluggish economic growth is the concentration of assets and wealth in so few hands, and the continuing stagnation/decline in wealth/living standards/etc of bottom 40% of the US when measured in things like "healthcare", "education" etc. A redistributive wealth tax that was well structured could be a huge boon to GDP growth.
This seems plausible, but not self-evident. Give us evidence.
Not the OP, but the most recent meta-analysis suggests that there is a negative correlation between inequality and growth[1]. Wealth inequality is more negatively correlated with growth than income inequality.
[1] https://www.sciencedirect.com/science/article/abs/pii/S03057...
[1] https://www.sciencedirect.com/science/article/abs/pii/S03057...
> A great example of this is "single family home neighborhoods" in urban areas. They have no societal benefit, they are essentially subsidized land use patterns for the well off, and it makes it harder for less well of folks to move to areas where they can get a better job/improve their lot in life and grow the economy.
I've seen this talking point twice now this week. What's the alternative? We all live in crowded multi-family buildings? We all live in squalor for the sake of a few saved acres in a country with vast amounts of land?
I've seen this talking point twice now this week. What's the alternative? We all live in crowded multi-family buildings? We all live in squalor for the sake of a few saved acres in a country with vast amounts of land?
Center City Philly is squalor now? I'll take that over a SFH in Conshohocken with > 45 mins commute on the Schuylkill Expressway each way any day of the week!
It's frightening that many people cannot imagine proper city planning when other countries (the Netherlands come to mind) demonstrate that it can be done and improves quality of life immensely.
It's frightening that many people cannot imagine proper city planning when other countries (the Netherlands come to mind) demonstrate that it can be done and improves quality of life immensely.
Multi-family buildings != squalor
It sounds like you've never been in an apartment building. Some are crappy, sure, but plenty are pretty nice or at least decent (the building, the apartments will be what the residents make of them).
It sounds like you've never been in an apartment building. Some are crappy, sure, but plenty are pretty nice or at least decent (the building, the apartments will be what the residents make of them).
I have lived in many apartment buildings; mostly why I hold this opinion. If my only aspiration for a future home for my family and myself is one where I have to deal with upstairs neighbors stopping and nextdoor neighbors with no respect for quiet hours, I would have very little to look forward to.
I have as well, and that's why I have my opinion that they aren't squalor, at least not guaranteed. I lived in one crappy apartment when I was in college because it was dirt cheap. After I got a job, I spent maybe 20-40% more on apartments up to my last one (which cost a lot more, but was in a great location for me, walking distance to my MMA gym and all my hangout spots). None of them were crappy, I rarely heard my neighbors. And the only truly obnoxious neighbors were evicted after the police were called for a combination of noise and indecent exposure (their guests went skinny dipping in the apartment pool).
I live in the suburbs now, and with regard to noise it's no better than the apartments except my first crappy apartment, and the brief time next to the obnoxious neighbors. My next door neighbors on one side are great, on the other side they're dicks and fight constantly and loudly. Across the street are two houses one with a muscle car and the other some kind of loud motorcycle, both are project vehicles. So I get to hear them revving their engines in the evening (too early to warrant filing a complaint, but still very obnoxious).
There's nothing magical about apartments that make them bad, or houses that make them good. The best you could hope for with regard to general quality of life (particularly noise and pests caused by poor hygiene from your neighbors) is to live in the country hundreds of feet (at least) from neighbors with trees in between. But then you forfeit access to everything else since nothing is close without having to drive.
I live in the suburbs now, and with regard to noise it's no better than the apartments except my first crappy apartment, and the brief time next to the obnoxious neighbors. My next door neighbors on one side are great, on the other side they're dicks and fight constantly and loudly. Across the street are two houses one with a muscle car and the other some kind of loud motorcycle, both are project vehicles. So I get to hear them revving their engines in the evening (too early to warrant filing a complaint, but still very obnoxious).
There's nothing magical about apartments that make them bad, or houses that make them good. The best you could hope for with regard to general quality of life (particularly noise and pests caused by poor hygiene from your neighbors) is to live in the country hundreds of feet (at least) from neighbors with trees in between. But then you forfeit access to everything else since nothing is close without having to drive.
I do not care if you choose to live in a single family home or a unit in a multi family building. The issue that we have is that "single family zoning" where the maximum density allowed on a plot of land is a single house is a land use pattern that it is a government restriction that subsidizes homes for the well off at the expense of everyone else. In a world in which central city land that is currently zoned SFHs is rezoned for multi family dwellings, the price of SFHs would rise to meet the true demand, while the price of a "living unit" in the area would fall due to the land required per dwelling unit decreasing.
Yeah it was never about squalor for me, but unless you are in a million dollar condo with top notch sound proofing in every wall you will hear your neighbors at all hours and everything they do. Some people may love this, but I hate it. How do I know? I lived it the first 30 years of my life until I bought a house in the burbs. My quality of life is so much better now. No I didn't buy a McMansion. I have lived in bigger apartments, however I have space and nice solid walls between myself and neighbors and it's a huge % increase in quality of life not to hear other people's sex, family quarrels, or bad taco bell incidents at all hours.
Alternative is to not subsidize inefficient suburban land use. That doesn't mean everyone lives in apartment buildings. It doesn't mean "ban the suburbs". It just means, if you want to live in a subdivision, you'll have to pay your share of the cost to maintain it (which is more than what you're paying now).
The alternative is upzoning and land value tax which encourages density.
If the wealthy want to live in a big detached house that's cool, but those types of lots/structures shouldn't be in dense space-limited urban areas. They want to have both the big house and the proximity to urban centers.
The alternative is that we remove most zoning and let the free market decide. We can even allow covenant-based zoning, but if your neighbors don't want to join and sell to a developer, tough luck.
Letting people decide where and how to live without deciding for them through tax structuring
It's not about taking single family homes away from people who really want one, but fighting the perception that it's the default. People in most countries (even most rich countries) live happily in multi-family buildings with much less space than the average American home. Most of those who believe their family needs 2000 square feet to be comfortable are simply mistaken - and we could build much higher-quality neighborhoods without the degree of suburban sprawl that mistake causes.
Inequality is mortgaging the future for the comfort of the few.
If you're talking about single family homes - that's a property tax, which is not what people are normally talking about when they discuss a wealth tax
I'm neither wealthy nor the media and I believe that wealth taxes are a bad idea, too.
Wealth taxes that are too high in relation to peers (other countries/states) will often lead to brain drain, capital flight and others. From an individual's perspective, many will see it as a disincentive in starting something new, you may also be incentivized to borrow more money to ensure the leverage is high enough to limit taxation and optimize current quality of life. Your decision to leave assets for your next of kin can also become distorted and you may feel encouraged to spend the money now (on them and otherwise) as opposed to getting tax fleeced.
Many other things need to be in place and fully functional for a high wealth tax to work and even then, it is likely to work for a 10 to 30 year period, only to serve as a dragging anchor at a later stage. I would argue that many of the challenges in Europe from a technological innovation standpoint, can be partially derived in high taxation.
It is also difficult to determine what is the right amount of taxation while taking into account the importance of incentive mechanisms. Also, at what point do tax hikes stop?
Some of the key real solutions to many of societies challenges is to have its populace be more active in all of its inner working, helping them to better understand the constraints and opportunities as opposed to being a bunch of people getting of top of their little soap box. There is also a major need for strong reforms to tackle nepotism, corruption and laziness at all levels of society.
Many other things need to be in place and fully functional for a high wealth tax to work and even then, it is likely to work for a 10 to 30 year period, only to serve as a dragging anchor at a later stage. I would argue that many of the challenges in Europe from a technological innovation standpoint, can be partially derived in high taxation.
It is also difficult to determine what is the right amount of taxation while taking into account the importance of incentive mechanisms. Also, at what point do tax hikes stop?
Some of the key real solutions to many of societies challenges is to have its populace be more active in all of its inner working, helping them to better understand the constraints and opportunities as opposed to being a bunch of people getting of top of their little soap box. There is also a major need for strong reforms to tackle nepotism, corruption and laziness at all levels of society.
Any chance your opinion was formed based on news/studies funded by wealthy individuals?
I'm not the person you responded to but this kind of comment really bugs me. Why assume someone didn't form their own opinion?
No one "forms their own opinion" in a vacuum. Your beliefs and opinions are influenced in a multitude of ways by your environment including the media you consume. Asking how the biases you have were formed is something everyone should be asking of themselves, and certainly doesn't seem like an inappropriate question.
Of course opinions are shaped by outside factors, but the reason those kind of responses are annoying is because they're just so... uninteresting.
I'm not the guy from above, but responding with "I disagree with you so are you sure your opinions are your own" is dismissive and doesn't lead to a more interesting or thoughtful discussion. Instead, asking WHY he believes gives you the opportunity to engage in the discussion, maybe change your views a little or change the other persons' a bit.
That's why comments like that are annoying, they're a way to dismiss discussion instead of engaging in it, and engaging in discussion is the point of this silly site.
I'm someone who also isn't wealthy and disagrees with wealth taxes. Responses like that one aren't an honest attempt to engage, and I'd also ignore it and move on :)
I'm not the guy from above, but responding with "I disagree with you so are you sure your opinions are your own" is dismissive and doesn't lead to a more interesting or thoughtful discussion. Instead, asking WHY he believes gives you the opportunity to engage in the discussion, maybe change your views a little or change the other persons' a bit.
That's why comments like that are annoying, they're a way to dismiss discussion instead of engaging in it, and engaging in discussion is the point of this silly site.
I'm someone who also isn't wealthy and disagrees with wealth taxes. Responses like that one aren't an honest attempt to engage, and I'd also ignore it and move on :)
How do you get at how a person has formed their opinions without asking and it being taken as a slight? There was no dismissal or disagreement. Just an on-topic question.
Problem is that it's a subtle accusation of speaking in bad faith or an accusation of lacking agency. In order to have respect for the other person, you can't start from either of those positions.
This perfectly describes how I feel and what I was trying to get across. You're much better at English than I.
Original comment was pretty threadbare, just “wealth taxes wouldn’t affect me but I don’t want them”. It’s worth knowing why they think that, especially if it’s getting upvoted so much.
We have to be able to ask these questions and assume they’re not attacks to have productive dialogues.
We have to be able to ask these questions and assume they’re not attacks to have productive dialogues.
[deleted]
And yours was formed based on gospel truth handed down from heaven? C'mon.
Why? (I mostly agree but it's not a strong opinion)
For me it comes down to a few things.
- I think wealth can be created and isn't always a zero sum transfer
- I think we want to incentivize wealth creation
- I think economic growth constrained by protection for human rights and environmental destruction is the best way to improve the quality of life for the most people the fastest.
- I think wealth taxes disincentivize a lot of these things with knock on effects (forcing people to liquidate their company equity, etc.). It's also repeatedly taxing the same money every year eventually down to whatever the cap is.
I'd rather set taxes/caps at generational wealth transfer if you're going to try and incentivize something - might as well go after dynastic wealth and the children that benefit from it without creating anything. I think focusing on housing and land use/zoning would also directly benefit more people by fixing existing perverse incentives.
PG writes about some of this in essays, Tyler Cowen's book Stubborn Attachments was also interesting on the growth aspect (though wealth taxes aren't specifically mentioned).
Why do we think wealth will be better allocated by a government? This money is largely already taxed either via capital gains or income. I'd suspect a lot of our problems are problems of incentives and competing priorities, not of available cash flow for government programs.
That's my take anyway, I suspect a 'hate the rich' motivated reasoning position pushing the idea of a wealth tax more than any serious thinking about incentives and what it might do. It seems political.
(I am nowhere near the level where the proposed tax would start and probably never will be.)
- I think wealth can be created and isn't always a zero sum transfer
- I think we want to incentivize wealth creation
- I think economic growth constrained by protection for human rights and environmental destruction is the best way to improve the quality of life for the most people the fastest.
- I think wealth taxes disincentivize a lot of these things with knock on effects (forcing people to liquidate their company equity, etc.). It's also repeatedly taxing the same money every year eventually down to whatever the cap is.
I'd rather set taxes/caps at generational wealth transfer if you're going to try and incentivize something - might as well go after dynastic wealth and the children that benefit from it without creating anything. I think focusing on housing and land use/zoning would also directly benefit more people by fixing existing perverse incentives.
PG writes about some of this in essays, Tyler Cowen's book Stubborn Attachments was also interesting on the growth aspect (though wealth taxes aren't specifically mentioned).
Why do we think wealth will be better allocated by a government? This money is largely already taxed either via capital gains or income. I'd suspect a lot of our problems are problems of incentives and competing priorities, not of available cash flow for government programs.
That's my take anyway, I suspect a 'hate the rich' motivated reasoning position pushing the idea of a wealth tax more than any serious thinking about incentives and what it might do. It seems political.
(I am nowhere near the level where the proposed tax would start and probably never will be.)
I don't have a super-well formed opinion about this but I think a wealth tax has some issues that don't get enough attention.
Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset.
So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of equity in the company (so that you can control it) but no matter how loudly you proclaim that the market is overvaluing your stock the price keeps going up and now you have to sell lots of shares in order to pay the wealth tax assessed against your equity and you don't have a controlling vote anymore and your vision for your company just dies.
And maybe the hordes of people who think no single person should have a controlling share of a billion-dollar company are right - I don't know. But I'm pretty sure a large fraction of people who build companies (like Bezos or Musk) are doing it to build an enterprise, and not for the cash. Otherwise they'd just stop and have fun with their private jets at a certain point. So if a wealth tax were not going to let them keep control of their enterprise beyond the first decade, they probably would opt not to waste their time building it at all.
And maybe that's fine, but I'm not sure what society looks like in a world where people don't want to build companies.
Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset.
So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of equity in the company (so that you can control it) but no matter how loudly you proclaim that the market is overvaluing your stock the price keeps going up and now you have to sell lots of shares in order to pay the wealth tax assessed against your equity and you don't have a controlling vote anymore and your vision for your company just dies.
And maybe the hordes of people who think no single person should have a controlling share of a billion-dollar company are right - I don't know. But I'm pretty sure a large fraction of people who build companies (like Bezos or Musk) are doing it to build an enterprise, and not for the cash. Otherwise they'd just stop and have fun with their private jets at a certain point. So if a wealth tax were not going to let them keep control of their enterprise beyond the first decade, they probably would opt not to waste their time building it at all.
And maybe that's fine, but I'm not sure what society looks like in a world where people don't want to build companies.
