The ProPublica Revelations Show Why We Need to Tax Wealth More Effectively(newyorker.com)
newyorker.com
The ProPublica Revelations Show Why We Need to Tax Wealth More Effectively
https://www.newyorker.com/news/our-columnists/the-propublica-revelations-show-why-we-need-to-tax-wealth-more-effectively
31 comments
> Any concentrated power, be it wealth, the crown, or something like the Church of England, were not coincidentally major targets in the founding documents.
The crown was discouraged by explicitly forming a republic with a non-hereditary elected executive of limited powers balanced by two other coequal branches. The church was constrained by the free exercise clause of the First Amendment.
But how do the founding documents target the accumulation of wealth? I'm not finding that in my copy of the Constitution or Declaration. Is it in some other founding document?
The crown was discouraged by explicitly forming a republic with a non-hereditary elected executive of limited powers balanced by two other coequal branches. The church was constrained by the free exercise clause of the First Amendment.
But how do the founding documents target the accumulation of wealth? I'm not finding that in my copy of the Constitution or Declaration. Is it in some other founding document?
(Half serious) suggestion: show me an AWS Well-Architected tax system.
We do these scalable, fault tolerant cloud systems, yet the tax code is a dirty diaper in a dumpster fire on a train wreck.
We do these scalable, fault tolerant cloud systems, yet the tax code is a dirty diaper in a dumpster fire on a train wreck.
I feel like this New Yorker piece is almost a non-article given how very, very short it is. All the meat is actually in the original ProPublica article that they link.
https://www.propublica.org/article/the-secret-irs-files-trov...
Prior big HN discussion.
https://news.ycombinator.com/item?id=27432326 (June 8)
https://www.propublica.org/article/the-secret-irs-files-trov...
Prior big HN discussion.
https://news.ycombinator.com/item?id=27432326 (June 8)
I also think it's a misnomer to say the ProPublica article was a revelation. It's like they breathlessly reported that the US Military has a bunch of weapons. Of course the rich don't pay tax on their wealth. Nobody does. And nobody ever asked them to.
It's more like.... People claim military has weapons, it's just an 'assumed', no shit...and Propublica snaps photos proving it...and maybe documenting more in-depth how much...like how many aircraft carriers... it was a "helpful" article, but definitely not earth shattering as a revelation.
[deleted]
Yes. It's mostly bait to try to get people to create accounts they can mine.
This is the most absurd thing I've seen today, and I've been on Reddit for an hour.
I'm surprised the author didn't explore — or even mention — the constitutional question related to levying a federal wealth tax.
Basically, 'direct' taxes (as opposed to income taxes, which are blessed by the 16th Amendment) have to be levied proportionally among the states, based on population. That means that billionaires could just move to Wyoming and pay essentially nothing.
Further reading, from the left and right:
https://www.motherjones.com/kevin-drum/2019/01/is-elizabeth-...
https://www.forbes.com/sites/peterjreilly/2019/06/25/wealth-...
https://www.washingtonpost.com/opinions/elizabeth-warren-wan...
https://www.wsj.com/articles/elizabeth-warrens-unconstitutio...
Basically, 'direct' taxes (as opposed to income taxes, which are blessed by the 16th Amendment) have to be levied proportionally among the states, based on population. That means that billionaires could just move to Wyoming and pay essentially nothing.
Further reading, from the left and right:
https://www.motherjones.com/kevin-drum/2019/01/is-elizabeth-...
https://www.forbes.com/sites/peterjreilly/2019/06/25/wealth-...
https://www.washingtonpost.com/opinions/elizabeth-warren-wan...
https://www.wsj.com/articles/elizabeth-warrens-unconstitutio...
Yeah, well, that pesky constitution kind of hinders radical change. People who want radical change badly enough tend to be willing to ignore it.
Fortunately, the courts mostly continue to be unwilling to ignore the constitution...
Fortunately, the courts mostly continue to be unwilling to ignore the constitution...
what if every interest increase from investments counts at the end of the year as "income" and is taxed at the normal 35% everyone else pays? Whether you let it stay in investments or pull it out? Then we wouldn't need to worry about collecting taxes only when pulling from retirement funds/etc because it's all taxed annually based on increase.
It seems like a simple solution! It gets tricky when you think about illiquid assets, especially those with few comparables, like fancy paintings or luxury real estate. Now you could say “well, we’ll just do this for XYZ types of assets, but not do it for the types of assets that are hard to value.”
But if you do that, you create distortions that would lead people to have a huge preference for certain asset classes over others.
Also, if you tax people on gains they have in good years, you have to also give people refunds in years when they lose money. Well, you don’t have to, but if you don’t then people will be much less likely to engage in risky ventures.
But if you do that, you create distortions that would lead people to have a huge preference for certain asset classes over others.
Also, if you tax people on gains they have in good years, you have to also give people refunds in years when they lose money. Well, you don’t have to, but if you don’t then people will be much less likely to engage in risky ventures.
>Why We Need to Tax Wealth More Effectively
uhh, isn't wealth explicitly not taxed? The title makes it sound like there are taxes on wealth but the rich people just keep working around them.
uhh, isn't wealth explicitly not taxed? The title makes it sound like there are taxes on wealth but the rich people just keep working around them.
