Tax the Super Wealthy

[EscapeVelocity2020]

https://www.cnn.com/2022/03/26/politics/white-house-billionaire-minimum-income-tax/index.html

Hopefully this finally comes to pass, that the uber wealthy in the United States actually have to pay taxes and support the country that they live in.  If we were in a 'fair' country, the rich would pay a higher tax % of their NW than poor people (e.g. Scandinavia vs. Middle East), but actually paying some tax is at least a start.  The rich are hollowing out this country and then paying politicians to obfuscate reality.  In fact, if you ask Scandinavians about being taxed, they are proud that their money is being used to provide health care and education. 

[Greystache]

Taxing the rich is like treating an illness instead of preventing an illness. If workers who generated the wealth were fairly compensated at every point in the production, transportation and sales cycle, there would be less wealth for individuals at the top to hoard and no need to redistribute that wealth via taxes. The gap between the average worker's pay and the top executive's pay is much greater than it was 40 years ago. Shrinking that gap is what we should be focused on.

[Chris22]

In this board, I would hope people understand what a horrible precedent it would set to tax unrealized wealth.

[bacchi]

Taxing the rich is like treating an illness instead of preventing an illness. If workers who generated the wealth were fairly compensated at every point in the production, transportation and sales cycle, there would be less wealth for individuals at the top to hoard and no need to redistribute that wealth via taxes. The gap between the average worker's pay and the top executive's pay is much greater than it was 40 years ago. Shrinking that gap is what we should be focused on.

We could always limit the C suite compensation to ~200x (or whatever) what the median full-time worker pay is.

https://aflcio.org/executive-paywatch/company-pay-ratios?combine=&industry=All&state=All&sp500=0&page=8

[GuitarStv]

Taxing the rich is like treating an illness instead of preventing an illness. If workers who generated the wealth were fairly compensated at every point in the production, transportation and sales cycle, there would be less wealth for individuals at the top to hoard and no need to redistribute that wealth via taxes. The gap between the average worker's pay and the top executive's pay is much greater than it was 40 years ago. Shrinking that gap is what we should be focused on.

That's not how capitalism works in practice.

Capitalism concentrates wealth in the hands of the few, which expands their power, which leads to less wealth in the hands of the poor.  It's a positive feedback loop - and a very effective optimizer for this.  Taxation is one of the few tools that we have to fight this capitalist tendency.

[YttriumNitrate]

Wealth taxes in Europe did not work out particularly well.
https://www.businessinsider.com/what-happened-when-the-wealth-tax-was-implemented-in-europe-2019-10

[Chris22]

Taxing the rich is like treating an illness instead of preventing an illness. If workers who generated the wealth were fairly compensated at every point in the production, transportation and sales cycle, there would be less wealth for individuals at the top to hoard and no need to redistribute that wealth via taxes. The gap between the average worker's pay and the top executive's pay is much greater than it was 40 years ago. Shrinking that gap is what we should be focused on.

We could always limit the C suite compensation to ~200x (or whatever) what the median full-time worker pay is.

https://aflcio.org/executive-paywatch/company-pay-ratios?combine=&industry=All&state=All&sp500=0&page=8

The ultra wealthy (Bezos, Musk, Zuck) got that way by starting companies, which they owned, and then taking them public and owning large chunks of the company. How would you practically limit their comp?  If they own 10% of a company worth $200B, how do you take that away from them?  Especially when taking it away means you remove their control over the company they started?

Yeah you can make the case that a regular CEO who has been hired on should have a comp ceiling, but that’s a different discussion, and frankly unrelated to the ultra rich that people bitch about.

[MoseyingAlong]

Wealth taxes in Europe did not work out particularly well.
https://www.businessinsider.com/what-happened-when-the-wealth-tax-was-implemented-in-europe-2019-10

Florida got rid of it as well. Don't remember why.

[Phenix]

Yes, tax the super wealthy who can afford to pay hundreds of thousands of dollars to lawyers and accountants to restructure their finances to avoid paying taxes.

[bmjohnson35]

This is a complex issue and politicians know that it's easy and popular to point fingers at this group.  As the wealth gap expands, it can eventually cause instability in our society, so we do need to close the gap somehow.  We also need to find ways to reduce the income gap in the corporate world.  The problem is how to approach it.  I find that most people I talk to agree with the idea of 20% tax on the top wealthy individuals.  The fundamental reasons is simply because "they can afford it" and "it will never apply to the average person".  This may or may not be true, but what if it does?  How would the MMM community feel if they had to pay taxes on their unrealized gains?  What if the taxes switch from income based to income and wealth based?  The 1% would survive either way. 

The US debt is over 30 trillion dollars.  It's simply mind boggling to think how big it has become.  One billion is 1000 million.  One trillion is one million million.  Even if we taxed the Super Wealthy 50% or 80%, we could never catch up. I don't have any workable solutions for these issues, but I don't think this tax the super wealthy route will solve anything.

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries. 

[EscapeVelocity2020]

Taxing the rich is like treating an illness instead of preventing an illness. If workers who generated the wealth were fairly compensated at every point in the production, transportation and sales cycle, there would be less wealth for individuals at the top to hoard and no need to redistribute that wealth via taxes. The gap between the average worker's pay and the top executive's pay is much greater than it was 40 years ago. Shrinking that gap is what we should be focused on.

Well, at least you can admit that there is an illness.  Many Americans seem to think the status quo (billionaires paying zero income tax while they pay) is 'right'.  Maybe it's Stockholm Syndrome - we've been so abused by billionaires bending the system to pay workers as little as possible, have a fleet of lawyers and accountants to skirt taxation, and have lobbyists make the rules favor them that we think that this is what Capitalism will always be...

[YttriumNitrate]

How would the MMM community feel if they had to pay taxes on their unrealized gains?  What if the taxes switch from income based to income and wealth based?  The 1% would survive either way. 