There is a ton of examples of societies where people don't want to build enterprises. Medieval Europe, where guild and social strata regulations prevented any large enterprise, except maybe large merchant operations. Sime of the poorer modern-day African countries, where social norms prescribe that any fortune has to be divided with the extended family, so concentration of assets to keep building something large is hard.
I frankly think that the American model of free enterprise with reasonably few restrictions made most to improve the well-being of its population.
I frankly think that the American model of free enterprise with reasonably few restrictions made most to improve the well-being of its population.
I think a wealth tax is a bad idea (as described in my comment above), but you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook).
Arguably a wealth tax would create an incentive for everyone to do this which I would argue is probably bad since then the company controllers have less skin in the game.
Generally I think a wealth tax creates a ton of these perverse incentives with little true upside.
Arguably a wealth tax would create an incentive for everyone to do this which I would argue is probably bad since then the company controllers have less skin in the game.
Generally I think a wealth tax creates a ton of these perverse incentives with little true upside.
> you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook).
I'm a little confused about this though. If class A shares have all the votes (while most shares are class B shares), what prevents the market from valuing the class A shares at an extremely high value and the class B shares not at all? When the company finally gets big and stops growing, the source of its value to shareholders will be the dividends that it pays and it will be the voting class A shareholders that decide how dividends are allocated.
I'm a little confused about this though. If class A shares have all the votes (while most shares are class B shares), what prevents the market from valuing the class A shares at an extremely high value and the class B shares not at all? When the company finally gets big and stops growing, the source of its value to shareholders will be the dividends that it pays and it will be the voting class A shareholders that decide how dividends are allocated.
There’s typically a rule that the shares with extra voting power cannot be sold. They automatically convert prior to sale.
Basically they’ve thought of these things and controlled for them already.
Basically they’ve thought of these things and controlled for them already.
If my wealth comes from owning a percentage of a company (say I own 30% of AMZN) what is the way to tax me other than taking my shares, i.e. the Gov would take certain percentage of my shares? And if we go that route how many years would it go by before Gov owned majority of shares of most companies?
Lots of people scream that we should tax the wealthy but I do not follow how you tax someone whose wealth comes from large ownership of a big company...?
Lots of people scream that we should tax the wealthy but I do not follow how you tax someone whose wealth comes from large ownership of a big company...?
Simple, it’s progressive, so if you are very wealthy and own 30% of the company you might need to sell 5% to pay off wealth taxes over a few years, and you sell them to people or institutions, with less wealth (and therefore less wealth taxes due). It wouldn’t end up with the government owning the shares, it would end up with people at a tax advantage relative to you owning the shares.
Whether or not that is a good idea, I don’t know.
Whether or not that is a good idea, I don’t know.
I don't see how you came to your conclusion. Gov would tax you as they do now (including when you receive shares for instance), by asking you money. It is up to you to find it. If your assets are illiquid, then it is your problem not the government's one -- and in some cases it can indeed be quite unfair, e.g. for some startup employees.
Let's look at jeff bezos for example. He sells over a billion dollars worth of amazon stock each year [0] (those numbers have increased slightly since then actually).
Fine, he pays some of that to the government, and maybe sells slightly more. I don't see the problem.
If, in fact, your wealth only comes from ownership in a company and you have no other source of wealth, then yes you would be encourages to sell your shares to pay the wealth tax.
I don't see why this is a problem. That's kinda the point of a wealth tax, that yes you do get taxed on your wealth.
[0]: https://www.reuters.com/article/us-space-bezos/bezos-is-sell...
Fine, he pays some of that to the government, and maybe sells slightly more. I don't see the problem.
If, in fact, your wealth only comes from ownership in a company and you have no other source of wealth, then yes you would be encourages to sell your shares to pay the wealth tax.
I don't see why this is a problem. That's kinda the point of a wealth tax, that yes you do get taxed on your wealth.
[0]: https://www.reuters.com/article/us-space-bezos/bezos-is-sell...
Why should I be forced to sell shares of my company when no other individual that owns shares of whatever other companies is being forced to sell?! As you said, Bezos sells billion dollars worth of AMZN and pays taxes on that just as you and I would when we do. I am not sure I follow why we are trying to tax owning of shares of companies?! If you buy 100,000 shares of AMZN today, do you hope that IRS will come knocking on your door to take 1,000 or whatever number it is each year? If that is the case no one would ever buy any shares of any company...
> If you buy 100,000 shares of AMZN today, do you hope that IRS will come knocking on your door to take 1,000 or whatever number it is each year?
Yes, I would expect that if I had 100k shares of amzn (300 million dollars of net worth), and we implemented a wealth tax, the IRS would tell me "You have to pay us $300k or so" each year on that wealth. If that means I sell some stock, then sure. That means, btw, if I live 60 more years and gain zero more dollars of wealth, I still have 280 million dollars left of my original 300 mil. I still have plenty of shares left.
You clearly don't understand the point of a wealth tax or how the rate rises progressively with wealth it is if you don't understand why we'd be taxing ownership of wealth, and why this wouldn't negatively impact most people.
> If that is the case no one would ever buy any shares of any company...
I currently don't have over 50M of net worth. A wealth tax would not impact me, so I'd still buy stock just as I do now, with no difference. If my stocks did so well that I had millions of dollars, I'd now be able to pay a wealth tax, and have on problem with that. I'd also keep buying stocks if they got me from a net worth of almost nothing to $50M, and all I had to do was pay a small percentage each year along the way.
Yes, I would expect that if I had 100k shares of amzn (300 million dollars of net worth), and we implemented a wealth tax, the IRS would tell me "You have to pay us $300k or so" each year on that wealth. If that means I sell some stock, then sure. That means, btw, if I live 60 more years and gain zero more dollars of wealth, I still have 280 million dollars left of my original 300 mil. I still have plenty of shares left.
You clearly don't understand the point of a wealth tax or how the rate rises progressively with wealth it is if you don't understand why we'd be taxing ownership of wealth, and why this wouldn't negatively impact most people.
> If that is the case no one would ever buy any shares of any company...
I currently don't have over 50M of net worth. A wealth tax would not impact me, so I'd still buy stock just as I do now, with no difference. If my stocks did so well that I had millions of dollars, I'd now be able to pay a wealth tax, and have on problem with that. I'd also keep buying stocks if they got me from a net worth of almost nothing to $50M, and all I had to do was pay a small percentage each year along the way.
That's a wealth tax of 0.1%. On that level, it's probably a net-loss to the government just from the bureaucracy. I think we are talking here about order a couple percent, so >10 times more.
The parent example was of "100,000 shares of AMZN... taxed 1,000", which matches 0.1%.
I used that number since that was the number the parent comment saw as being obviously too much already, so I didn't need to use a higher number.
I do think 0.1% would already be pretty appreciable. That's already several 10s of billions a year. The current budget for all of the IRS is on the order of 10s of billions now, so I really doubt adding that new tax would be a net-loss.
And, of course, once you have a wealth tax and the sky doesn't fall, tweaking the number up over time is easier.
I used that number since that was the number the parent comment saw as being obviously too much already, so I didn't need to use a higher number.
I do think 0.1% would already be pretty appreciable. That's already several 10s of billions a year. The current budget for all of the IRS is on the order of 10s of billions now, so I really doubt adding that new tax would be a net-loss.
And, of course, once you have a wealth tax and the sky doesn't fall, tweaking the number up over time is easier.
I might be parsing the original text wrong, but 1,000 out of 100,000 is 1%. Not 0.1% ?!?
Ah, yup, I'm an idiot. This is why my computer normally does math for me.
Exactly. Some people seem to believe that wealth in shares of a company are in some way different from other types of wealth. Just sell shares an you'll be fine with your taxes. By the way, if you're the controller of a company, you can sell shares without voting power (this has always been a possibility).
I have $1,000,000,000 in my checking account. This is my wealth. I am not going to be taxed a single penny on this money. Why tax my "shares" wealth and not my wealth from my checking account?
And if I have my shares, I don't want to sell them. I currently own X number of shares of dozens of companies, I don't have IRS breathing down my neck to sell them, why should Bezos have them breathing down his?! I pay taxes when I sell my shares, not just due to the fact that I own them...
And if I have my shares, I don't want to sell them. I currently own X number of shares of dozens of companies, I don't have IRS breathing down my neck to sell them, why should Bezos have them breathing down his?! I pay taxes when I sell my shares, not just due to the fact that I own them...
> I have $1,000,000,000 in my checking account. This is my wealth. I am not going to be taxed a single penny on this
That's the point of a wealth tax, to in fact tax that checking account too. You seem to misunderstand how it would work and what the intent is. It doesn't treat your checking account differently from company ownership; both are wealth, a wealth tax suggests taxing both.
> I don't have IRS breathing down my neck to sell them, why should Bezos have them breathing down his?
You shouldn't if you're not wealthy (as in you have under 20 mil net worth). If you're wealthy, you can afford to pay a wealth tax, and your money will help those poorer.
Why shouldn't we be taking money from the rich and helping the entire country? Why should our country continue to have a wider and wider economic divide?
Anyway, the IRS absolutely would breath down your neck to give them money if you owed them taxes. If all your assets were stock, and you somehow triggered a large tax liability, you'd have to sell some stock to pay the IRS. That's already true. It's perfectly possible to trigger a tax liability larger than your liquid assets now, and have to sell stock to cover it.
But that's rare now. And with a wealth tax that would still be rare. Most people with 20MM+ net worth have liquid assets, or the ability to easily liquidate assets.
You're arguing about an edge case that almost certainly doesn't effect you in any way.
That's the point of a wealth tax, to in fact tax that checking account too. You seem to misunderstand how it would work and what the intent is. It doesn't treat your checking account differently from company ownership; both are wealth, a wealth tax suggests taxing both.
> I don't have IRS breathing down my neck to sell them, why should Bezos have them breathing down his?
You shouldn't if you're not wealthy (as in you have under 20 mil net worth). If you're wealthy, you can afford to pay a wealth tax, and your money will help those poorer.
Why shouldn't we be taking money from the rich and helping the entire country? Why should our country continue to have a wider and wider economic divide?
Anyway, the IRS absolutely would breath down your neck to give them money if you owed them taxes. If all your assets were stock, and you somehow triggered a large tax liability, you'd have to sell some stock to pay the IRS. That's already true. It's perfectly possible to trigger a tax liability larger than your liquid assets now, and have to sell stock to cover it.
But that's rare now. And with a wealth tax that would still be rare. Most people with 20MM+ net worth have liquid assets, or the ability to easily liquidate assets.
You're arguing about an edge case that almost certainly doesn't effect you in any way.
I'm not the one you're asking. But here's my take:
To some degree, wealth taxes break down the idea of private property ownership. "Your right of ownership is secured by law, but if you own too much, we'll take some of it away." I know that's not the way it's sold. But that is one aspect of the reality of it. I am in favor of the continued existence of private property rights, and for that reason I don't like a wealth tax.
Also, such things tend to grow with time. You're going to tax those with more than a billion dollars? Seems OK, no relevance to me, and those people can afford it. You need more money this year, and you're going to tax those with more than 10 million? Well, I don't have that, either, but it's getting closer. Need still more money, and so you're moving it to a million? I might, by then, especially if inflation kicks back up.
On the other hand, you could make a reasonable case that the existence of a wealth disparity of the magnitude that exists today is a threat to our society, especially if it can be inherited.
So I lean against a wealth tax, but I can also see reasons for it...
To some degree, wealth taxes break down the idea of private property ownership. "Your right of ownership is secured by law, but if you own too much, we'll take some of it away." I know that's not the way it's sold. But that is one aspect of the reality of it. I am in favor of the continued existence of private property rights, and for that reason I don't like a wealth tax.
Also, such things tend to grow with time. You're going to tax those with more than a billion dollars? Seems OK, no relevance to me, and those people can afford it. You need more money this year, and you're going to tax those with more than 10 million? Well, I don't have that, either, but it's getting closer. Need still more money, and so you're moving it to a million? I might, by then, especially if inflation kicks back up.
On the other hand, you could make a reasonable case that the existence of a wealth disparity of the magnitude that exists today is a threat to our society, especially if it can be inherited.
So I lean against a wealth tax, but I can also see reasons for it...
Hard to value creating expensive compliance and easy game-ability.
Not easily convertible to cash.
Doesn't fix the government's spending pattern or plug its budget hole unless it resorts to full on expropriation.
Not competitive.
Not easily convertible to cash.
Doesn't fix the government's spending pattern or plug its budget hole unless it resorts to full on expropriation.
Not competitive.
I heard an idea: "you must declare all your assets, if an asset is found that you're not claiming, it becomes government property".
So if you try to game the system by not claiming a vacation home, it just becomes public property.
Thoughts?
So if you try to game the system by not claiming a vacation home, it just becomes public property.
Thoughts?
still very gameable.
The LLC with the innocuous name of 123 Main St LLC which is the owner of the property at 123 Main St definitely has an owner, and it might not be a tax resident because the LLC is owned by 123 Main St Limited in the Cayman Islands and the ultimate beneficial owner, who is still unknown at this point, may not be an American to begin with.
So just applying heuristics to "hey that house doesn't appear in our tax records get it boys" would create more problems than you think.
And this also circles back to "not competitive". If your country has problems with expropriation people will stop coming there, and others will leave.
But also note, the US constitution does protect against expropriation in the 5th amendment. When rich people start being the subject of civil asset forfeiture the 5th amendment will suddenly start applying again.
The LLC with the innocuous name of 123 Main St LLC which is the owner of the property at 123 Main St definitely has an owner, and it might not be a tax resident because the LLC is owned by 123 Main St Limited in the Cayman Islands and the ultimate beneficial owner, who is still unknown at this point, may not be an American to begin with.
So just applying heuristics to "hey that house doesn't appear in our tax records get it boys" would create more problems than you think.
And this also circles back to "not competitive". If your country has problems with expropriation people will stop coming there, and others will leave.
But also note, the US constitution does protect against expropriation in the 5th amendment. When rich people start being the subject of civil asset forfeiture the 5th amendment will suddenly start applying again.
1 and 2 are easily surmountable. I wouldn't even call those challenges. (We've had property taxes for decades.)
3 and 4 are the real problems with a wealth tax.
The fundamental issue is that the government spends too much money. The politicians and the voters who support them refuse to support cuts in the magnitudes necessary to bring that situation back in hand. Many don't even believe it is a problem. On top of all that, the programs they refuse to cut, at every governmental level, are exactly the programs that suck up the most money. Medicare, Military, Police and Fire, on and on.