You're right — the headline gives away that this is not a serious piece. Journalists often do not have input on headlines, but I would think that they would be able to push back on a headline that is actually misleading (or makes them look foolish, as it conflates income/wealth).
There are a few ways wealth can be taxed, but usually only when it is changing hands. The so called "death tax" is an example, which is why it is such a hot button issue with billionaires that they propagandize it to the point that most Americans think it could affect them. A tax on wealth that is otherwise idle is novel.
In some ways the system as it currently stands is backwards, as it rewards hoarding and punishes people only when they try to make their wealth do something.
In some ways the system as it currently stands is backwards, as it rewards hoarding and punishes people only when they try to make their wealth do something.
>There are a few ways wealth can be taxed, but usually only when it is changing hands.
So an income tax?
So an income tax?
Can’t you avoid estate taxes with a trust?
Trusts do not avoid estate taxes. They can be used to engage in tax planning, but they are still subject to the same limits on tax-free transfer.
In South Dakota, there are no estate taxes and there are trusts that avoid federal estate taxes
There are no estate or inheritance taxes in most states. Please elaborate on the trusts that avoid federal estate taxes! I used to be a corporate tax attorney, and worked in one of the leading international law firms for estate law, but have never heard of such a thing.
They are called dynasty trusts and the IRS allows shelter for up to only $11.7m per individual. After a google search I see there are many more states that allow them these days.
I think what you're referring to is the exemption from generation-skipping taxes, and subsequent assessments of estate taxation. IIRC, these instruments are still subject to the regular estate tax when they are first set up, which is why they would typically be funded with an amount that is exempt from the estate tax.
Eh, it's a fuzzy topic, because wealth is essentially income at the top end. But yes, you're correct.
Investment interest accrual should be considered "income" at the end of the year. If I earned 20 and invested in stocks, I'm still taxed on the 20... if that 20 was earned from interest in stocks and re-invested, I'm not taxed on it....
That's where the change needs to happen.
That's where the change needs to happen.
Exactly - right now investments function as a tax-deferred account with no maximum, which allows billionaires to accumulate wealth without any taxation.
They also strongly incentivize the wealthy to push for policy changes that reduce gains and estate taxes, because the payoff for even a short-lived reduction in gains taxes is massive when you have $500M in yet-to-be-taxed assets accumulated.
If net-asset-gains in a year were treated as income, the actual tax rate could be cut by 80% and we'd still have increased tax revenue.
They also strongly incentivize the wealthy to push for policy changes that reduce gains and estate taxes, because the payoff for even a short-lived reduction in gains taxes is massive when you have $500M in yet-to-be-taxed assets accumulated.
If net-asset-gains in a year were treated as income, the actual tax rate could be cut by 80% and we'd still have increased tax revenue.
>If net-asset-gains in a year were treated as income, the actual tax rate could be cut by 80% and we'd still have increased tax revenue.
But wouldn't that only be the case because we're collecting the tax upfront rather than allowing people to defer it? Therefore the tax revenue might be higher in the short term because we're collecting everything upfront plus whatever was deferred in the previous years, but decades into the future the deferred taxes would dry up (because everyone's immediately realizing their gains), taking us back to square one?
But wouldn't that only be the case because we're collecting the tax upfront rather than allowing people to defer it? Therefore the tax revenue might be higher in the short term because we're collecting everything upfront plus whatever was deferred in the previous years, but decades into the future the deferred taxes would dry up (because everyone's immediately realizing their gains), taking us back to square one?
No, I was assuming we didn't treat all of the already-deferred tax as immediately due.
There would be some large long-term effects on investment behavior though, for sure. The topic is much more complicated than my napkin math suggests, and an appropriate policy to actually implement it would be huge and complex.
I'd guess there'd need to be some kind of asset class to represent those prior gains, so they can still be properly taxed at realization, and also some kind of risk-averaging system so that volatile investments don't end up taxed every time they appreciate through the same range of value (you can't tax a wave on every rise).
There would be some large long-term effects on investment behavior though, for sure. The topic is much more complicated than my napkin math suggests, and an appropriate policy to actually implement it would be huge and complex.
I'd guess there'd need to be some kind of asset class to represent those prior gains, so they can still be properly taxed at realization, and also some kind of risk-averaging system so that volatile investments don't end up taxed every time they appreciate through the same range of value (you can't tax a wave on every rise).
>if that 20 was earned from interest in stocks and re-invested, I'm not taxed on it....
By "interest" do you mean dividends? If so they're most certainly taxed.
By "interest" do you mean dividends? If so they're most certainly taxed.
He's just being imprecise - he must really mean asset appreciation. (Reinvested dividends are still taxed, but lots of people aren't aware of that)
No matter who is in power, the wealthy always prosper, but at least one political party actively tries to reduce taxes for the rest of us.
Any concentrated power, be it wealth, the crown, or something like the Church of England, were not coincidentally major targets in the founding documents.
But wealth concentrated, eroded the laws through hammering of the courts, then ended up buying the levers of power "under the dome" and here we are.