The one area where people are already paying taxes on unrealized gains is real estate. Minimizing these taxes is an art form and the system is certainly rigged in some instances. It's no surprise that Michael Madigan, the now disgraced politician that ran the Illinois house of representatives for two decades, was in the business of doing property tax appeals. (http://www.madigetz.com/about-us.html).

Taxing easily movable property that lacks decent comparables would be orders of magnitude more complex (and easier to avoid with good legal assistance).

[GuitarStv]

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries.

A dictatorship isn't an economic system.

Communism sucks as a system because it doesn't seem to be possible to implement in reality.  As you mentioned, in practice the socialist aspects of the system are always subverted to concentrate power in the hands of the few.  I think it's fundamentally incompatible with the human psyche.

This is different than capitalism.  Capitalism is the cause of wealth disparity by design.  The person who wins more gets more capital.  This capital can be used to increase existing capital.  It's a positive feedback loop.  Socialism was originally devised as a counter to the wealth concentration that is fundamentally built into capitalist systems.  So in capitalist/socialist hybrids, when wealth concentration becomes too great the only solution that can work to fix the problem is to shift balance towards more socialist policy.  Whether that's through increased taxation/wealth distribution, more government programs, nationalization/abolition of private property, greater regulation . . . there is no way around it.

[PhrugalPhan]

In this board, I would hope people understand what a horrible precedent it would set to tax unrealized wealth.

You would hope.  And quite often you would be disappointed.  It comes with the territory.

[Chris22]

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries.

A dictatorship isn't an economic system.

Communism sucks as a system because it doesn't seem to be possible to implement in reality.  As you mentioned, in practice the socialist aspects of the system are always subverted to concentrate power in the hands of the few.  I think it's fundamentally incompatible with the human psyche.

This is different than capitalism.  Capitalism is the cause of wealth disparity by design.  The person who wins more gets more capital.  This capital can be used to increase existing capital.  It's a positive feedback loop.  Socialism was originally devised as a counter to the wealth concentration that is fundamentally built into capitalist systems.  So in capitalist/socialist hybrids, when wealth concentration becomes too great the only solution that can work to fix the problem is to shift balance towards more socialist policy.  Whether that's through increased taxation/wealth distribution, more government programs, nationalization/abolition of private property, greater regulation . . . there is no way around it.

Except that presumes some sort of closed zero-sum game. In reality, Bezos/Musk/Zuck/etc having lots of money doesn’t cause me to have less money. There isn’t a finite amount of money to go around.

[JGS1980]

It's all about closing the Buy, Borrow, Die loophole.

One part of this is taxing a percentage of held stocks (what Biden proposed above)

Another part of this is eliminating the "step up in basis when you die" loophole. This has been loosely proposed as well.  Remember that this whole step up basis bullshit is just an arcane part of our tax code that exists because it used to be so damn hard to calculate the tax basis for long held assets to begin with.

https://www.cnet.com/tech/tech-industry/bezos-musk-and-other-billionaires-pay-next-to-nothing-in-income-taxes-report-says/#:~:text=Jeff%20Bezos%2C%20Mark%20Zuckerberg%20and,activity%20was%20illegal%2C%20ProPublica%20said.

https://en.wikipedia.org/wiki/Stepped-up_basis

In the advent of modern digital record keeping, I see no reason why my long held assets in Pretax retirement accounts or Taxable gains in Taxable account shouldn't be taxed at death. Got to pay our fair share.

Meanwhile, remember that only about 50% of US Adults actually own any stock at all (the richer half!). Some folks are benefiting from these loopholes whereas a lot of other folks get absolutely diddly squat.

[EscapeVelocity2020]

This is a complex issue and politicians know that it's easy and popular to point fingers at this group.  As the wealth gap expands, it can eventually cause instability in our society, so we do need to close the gap somehow.  We also need to find ways to reduce the income gap in the corporate world.  The problem is how to approach it.  I find that most people I talk to agree with the idea of 20% tax on the top wealthy individuals.  The fundamental reasons is simply because "they can afford it" and "it will never apply to the average person".  This may or may not be true, but what if it does?  How would the MMM community feel if they had to pay taxes on their unrealized gains?  What if the taxes switch from income based to income and wealth based?  The 1% would survive either way. 

The US debt is over 30 trillion dollars.  It's simply mind boggling to think how big it has become.  One billion is 1000 million.  One trillion is one million million.  Even if we taxed the Super Wealthy 50% or 80%, we could never catch up. I don't have any workable solutions for these issues, but I don't think this tax the super wealthy route will solve anything.

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries.

If you truly think 'there is nothing humans can do' about inequality then you need to move to Norway and live there until you are disabused of this notion.  Capitalism is another human system that evolved out of necessity, but has now been purloined and twisted.  It worked well, then Laissez Faire was a problem that was fixed, but now we're back here again...

[GuitarStv]

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries.

A dictatorship isn't an economic system.

Communism sucks as a system because it doesn't seem to be possible to implement in reality.  As you mentioned, in practice the socialist aspects of the system are always subverted to concentrate power in the hands of the few.  I think it's fundamentally incompatible with the human psyche.

This is different than capitalism.  Capitalism is the cause of wealth disparity by design.  The person who wins more gets more capital.  This capital can be used to increase existing capital.  It's a positive feedback loop.  Socialism was originally devised as a counter to the wealth concentration that is fundamentally built into capitalist systems.  So in capitalist/socialist hybrids, when wealth concentration becomes too great the only solution that can work to fix the problem is to shift balance towards more socialist policy.  Whether that's through increased taxation/wealth distribution, more government programs, nationalization/abolition of private property, greater regulation . . . there is no way around it.

Except that presumes some sort of closed zero-sum game. In reality, Bezos/Musk/Zuck/etc having lots of money doesn’t cause me to have less money. There isn’t a finite amount of money to go around.

No, it doesn't presume that at all.

[JGS1980]

Except that presumes some sort of closed zero-sum game. In reality, Bezos/Musk/Zuck/etc having lots of money doesn’t cause me to have less money. There isn’t a finite amount of money to go around.