99.999% of all voters are like the family in the financial advisor's office who are willing to cut the trips to Starbuck's or go to a cheaper gym. So they feel they are being responsible. But they tell the financial advisor that the kids' private school tuition and the $50,000 cars they drive are not up for discussion. (Lord help you if you have the temerity to bring up the biggest issue of all, the $500,000 house they live in. You better have you kevlar on for that discussion.)
What can you do with people like that?
3 and 4 are the real problems with a wealth tax.
The fundamental issue is that the government spends too much money. The politicians and the voters who support them refuse to support cuts in the magnitudes necessary to bring that situation back in hand. Many don't even believe it is a problem. On top of all that, the programs they refuse to cut, at every governmental level, are exactly the programs that suck up the most money. Medicare, Military, Police and Fire, on and on.
99.999% of all voters are like the family in the financial advisor's office who are willing to cut the trips to Starbuck's or go to a cheaper gym. So they feel they are being responsible. But they tell the financial advisor that the kids' private school tuition and the $50,000 cars they drive are not up for discussion. (Lord help you if you have the temerity to bring up the biggest issue of all, the $500,000 house they live in. You better have you kevlar on for that discussion.)
What can you do with people like that?
Yes, 1 and 2 would seemingly apply like property tax, but it gets much more complex than having an appraiser come out.
My guess: because they hope to be wealthy some day.
There are other reasons to oppose them like they historically bring in very little money, they're a pain in the ass to administer, capital flight. Some evidence for this are parts of Europe is abandoning their wealth taxes.
If you want to raise money or reduce inequality there are better ways to do it. Income tax, capital gains, inheritance, etc...
If you want to raise money or reduce inequality there are better ways to do it. Income tax, capital gains, inheritance, etc...
> Some evidence for this are parts of Europe is abandoning their wealth taxes.
That's not evidence. We have right-wing parties in Europe too. They introduce right-wing policies when they have power, such as the above.
That's not evidence. We have right-wing parties in Europe too. They introduce right-wing policies when they have power, such as the above.
Do you think that successful policies are as likely to be rolled back as unsuccessful ones?
What kind of strange reasoning is that? Policies are enacted for multiple reasons, very often without any concrete evidence that it's better or worse.
That's very reductive. You should know that the Federal Income Tax that was first collected in 1913 had a top bracket of 7%. Today, the minimum bracket is 10% and the average middle class citizen pays around 12-18% of their income to the IRS.
So sure, the wealth tax would only be on "the rich" when it first starts out but I guarantee you the middle class will be hit by it eventually.
So sure, the wealth tax would only be on "the rich" when it first starts out but I guarantee you the middle class will be hit by it eventually.
Most people are already hit by "wealth taxes", except they are regressive - it's called "property tax".
[deleted]
Surely property tax is trivially easy to justify? It usually is collected by the municipality and pays for things that have ongoing operating costs— roads, fire department, schools, etc. How else should those things be paid for?
From the other taxes? Germany has vanishing property taxes compared to the US. Better roads and schools, no question.
I don't know how it works in Germany, but here in Canada, one of the big issues with that is that income taxes are only collected at the provincial and federal level. Now, a chunk of that money gets sent down to lower levels of government— Waterloo region where I live recently received $600M from upper levels of government for a light rail system that is now built and operating, and the current budget shows 27% of revenue coming from "provincial and federal grants".
The thing is, that money which comes from the upper levels is extremely subject to the whims of those governments; it can fluctuate wildly depending who comes into power and what their priorities are. So without some guarantees around it, I can understand the municipalities wanting a stable source of income over which they have some agency, and out of which they can reap immediate benefit from growing the local economy.
Anyway, I'd love to hear from someone in Germany how this is resolved there; but I'd assume there'd need to be some pretty structured, long-term agreements around minimum amounts, percentages of new growth, and so on.
The thing is, that money which comes from the upper levels is extremely subject to the whims of those governments; it can fluctuate wildly depending who comes into power and what their priorities are. So without some guarantees around it, I can understand the municipalities wanting a stable source of income over which they have some agency, and out of which they can reap immediate benefit from growing the local economy.
Anyway, I'd love to hear from someone in Germany how this is resolved there; but I'd assume there'd need to be some pretty structured, long-term agreements around minimum amounts, percentages of new growth, and so on.
Schools are funded from the federal, state and local level, plus non-government sources (churches etc.). Police is state level, AFAIK. Fire department is paid for by an extra tax on fire insurance (so, I guess you could argue it's a property tax via extra steps), and state funds. For streets, it depends, cities pay for city streets. Autobahn is mostly federal, others are state, federal.
For the taxes, it's complicated, because there are some taxes for which the cities and states can decide the amount, and others (for example VAT), from which they get a certain fraction, but the amount is decided on the federal level.
Edit: Let me add: Property taxes are very strangely regressive. You pay it whether you rent or own, and there is a minimum apartment cost, so you'll always pay, while a low income might not be taxed at all. Then, often, there is a sudden jump from apartment complex to SFH.
For the taxes, it's complicated, because there are some taxes for which the cities and states can decide the amount, and others (for example VAT), from which they get a certain fraction, but the amount is decided on the federal level.
Edit: Let me add: Property taxes are very strangely regressive. You pay it whether you rent or own, and there is a minimum apartment cost, so you'll always pay, while a low income might not be taxed at all. Then, often, there is a sudden jump from apartment complex to SFH.
Doesn't everyone?
Plus, there's other reasons to be skeptical of wealth taxes, capital flight is a real thing.
Plus, there's other reasons to be skeptical of wealth taxes, capital flight is a real thing.
Isn't that just another myth peddled by wealthy groups? This was a pretty good study and didn't find that effect[1].
Just on the face of it, sure if you're wealthier you have greater ability to move but that also means you probably like where you are because you chose to be there. Most of my high school friends dispersed around the country solely for job opportunities, not because they wanted to be somewhere.
[1] https://minnesota.publicradio.org/features/2011/02/documents...
> The New Jersey millionaire tax experiment offers a potent testing ground, given the magnitude of the policy change and the relative ease of relocating to a different state tax regime without leaving the New York or Philadelphia metropolitan areas. Using a difference-in-difference estimator, we find minimal effect of the new tax on the migration of millionaires.
Just on the face of it, sure if you're wealthier you have greater ability to move but that also means you probably like where you are because you chose to be there. Most of my high school friends dispersed around the country solely for job opportunities, not because they wanted to be somewhere.
[1] https://minnesota.publicradio.org/features/2011/02/documents...
> The New Jersey millionaire tax experiment offers a potent testing ground, given the magnitude of the policy change and the relative ease of relocating to a different state tax regime without leaving the New York or Philadelphia metropolitan areas. Using a difference-in-difference estimator, we find minimal effect of the new tax on the migration of millionaires.
>capital flight is a real thing.
Can anyone provide some examples of it happening in an economy like ours?
Can anyone provide some examples of it happening in an economy like ours?
Not sure if "France" is an "economy like yours" but they have definitely suffered from capital flight following a wealth tax hike[0][1].
[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1268381
[1] https://www.forbes.com/sites/jonhartley/2015/02/02/frances-7...
[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1268381
[1] https://www.forbes.com/sites/jonhartley/2015/02/02/frances-7...
That's why you pair them with capital controls, to keep that from happening. This, unfortunately, requires significant cooperation from the international community, and ought to be done before any wealth tax is imposed.
BTW, have you seen how expensive it is for high net worth individuals to renounce US citizenship?
BTW, have you seen how expensive it is for high net worth individuals to renounce US citizenship?
> Doesn't everyone?
God I hope not. How empty would we all be if we all wanted to have more money than the next guy.
God I hope not. How empty would we all be if we all wanted to have more money than the next guy.
> capital flight is a real thing
Yep, that's why all of the rich people have left New York and California.
Yep, that's why all of the rich people have left New York and California.
You think rich people are paying those kind of taxes? Why wouldn't they leave if this wealth tax were suddenly imposed upon them?
> You think rich people are paying those kind of taxes?
Judging by the amount of wealth in New York and California: obviously yes.
> Why wouldn't they leave if this wealth tax were suddenly imposed upon them?
Because they want what the taxes get them.
Judging by the amount of wealth in New York and California: obviously yes.
> Why wouldn't they leave if this wealth tax were suddenly imposed upon them?
Because they want what the taxes get them.
Equally as valid to say you are in support because you believe you will derive additional benefits financed by taxes you will never have to pay.
So what?
I hope to be wealthy and not pull up the ladder behind me.
I hope to be wealthy and not pull up the ladder behind me.
Also called "American dream".
A famous formulation of that is: "John Steinbeck once said that socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."
So tired of reading this quote every time taxes come up like it's some profound statement. I see it so often to ridicule "silly poor people voting for lower taxes".
It's possible for someone to think that it's unfair for some people to pay a huge amount of taxes unfairly, without they themselves thinking "one day I'll be rich".
It's possible for someone to think that it's unfair for some people to pay a huge amount of taxes unfairly, without they themselves thinking "one day I'll be rich".
I think it's more than just "one day I'll be rich"; it's part of the mythos of where wealth comes from. If your starting point is the American Dream, that wealth comes purely from a combination of ingenuity, luck, and hard work, either from the individual or one or more previous generations, then it's easy to see being asked to pay away a share of it as unfair. But if you see wealth as something that arises at least in part from the opportunities afforded by the structures and services within a society, then it's reasonable to expect that the society is owed back a portion of it, in part to maintain those services for the benefit of others coming later.
And fairness aside, there's the purely pragmatic concern that multi-generational wealth concentration is bad for almost everything— bad for democracy, bad for fairness in media, bad for civil unrest, etc etc. Is taxing wealth an effective way to manage this? Maybe, maybe not. But anyone who wants to critique it should probably be willing to support _some_ plan for controlling wealth inequality over the long term.
And fairness aside, there's the purely pragmatic concern that multi-generational wealth concentration is bad for almost everything— bad for democracy, bad for fairness in media, bad for civil unrest, etc etc. Is taxing wealth an effective way to manage this? Maybe, maybe not. But anyone who wants to critique it should probably be willing to support _some_ plan for controlling wealth inequality over the long term.
It's a fallacy to believe that making the rich less rich makes the poor less poor. There are a lot of things in between which must go right.
It is typical of Americans because most of their families came to the country with the allure of becoming wealthy. So it was important for them to tell themselves this story.
And probably that was the secret to America’s success: people seeing themselves as future winners and not permanent victims.
I mean it makes sense socialism removes any real chance of your country being successful so if you think your country has a chance accepting defeat would be horrible.
Doesn't the truth of this hang on what the definition of "success" is? Is ability to produce the occasional Mark Z or Jeff B "success"? Or is success just an upward slope on broad economic indicators like GDP?
I think the picture looks quite different if you look at things like quality of life indicators— and then it's (surprise!) nations like Denmark and Switzerland which top the list. I suspect it would be even more stark if you were able to measure class mobility— the number of people who have at least +x% inflation adjusted net worth over their parents at the same age.
So yeah, it's a little bizarre (and a very US-centric view) to just assume that "success" on a national level and socialist policies are mutually exclusive.
I think the picture looks quite different if you look at things like quality of life indicators— and then it's (surprise!) nations like Denmark and Switzerland which top the list. I suspect it would be even more stark if you were able to measure class mobility— the number of people who have at least +x% inflation adjusted net worth over their parents at the same age.
So yeah, it's a little bizarre (and a very US-centric view) to just assume that "success" on a national level and socialist policies are mutually exclusive.
Denmark and Switzerland are objectively capitalist systems and have little to no state control of the means of production.
Okay, but that's moving the goalposts. For the purposes of this discussion, most Americans who pull the alarm on "socialism" do so when things like wealth taxes (or single-payer healthcare, or free tuition) are mentioned.
Among other things I guess “wealthy” is an easily movable goal post...
This seems to be a classic problem in American political discourse, people immediately discount solutions for very serious problems that exist right now, due to (often extremely shaky) hypotheticals that might some day come to pass (usually with a massive heaping helping of slippery slope fallacy).
I disagree. We have evidence of this happening repeatedly. Income tax being the prime example.
I believe the problem is this: we hardly ever describe the end state. We don't define a metric that we look to achieve and then what we change about the policy when we've achieved it. So what happens is bloated bureaucracies become established and fight for self preservation, even if the mission they were on is complete.
I believe the problem is this: we hardly ever describe the end state. We don't define a metric that we look to achieve and then what we change about the policy when we've achieved it. So what happens is bloated bureaucracies become established and fight for self preservation, even if the mission they were on is complete.
Well, as long as there is no definition of “wealth”, there is a slippery slope.
Is having saved 200.000$ in 30 years (not so bonkers) being rich?
Is having saved 200.000$ in 30 years (not so bonkers) being rich?
Would you consider volontarily contribution instead?
Possibly not what you mean but I very strongly believe tax rates should he a minimum where you can set your own (and displayed publicly) tax rate above a certain level for your income.
Both physically and online, as someone who grew up not poor but far far from rich i.e. I've still only been abroad from the UK twice in my (so far short) life, I am absolutely sick of rich people saying "I'd pay more tax if I could" as a throwaway gesture. I increasingly think an underlying motive of why I study fairly intensely is just to end up better than those who were born better than me.
If you really believe that, put your money where your mouth is.
Both physically and online, as someone who grew up not poor but far far from rich i.e. I've still only been abroad from the UK twice in my (so far short) life, I am absolutely sick of rich people saying "I'd pay more tax if I could" as a throwaway gesture. I increasingly think an underlying motive of why I study fairly intensely is just to end up better than those who were born better than me.
If you really believe that, put your money where your mouth is.
Oh please. Of course they don't meant that. Because you can totally give money to the government. https://www.fiscal.treasury.gov/public/gifts-to-government.h...
What they actually mean is "I wish you made me pay more". Because they can't bring themselves to write a check to -give- it away, but -do- feel they should have to pay more. Part of that is the social aspect; why should I, as a rich person, be paying more than other people of similar wealth? But I support all of us paying more.
What they actually mean is "I wish you made me pay more". Because they can't bring themselves to write a check to -give- it away, but -do- feel they should have to pay more. Part of that is the social aspect; why should I, as a rich person, be paying more than other people of similar wealth? But I support all of us paying more.
