Temporarily embarrassed millionaires.
KevinC
2856
I feel like we already tax twice all the time? I got taxed on my paycheck, then when I spent those dollars on a car it was taxed at the point of sale. I get taxed every time I put gas in it and taxed again each year when I register the vehicle. I get taxed every year on my house, taxed on the HDMI cable I just bought from Amazon, and for all of this my income was already taxed to begin with.
Well, if we want to go down THAT road, let’s get to work on implementing jubilee, please.
Yes, you’re right.
Also: if anything, the ‘wealth’ of most ordinary people is overstated, because it’s wealth they can’t realize. They can’t make use of the ‘wealth’ of their car without losing the car, then they have no transportation. They can’t make use of the ‘wealth’ in their home without either losing the home (and having to replace it) or borrowing against it (eradicating that net wealth and driving up their living expenses).
KevinC
2860
Can’t tax this.
Doo do do doo doodoo doo dooo.
I’m going to add this although I am sure that the thread has moved on. Any time I have mentioned income avoidance I’ve been suggesting that we eliminate it. You earn it (in any fashion), you pay taxes on it, and then it is yours to do with as you will without being taxed again.
From other posts I think we are fairly close in thinking but I felt that quoted bit gave the wrong impression of my thoughts.
I think the problem here is that great fortunes can and do grow without any income at all, by asset appreciation, and that appreciation is not taxed. You can’t do anything to check the growth of those fortunes without doing something that taxes them. Income taxes won’t do it, no matter how rigorously you capture income and how high you set income tax rates.
[this also addresses your other response Scott]
This seems to be partially a disagreement over definitions (which isn’t surprising - as others have noted it is murky). You maintain that wealth can grow without income. Which can be true if you have a limited definition of income but doesn’t have to be true. There is no reason that capital gains must be treated differently than other income. There is no reason that gifts, inheritances, and money from trusts must be treated specially. All of these can be considered transfers from pool A to pool B and thus “income” for the owner of pool B.
Currently we have lots of loopholes and schemes to avoid income taxes because that is what we are assessing. Adding a wealth tax would create a pressure to shift assets from personal wealth to trusts and companies or otherwise create schemes so that these people look less wealthy but still control the wealth.
I agree with all of this, but I’m talking specifically about appreciation in asset values. As people repeatedly point out, much of Bezos’ wealth is the result of him owning Amazon shares which appreciate in value. Thus his wealth grows without any income which can be taxed. The same is likely true of all of the super-rich: they hold assets that will reliably appreciate in value over the long term, increasing the size of their fortunes in perpetuity without any need to pay any tax because there is no income involved in the appreciation.
KevinC
2865
I know one of the things Timex has said is that if he actually tries to use any of that wealth (by selling shares) it gets taxed then so not an issue. I don’t have any expertise in this area and I know you’ve refuted that, but my (very limited) understanding is that they don’t need to sell shares in order to get money to do something with. Don’t a lot of them borrow against those vast fortunes at extremely low interest and use that for liquidity? Again, might be totally wrong on that. I’m here to be educated.
Timex
2866
Yes, rich people can potentially borrow money at low interest rates, using their investments as collateral.
But those are still just loans, they aren’t actual money they can just spend as they see fit. They need to pay that money back, so they can’t just, for instance, take out loans and pay their bills with that money.
Only the gains he realizes can be taxed, if that. Since he has no real need to liquidate his fortune, the fortune largely will never be taxed. In practice, the fortune grows at a rate higher than it is eroded by liquidation and taxation, so he just gets richer. Taxing his income will never solve that problem.
CraigM
2868
The other thing that complicated things, noting I am firmly in the @scottagibson tax the wealth camp, is that those wealthy people have access to tools and financial methods to allow them to use that asset appreciation as as income in many ways.
See the types of loans and financial transfers that Bezos and others use to create spendable money against those asset appreciations, without ever realizing income on them. And to do so at far more advantageous rates then us mere plebes could ever hope.
And, yeah, you can argue it is a definitional thing @Madmarcus , and there is truth to that. But in the US there are whole categories of what you and I may consider income that is not treated as such.
Consider the case of the Walton family. What income have they realized? Not much. Yet their assets are massive, and largely inheritance. And each minute they make more than employees make in a year
And yet because how they inherited this, how the tax code favors investment income, and how they likely use the trust and other means to obscure and pay yet less taxes on this, their effective taxation is far lower.
And this is all wealth they generate simply by having been born, and is not counting the actual value of the shares themselves, simply the earnings on them.
Add in deferments, dodges, shell corporations, and on and on, and the truth is that without a massive change in what is understood as income for tax purposes this never gets fixed.
The incentives are all wrong. Tax the rich. They’ll even like it better than the alternatives.
They can, they just need another loan to pay back the original, with the interest rate still lower than the profit rate. Like the “we can sell new bonds now to buy older ones” thing going around, at least in non-sovereign currency euroland.
I think any wealth tax, regardless of the thresholds, would need to apply to all entities in the country. That is, companies and trusts in addition to real people. This would help reduce avoidance via shuffling funds into anonymous accounts.
Matt_W
2871
It’s also a question of incentives.
Person A contributes their labor to the economy. They work 2000 hours in a year and earn, say, $100,000 doing it. We feel no compunction about taxing that income at an effective federal rate of 22%.
Person B has an inherited fortune of $2,000,000 invested in various long-held stock interests. They spend 2000 hours in a year snorting coke, masturbating, and yelling at homeless people. Their stocks appreciate at 5% and they liquidate the appreciation for an income of $100,000. They pay an effective federal tax rate on those capital gains of 9%. (The first $40k of long-term capital gains in any year is untaxed.)
The lazy fucker gets to keep an extra $13,000. That’s enough to order a high-end hooker every other week. Why are we privileging people who don’t work? What kind of Puritan society are we?
Income and gains taxes are utterly useless for solving the core problem that most of the country’s wealth is now in countably few hands. Even a 100% tax on income with no loopholes and all foreign income counted as taxable wouldn’t change this.
Since a wealth tax will never be implemented, partly due to ideological aversion, and substantially due to the fact that Congress is mostly owned by billionaires, the imbalance will continue worsening until the situation ruptures either due to a revolution or a complete collapse of the system. Neither of those things is imminent.
Ah, but see, while he’s snorting coke and masturbating all day, I’m assured that he is also creating jobs and trickling down and being good for the economy. And shouldn’t we reward such behavior?
When you buy a car, you’re paying sales tax on the car, not an additional tax on the money you spend. It’s a sales tax, not an income tax. You’re not taxed just for having that money. Same thing when you get gas. And no, you’re not taxed when you register your car; in fact, car registration is a deduction on your taxes, so you specifically aren’t taxed on it.
Yes, you pay ongoing annual taxes on your house, because of the ongoing costs of public utilities that support having a house (roads, utilities, mail, etc.). There’s not an ongoing cost for just having money.