Sure it does. If Bezos/Musk/Zuck/etc and their corporations not only have Billions more money than you do, but also happen to use that money to influence politicians (legally, of course), this will lead to the progressive and systematic adjustment of our current system to benefit them and screw everybody else over.

More for them very often leads to a deficit in resources that then obligate every one else to fork over more for Police, Firemen, Roads, Public Schools, etc...

Here's an a brief example about Disney's effect on copyright rules:

https://www.theiplawblog.com/2016/02/articles/copyright-law/disneys-influence-on-united-states-copyright-law/

https://en.wikipedia.org/wiki/Copyright_Term_Extension_Act

Here's a longer read from the NYTimes about Senator Manchin and his relationship with the oil and gas industry.

https://www.nytimes.com/2022/03/27/climate/manchin-coal-climate-conflicts.html?searchResultPosition=2

Finally, we all know about Amazon lobbying various states, counties, cities for tax breaks to create their "East Coast Hub" a few years ago. How did that turn out?

JGS

[bmjohnson35]

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries.

A dictatorship isn't an economic system.

Communism sucks as a system because it doesn't seem to be possible to implement in reality.  As you mentioned, in practice the socialist aspects of the system are always subverted to concentrate power in the hands of the few.  I think it's fundamentally incompatible with the human psyche.

This is different than capitalism.  Capitalism is the cause of wealth disparity by design.  The person who wins more gets more capital.  This capital can be used to increase existing capital.  It's a positive feedback loop.  Socialism was originally devised as a counter to the wealth concentration that is fundamentally built into capitalist systems.  So in capitalist/socialist hybrids, when wealth concentration becomes too great the only solution that can work to fix the problem is to shift balance towards more socialist policy.  Whether that's through increased taxation/wealth distribution, more government programs, nationalization/abolition of private property, greater regulation . . . there is no way around it.

I agree with your clarifications.  I also suspect you are correct that increasing socialistic policy/regulation will be the solution.  I am generally wary when the goal is "fairness."  It's an overused and messy qualifier.  Unless we do a significantly better job of regulating the healthcare and pharmaceutical industry, I suspect the US will eventually end up having a go to more socialized healthcare.  Putting aside the "fairness" issue, I still don't think taxing the super wealthy will fix our healthcare, education or debt issues.  I suspect our recent excessive manipulation of interest rates and money supply has also caused unnatural economic conditions that has accelerated the expansion of the wealth gap.

[Chris22]

Except that presumes some sort of closed zero-sum game. In reality, Bezos/Musk/Zuck/etc having lots of money doesn’t cause me to have less money. There isn’t a finite amount of money to go around.

Sure it does. If Bezos/Musk/Zuck/etc and their corporations not only have Billions more money than you do, but also happen to use that money to influence politicians (legally, of course), this will lead to the progressive and systematic adjustment of our current system to benefit them and screw everybody else over.

More for them very often leads to a deficit in resources that then obligate every one else to fork over more for Police, Firemen, Roads, Public Schools, etc...

Here's an a brief example about Disney's effect on copyright rules:

https://www.theiplawblog.com/2016/02/articles/copyright-law/disneys-influence-on-united-states-copyright-law/

https://en.wikipedia.org/wiki/Copyright_Term_Extension_Act

Here's a longer read from the NYTimes about Senator Manchin and his relationship with the oil and gas industry.

https://www.nytimes.com/2022/03/27/climate/manchin-coal-climate-conflicts.html?searchResultPosition=2

Finally, we all know about Amazon lobbying various states, counties, cities for tax breaks to create their "East Coast Hub" a few years ago. How did that turn out?

JGS

Two different issues. One can be against money and influence in politics while also not being against confiscatory taxes. Consider: if the government had fewer touch points on our daily lives, the ability of billionaires to influence government would be greatly reduced. A flat tax would be a great example of this.

[bmjohnson35]

This is a complex issue and politicians know that it's easy and popular to point fingers at this group.  As the wealth gap expands, it can eventually cause instability in our society, so we do need to close the gap somehow.  We also need to find ways to reduce the income gap in the corporate world.  The problem is how to approach it.  I find that most people I talk to agree with the idea of 20% tax on the top wealthy individuals.  The fundamental reasons is simply because "they can afford it" and "it will never apply to the average person".  This may or may not be true, but what if it does?  How would the MMM community feel if they had to pay taxes on their unrealized gains?  What if the taxes switch from income based to income and wealth based?  The 1% would survive either way. 

The US debt is over 30 trillion dollars.  It's simply mind boggling to think how big it has become.  One billion is 1000 million.  One trillion is one million million.  Even if we taxed the Super Wealthy 50% or 80%, we could never catch up. I don't have any workable solutions for these issues, but I don't think this tax the super wealthy route will solve anything.

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries.

If you truly think 'there is nothing humans can do' about inequality then you need to move to Norway and live there until you are disabused of this notion.  Capitalism is another human system that evolved out of necessity, but has now been purloined and twisted.  It worked well, then Laissez Faire was a problem that was fixed, but now we're back here again...

I don't recall saying there is nothing we can do, but did admit I don't have good solutions.  I will have to look into Norway more.  Have you live there yourself or are you basing this off things you have read online?  I wasn't aware it was the poster child for economic utopia.  No matter how good something is, I often find that most things in life have trade-offs, I assume Norway is no exception.

[FireLane]

Speaking as a wealthy person, I'm all in favor of this. Inequality in the U.S. is out of control. If everyone had a place to live, sufficient food, access to affordable medical care and other basic survival needs, I wouldn't mind as much that there were some very rich individuals. As it is, it's egregious that a tiny number of people can hoard billions of dollars while kids go hungry and people with diabetes have to ration insulin.

The most useful thing about a wealth tax is that it would cut down on generational inequality. If capitalism is about merit, about using your skills and innovating to create value, why is there inheritance? Shouldn't everyone get the same fair shake when they start out, rather than some people getting to coast because their parents were rich?

[JGS1980]

Two different issues. One can be against money and influence in politics while also not being against confiscatory taxes. Consider: if the government had fewer touch points on our daily lives, the ability of billionaires to influence government would be greatly reduced. A flat tax would be a great example of this.