Saying "I wish you made me pay more" while then turning around and hire the best tax accountants to avoid paying even one cent, and lobbying, funding and grooming politicians that will block any wealth taxes, is just adding insult to injury and insulting hypocrisy.
Well, it's the same motivation, isn't it? "All my peers are doing this - I would be a sucker not to do the same". It's that feeling of being taken advantage of that they want to avoid.
Let's be clear, there are three kinds of mindsets here:
"I don't want to be taxed at all" - lots of lobbying and such to keep taxes on the rich low, and lots of loopholes.
"I think people of my bracket should be taxed higher, but I am going to avail myself of every existing loophole and itemization I can" - doesn't want to feel like a sucker, but agrees people in their bracket, themselves included, should pay more.
"I think people of my bracket should be taxed higher, and I'm going to give money away anonymously or similar to put my money where my mouth is, even if others of my bracket are not" - a unicorn.
Let's be clear, there are three kinds of mindsets here:
"I don't want to be taxed at all" - lots of lobbying and such to keep taxes on the rich low, and lots of loopholes.
"I think people of my bracket should be taxed higher, but I am going to avail myself of every existing loophole and itemization I can" - doesn't want to feel like a sucker, but agrees people in their bracket, themselves included, should pay more.
"I think people of my bracket should be taxed higher, and I'm going to give money away anonymously or similar to put my money where my mouth is, even if others of my bracket are not" - a unicorn.
This is very similar to saying that charities should deal with these issues (homelessness, drug additction, etc) not the government. Charities rely on donations. I strongly think that the government should be dealing with these things.
I think I should be taxed more but I also don't think that me voluntarily paying 1% more tax will change anything. However everyone playing 1% more tax will so fundamentally change everything that it's worth doing.
I don't say "I'd pay more tax if I could" I say "I should pay more tax and so should everyone else earning as much as me"
>I increasingly think an underlying motive of why I study fairly intensely is just to end up better than those who were born better than me. You might want to consider the fact then that social mobility is generally higher in countries with higher tax rates.
I think I should be taxed more but I also don't think that me voluntarily paying 1% more tax will change anything. However everyone playing 1% more tax will so fundamentally change everything that it's worth doing.
I don't say "I'd pay more tax if I could" I say "I should pay more tax and so should everyone else earning as much as me"
>I increasingly think an underlying motive of why I study fairly intensely is just to end up better than those who were born better than me. You might want to consider the fact then that social mobility is generally higher in countries with higher tax rates.
Well define not wealthy, if you have over $90,000 net worth you would be in the top 10% already.
This is not accurate. For the US, [0] shows the 90% percentile to be $1.2 million net worth.
This data is sourced from the federal reserve's survey [1].
[0]: https://dqydj.com/average-median-top-net-worth-percentiles/
[1]: https://www.federalreserve.gov/econres/scfindex.htm
This data is sourced from the federal reserve's survey [1].
[0]: https://dqydj.com/average-median-top-net-worth-percentiles/
[1]: https://www.federalreserve.gov/econres/scfindex.htm
Well I never said it was for the US, instead it's globally. If you are in the US you would have even more advantages.
The article this comment section is on is entirely about the united states and the wealthy in the context of the united states.
You would have had to make it explicitly clear that you were talking about something other than the rest of the comments (the whole world) for your comment to be read as such.
Anyway, comparing wealth between the developed world and the developing/less-developed nations is tricky, and needs to be done with care. I don't think using that number in this context is useful.
You would have had to make it explicitly clear that you were talking about something other than the rest of the comments (the whole world) for your comment to be read as such.
Anyway, comparing wealth between the developed world and the developing/less-developed nations is tricky, and needs to be done with care. I don't think using that number in this context is useful.
Wealthy = enough money to lobby
400k per year income could be 0 saved if one has enough expenses.
so could 1 billion per year.
[deleted]
No one has mentioned that wealth taxes that have been tried before in other developed countries have not gone well, so based on that alone I'm skeptical. And I heard about this from Planet Money (NPR) so I don't think this is some idea planted in my head by "media owned by wealthy".
I think you raise a good point. Why have so many developed countries abandoned wealth taxes? According to wikipedia
> Some other European countries have discontinued this kind of tax in recent years: Austria, Denmark (1995), Germany (1997), Finland (2006), Luxembourg (2006) and Sweden (2007).
source: https://en.wikipedia.org/wiki/Wealth_tax#Historical_examples
The WSJ has their take https://www.wsj.com/articles/where-wealth-taxes-failed-11572.... Criticisms within the same wiki article can probably shed extra light into why https://en.wikipedia.org/wiki/Wealth_tax#Criticisms
> Some other European countries have discontinued this kind of tax in recent years: Austria, Denmark (1995), Germany (1997), Finland (2006), Luxembourg (2006) and Sweden (2007).
source: https://en.wikipedia.org/wiki/Wealth_tax#Historical_examples
The WSJ has their take https://www.wsj.com/articles/where-wealth-taxes-failed-11572.... Criticisms within the same wiki article can probably shed extra light into why https://en.wikipedia.org/wiki/Wealth_tax#Criticisms
I think the main argument is that the French billionaires are much more mobile - they were able to simply relocate a few hours away to a nearby French-speaking country.
Any sensible wealth tax proposal in the U.S. would probably have to pair it with a similar tax on the transfer of assets abroad.
Any sensible wealth tax proposal in the U.S. would probably have to pair it with a similar tax on the transfer of assets abroad.
Wealth taxes are a bad idea because they target everyone with wealth, regardless of the actual views they hold, regardless of the degree to which they have personally contributed to the collapse we are facing.
The real inequality we have today is being perpetuated by outdated regulations, primarily from the 1930s. It's also being perpetuated by people that invest in Warren Buffet-style "value" stocks, which extract actual rents from people, while delivering no technological improvements. Housing is 80% of the inequality problem, and if we are going to fix that, we have to stop making it illegal to build enough homes for people that need them. And to do it cheaply enough, we have to turn to automated custom home manufacturing, which means overcoming the objections of labor unions.
For example, I just saw this in the LA Times - "Labor unions, environmentalists are biggest opponents of Gov. Brown’s affordable housing plan":
https://www.latimes.com/politics/la-pol-sac-labor-enviro-hou...
NB: I think we need new, distributed structures to replace labor unions, because the goal they serve is an important one. The existing ones concentrate power at the top, and have become just another corrupt institution.
The real inequality we have today is being perpetuated by outdated regulations, primarily from the 1930s. It's also being perpetuated by people that invest in Warren Buffet-style "value" stocks, which extract actual rents from people, while delivering no technological improvements. Housing is 80% of the inequality problem, and if we are going to fix that, we have to stop making it illegal to build enough homes for people that need them. And to do it cheaply enough, we have to turn to automated custom home manufacturing, which means overcoming the objections of labor unions.
For example, I just saw this in the LA Times - "Labor unions, environmentalists are biggest opponents of Gov. Brown’s affordable housing plan":
https://www.latimes.com/politics/la-pol-sac-labor-enviro-hou...
NB: I think we need new, distributed structures to replace labor unions, because the goal they serve is an important one. The existing ones concentrate power at the top, and have become just another corrupt institution.
> regardless of the actual views they hold
Are you really suggesting that taxing someone based on their views is a good idea.
Are you really suggesting that taxing someone based on their views is a good idea.
Of course not. I'm merely saying that many people that support the wealth tax are looking at it from the perspective of getting back at the boomers. They are onto something, insofar as that generation did support policies that really did effect a huge wealth transfer that benefitted the boomers, at the expense of basically everyone else.
The thing I'm trying to call out is that they might not want to wipe out GenX-ers like me, who invested their personal savings into TSLA, and are working to use the wealth to actually help people rather than to buy fancy clothes, condos and yachts.
https://www.youtube.com/watch?v=rIAZJNe7YtE
(Something to understand here is Weinstein's argument about WWII, embedded growth obligations and institutional decline...)
The thing I'm trying to call out is that they might not want to wipe out GenX-ers like me, who invested their personal savings into TSLA, and are working to use the wealth to actually help people rather than to buy fancy clothes, condos and yachts.
https://www.youtube.com/watch?v=rIAZJNe7YtE
(Something to understand here is Weinstein's argument about WWII, embedded growth obligations and institutional decline...)
> we have to stop making it illegal to build enough homes for people that need them
There's already enough homes (in the USA, at least) to house all the homeless people in the country. Unfortunately, giving homes away wouldn't be profitable, and profit is all that seems to matter.
There's already enough homes (in the USA, at least) to house all the homeless people in the country. Unfortunately, giving homes away wouldn't be profitable, and profit is all that seems to matter.
What about the fact that those homes are not equally distributed geographically? There are reasons people prefer to live near their families, workplaces, places with good weather, etc.
without profit as incentive, no homes would've been build. Or maybe they would've been, North Korea style.
Sounds like you agree that there's a problem with a system the prioritizes profit over everything else :)
Sounds like you didn't understand my comment
Classic circular fallacy. "Wealth taxes are good. Wealthy people don't like wealth taxes, and that's how you know they are good."
Or is it an ad hominem even if the "hominem" is a class (wealthy people) instead of a person?
Or is it an ad hominem even if the "hominem" is a class (wealthy people) instead of a person?
Its not making the argument that wealth taxes are good because wealthy people oppose them, only that their point of view on the topic is deeply self serving and masquerading as an objective analysis.
> is deeply self serving
To the extent that they do it for themselves alone, which is making an assumption about intent.
Many wealthy people honestly believe that low taxes drive economic growth that is good for all.
To the extent that they do it for themselves alone, which is making an assumption about intent.
Many wealthy people honestly believe that low taxes drive economic growth that is good for all.
There are also many who approve of a higher income tax (and capital gains) for the wealthy, but reject a wealth tax.
in the spectrum of taxes I think would rank them in decreasing order of fairness as (Vices, Consumption, Income, Wealth)...
Wealth tax is really rough because you can lose money on an asset AND lose more w/ the taxation on the capital base. At least with an income tax it's, hypothetically, only in the case of profit.
Wealth Tax is kind of like mandatory quotas. Income tax is like sharecropping.
Consumption is like sharing your goods consumption with society (think Potluck)
Vices is actually a disincentives structure for things proven to be societally disastrous or distasteful
And of course the devil is in the details entirely, because loopholes and policy can change it entirely.
Wealth tax is really rough because you can lose money on an asset AND lose more w/ the taxation on the capital base. At least with an income tax it's, hypothetically, only in the case of profit.
Wealth Tax is kind of like mandatory quotas. Income tax is like sharecropping.
Consumption is like sharing your goods consumption with society (think Potluck)
Vices is actually a disincentives structure for things proven to be societally disastrous or distasteful
And of course the devil is in the details entirely, because loopholes and policy can change it entirely.
No one claimed wealthy people aren't cherry picking their data to serve their own pre-existing bias. Only that, like a tobacco study funded by the tobacco industry, their claims are subject to a very evident bias and so should not be given the same weight as claims by those not suffering that bias.
Alabama with its 1901 constitution is proof that the belief is false, no matter how dearly held.
One point of data proves something. Interesting approach.
If we grant that this argument is valid, do the same implications apply to the contrapositive case? E.g. people who aren't wealthy that support wealth taxes (or higher taxes on people who earn more than them).
Fair, but that's a weak stance. We should debate the consequences, implementation, and rationale of wealth taxes, not ascribe motivations to their supporters/dissenters.
It's definitely a useless argument for a fairly lazy article. I don't disagree that the articles they link have weak arguments, but why not actually cite economic policy experts and economists that agree with wealth inequality? The lack of attention to such viewpoints, if their claim holds true, would better indicate media bias than them publishing weak op-eds.
[deleted]
This is about as insightful as saying that media catering to the not-wealthy are quick to tell you wealth taxes are a great idea.
This organization is not living up to it's name if it's only taking the easiest potshots imaginable at one side of the issue.
This organization is not living up to it's name if it's only taking the easiest potshots imaginable at one side of the issue.
Agree that FAIR.org does not live up to its name. After skimming some, their story choices and language used seem to lean away from center and unbiased. Was really hopeful for a new news source from the domain name, such a disappointment
> center and unbiased
Those two things are not the same, nor even necessarily correlated.
Those two things are not the same, nor even necessarily correlated.
fair point :]
[deleted]
If the US Government were a charity, the rating would be 0-stars. Nearly all tax money is pocketed by special interests. The usual arguments "yeah what about fire and police" account for a rounding error in tax collection while the vast majority is simply pocketed by friends of your elected officials.
You know what'd be nice? Consent. I'd like to be consented before my value is forceful removed from me. I'd like to pick an efficient charity to give this money to.
You know what'd be nice? Consent. I'd like to be consented before my value is forceful removed from me. I'd like to pick an efficient charity to give this money to.
I think Italy has something like that for the "church tax". You can select whether you want that money to go to a church or a different non-profit, but you have to pick something and pay.
As an immigrant I concur. I have taxation without representation.
Filling your census form allocates Congressional and Electoral College representation to your state, regardless if you're a citizen.
The problem with relying on philanthropy to fund the public good, instead of taxes, is that it is one dollar, one vote, rather than one person, one vote. This means the more you have to give, the more you get to decide for the rest of us what counts as “public good.” I’m not sure I like the idea of a handful of billionaires deciding for us what public projects are worthy and good.
Today, my neighborhood's roads get paved the same as Jeff Bezos's neighborhood. If taxes were voluntary, then I might not be able to afford more than dirt roads for my house, whereas I bet Jeff's house would be fine.
Today, my neighborhood's roads get paved the same as Jeff Bezos's neighborhood. If taxes were voluntary, then I might not be able to afford more than dirt roads for my house, whereas I bet Jeff's house would be fine.
Near 50% of American pay zero federal tax. The top 10% of all Americans pay 69% of all federal taxes currently. This is a point 'left out' of current discussions.
Instead of increasing entitlements or adding yet more taxes - we lower the size of the government spending UNTIL it matches where most people pay for the services received in a more scaled manner.
Source: https://taxfoundation.org/summary-latest-federal-income-tax-...
Instead of increasing entitlements or adding yet more taxes - we lower the size of the government spending UNTIL it matches where most people pay for the services received in a more scaled manner.
Source: https://taxfoundation.org/summary-latest-federal-income-tax-...
> Near 50% of American pay zero federal tax.
I was looking for the lucky duckies argument to rear its head. The Intercept has an article which does a great job of eviscerating it[1]
> ...when you take all U.S. taxes into account — federal income taxes, federal payroll taxes, federal corporate taxes, the federal estate tax, federal excise taxes, and the plethora of state and local taxes — the U.S. tax system is just mildly progressive.
> If the U.S. tax system were perfectly flat, the share of taxes paid by each group of Americans above would be equal to their share of income.
> Instead, the top 1 percent — with an average income of about $2 million — made 20.9 percent of America’s income, but paid 24.1 percent of America’s taxes. Few people will perceive this as a monstrous injustice.
> Meanwhile, the middle 20 percent of Americans— with incomes between $41,000 and $66,000 per year — make 10.9 percent of America’s income and pay 9.4 percent of America’s taxes. The bottom 20 percent, making less than $23,000, make just 2.8 percent of America’s income and pay 2 percent of America’s taxes. That is, the “lucky duckies” of the right’s imagination who pay little to nothing in income taxes are still paying a significant portion of their income in taxes overall.
[1] https://theintercept.com/2019/04/13/tax-day-taxes-statistics...
I was looking for the lucky duckies argument to rear its head. The Intercept has an article which does a great job of eviscerating it[1]
> ...when you take all U.S. taxes into account — federal income taxes, federal payroll taxes, federal corporate taxes, the federal estate tax, federal excise taxes, and the plethora of state and local taxes — the U.S. tax system is just mildly progressive.
> If the U.S. tax system were perfectly flat, the share of taxes paid by each group of Americans above would be equal to their share of income.
> Instead, the top 1 percent — with an average income of about $2 million — made 20.9 percent of America’s income, but paid 24.1 percent of America’s taxes. Few people will perceive this as a monstrous injustice.
> Meanwhile, the middle 20 percent of Americans— with incomes between $41,000 and $66,000 per year — make 10.9 percent of America’s income and pay 9.4 percent of America’s taxes. The bottom 20 percent, making less than $23,000, make just 2.8 percent of America’s income and pay 2 percent of America’s taxes. That is, the “lucky duckies” of the right’s imagination who pay little to nothing in income taxes are still paying a significant portion of their income in taxes overall.
[1] https://theintercept.com/2019/04/13/tax-day-taxes-statistics...
Problem there is that it ignores transfer payments. So the people making 2.8% of the national income are really taking home more than that since they (collectively, not every individual receives all of these) are receiving snap, section 8, tanf, social security/SSI, Medicaid, etc.
From a post transfer perspective, America’s tax system is firmly progressive, but less so than European countries. The other side of that is that in America you have the opportunity to do quite well for yourself if you aren’t in one of the aristocratic elite families. That isn’t really the case in many of these European social democracies. Not only is there a safety net below you, but there is also a net above you as well.
From a post transfer perspective, America’s tax system is firmly progressive, but less so than European countries. The other side of that is that in America you have the opportunity to do quite well for yourself if you aren’t in one of the aristocratic elite families. That isn’t really the case in many of these European social democracies. Not only is there a safety net below you, but there is also a net above you as well.
> The other side of that is that in America you have the opportunity to do quite well for yourself if you aren’t in one of the aristocratic elite families. That isn’t really the case in many of these European social democracies. Not only is there a safety net below you, but there is also a net above you as well.
Hasn't this been thoroughly debunked by economic mobility studies? The US regularly ranks below many European countries by this metric, and the nordic countries tend to dominate in this regard.
Hasn't this been thoroughly debunked by economic mobility studies? The US regularly ranks below many European countries by this metric, and the nordic countries tend to dominate in this regard.
If you look at quintile based measurements sure. But there’s far less difference between the European quintiles than the American ones. So it’s a misleading measure
> So the people making 2.8% of the national income are really taking home more than that since they (collectively, not every individual receives all of these) are receiving snap, section 8, tanf, social security/SSI, Medicaid, etc.
It makes sense to look at these payments to the extreme low income brackets as insurance against revolution. People will put up with a lot of misery, but there comes a point where they start getting angry about it, and as a bonus they're well armed in the US.
It makes sense to look at these payments to the extreme low income brackets as insurance against revolution. People will put up with a lot of misery, but there comes a point where they start getting angry about it, and as a bonus they're well armed in the US.
I was referencing only federal income, which I clarified a bit. Thank you for doing the work of providing those break downs.
> Near 50% of American pay zero federal tax. The top 10% of all Americans pay 69% of all federal taxes currently. This is a point 'left out' of current discussions.
Nearly 50% pay no federal income tax. It's worth making that statement precise in this case, because saying they pay no federal tax is just a lie.
Nearly 50% pay no federal income tax. It's worth making that statement precise in this case, because saying they pay no federal tax is just a lie.
[deleted]
Federal income tax is what matters. So yes, everyone pays some sales tax, some property tax, FICA, etc.
But what matters is income tax (for individuals).
But what matters is income tax (for individuals).
It is not the only one that matters, though it does make up (looked up, link at bottom) about 50% of federal tax revenue. Payroll taxes make up another 36%. Everyone who works and is paid aboveboard pays federal payroll taxes. It's only those whose AGI falls below whatever the present threshold is, or who are not paid aboveboard, who don't pay federal income taxes. If wages were keeping up better with inflation, we'd probably see a lot more people paying federal income taxes.
https://www.taxpolicycenter.org/briefing-book/what-are-sourc...
https://www.taxpolicycenter.org/briefing-book/what-are-sourc...
I don't disagree. I was slyly trying to suggest we already have a wealth tax, called 'federal income tax'.
Income tax appears to be half of the federal taxes that are taken in. Payroll is the other major one.
https://www.cbpp.org/research/federal-tax/policy-basics-wher...
https://www.cbpp.org/research/federal-tax/policy-basics-wher...
You don't defend your argument, you just state it.
Astute.
As an engineer, I've found there are two types of 'engineering minds'. Literalists, which cannot get too far past the scope fo the statement. They tend to dissect and add detail; and Expanders, who take it far beyond the original meaning. They tend to "yes, and" a solution (in the improv comedy stance) and expand it in different directions - but are remiss with detail.
And good discussions happen with both insights.
As an engineer, I've found there are two types of 'engineering minds'. Literalists, which cannot get too far past the scope fo the statement. They tend to dissect and add detail; and Expanders, who take it far beyond the original meaning. They tend to "yes, and" a solution (in the improv comedy stance) and expand it in different directions - but are remiss with detail.
And good discussions happen with both insights.
The top 10% of wage earners pay all the tax. But they're not the top 10% by wealth or unearned income. Those guys are getting off free. Reducing income tax by properly taxing inheritance, cap gains or wealth itself would help people who work for a living instead of sitting on their arses and jealousy guarding what their grandfather's grandfather's grandfather brought over from the old country.
The amazing thing is we can ALL buy assets and be the "grandfather's grandfather's grandfather". It isn't hard. Even very small wealth compounds incredibly after 150 years.
> we can ALL buy assets and be the "grandfather's grandfather's grandfather".
How many families/people are wealthy on the basis of the earnings of a regular person in 1870 and their incredibly compounded wealth? The answer is likely none.
How many families/people are wealthy on the basis of the earnings of a regular person in 1870 and their incredibly compounded wealth? The answer is likely none.
Not 1870, but my great grandfather came to the US in 1905 or so with little more than the shirt on his back and worked a series of ‘regular person’ jobs until he died. The money he saved allowed several of his sons to start a small business, which did fine for several decades but went under around 2000. However that modest income split between the three brothers (one of whom was my grandfather) allowed them to save enough money to each become homeowners in the 50s and live a reasonable lifestyle in the suburbs. My grandpas frugality meant that even after he died young my dad could go to college without debt, and my dad has been somewhat frugal his whole life.
So by 2020, based on the savings from a series of people working ‘regular person’ jobs, most of my great grandpas descendants who are in my dad’s generation are very well off, several are millionaires (I’m excluding my dad because he was the smart one in the family and went to medical school, his job pays far more than a ‘regular person’ job). And this story is not at all uncommon across the US. The reason you don’t hear it is because there’s a big (especially in the Midwest) cultural aversion to discussing wealth or showing it off.
So by 2020, based on the savings from a series of people working ‘regular person’ jobs, most of my great grandpas descendants who are in my dad’s generation are very well off, several are millionaires (I’m excluding my dad because he was the smart one in the family and went to medical school, his job pays far more than a ‘regular person’ job). And this story is not at all uncommon across the US. The reason you don’t hear it is because there’s a big (especially in the Midwest) cultural aversion to discussing wealth or showing it off.
This is due to human nature, not what logical, future thinking beings should do.
I'm suggesting, that everyone can feel empowered, because assets or dollars invested today can be worth considerably more after inflation in the future. This should give EVERYONE hope.
I'm suggesting, that everyone can feel empowered, because assets or dollars invested today can be worth considerably more after inflation in the future. This should give EVERYONE hope.
No, you can't. Because while the 10k you manage to stash away compounds, the 10bn they stashed away compounds faster and isn't taxed. That's the issue. You'll never get there, neither will your (great great great grand) kids.
Plus, wtf? Why should I be the grandfather's grandfather? If I work hard, I should be rewarded, if I'm lazy I shouldn't be. What my ancestors did or didn't do should be irrelevant and what I do should be irrelevant to my forebears. That's because this is the 21dt century, we're capitalist and meritocratic and pursue the American Dream. We're not a 10th century feudal system monarchy!?
Plus, wtf? Why should I be the grandfather's grandfather? If I work hard, I should be rewarded, if I'm lazy I shouldn't be. What my ancestors did or didn't do should be irrelevant and what I do should be irrelevant to my forebears. That's because this is the 21dt century, we're capitalist and meritocratic and pursue the American Dream. We're not a 10th century feudal system monarchy!?
The top 10% of Americans have much more than 69% of the disposable income. The majority of Americans aren't able to afford a surprise $250 expense.
? What does this even mean ?
The poor, by necessity, have to use government services more because they don't have resources ; are you suggesting that the poor pay more taxes to "scale things out" ?
That's not surprising, nor necessarily a problem. The top 20% of earners make ~50% of the income in the US. And those people will have more margin to make up for that bottom 10% that makes 1% of the income.
Per wikipedia
Per wikipedia
using "percent of taxes" is an arbitrary metric. Why not ask about percent of wealth? I assume because "taxfoundation.org" is in the business of lowering taxes, which is only one of many things to be optimized in the US government.
https://en.wikipedia.org/wiki/File:US_Wealth_Inequality_-_v2...
Eyeballing this chart suggests that the top 10% have more than 69% of the wealth, so paying 69% of the taxes seems like a good deal for them.
https://en.wikipedia.org/wiki/File:US_Wealth_Inequality_-_v2...
Eyeballing this chart suggests that the top 10% have more than 69% of the wealth, so paying 69% of the taxes seems like a good deal for them.
What proportion of overall income do these people earn?
Also, Buffets effective tax rate is lower than his secretary's tax rate.
The gap between the rich and poor is growing, and has been doing so since 1980.
r > g is the biggest long term problem facing capitalist democracies.
The gap between the rich and poor is growing, and has been doing so since 1980.
r > g is the biggest long term problem facing capitalist democracies.
>Also, Buffets effective tax rate is lower than his secretary's tax rate.
That should be a lesson in how much of our taxation system is regressive not a lesson on how little Buffet is taxed.
Buffet and his secretary both pay a couple hundred dollars of tax to register their used cars or a couple dollars of tax on a pack of smokes or a couple tens of dollars fee for some government service or a buck here and there for toll roads and those things are a much larger fraction of the secretary's income. The less you make the more these "fixed fee" taxes screw you.
That should be a lesson in how much of our taxation system is regressive not a lesson on how little Buffet is taxed.
Buffet and his secretary both pay a couple hundred dollars of tax to register their used cars or a couple dollars of tax on a pack of smokes or a couple tens of dollars fee for some government service or a buck here and there for toll roads and those things are a much larger fraction of the secretary's income. The less you make the more these "fixed fee" taxes screw you.
Nearly 50% of Americans are children, students, and retirees.
I should have been more literal - 50% of federal taxpayers.
The median household income in the US is $68,000, I'm pretty sure that household pays federal taxes.
Should we move the goalposts again?
Should we move the goalposts again?
At that income level, a married couple with two children and childcare expenses could easily end up with zero tax bill and maybe even paying negative income tax. Standard deductions, child tax credit and childcare expense credits get you there without any exceptional circumstances.
The average number of people per household is 2.6.
The two adult two child family is not a median american family. It's a much-larger than normal family. Of course if you apply their deductions to an average income, you get a very low tax rate.
It's not typical.
The two adult two child family is not a median american family. It's a much-larger than normal family. Of course if you apply their deductions to an average income, you get a very low tax rate.
It's not typical.
I like how you lump it up to top 10%. The top 1% of Americans pay 37% of the tax burden yet own over 60% of the wealth. They are grossly underpaying.
Cutting entitlements and putting MORE of a financial burden on people who have nothing isn't going to fix the problem. AT BEST it'll result in massive social unrest and the end of the American Experiment.
"I know you can't afford healthcare, and can barely afford food, but we're going to need to take away your food stamps, and your subsidized housing because Larry Ellison just can't afford another 1% increase in taxes". That's what you're going with?
Cutting entitlements and putting MORE of a financial burden on people who have nothing isn't going to fix the problem. AT BEST it'll result in massive social unrest and the end of the American Experiment.
"I know you can't afford healthcare, and can barely afford food, but we're going to need to take away your food stamps, and your subsidized housing because Larry Ellison just can't afford another 1% increase in taxes". That's what you're going with?
> The top 1% of Americans pay 37% of the tax burden yet own over 60% of the wealth.
Your statement confuses wealth with income.
Your statement confuses wealth with income.
A person is a person, fair and square to be treated equal - until we can extract more from ones pocketbook.
I would look at it as the surcharge on protecting a person's wealth. A person with no wealth doesn't need to have their wealth protected. A person with a great deal of wealth enjoys the benefits of taxation, having their wealth protected from the starving mobs outside their estate.
A person is treated equally. If a person is poor, they get taxed little. If that same person becomes rich, they get taxed more.
Money isn't a protected class. Why do you act like it is?
Money isn't a protected class. Why do you act like it is?
I’m more concerned about what happens if we don’t start taxing the rich more (in the US). I’m worried about the class divide turning violent
The top 1% of US taxpayers already cover 21% of the share of federal taxes collected with the top 10% covering 48% percent of taxes. The bottom 50% of income earners pay little to no taxes (11%).
https://taxfoundation.org/summary-of-the-latest-federal-inco...
https://taxfoundation.org/summary-of-the-latest-federal-inco...