So, according to you, massive inequality in our current system would be corrected if government, instead of regulating it away, chooses to take the guardrails off entirely???

I think the healthcare point above is a great example of what can happen when the government "keeps its hands off" our daily lives.

[reeshau]

The US debt is over 30 trillion dollars.  It's simply mind boggling to think how big it has become.  One billion is 1000 million.  One trillion is one million million.  Even if we taxed the Super Wealthy 50% or 80%, we could never catch up. I don't have any workable solutions for these issues, but I don't think this tax the super wealthy route will solve anything.

Following the historical precedent, the US would print 30 trillion dollars, which would degrade all our dollar savings by a similar proportion.   Real assets would be revalued, and everyone would start from scratch.  But that would do nothing for inequality, as the wealthy generally have those real assets.

I had a conversation with a tour guide while visiting St. Petersburg in 2013.  She said her parents (boomer aged) were quite nostalgic for Soviet times.  I asked why.  She said they had a good nest egg for retirement; enough to buy a Sachs.  (A vacation cottage)  But when the 1998 Russian financial crisis hit, that savings became enough to buy a 2 liter of Coke.

[uniwelder]

In this board, I would hope people understand what a horrible precedent it would set to tax unrealized wealth.

You would hope.  And quite often you would be disappointed.  It comes with the territory.

Most people posting here are concerned with bettering the world, even though that comes at personal cost.  I'm not disappointed to be part of a group thats willing to pay a little more from their own pocket for the benefit of others.

From a practical standpoint, I don't think anyone here is wealthy enough to be affected by whatever law that may pass.

[GuitarStv]

Speaking as a wealthy person, I'm all in favor of this. Inequality in the U.S. is out of control. If everyone had a place to live, sufficient food, access to affordable medical care and other basic survival needs, I wouldn't mind as much that there were some very rich individuals. As it is, it's egregious that a tiny number of people can hoard billions of dollars while kids go hungry and people with diabetes have to ration insulin.

The most useful thing about a wealth tax is that it would cut down on generational inequality. If capitalism is about merit, about using your skills and innovating to create value, why is there inheritance? Shouldn't everyone get the same fair shake when they start out, rather than some people getting to coast because their parents were rich?

Capitalism isn't about merit or innovation - this is a common misconception.  Capitalism is about capital acquisition.

A skillful and innovative person can often generate capital in a capitalist system (that's one of the biggest pluses of the whole setup).  But it's very easy for a not very skillful or innovative person with a huge amount of starting capital to continue to be very wealthy.

Typically, the most skillful/innovative people will generate a huge amount of capital early on in their career . . . but it's very common for the innovation and skill to largely die off after accumulation of capital.  Look at Bill Gates or Jeff Bezos.  Neither have created anything of value from an innovation perspective for an awful lot time.  They don't need to anymore - they already have the capital.

Capital acquisition doesn't have to benefit society either - just to generate more capital.  A lot of rich people made their wealth illegally - check out the winners of prohibition.  Or look at the Perdue family and their massive capital returns by pushing opioids.  As long as you get away with whatever you're doing, the capital acquisition is good.

[Chris22]

Two different issues. One can be against money and influence in politics while also not being against confiscatory taxes. Consider: if the government had fewer touch points on our daily lives, the ability of billionaires to influence government would be greatly reduced. A flat tax would be a great example of this.

So, according to you, massive inequality in our current system would be corrected if government, instead of regulating it away, chooses to take the guardrails off entirely???

I think the healthcare point above is a great example of what can happen when the government "keeps its hands off" our daily lives.

1. I think the massive inequality in our system is looked at incorrectly. I don’t care how far ahead of me Bezos, etc are. We’re better served looking at how far behind others are and trying to fix that. And just taking it from Bezos etc and giving it to others isn’t going to fix that.

2.  Yes, government tries to do too much at once and it distorts things. Look at our Byzantine tax code, where wealthy people can use a zillion tax avoidance schemes to lower their burden, schemes that are often not available to the common person. Throw a flat tax out there and top trying to use the tax code to force a zillion other behaviors and there are much less opportunities for fuckery.

[Chris22]

Look at Bill Gates or Jeff Bezos.  Neither have created anything of value from an innovation perspective for an awful lot time.  They don't need to anymore - they already have the capital.

Imagine having the viewpoint that Gates and Bezos haven’t innovated enough. I’d love to see your CV compared to theirs.


Also, you realize that both have essentially retired correct?

[JGS1980]

Two different issues. One can be against money and influence in politics while also not being against confiscatory taxes. Consider: if the government had fewer touch points on our daily lives, the ability of billionaires to influence government would be greatly reduced. A flat tax would be a great example of this.

So, according to you, massive inequality in our current system would be corrected if government, instead of regulating it away, chooses to take the guardrails off entirely???

I think the healthcare point above is a great example of what can happen when the government "keeps its hands off" our daily lives.

1. I think the massive inequality in our system is looked at incorrectly. I don’t care how far ahead of me Bezos, etc are. We’re better served looking at how far behind others are and trying to fix that. And just taking it from Bezos etc and giving it to others isn’t going to fix that.

2.  Yes, government tries to do too much at once and it distorts things. Look at our Byzantine tax code, where wealthy people can use a zillion tax avoidance schemes to lower their burden, schemes that are often not available to the common person. Throw a flat tax out there and top trying to use the tax code to force a zillion other behaviors and there are much less opportunities for fuckery.

1. Agree to disagree
2. I'd agree to a flat tax if you place it at 25% and only start it AFTER 300K in income. Deal? Also, bring back inheritance tax of 25% of anything over 2.5 million per individual.
[anyone want to do the math on that one?]

[Scandium]

Two different issues. One can be against money and influence in politics while also not being against confiscatory taxes. Consider: if the government had fewer touch points on our daily lives, the ability of billionaires to influence government would be greatly reduced. A flat tax would be a great example of this.