The top 1% also have 39 percent of the wealth and rising. The "and rising" means it's pretty clear that the taxes are not enough (and/or wages need to be wildly adjusted), if you believe that we currently have too much wealth inequality.
I would like to see a graph that correlates this phenomenon with the output of the FED's printing presses.
>The top 1% of US taxpayers already cover 21% of the share of federal taxes collected
The top 1% of US taxpayers control over 60% of the wealth. If they're only paying 21% of the tax burden they are GROSSLY under-taxed.
https://www.bloomberg.com/news/articles/2019-11-09/one-perce...
The top 1% of US taxpayers control over 60% of the wealth. If they're only paying 21% of the tax burden they are GROSSLY under-taxed.
https://www.bloomberg.com/news/articles/2019-11-09/one-perce...
Arguably, that itself can be a sign that income inequality is far too high, as 50% of the population doesn't earn enough to pay meaningful amounts of federal tax.
Or not turning violent. Either way is a lot of misery.
Also, how about the game of entrepreneurship? I'd much rather play that game on a playing field where there are a lot of customers who are well off.
Also, how about the game of entrepreneurship? I'd much rather play that game on a playing field where there are a lot of customers who are well off.
Learn Mandarin if not already.
Any kind of class divide that grows over time is bound to become violent. A stable society may have classes, but these classes have to remain relatively the same for a long time (even if there is movement of people between classes). For example, medieval society was unjust, but at least the difference between classes was stable over several centuries. In the modern world we now have a class of owners that increase their wealth astronomically in a few years, while most people are seeing their incomes stagnate or decrease.
They'll all be in New Zealand in their other private compounds.
I love this idea that they think Kiwis, with the huge and growing wealth inequality problems there too, somehow will welcome the billionaires from America and won't come for them in their Queenstown mansions.
Yeah, relative to other nations, Kiwi governance is extremely responsive to the will of its citizenry.
Compared to America, I think they're much more likely to end up taxing the snot out of their own billionaires (both imported and domestic).
Compared to America, I think they're much more likely to end up taxing the snot out of their own billionaires (both imported and domestic).
> I’m worried about the class divide turning violent
reply
it doesn't have to be if Marxists don't stir it all the time
it doesn't have to be if Marxists don't stir it all the time
I will say that this article points out a CNBC article on "$400k in a big city...". And FAIR seems to be missing that both earnings _and expenses growth_ have been growing very fast for those in cities.
Progressive taxation of someone earning $100k per year in San Francisco or NYC is hardly fair. At least prior to covid19 causing a crash in the rental market one could expect to pay ~$2500 a month to share a 2bedroom place. That's spending 42% of take home pay to have roommates! Not to mention everything else costs more, a meal out, riding the bus, getting your bicycle repaired, clothing etc.
$400k per year is about what it takes to run a middle class family w/ 2 kids in such a city. -- They're already paying $162,121 in taxes annually.
When we progressively tax those who actually have less than the median after CoL, we're being unfair (IMO)
Progressive taxation of someone earning $100k per year in San Francisco or NYC is hardly fair. At least prior to covid19 causing a crash in the rental market one could expect to pay ~$2500 a month to share a 2bedroom place. That's spending 42% of take home pay to have roommates! Not to mention everything else costs more, a meal out, riding the bus, getting your bicycle repaired, clothing etc.
$400k per year is about what it takes to run a middle class family w/ 2 kids in such a city. -- They're already paying $162,121 in taxes annually.
When we progressively tax those who actually have less than the median after CoL, we're being unfair (IMO)
If people were taxed less, housing and rent would be even more expensive in SF.
The solution to the problem is not taxing people in SF less. This is the same flawed idea that the solution to houses being unaffordable is to have a mortgage interest deduction and (previously) a property tax deduction for home-owners.
All this did was make houses and land more expensive to make up for the tax deduction.
The solution to the problem is not taxing people in SF less. This is the same flawed idea that the solution to houses being unaffordable is to have a mortgage interest deduction and (previously) a property tax deduction for home-owners.
All this did was make houses and land more expensive to make up for the tax deduction.
I agree that the solution to housing crisis in California is not by reducing taxes. I'm pointing out that progressive taxes on those who, on a cost of living adjusted basis, have less than their less progressively taxed peers.
I full agree that housing costs should not be deductions.
Another way to think about it is that in a high CoL markets, not only does a marginal dollar buy you less marginal goods (such as a burrito), but you also are likely in a higher marginal tax rate making it geometrically worse.
I full agree that housing costs should not be deductions.
Another way to think about it is that in a high CoL markets, not only does a marginal dollar buy you less marginal goods (such as a burrito), but you also are likely in a higher marginal tax rate making it geometrically worse.
> That's spending 42% of take home pay to have roommates!
So, probably not affected much by a wealth tax.
> $400k per year is about what it takes to run a middle class family w/ 2 kids in such a city.
What? The median household income in NYC is about $63k.
So, probably not affected much by a wealth tax.
> $400k per year is about what it takes to run a middle class family w/ 2 kids in such a city.
What? The median household income in NYC is about $63k.
Almost no one in the US identifies themselves as rich. Most rich people think they are upper-middle-class at best.
My step mother told me that she "can't possibly be in the 1% because she doesn't even have a gardener."
My step mother told me that she "can't possibly be in the 1% because she doesn't even have a gardener."
The point is why should someone get progressively taxed when they are attempting to live a "median" American lifestyle.
That is a home, a bedroom for each child (etc as the CNBC article pointed out)
They are still making nearly 6x the "median" income in their city so saying they are attempting to live a "median" American lifestyle is disingenuous.
But that's the point. If the median experience, in absolute goods is a certain thing, then why should someone making 6x the median income not be able to afford such a thing. And more topically, why should we introduce additional progressive marginal decrements to what they are able to have?
Middle class is not median. I’d agree that $400k is barely enough to get to the comparable middle class living in NYC. Earning below $100k will get you subsidized college, right?
Per https://statisticalatlas.com/place/New-York/New-York/Househo..., $123k puts you in top 20%; $250k puts you in top 5%. "95%+ of NYC are lower-class" is simply an unsupportable assertion.
> Earning below $100k will get you subsidized college, right?
That's more reflective of the insane inflation in college costs (and our typical "socialize things, but in the silliest possible way" approach in the States) than what lower/middle/upper class thresholds are.
> Earning below $100k will get you subsidized college, right?
That's more reflective of the insane inflation in college costs (and our typical "socialize things, but in the silliest possible way" approach in the States) than what lower/middle/upper class thresholds are.
Throughout history 99% were lower class. This is coming back. Not being secure about housing, education and healthcare puts you into the lower class. The middle class is almost dead.
Obviously, the «middle class» is a nebulous term defined differently by different authors, but ability to buy a home, having access to good education and childcare, surviving medical bills and set aside enough retirement money to keep the same lifestyle seems pretty reasonable to me.
slightly offtopic but ive always considered media to be the most fascinating asset controlled by wealth.
The news ensures rote reinforcement and education of the class system for the masses, while celebrities act as a sort of failsafe to avoid things like the 18th century French revolution.
individual celebrity popularity is permitted to ebb and flow, however a general aversion to or boycott of celebrities acts as a canary in a coal mine, alerting the most wealthy and opulent to the existence of a systemic backlash against the fundamental tenents of class inequality and, most importantly, the ruling class of wealth. This sort of unilateral distaste for celebrities was last seen during the COVID quarantine when celebrities insisted solidarity with their fans while sequestered in lavish mansions or private estates. the acrid contrast between pawns forced to work multiple jobs and elites who merely benefitted from the inconvenience of isolation in paradise produced a widespread backlash. In response, celebrities were recalled by media owners and a greater focus was put on thanking "essential workers" in media (print, tv, and billboards) as well as the Amazon news piece, which acted to repair and maintain the US populations perception of wealth as a net-good.
The news ensures rote reinforcement and education of the class system for the masses, while celebrities act as a sort of failsafe to avoid things like the 18th century French revolution.
individual celebrity popularity is permitted to ebb and flow, however a general aversion to or boycott of celebrities acts as a canary in a coal mine, alerting the most wealthy and opulent to the existence of a systemic backlash against the fundamental tenents of class inequality and, most importantly, the ruling class of wealth. This sort of unilateral distaste for celebrities was last seen during the COVID quarantine when celebrities insisted solidarity with their fans while sequestered in lavish mansions or private estates. the acrid contrast between pawns forced to work multiple jobs and elites who merely benefitted from the inconvenience of isolation in paradise produced a widespread backlash. In response, celebrities were recalled by media owners and a greater focus was put on thanking "essential workers" in media (print, tv, and billboards) as well as the Amazon news piece, which acted to repair and maintain the US populations perception of wealth as a net-good.
Do people really find these sorts of articles compelling? They're nothing more dressed up ad hominem--attack the messenger without engaging with the substance.
Here are the facts that aren't in dispute:
1) Other countries that have tried wealth taxes have started abandoning them, most recently France and Sweden: https://www.cato.org/publications/commentary/why-europe-axed....
2) There is little economic consensus on whether wealth taxes would be efficient or hamper economic growth: https://assets.aspeninstitute.org/content/uploads/2019/09/We....
3) Economists do generally agree, however, that consumption taxes on individuals are the most efficient and least distortionary strategies: https://www.npr.org/sections/money/2012/07/19/157047211/six-...
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
> Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
4) Warren's and Sanders' proposed wealth taxes would be dramatically higher than anything a developed country has attempted (up to 6% and 8%). And even based on the candidates' own projections, they would raise not very much money (under $300 billion per year, or less than 1/6 of what would be required to fund Medicare 4 All).
5) Billionaires just don't have that much money in the aggregate to warrant such an outsized attention in tax policy. All the wealth of all U.S. billionaires adds up to $3.4 trillion. Even if you confiscated it all in one go, that would fund the local, state, and federal governments for a bit over six months, without even accounting for the new spending proposed by Warren and Sanders.
Here are the facts that aren't in dispute:
1) Other countries that have tried wealth taxes have started abandoning them, most recently France and Sweden: https://www.cato.org/publications/commentary/why-europe-axed....
2) There is little economic consensus on whether wealth taxes would be efficient or hamper economic growth: https://assets.aspeninstitute.org/content/uploads/2019/09/We....
3) Economists do generally agree, however, that consumption taxes on individuals are the most efficient and least distortionary strategies: https://www.npr.org/sections/money/2012/07/19/157047211/six-...
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
> Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
4) Warren's and Sanders' proposed wealth taxes would be dramatically higher than anything a developed country has attempted (up to 6% and 8%). And even based on the candidates' own projections, they would raise not very much money (under $300 billion per year, or less than 1/6 of what would be required to fund Medicare 4 All).
5) Billionaires just don't have that much money in the aggregate to warrant such an outsized attention in tax policy. All the wealth of all U.S. billionaires adds up to $3.4 trillion. Even if you confiscated it all in one go, that would fund the local, state, and federal governments for a bit over six months, without even accounting for the new spending proposed by Warren and Sanders.
I'm also not convinced that wealth taxes in the US are constitutional, since wealth isn't income (unlike salaries, dividends, and capital gains), and the Federal government is explicitly prohibited from direct taxation with the explicit exception of income.
Same reason we don't have a Federal property tax.
Same reason we don't have a Federal property tax.
Wealth tax unconstitutionality is not some 'dream'. I think that a wealth tax is a great idea, but I dont see any good way of implementing it. The constitution (16th amendment) only specifically allows for income taxes, not property taxes. What makes the famous carriage tax legal is that its a tax on consumption and spending, and is therefore not a direct tax. The carriage tax was never argued to be a property tax, thats the key distinction here. The only way to pass it is to argue its a consumption and usage tax, or get every state to pass a wealth tax.
https://en.wikipedia.org/wiki/Direct_tax#U.S._constitutional...
There's actually a decent amount of precedent that holds the property tax as a direct tax, and therefore unconstitutional on the federal level. Even a liberal court would make this decision I think.
https://en.wikipedia.org/wiki/Direct_tax#U.S._constitutional...
There's actually a decent amount of precedent that holds the property tax as a direct tax, and therefore unconstitutional on the federal level. Even a liberal court would make this decision I think.
Why can't there just be a new amendment? Income tax was "unconstitutional" before the 16th amendment, right?
Sure, you could pass a new amendment. That requires 2/3 majority in both houses which I think would be tough. Most of my issues with it are in the implementation, its just not practical. Theres lots of other insightful comments here talking about that issue.
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There is a long tail of blogs, podcasts, and independent authors now, no longer beholden to corporate interests (or not as much.) I find a rich selection of everything these days -- and if you subscribe the $ mostly goes directly to the author (e.g., with substack) which is awesome.
The Guardian is published by a charitable trust of which their most highly regarded journalists become trustees
https://en.wikipedia.org/wiki/Scott_Trust_Limited
https://en.wikipedia.org/wiki/Scott_Trust_Limited
Yes, but you wouldn't know it by how Google ranks news websites.
Not really. This is the core problem with a lot of issues these days.
Yes. There are worker-owned media outlets.
The British, Canadian and Australian Broadcasting Corporations.
NPR and PBS in the US.
NPR and PBS in the US.
NPR? It's a non-profit.
4chan?
Moot was at least a millionaire, and the current owner Hiroyuki Nishimura's wikipedia page[0] doesn't make him seem likely to be poor.
[0]https://en.wikipedia.org/wiki/Hiroyuki_Nishimura
[0]https://en.wikipedia.org/wiki/Hiroyuki_Nishimura
Moot might have been a millionaire after selling it, but it never sounded like 4chan was making him money. He was still living with his parents, and paying for the lawsuits was very expensive.
Wealth taxes are fundamentally ex post facto, which changes the nature of voting. Voting should be about changing the rules for the future rather than changing the rules for the past.
And it has real consequences for the spirit of democracy. It opens up the idea that people can literally vote to take other people's stuff and give it to themselves. That process will not have any good results for anyone.
And it has real consequences for the spirit of democracy. It opens up the idea that people can literally vote to take other people's stuff and give it to themselves. That process will not have any good results for anyone.
The real solution: a flat tax. 20% for everyone, regardless of take. A fair, non-political solution.
Dismantle the IRS, ditch all of the complexity.
Dismantle the IRS, ditch all of the complexity.
Progressive taxation is viewed as more fair by more people that flat taxation.
You're using "income" as your input variable to calculate "fairness", but you could just as easily use "disposable income". Someone making $25,000 per year might have a disposable income of $0. Asking this person to kick in $5000 seems ludicrous.
I honestly don't know how you could assess fairness without looking at ability-to-pay:
(income) - (basic survival needs) = (money leftover you can potentially contribute to the government)
This is obvious, fair, and is why most nations have progressive taxation structures.
You're using "income" as your input variable to calculate "fairness", but you could just as easily use "disposable income". Someone making $25,000 per year might have a disposable income of $0. Asking this person to kick in $5000 seems ludicrous.
I honestly don't know how you could assess fairness without looking at ability-to-pay:
(income) - (basic survival needs) = (money leftover you can potentially contribute to the government)
This is obvious, fair, and is why most nations have progressive taxation structures.
I'd rather see a tax floor than progressive taxing. Assuming deductions weren't a thing, if you're making less than $40k per year (for example, I'd have to do the math to figure out the exact amount based on commodity and housing prices), you don't pay taxes.
That, or a progressive tax with a ceiling at 20%.
That, or a progressive tax with a ceiling at 20%.
A flat tax is a big tax cut for higher incomes without reducing complexity. The complexity of the tax code is to determine taxable income. The flat tax doesn’t help with that. Once you have determined taxable income then calculating taxes owed is easy no matter how the curve looms.
> ditch all of the complexity.
I fully agree with a flat tax w/ 0 baseline deduction.
but we still need a definition of what is "take". Afterall , paying 20% tax on $100 receipts makes no sense if it cost me $105 in expenses already.
I fully agree with a flat tax w/ 0 baseline deduction.
but we still need a definition of what is "take". Afterall , paying 20% tax on $100 receipts makes no sense if it cost me $105 in expenses already.
Can someone tell me - what's to stop me fro taking my assets and buying land/assets in a foreign country? Will the US claim jurisdiction over all countries? How will they audit this?
BI sucks but even they said as much for why Europe has scrapped most of their wealth taxes:
https://www.businessinsider.com/4-european-countries-wealth-...
The US is a country with a terribly funded IRS. They can barely audit those who obviously don't pay their taxes. If you are someone with 10 or 100M of assets it's easy and obvious to hide them in assets that can't be tracked.
BI sucks but even they said as much for why Europe has scrapped most of their wealth taxes:
https://www.businessinsider.com/4-european-countries-wealth-...
The US is a country with a terribly funded IRS. They can barely audit those who obviously don't pay their taxes. If you are someone with 10 or 100M of assets it's easy and obvious to hide them in assets that can't be tracked.
The IRS is a strange beast - it might be the only government department that, when you give it an extra dollar, it generates more than a dollar in tax revenue.
I'm sure there's a theoretical tipping point where they become too bloated to do their job well, but their current levels of funding are far below that.
People who subscribe to the "wealthy people should pay their fair share" meme would probably be better off directing their efforts toward advocating for more IRS funding, than for changing laws and closing loopholes. The laws are already there - we just need to properly fund the folks that enforce them.
I'm sure there's a theoretical tipping point where they become too bloated to do their job well, but their current levels of funding are far below that.
People who subscribe to the "wealthy people should pay their fair share" meme would probably be better off directing their efforts toward advocating for more IRS funding, than for changing laws and closing loopholes. The laws are already there - we just need to properly fund the folks that enforce them.
Just throwing some thoughts out here. Wealth and income need to be broadly distributed to create somewhat equal power dynamics between people and communities. If the market is not creating that type of outcome government has stepped in through taxation and spending to mitigate this imbalance somewhat. If you want a smaller government more people need more wealth and income so they don’t need government services and can do it themselves.
Wealth taxes are great in theory but tough to implement. The value of large pools of assets can be easily reduced by marketability and liquidity discounts. See the real estate industry. I’d like to see wealth taxes work but I think having value accrue to people over capital is a better approach.
Wealth taxes are great in theory but tough to implement. The value of large pools of assets can be easily reduced by marketability and liquidity discounts. See the real estate industry. I’d like to see wealth taxes work but I think having value accrue to people over capital is a better approach.
Open Question: Why don't taxes actually go down over time? Who is capturing the value generated by productivity gains that might make things cheaper to run?
This is a pet-peeve of mine. There's a part of taxes that has to grow with the economy size because the service is provided by people and they need to be compensated at market rate. Say the army, education, etc. But of course there is a bunch of things the government does that should be getting cheaper, like administration of services, etc.
Its the problem with income-taxes, naturally government increases expenditures without need for legislation. It's a bad rule. This is why I think government should be financed by flat-expenditures: sum of costs / people and send a bill. This framing would make government very sensitive to increase of expenditures.
Its the problem with income-taxes, naturally government increases expenditures without need for legislation. It's a bad rule. This is why I think government should be financed by flat-expenditures: sum of costs / people and send a bill. This framing would make government very sensitive to increase of expenditures.
The services provided by the government have not been stable over time and have dramatically increased
I always thought they were just a provocation to make other measures seem more reasonable, or a kind of signal for filtering off thoughtful people and attracting rubes for a rabble. When you realize wealth taxes are economic cannibalism, you just can't unsee it.
Sure, eat the rich, but you are left with the same question the sort people who advocate that kind of thing never seem to ask themselves, which is, "and then what?"
Sure, eat the rich, but you are left with the same question the sort people who advocate that kind of thing never seem to ask themselves, which is, "and then what?"
[deleted]
Not mentioned is anything from media not owned by the wealthy. Who would that be? NPR, AP? The Financial Times' take on a wealth tax seems measured: https://www.ft.com/content/0bab153a-026b-11ea-b7bc-f3fa4e77d...
I suppose that if a wealth tax is enacted, one of the consequences will be mass-splitting the stock into voting and non-voting. Wealthy people who have a majority stake in their companies will transform shares to e.g. 5% voting + 95% not, and the big shareholders will only sell the non-voting stock to keep control of their companies.
If wealth flight is really going to be your justification for being against a wealth tax, at bare minimum name the country the wealthy are going to flee to in order to avoid it. The US has a significantly lower marginal tax rate compared to pretty much any nation in Europe.
I just see tax dodgers as morally redundant people. I try hard to think about it another way, but I just can't.
It seems obvious to me from reading extensively around this that we have very little basis for arguing the case for free will. Our entire existence: our personal lives, our business lives, our investments, our health, our wealth - are driven by luck.
I run a successful small business in the UK. I can squint and pretend that everything about this success is down to me, but the reality is:
I'm white
Middle class
Have a great family
Have had the luck to have a wonderful family background including supportive parental influence as well as a generational (mother + grandparents) financial safetynet all the way through my life.
Have (so far) had great luck as far as health is concerned.
Are ANY of these things down to me and my skill? No, none. They are down to luck.
Am I a good business person? Yes, I like to think so. What's that down to? Luck.
So for me, now, to turn around and say "No, I'm not paying my taxes. I don't believe in taxes. I don't believe in helping those less well off than me. I don't believe in helping people. I don't believe in the state"...? That is bullshit. Utter, total bullshit. And it makes me f*g sick when I see people gathering vast quantities of wealth and then somehow making out that they are somehow separate from the [majority] of people in this world who really badly need help.
We should all be getting off our fat, lucky arses and doing more to help people instead of squirreling away our wealth and pretending we're somehow special. And we should start by taxing the bejesus out of the wealthy. They [we] [I] can afford it.
Rant over. As you were.
It seems obvious to me from reading extensively around this that we have very little basis for arguing the case for free will. Our entire existence: our personal lives, our business lives, our investments, our health, our wealth - are driven by luck.
I run a successful small business in the UK. I can squint and pretend that everything about this success is down to me, but the reality is:
I'm white
Middle class
Have a great family
Have had the luck to have a wonderful family background including supportive parental influence as well as a generational (mother + grandparents) financial safetynet all the way through my life.
Have (so far) had great luck as far as health is concerned.
Are ANY of these things down to me and my skill? No, none. They are down to luck.
Am I a good business person? Yes, I like to think so. What's that down to? Luck.
So for me, now, to turn around and say "No, I'm not paying my taxes. I don't believe in taxes. I don't believe in helping those less well off than me. I don't believe in helping people. I don't believe in the state"...? That is bullshit. Utter, total bullshit. And it makes me f*g sick when I see people gathering vast quantities of wealth and then somehow making out that they are somehow separate from the [majority] of people in this world who really badly need help.
We should all be getting off our fat, lucky arses and doing more to help people instead of squirreling away our wealth and pretending we're somehow special. And we should start by taxing the bejesus out of the wealthy. They [we] [I] can afford it.
Rant over. As you were.
If all choices are reduced down to luck that would include moral choices. If morality is a matter of deterministic luck, there is hardly any meaning between right and wrong. If there's no way to be morally right or wrong, what's motivating you to be so upset with others' pseudo-random choices and opinions?
That’s a terrible reductionist argument, and you know it. It’s also avoiding the point.
Since it’s all down to luck, why don’t you try tomorrow this little experiment: donate away your wealth and completely stop all your current hard working. Instead just lay around and watch TV all day.
A year later, come back and let us know how far your luck got you.
A year later, come back and let us know how far your luck got you.
Can I rant from a different perspective?
I'm from a working class family in the UK, most of whom are on benefits and half are immigrants. My sister is a single mum (by choice), because she wanted to move out and in the UK the only way to really do that if you're working class is to have kids and hope the government gives you a home.
My partner's mum is earning around £45,000 and lives in a £500,000 house. She's also a single mum and has never worked a day in her life. She has done pretty well though because she (reluctantly) had 5 kids and managed to get one diagnosed with autism despite most GPs believing he doesn't actually have autism – you only need one doctor to give you a diagnosis, so she just keep trying until she got it. A few months back she was thinking of getting a job (not because she needs the money, but because she was bored while the kids were at school). The guy at the job centre told her not to get a job because it wouldn't make financial sense given what she's receiving from the government. Another nice perk is that she gets free food from the food bank every week which she'll often give to us because she doesn't actually need it – sometimes she'll get some nice deserts from M&S so it's worth getting either way. In fact, most of my family go to the food bank despite not needing to do so because why not?
In contrast me and my partner live in a very small home, which we work full time to afford. We can't afford kids, but we hope one day we might be finically secure enough to have at least one before we turn 35. Not that we'd want to, but if I'm honest I'm doubtful whether we'd ever be able to afford 5 kids or live in a £500,000 house like her mum.
As someone from the working class I can honestly say I have no idea what my upper-middle class colleagues are talking about when they talk about wealth inequality. Apart from me only people I know who are my age who don't live with their parents are those that had kids. If fact most of the time those in my family who have had children live in much nicer homes than my middle-class colleagues. Thankfully I consider myself somewhat lucky that I'm weirdly good with computers which allowed me to get a middle class job despite the fact software development would typically be out of reach for someone from my background.
What upset me the most though is that when I lost my job a few years back I received very little government help because I had around £10,000 saved up to pay taxes (I had to fill self assessment at the time). Apparently if you have savings that disqualifies you from help. I recently found out the reason my sister blew all her savings on a BMW after having her kid is because that way she had a better chance of being given a house by the government.
Sometimes I wonder if our welfare state would actually help the working class more if it focused on incentivising people to make good decisions rather than having as many kids as possible and spending everything you get on cars and holidays. As far as I can tell the system right now doesn't actually help the working class, that is unless you're content living on welfare your whole life. In my experience the middle class is completely detached from how hard it is if you're from a working class family a want to simply make an honest living instead of following the more traditional working-class route of not working and having children. As far as I can supporting this system is just propagating a system that leads to further poverty and income inequality.
I see this reasoning bias in many middle-class positions though. For example, most of my middle class colleagues seem to think drugs are harmless and that's presumably because they do them now and again at parties, but they're not the kind of people who would allow drugs to consume their lives. Yet, just yesterday I had my partner crying to me because both her mother and brother are addicted and abusing drugs. I also have alcoholics and drug users in my family. There is a very clear reasoning fallacy going on here, specifically how the middle class just assumes that working class people act like they do. But they don't. Most working class will prefer living on welfare if you give them the option because they don't have many options and that's all they know. Just like many will abuse drugs if you allow them because these aren't people who make the best life decisions, especially if they're not incentivised to make the right decisions.
I'm sorry if this comments comes off as overly emotional, but it does upset me having to watch this cycle of poverty happen over and over again in my family. What the working class needs are good incentives to work and negative incentives to have children they can't afford or to abuse drugs. They also need good opportunities, so if you're a business owner I'd urge you to consider hiring some people from less well off backgrounds who may not having a university degree, etc but who you can train up and get on the right path. This push for more people to go to university has also done a lot of harm to the working class – you get automatically ruled out from a lot of jobs (including software development roles) regardless of your experience simply because you weren't privileged enough to go to university.
I'm from a working class family in the UK, most of whom are on benefits and half are immigrants. My sister is a single mum (by choice), because she wanted to move out and in the UK the only way to really do that if you're working class is to have kids and hope the government gives you a home.
My partner's mum is earning around £45,000 and lives in a £500,000 house. She's also a single mum and has never worked a day in her life. She has done pretty well though because she (reluctantly) had 5 kids and managed to get one diagnosed with autism despite most GPs believing he doesn't actually have autism – you only need one doctor to give you a diagnosis, so she just keep trying until she got it. A few months back she was thinking of getting a job (not because she needs the money, but because she was bored while the kids were at school). The guy at the job centre told her not to get a job because it wouldn't make financial sense given what she's receiving from the government. Another nice perk is that she gets free food from the food bank every week which she'll often give to us because she doesn't actually need it – sometimes she'll get some nice deserts from M&S so it's worth getting either way. In fact, most of my family go to the food bank despite not needing to do so because why not?
In contrast me and my partner live in a very small home, which we work full time to afford. We can't afford kids, but we hope one day we might be finically secure enough to have at least one before we turn 35. Not that we'd want to, but if I'm honest I'm doubtful whether we'd ever be able to afford 5 kids or live in a £500,000 house like her mum.
As someone from the working class I can honestly say I have no idea what my upper-middle class colleagues are talking about when they talk about wealth inequality. Apart from me only people I know who are my age who don't live with their parents are those that had kids. If fact most of the time those in my family who have had children live in much nicer homes than my middle-class colleagues. Thankfully I consider myself somewhat lucky that I'm weirdly good with computers which allowed me to get a middle class job despite the fact software development would typically be out of reach for someone from my background.