So, according to you, massive inequality in our current system would be corrected if government, instead of regulating it away, chooses to take the guardrails off entirely???

I think the healthcare point above is a great example of what can happen when the government "keeps its hands off" our daily lives.

1. I think the massive inequality in our system is looked at incorrectly. I don’t care how far ahead of me Bezos, etc are. We’re better served looking at how far behind others are and trying to fix that. And just taking it from Bezos etc and giving it to others isn’t going to fix that.

2.  Yes, government tries to do too much at once and it distorts things. Look at our Byzantine tax code, where wealthy people can use a zillion tax avoidance schemes to lower their burden, schemes that are often not available to the common person. Throw a flat tax out there and top trying to use the tax code to force a zillion other behaviors and there are much less opportunities for fuckery.

1. Agree to disagree
2. I'd agree to a flat tax if you place it at 25% and only start it AFTER 300K in income. Deal? Also, bring back inheritance tax of 25% of anything over 2.5 million per individual.
[anyone want to do the math on that one?]

Flat tax is a red herring libertarians and other shills for unregulated capitalism throw out there in an attempt to pretend they are for anything other than zero-tax for the richest.

No amount of "flat tax", of any percentage, on any income, would solve anything! Exactly as the proposed law in the OP points out; because the richest 0.1% don't have any income! The live of unrealized gains, held either in the US, or even in holding companies abroad. They can borrow billions against the value of these shares and pay nothing in tax. And when they finally die of a caviar and champagne overdose their heirs get the shares with a step-up in basis and can pay back the loans for free. Or they can of course always manufacture some stock-loss to offset any gains if they have to sell before.

The stupidity of trying to spread pro-billionaire propaganda opposing these laws to people who save maybe a couple million in 401ks, because "they'll tax you next!" is truly something. No I'm not in the same universe as someone who spends more refueling their yacht than I'll earn in a lifetime.. 

[seattlecyclone]

Another part of this is eliminating the "step up in basis when you die" loophole. This has been loosely proposed as well.  Remember that this whole step up basis bullshit is just an arcane part of our tax code that exists because it used to be so damn hard to calculate the tax basis for long held assets to begin with.

It still is. Suppose your dad passes away, and you find a box of gold coins stuffed under the mattress. The coins could have been bought at any time in the past 50 years, and he didn't save his receipts. What's your cost basis?

The most useful thing about a wealth tax is that it would cut down on generational inequality. If capitalism is about merit, about using your skills and innovating to create value, why is there inheritance? Shouldn't everyone get the same fair shake when they start out, rather than some people getting to coast because their parents were rich?

Yes, I am very much in favor of placing some limits on the intergenerational transfer of wealth. If you start a big company that earns the support of a bunch of customers and you become super wealthy, good for you. Enjoy your yachts and whatever. Your kids didn't do a thing to earn that wealth though. I think it's in the best interest of society to tax most of it away so that we don't develop a hereditary aristocracy.

I'm less than enamored with an annual wealth tax though. Documenting your net worth in a way that would stand up to a tax audit can be an expensive and time-consuming process, especially for the very wealthy who have a bunch of illiquid investments. They already have to do that at death for estate tax purposes. Why not just raise the estate tax then? For whatever X% wealth tax you might want to charge, there's a Y% estate tax you could charge that would raise the same amount of money and prevent the same amount of intergenerational wealth transfer, with less administrative burden.

[GuitarStv]

Look at Bill Gates or Jeff Bezos.  Neither have created anything of value from an innovation perspective for an awful lot time.  They don't need to anymore - they already have the capital.

Imagine having the viewpoint that Gates and Bezos haven’t innovated enough. I’d love to see your CV compared to theirs.


Also, you realize that both have essentially retired correct?

Yes, I'm aware that both are now retired.  But I'm also aware that both spent many years 'working' as corporate heads but not doing anything particularly innovative.  Yet the capital continued to flow in.  If you'll recall, my argument was that Capitalism isn't about merit or innovation - it's about capital acquisition.

I did not say that Bezos and Gates didn't 'innovate enough' - both were pretty big tech innovators in their time.  It was to draw attention to the fact that while often capitalism is pretty good at initially rewarding good ideas/hard work it's very rare that the innovative people it rewards continue being innovative for very long.  Because they don't need to once they've amassed their capital - at that point their capital can do the work for them.

[Fishindude]

Interesting that it's okay for this group to suggest; taking money away from, imposing more taxes on another group, limiting their wealth, etc.
What if the folks a couple rungs down the ladder suggested the same kind of financial hits and sacrifices for us?   How many here would be willing to give another 10-30% of their income to help a lower class?
If you really feel strongly about evening the playing field, give more of your own money to those less fortunate.

These uber wealthy folks are playing within the rules.  And don't forget that they also created shitloads of great jobs which raised the living standards for a lot of their employees, suppliers, vendors, customers, etc. at all levels.   Not to mention a lot of great products and services that improved many of our lives and / or allowed us to be more successful and earn more.

[seattlecyclone]

These uber wealthy folks are playing within the rules.

They're playing within the rules, therefore we shouldn't change the rules when we notice that the current rules can lead to undesirable results?

[wageslave23]

Two different issues. One can be against money and influence in politics while also not being against confiscatory taxes. Consider: if the government had fewer touch points on our daily lives, the ability of billionaires to influence government would be greatly reduced. A flat tax would be a great example of this.

So, according to you, massive inequality in our current system would be corrected if government, instead of regulating it away, chooses to take the guardrails off entirely???

I think the healthcare point above is a great example of what can happen when the government "keeps its hands off" our daily lives.

1. I think the massive inequality in our system is looked at incorrectly. I don’t care how far ahead of me Bezos, etc are. We’re better served looking at how far behind others are and trying to fix that. And just taking it from Bezos etc and giving it to others isn’t going to fix that.

2.  Yes, government tries to do too much at once and it distorts things. Look at our Byzantine tax code, where wealthy people can use a zillion tax avoidance schemes to lower their burden, schemes that are often not available to the common person. Throw a flat tax out there and top trying to use the tax code to force a zillion other behaviors and there are much less opportunities for fuckery.

1. Agree to disagree
2. I'd agree to a flat tax if you place it at 25% and only start it AFTER 300K in income. Deal? Also, bring back inheritance tax of 25% of anything over 2.5 million per individual.
[anyone want to do the math on that one?]

How about everyone pays 10k a year for the right to live in the US regardless of income.  If you wat to talk about fairness, that's the most fair.  If you go to Disneyland everyone pays the same amount to get in regardless of how much money they make or how many rides they go on.  Start with "fair" and then add some generosity.

[EscapeVelocity2020]

This is a complex issue and politicians know that it's easy and popular to point fingers at this group.  As the wealth gap expands, it can eventually cause instability in our society, so we do need to close the gap somehow.  We also need to find ways to reduce the income gap in the corporate world.  The problem is how to approach it.  I find that most people I talk to agree with the idea of 20% tax on the top wealthy individuals.  The fundamental reasons is simply because "they can afford it" and "it will never apply to the average person".  This may or may not be true, but what if it does?  How would the MMM community feel if they had to pay taxes on their unrealized gains?  What if the taxes switch from income based to income and wealth based?  The 1% would survive either way. 

The US debt is over 30 trillion dollars.  It's simply mind boggling to think how big it has become.  One billion is 1000 million.  One trillion is one million million.  Even if we taxed the Super Wealthy 50% or 80%, we could never catch up. I don't have any workable solutions for these issues, but I don't think this tax the super wealthy route will solve anything.

As for the idea that capitalism is the cause for the wealth gap.  As far as I know, every economic system out there results in a very small percentage of society possessing the majority of the wealth.  This is true of capitalism, socialism, communism and certainly a dictatorship.  The US is a hybrid of capitalism and socialism (mixed economy), just like most western countries.

If you truly think 'there is nothing humans can do' about inequality then you need to move to Norway and live there until you are disabused of this notion.  Capitalism is another human system that evolved out of necessity, but has now been purloined and twisted.  It worked well, then Laissez Faire was a problem that was fixed, but now we're back here again...

I don't recall saying there is nothing we can do, but did admit I don't have good solutions.  I will have to look into Norway more.  Have you live there yourself or are you basing this off things you have read online?  I wasn't aware it was the poster child for economic utopia.  No matter how good something is, I often find that most things in life have trade-offs, I assume Norway is no exception.

Yes, I lived in Norway with our 1 and 3 year old…. Co-workers had children while they were in Norway…. Life was good…. Americans really don’t understand the idea that the government exists because of them…. It’s so weird!

[rantk81]

In my mind, the "fairest" approach would be to have a big enough VAT or consumption tax on all goods and services that are consumed, in order to support the needed level of government spending.  Meanwhile, eliminate all of the income tax code.  In order to make it progressive, everyone would receive a monthly or annual transfer-payment of some multiple of the poverty rate, to make up for paying any of the consumption taxes on some base-line standard of living.

It's not perfect, but it would eliminate a huge corrupt income-tax-code that has a million different carve-outs for special interests. It would tax anyone who wanted to consume anything.  So if a wealthy person wanted to be a saver/investor, they could choose to do that instead of buying yachts.

Of course, this would never happen.  Too many businesses and people's jobs depend on having this byzantine federal tax code and the need to earn an income by helping or forcing everyone to comply with it.  It would also neuter a lot of the ability for congress/reps to take bribers...

[Log]

Seeing as I just read Capital in the 21st Century by Thomas Pikkety, I will try to chime in with his expertise and excellent research and limit my own commentary or bias. Unfortunately I read a copy from the library I don't have on hand anymore, so I will be operating from memory and surely my own interpretations will creep in.

Income inequality and wealth inequality are both much higher in the US than in other countries. Economic policies in other wealthy nations produce less inequality than the US, so policy changes can reduce the problem - we know because they already do in Germany, France, Japan and the Scandinavian countries.

First off, it is harder for wealth inequality to get this extreme if we have a institute a more assertive progression to the income tax. If we returned to top tax brackets above 50% (they have gone as high as 80% in some nations at some times, and those times/places are highly correlated with more egalitarian economies) then companies would be far less incentivized to pay their C-suite executives extravagant salaries. Why pay the CEO $5million a year when that amounts to paying them something like $2.7 million net, and then just sending the other $2.3 million to the federal government? Extreme top tax brackets aren't about revenue, they're about guiding behavior. Top CEOs still get to be the most wealthy people in society, just by a less egregious amount, and the company can put that money towards higher compensation for other employees, or greater returns for shareholders. Reagan/Thatcher tax cuts led directly to skyrocketing inequality in the US and UK.

Secondly, a wealth tax that isn't coordinated by many nations is handicapped by the fact that the rich can just hide their wealth elsewhere. That doesn't mean it isn't worth doing. The federal government did not have the information or infrastructure necessary to institute an income tax before they did it. Once they did, information on incomes became a matter of public record that is preserved for history to study and understand. Obviously many people partake in illicit activities and have significant amounts of unreported income every year. That doesn't mean the income tax doesn't work or shouldn't exist. If we instituted a modest wealth tax, that establishes the precedent of the government having the information and the capacity to tax wealth. Then over time, we can move towards a system where the US, Canada, Japan, and the EU coordinate their wealth records and tax wealth in a harder-to-evade manner. The system could continue to cover more of the world and charge more progressive rates from a basic floor, but we need the infrastructure in place first.

I continued to rant on my own elaborations for another couple paragraphs but it felt excessive so I'll trim that off for now and leave it at the expert economist's thoughts on tax policy, because he's probably more interesting than me. The part I will leave in: if the objection to raising taxes is that America will lose it's "competitive advantage," I don't think that's a reasonable objection. We could raise our taxes to levels significantly lower than the next lowest taxes among wealthy, developed nations (probably the UK or Canada?) and that would be a significant tax increase, while still being the most attractive market for "innovative" CEOs who want to show off their big net worths on their mega-yachts. And for anyone pulling a slippery slope argument to say, "we can't tax millionaries because they'll come for our frugal FIRE fortunes next," I say 1) we're talking about so many orders of magnitudes of difference that it's completely ridiculous. 2) Even if high wealth taxes slippery-sloped their way all the way down to 7-digit fortunes, that's still not bad for society. FIRE is an enormous privilege, and those of you who already have your 7-digit fortunes are already in an elite class of wealth, far above what most Americans will ever see in their lives.

[dividendman]

<snip>
Income inequality and wealth inequality are both much higher in the US than in other countries. Economic policies in other wealthy nations produce less inequality than the US, so policy changes can reduce the problem - we know because they already do in Germany, France, Japan and the Scandinavian countries.

<snip>

I agree that those societies are more equal with regards to wealth... but is that actually desirable?

Is it a coincidence that the most innovative and largest companies in the world come from the USA?

I agree we don't want people starving... but I think giving people "comfortable" lives from the government results in less innovation and therefore less improvement for the world as a whole.

[PDXTabs]

It's all about closing the Buy, Borrow, Die loophole.

Indeed. But is there a better way to close the loophole?

In particular, is this proposal going to lead more companies to stay private and to undervalue themselves for tax purposes? Because that's bad for the people on this forum.

Perhaps closing the loophole at the "die" step could work better?

[Log]

<snip>
Income inequality and wealth inequality are both much higher in the US than in other countries. Economic policies in other wealthy nations produce less inequality than the US, so policy changes can reduce the problem - we know because they already do in Germany, France, Japan and the Scandinavian countries.

<snip>

I agree that those societies are more equal with regards to wealth... but is that actually desirable?

Is it a coincidence that the most innovative and largest companies in the world come from the USA?

I agree we don't want people starving... but I think giving people "comfortable" lives from the government results in less innovation and therefore less improvement for the world as a whole.

But are these people/companies motivated only by extravagant hundred billion dollar fortunes, or if these extreme fortunes were taxed out of existence, would these people still be motivated by 9 or 10 digits of wealth? At that point the money doesn’t really make a difference, but solely because we’ve allowed the precent of 12-digit fortunes to exist, that’s what they anchor to. Through different policies, Bezos or Musk could still be the richest people on Earth with much smaller absolute fortunes.

In our current system where tax policies in wealthy, developed nations differ so wildly, when people want to start giant multinational corporations of course they will take their business to the nation with the lowest taxes, because “number go up more.” But it’s a pretty bleak vision of humanity to think that ambitious people with innovative ideas just wouldn’t bother to work hard if it didn’t buy them the privilege to ride phallic rockets to the edge of space while commissioning the most extravagant yacht ever built by mankind.

Again: the US could raise taxes to levels just below Canada’s or the UK’s rates, completely maintaining its competitive advantage in attracting businessmen and entrepreneurship, and still get benefits of less extreme inequality. It’s not a binary choice between 1) our current level of extreme inequality or 2) completely flat distribution where no one is financially incentivized to do anything. We can move slowly in the direction of a more egalitarian economy, and then adjust as needed if we don’t like any of the consequences. To present a slippery slope and then say we can’t take any action at all is just a little too pessimistic to my sensibilities. Scandinavian countries still have wealth inequality, just less. Then France, Germany, and Japan have slightly more than them, then Canada and the UK. Then the US is way out in extreme territories. We’re moving past levels of inequality that have never been seen before in developed democracies.

[JGS1980]

I agree that those societies are more equal with regards to wealth... but is that actually desirable?

Is it a coincidence that the most innovative and largest companies in the world come from the USA?

I agree we don't want people starving... but I think giving people "comfortable" lives from the government results in less innovation and therefore less improvement for the world as a whole.

Is it "desirable" for the downtrodden of society to come out with pitchforks and baseball bats? What's the point of having more innovative and larger companies if the average family doesn't get any benefit from it? In fact, the average family tends to subsidize companies like Amazon, Nike, Fedex, or Apple, who pay virtually ZERO federal taxes.

Speaking of the world as a whole -> the world may benefit, but it is US policy, stability, and infrastructure that allow these companies to thrive. Thus, they should pay adequate tax to support that structure.

[GuitarStv]

In my mind, the "fairest" approach would be to have a big enough VAT or consumption tax on all goods and services that are consumed, in order to support the needed level of government spending.  Meanwhile, eliminate all of the income tax code.  In order to make it progressive, everyone would receive a monthly or annual transfer-payment of some multiple of the poverty rate, to make up for paying any of the consumption taxes on some base-line standard of living.

It's not perfect, but it would eliminate a huge corrupt income-tax-code that has a million different carve-outs for special interests. It would tax anyone who wanted to consume anything.  So if a wealthy person wanted to be a saver/investor, they could choose to do that instead of buying yachts.

Of course, this would never happen.  Too many businesses and people's jobs depend on having this byzantine federal tax code and the need to earn an income by helping or forcing everyone to comply with it.  It would also neuter a lot of the ability for congress/reps to take bribers...

You've got two guys.  A has 1,000$ to his name, and B is worth 1,000,000,000.

They both have to eat.  So A buys a bag of rice and a bag of beans . . . and incredibly manages to get the total cost of his meals down to 1$ per day.  B only eats sushi off naked women, so he's spending about 10,000$ a day on food.

They both have to live somewhere.  So A has rented a cockroach infested place with five other guys and only has to pay 500$ a month.  B has three mansions that he bought in the past that he jets to and from.  He's paying 30,000$ each month in property taxes on the mansions.

They both need clothing.  So A will occasionally buy used stuff from Goodwill.  Let's say 5$ a month, because this shit is already pretty worn so it wears out.  B likes to buy clothes that he'll never wear and then burn them for fun.  So 15,000$ a month.

They both need to get around.  A has a monthly bus pass for 120$.  B likes to travel by helicopter . . . so let's say 50,000$ a month all in.

So let's add up monthly taxes, assuming a flat rate of 5% for purchases:

A
Food - 1.5
Rent - 25
Clothes - .25
Transportation - 6
Total - 32.75
   Which gives a yearly total of - 393$

B
Food - 15,000
Rent Property Tax - 30,000 (yeah, it's not a consumption tax . . . but rich people always own property, so let's just count it that way)
Clothes - 1,500$
Transportation - 2,500$
Total - 49,000$
   Which gives a yearly total of 588,000$

Looks good so far right?  The extravagant B is paying way more in taxes!  Well . . . when you look at how much they're paying based upon net worth (ignoring all frivolous spending - just looking at the essentials necessary to survive here) . . . A is spending 39.3% of his net worth in taxes each year just to survive and B is spending 0.0588% of his while being a wasteful dick.

Consumption taxes tend to be rather regressive.  They're great if you're rich enough that the cost of survival is so low you can choose to consume or not to.  But most people dismiss them outright because of how unfairly they penalize the poorest folks in society.

[Chris22]

I agree that those societies are more equal with regards to wealth... but is that actually desirable?

Is it a coincidence that the most innovative and largest companies in the world come from the USA?

I agree we don't want people starving... but I think giving people "comfortable" lives from the government results in less innovation and therefore less improvement for the world as a whole.

Is it "desirable" for the downtrodden of society to come out with pitchforks and baseball bats? What's the point of having more innovative and larger companies if the average family doesn't get any benefit from it? In fact, the average family tends to subsidize companies like Amazon, Nike, Fedex, or Apple, who pay virtually ZERO federal taxes.

Speaking of the world as a whole -> the world may benefit, but it is US policy, stability, and infrastructure that allow these companies to thrive. Thus, they should pay adequate tax to support that structure.

That’s an extremely narrow way of looking at it. All of those companies have thousands of employees, which all pay taxes on their income and consumption. And generally, corporate taxes are just a pass through to consumers anyways.

[bacchi]

In my mind, the "fairest" approach would be to have a big enough VAT or consumption tax on all goods and services that are consumed, in order to support the needed level of government spending.  Meanwhile, eliminate all of the income tax code.  In order to make it progressive, everyone would receive a monthly or annual transfer-payment of some multiple of the poverty rate, to make up for paying any of the consumption taxes on some base-line standard of living.

You've got two guys.  A has 1,000$ to his name, and B is worth 1,000,000,000.

They both have to eat.  So A buys a bag of rice and a bag of beans . . . and incredibly manages to get the total cost of his meals down to 1$ per day.  B only eats sushi off naked women, so he's spending about 10,000$ a day on food.

They both have to live somewhere.  So A has rented a cockroach infested place with five other guys and only has to pay 500$ a month.  B has three mansions that he bought in the past that he jets to and from.  He's paying 30,000$ each month in property taxes on the mansions.

They both need clothing.  So A will occasionally buy used stuff from Goodwill.  Let's say 5$ a month, because this shit is already pretty worn so it wears out.  B likes to buy clothes that he'll never wear and then burn them for fun.  So 15,000$ a month.

They both need to get around.  A has a monthly bus pass for 120$.  B likes to travel by helicopter . . . so let's say 50,000$ a month all in.

<snip>

Looks good so far right?  The extravagant B is paying way more in taxes!  Well . . . when you look at how much they're paying based upon net worth (ignoring all frivolous spending - just looking at the essentials necessary to survive here) . . . A is spending 39.3% of his net worth in taxes each year just to survive and B is spending 0.0588% of his while being a wasteful dick.

Consumption taxes tend to be rather regressive.  They're great if you're rich enough that the cost of survival is so low you can choose to consume or not to.  But most people dismiss them outright because of how unfairly they penalize the poorest folks in society.

Person A then gets a monthly payment of $32.70 so that they both spend about 0.0588% of their income on living expenses.

[Fi(re) on the Farm]

I know it would be impossible to regulate but I think people over a certain wealth should pay income taxes on what they spend in addition to sales tax. You pay no income tax so how could you afford a $40mil yacht? I think a 10% on every penny they spend would be fair. I know a lot of their income is not sitting in their savings account but if you have it to spend it then you should be taxed on it.

[JGS1980]

I agree that those societies are more equal with regards to wealth... but is that actually desirable?

Is it a coincidence that the most innovative and largest companies in the world come from the USA?

I agree we don't want people starving... but I think giving people "comfortable" lives from the government results in less innovation and therefore less improvement for the world as a whole.

Is it "desirable" for the downtrodden of society to come out with pitchforks and baseball bats? What's the point of having more innovative and larger companies if the average family doesn't get any benefit from it? In fact, the average family tends to subsidize companies like Amazon, Nike, Fedex, or Apple, who pay virtually ZERO federal taxes.

Speaking of the world as a whole -> the world may benefit, but it is US policy, stability, and infrastructure that allow these companies to thrive. Thus, they should pay adequate tax to support that structure.

That’s an extremely narrow way of looking at it. All of those companies have thousands of employees, which all pay taxes on their income and consumption. And generally, corporate taxes are just a pass through to consumers anyways.

You didn't respond to my points at all, but I'll respond to yours...

There are millions of small businesses who also have millions of employees in the US, and a lot of their costs are passed to their customers, and they all pay more in taxes too.

[JGS1980]

It's all about closing the Buy, Borrow, Die loophole.

Indeed. But is there a better way to close the loophole?

In particular, is this proposal going to lead more companies to stay private and to undervalue themselves for tax purposes? Because that's bad for the people on this forum.

Perhaps closing the loophole at the "die" step could work better?

I think the problem with that is these fuckers will eventually learn how to live forever!

[PDXTabs]

It's all about closing the Buy, Borrow, Die loophole.

Indeed. But is there a better way to close the loophole?

In particular, is this proposal going to lead more companies to stay private and to undervalue themselves for tax purposes? Because that's bad for the people on this forum.

Perhaps closing the loophole at the "die" step could work better?

I think the problem with that is these fuckers will eventually learn how to live forever!

Indeed, but they haven't yet.

I'm a huge fan of reducing GINI, I'm just no sure what the best way to go about it is.