What upset me the most though is that when I lost my job a few years back I received very little government help because I had around £10,000 saved up to pay taxes (I had to fill self assessment at the time). Apparently if you have savings that disqualifies you from help. I recently found out the reason my sister blew all her savings on a BMW after having her kid is because that way she had a better chance of being given a house by the government.
Sometimes I wonder if our welfare state would actually help the working class more if it focused on incentivising people to make good decisions rather than having as many kids as possible and spending everything you get on cars and holidays. As far as I can tell the system right now doesn't actually help the working class, that is unless you're content living on welfare your whole life. In my experience the middle class is completely detached from how hard it is if you're from a working class family a want to simply make an honest living instead of following the more traditional working-class route of not working and having children. As far as I can supporting this system is just propagating a system that leads to further poverty and income inequality.
I see this reasoning bias in many middle-class positions though. For example, most of my middle class colleagues seem to think drugs are harmless and that's presumably because they do them now and again at parties, but they're not the kind of people who would allow drugs to consume their lives. Yet, just yesterday I had my partner crying to me because both her mother and brother are addicted and abusing drugs. I also have alcoholics and drug users in my family. There is a very clear reasoning fallacy going on here, specifically how the middle class just assumes that working class people act like they do. But they don't. Most working class will prefer living on welfare if you give them the option because they don't have many options and that's all they know. Just like many will abuse drugs if you allow them because these aren't people who make the best life decisions, especially if they're not incentivised to make the right decisions.
I'm sorry if this comments comes off as overly emotional, but it does upset me having to watch this cycle of poverty happen over and over again in my family. What the working class needs are good incentives to work and negative incentives to have children they can't afford or to abuse drugs. They also need good opportunities, so if you're a business owner I'd urge you to consider hiring some people from less well off backgrounds who may not having a university degree, etc but who you can train up and get on the right path. This push for more people to go to university has also done a lot of harm to the working class – you get automatically ruled out from a lot of jobs (including software development roles) regardless of your experience simply because you weren't privileged enough to go to university.
Sad to see ignorance being spewed all over. The Wealthy have tax engineers that make sure they pay as little taxes as legally possible. High Taxes only punish the Working class and Business owners making sure that social mobility becomes nonexistent.
Is it worse than running up a multi trillion dollar deficit? The tax cut was sold as it would give a boost to the economy and we would make it back with additional revenue due to economic growth.
However the required growth rate to justify the tax cut was estimated by 6.5. Even when the economy was good before the pandemic it never got above 4.5 percent. And now we're not even close.
Maybe a wealth tax is not the best idea but based on the current economic realities and the budget deficit what is a better alternative? Conservatives will say "cut the budget or spending" but which expenditures are you going to cut?
It might be a bad idea but compared to 23 trillion dollar? The super wealthy have benefitted from how many tax cuts and yet we are still running a massive deficit. Many like to say 'its a spending problem' but then ask them where to cut spending and usually its spending that does not affect them. Plus you need to factor in the affects of austerity on the economy, as the UK has tried it and it did not work, which will reduce revenue and make the deficit and economy worse.
Hate it all you want but it should be on the table as an option to stop the bleeding. Bring on the downvotes.
However the required growth rate to justify the tax cut was estimated by 6.5. Even when the economy was good before the pandemic it never got above 4.5 percent. And now we're not even close.
Maybe a wealth tax is not the best idea but based on the current economic realities and the budget deficit what is a better alternative? Conservatives will say "cut the budget or spending" but which expenditures are you going to cut?
It might be a bad idea but compared to 23 trillion dollar? The super wealthy have benefitted from how many tax cuts and yet we are still running a massive deficit. Many like to say 'its a spending problem' but then ask them where to cut spending and usually its spending that does not affect them. Plus you need to factor in the affects of austerity on the economy, as the UK has tried it and it did not work, which will reduce revenue and make the deficit and economy worse.
Hate it all you want but it should be on the table as an option to stop the bleeding. Bring on the downvotes.
We aren’t printing enough money: https://www.lesswrong.com/posts/tAThqgpJwSueqhvKM/frequently...
We can look at France, which used to have a wealth tax, after they elected a socialist in 1981. https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth
It not only failed to raise the expected revenue, it was estimated it actually led to a net negative revenue due to capital flight and a higher percent of French people renouncing citizenship. Because it was unpopular and didn’t raise much money, in 2017 it was abolished.
There are some types of wealth taxes that I believe can succeed, such real estate taxes and inflation (which operates effectively as a tax on unspent money). How about instead of proposing wealth taxes which have failed in the past and cause strange incentives, we try to hit our inflation targets first?
We can look at France, which used to have a wealth tax, after they elected a socialist in 1981. https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth
It not only failed to raise the expected revenue, it was estimated it actually led to a net negative revenue due to capital flight and a higher percent of French people renouncing citizenship. Because it was unpopular and didn’t raise much money, in 2017 it was abolished.
There are some types of wealth taxes that I believe can succeed, such real estate taxes and inflation (which operates effectively as a tax on unspent money). How about instead of proposing wealth taxes which have failed in the past and cause strange incentives, we try to hit our inflation targets first?
PG also seems to think this, is there any evidence wealth taxes make people poorer on average? Even people like Ray Dalio are in favour of redistribution as he thinks the system is unbalanced.
https://www.linkedin.com/pulse/why-how-capitalism-needs-refo...
https://www.linkedin.com/pulse/why-how-capitalism-needs-refo...
Why the hell has this article been flagged? PG literally just wrote a blog post that definitely took an anti-wealth tax position. So this is the other side and now its off the front page. What kind of cowardice is this?
Eh, true wealthy people are against a tax that hurts them, but that doesn't mean that their argument is without merit.
Think about what a wealth tax means. Say I found a company like WeWork (bear with me and try to forget the shenanigans pulled by their CEO). Things are going pretty well and before you know it, we raise money at a $200 million valuation and my stake is 50%. On paper I'm now worth $100 million dollars, but that money isn't in my bank account... it's an imaginary number that my investors decided to invest at. Based on E. Warren's wealth tax plan, I now owe 2% of my wealth above $50M. So where do I get that $1 million from? I don't have cash or liquid assets, so likely I have to dilute my shares to get some personal money. No problem... investors will understand.
So I go on for a few years paying some taxes on my new wealth, 3-5% of my equity a year. Now, the company has grown and we raise a big amount of money. Say Softbank gives us $5 billion at a $20 billion valuation, and i've been diluted to 25% at this point, but now I'm worth $5 billion on paper. Under EW's plan, I owe 3% of my wealth above $1 billion, plus 2% of wealth between 50M and 1B. My tax bill is gonna be $139,000,000. Again, my wealth doesn't exist in the bank... it's in my private shares. But okay, I raise money from investors to dilute my shares and pay taxes... at this point they expect it.
OK... now I make plans to take my company public. Finally I'll have some real liquid money and paying these taxes will be easier, because I can just sell shares on the open market. But wait, I put some feelers out and the market thinks my company isn't worth $20 billion... it thinks it's worth $10 billion. Do I get a refund for past tax payments?
The point is that the government will have a very hard time determining what things are worth. It's easy to tax income or sales, because those are known values. The price of WeWork, or a Picasso for that matter are not. So what's gonna happen? I can guarantee that billionaires are gonna come up with a 1000 ways to claim that they are worth much less than they are. They'll start taking companies private. They'll put money into hard-to-value and illiquid assets. Some will revoke their citizenship and move elsewhere. On the whole, it may not gonna be great for the economy, even though in a sense there's a moral justness to it.
There are better ways to tax the wealthy. Higher capital gains taxes and estate taxes to name a few (estate taxes run into the same issues as wealth taxes, but at least it doesn't burden people to value their property every year).
Think about what a wealth tax means. Say I found a company like WeWork (bear with me and try to forget the shenanigans pulled by their CEO). Things are going pretty well and before you know it, we raise money at a $200 million valuation and my stake is 50%. On paper I'm now worth $100 million dollars, but that money isn't in my bank account... it's an imaginary number that my investors decided to invest at. Based on E. Warren's wealth tax plan, I now owe 2% of my wealth above $50M. So where do I get that $1 million from? I don't have cash or liquid assets, so likely I have to dilute my shares to get some personal money. No problem... investors will understand.
So I go on for a few years paying some taxes on my new wealth, 3-5% of my equity a year. Now, the company has grown and we raise a big amount of money. Say Softbank gives us $5 billion at a $20 billion valuation, and i've been diluted to 25% at this point, but now I'm worth $5 billion on paper. Under EW's plan, I owe 3% of my wealth above $1 billion, plus 2% of wealth between 50M and 1B. My tax bill is gonna be $139,000,000. Again, my wealth doesn't exist in the bank... it's in my private shares. But okay, I raise money from investors to dilute my shares and pay taxes... at this point they expect it.
OK... now I make plans to take my company public. Finally I'll have some real liquid money and paying these taxes will be easier, because I can just sell shares on the open market. But wait, I put some feelers out and the market thinks my company isn't worth $20 billion... it thinks it's worth $10 billion. Do I get a refund for past tax payments?
The point is that the government will have a very hard time determining what things are worth. It's easy to tax income or sales, because those are known values. The price of WeWork, or a Picasso for that matter are not. So what's gonna happen? I can guarantee that billionaires are gonna come up with a 1000 ways to claim that they are worth much less than they are. They'll start taking companies private. They'll put money into hard-to-value and illiquid assets. Some will revoke their citizenship and move elsewhere. On the whole, it may not gonna be great for the economy, even though in a sense there's a moral justness to it.
There are better ways to tax the wealthy. Higher capital gains taxes and estate taxes to name a few (estate taxes run into the same issues as wealth taxes, but at least it doesn't burden people to value their property every year).
Those who theorize that we can accelerate the economy via pressure on the tax and regulatory brakes are not the ones desirable for decision-making positions.
we already have a wealth tax.
Have cash? Inflation (cheapens govt debt) Own Property? Property Taxes. Own Equity? capital gains on realization of profits Get Dividends? Dividends are taxed. Income? Taxed.
Virtual every form of wealth is taxed. The question should be how much should it be taxed, and enforcement. A wealth tax is a nice song and dance around the issue and cannot be reasonably implemented hence why it's in the zeitgeist.
Have cash? Inflation (cheapens govt debt) Own Property? Property Taxes. Own Equity? capital gains on realization of profits Get Dividends? Dividends are taxed. Income? Taxed.
Virtual every form of wealth is taxed. The question should be how much should it be taxed, and enforcement. A wealth tax is a nice song and dance around the issue and cannot be reasonably implemented hence why it's in the zeitgeist.
Inflation and property taxes are wealth taxes. Capital gains tax and tax on dividends is not.
Inflation is not really tax, more exogenous parameter of monetary system. It does not give much advantage to government (as expected inflation rate is accounted in bond rate).
Property tax would make more sense as a tax on limited resource than as a wealth tax.
Property tax would make more sense as a tax on limited resource than as a wealth tax.
You are right, of course, for inflation. I was aiming at the basis for the "tax", i.e. "wealth" or "positive change of wealth"
say you had a 100m in stock. did nothing but borrow against it until you die. how much tax would you pay. as long as you borrow less than your stock appreciates.
> until you die
Given the amount of future debt we've taken on, it's probably a good thing to have growing deferred income too.
Given the amount of future debt we've taken on, it's probably a good thing to have growing deferred income too.
I will never understand the people who think that media outlets are biased... toward the left. Yes, I'm sure that if this multinational conglomerate of 100 TV channels and 200 newspapers, owned by a multibillionaire, is a communist propaganda outlet.
fair.org? Ha! Confiscating others money is hardly "fair" but here we are.
You take for granted that private property and capital accumulation is inherently "fair".
Many people do, it is the organizing principle of most modern civilization after all but that does not mean it is indeed inherently "fair" or "good".
Many people do, it is the organizing principle of most modern civilization after all but that does not mean it is indeed inherently "fair" or "good".
Not contributing fairly to the society that allowed one to accrue a large volume of wealth is also "unfair."
"contributing fairly" sounds good but is meaningless. There are too many competing definitions of "fair."
"Contributing fairly" has meaning when compared to "no contribution" or "negative contributions".
We can argue about what fair is all day but it hard to say that someone who accrued $1B has contributed fairly. Warren Buffet acknowledges as much in his famous quote about his secretary paying more in taxes than he does.
Let's not let perfect be the enemy of good when it comes to equitable contribution.
We can argue about what fair is all day but it hard to say that someone who accrued $1B has contributed fairly. Warren Buffet acknowledges as much in his famous quote about his secretary paying more in taxes than he does.
Let's not let perfect be the enemy of good when it comes to equitable contribution.
Of course that was fair.
All of the tricks Buffet jumped through to get his taxes that low were intended to encourage that behavior, whatever it was. So his reinvestment of profits in the company, investments in clean energy, contributions to charity, profit losses due to forgiving debts owed by people in disaster zones...whatever it all was.
Someone making laws figured all of that was "fair."
If someone followed the given rules, dealt fairly and openly with others and made 1 billion dollars they did it fairly. The huge amount of money does not make it unfair in any way.
See, my definition of "fair" is followed the law and didn't deceive others. Obviously yours doesn't agree which kind of proves my point, doesn't it.
All of the tricks Buffet jumped through to get his taxes that low were intended to encourage that behavior, whatever it was. So his reinvestment of profits in the company, investments in clean energy, contributions to charity, profit losses due to forgiving debts owed by people in disaster zones...whatever it all was.
Someone making laws figured all of that was "fair."
If someone followed the given rules, dealt fairly and openly with others and made 1 billion dollars they did it fairly. The huge amount of money does not make it unfair in any way.
See, my definition of "fair" is followed the law and didn't deceive others. Obviously yours doesn't agree which kind of proves my point, doesn't it.
> Confiscating others money
You can see it as a subscription fee for the service of upholding private property rights instead.
You can see it as a subscription fee for the service of upholding private property rights instead.
Time to open-source the news.
in other words, the sky is blue the grass is green
CNN likes to post rich people in favor of wealth taxes.
is the opposite the case too?
The same argument can be used against the poor. Poor-people-oriented media will be quick to tell that wealth taxes are a good idea.
Communism was an approach to gain fair equality, but humans are so corrupted it never was achieved.
Wealth taxes mean another evolution iteration for loopholes. Of course the politicians whose audience is poor would promote that idea. But is it fair?
I know this isn't always the case with everyone. And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them.
But this incentive is so blatantly obvious in other cases and so rarely understood. I can only assume that the vast majority of people think businesses are taxed like people. You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives.