2937

We were talking about if they didn’t realize the investments, because they didn’t have to. And, despite the “high risk” label, there really isn’t all that much in enough investments in the financial age. As long as you’re not greedy and dumb, tech and pharma stocks, say, or property in tourism cities, or… isn’t going to lose money anytime soon.

Agreed, but it also nidicolous to suggest that without them a bunch of stuff and services wouldn’t be part of common life, and thus it has the same societal benefit level. Or, rather, a level worthy of much higher prosperity than anyone else involved that also put in the work but should piss in a bottle in the panopticon.

Minor point, but that isn’t a good thing that decreases inequality, quite the opposite. Not the fault of any one person having a sucessfull company, though.

2938

Does the national defense argument hold water for you? E.g. you are paying taxes on that Vermeer because we need to fund the military to keep the Canadians from just taking your Vermeer as the spoils of conquest.

2939

Sure, we can agree to let billionaires use the money they pay for their wealth tax as a deduction on their income tax. Great, I’m glad you’re on board with wealth taxes now that people aren’t being taxed twice.

2940

Or how about this: People are taxed on their unrealized capital gains in the year they occurred, and then they’re no longer taxed on those gains once they’re actually cashed out. Would that be acceptable to you? And then capital losses could be written off against capital gains? Or does the ratchet only go one way?

2941

Yes that’s exactly my point: People are happy to suggest plans to increase taxes on the rich, but when the same logic is applied to their own wealth, the response is “Whoa whoa whoa, no one is proposing taxing ME!”

Yes, we can agree that when those taxes are levied on someone in the very specific instance where they have no other income, that becomes double taxation.

The question remains: If we justify property taxes based on upkeep to public facilities, and we justify car registration based on maintenance of roads and other transportation, what is the justification for taxing people’s accumulated wealth, which requires no maintenance or upkeep?

If they want to pay back to original loan, they absolutely have to realize the original investments. And yeah, things like property in tourism cities aren’t high risk…until there’s a global pandemic. Some investments are high risk and high rewards, while others are low risk and low reward. But in every case, the initial loans need to be paid back.

2942

And, yet, it moves, and returns are higher than interest.

EDIT:
In my bank, an officially high risk grade fund has a nice 5 year profit of 14,65%. Yeah, very risky, with Amazon, Apple, Tesla, Google, Pfizer and so on that are oh so at risk of crashing. Or the dollar/euro.
I mean, I appreciate the income, but it’s ridiculously and obviously broken by me not even doing anything for it, just inheriting the ability to put the money there. Imagine people who do, with loopholes as a sidedish.

2943

A company doesn’t have to crash in order to lose money over a year. If that fund is a high-risk fund, then that means there’s a chance it could lose money. And this is all premised on your claim that rich can take low-interest loans based on their investments, then pay back those loans with other loans, then make a guaranteed gain from that investment, and then somehow pay back that loan without actually cashing out the fund they invested in…??

This all seems like a very elaborate scheme that doesn’t actually hold up under scrutiny. If these investments were guaranteed at 15%, then the bank would be investing in those funds instead of giving out low-interest loans with very little return. And why would someone take out a loan in order to invest, reducing their returns by the cost of the loan? They would more likely just invest in those funds directly, so they could take the profits without the unnecessary overhead.

2944

I’ve been out of the thread for a bit but glad to see that it has been in good hands.

As I have said before, the point of a wealth tax is to make the very wealthy actually pay a fair amount of taxes, since they are able to effectively not have income commensurate with their wealth level, and thus avoid paying income tax at a level commensurate with their wealth level.

The reason we wouldn’t use a wealth tax on the lower 99.9% of people is that they are paying into the system through income taxes. The whole point is to have the .1% actually pay an equivalent portion of their wealth as the rest of us do through income taxes. It’s not meant to be ‘fair’ and used widespread, it is rather a means to an end. If you have a better means to the end of actually having the .1% pay an amount yearly that is equivalent to what someone making 50k a year does, as a portion of their total wealth, please fill us all in.

So your argument that ‘it’s not fair’ is, well, duh. It’s not fair to have a progressive income tax, but we do that too. People who have more should pay more. People who own 70% of the wealth in a country should pay 70% of the cost of running the country.

2945

The wealthy pay less taxes, and the trend is worsening

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The grey lines in the last are historical data

And keep in mind that poor and working class people tend to pay more on consumption taxes relative to income. They can’t avoid paying sales tax because certain things like food and clothes are kind of essential.

2946

Yeah, but what’s the alternative? Tax them twice, hit them with the very bad owning tax instead of the right and proper transaction tax, take their Vermeers? That’s all crazy talk.

2947

See, I’m glad you ask!

I have scoured the historical records for alternatives to curbing massive wealth inequality. It turns out that in the early 20th century, following a massive wave of unrest at the depredations of the robber barons, the first great progressive movement of the US came to be. And the robber barons accented to massive increases in tax rates and regulations.

However not all societies had decided thusly, and in particular we can see examples where the populace took a different turn.

It seems the alternative was bloody revolution.

So they can choose how to pay, in coin or in blood.

I think wise minds would acknowledge the supremacy of coin here. But it really is their call.

2948

It’s amazing that the incredibly wealthy have managed to brainwash a high enough % of the population that they keep voting against their own self interests, driving the taxes on the wealthy down to the above historic level. Just insane.

2949

Instead of showing the data for the top 400 wealthiest families, why don’t you show the data for the top 1% compared to the bottom 50%? Because even if the top 400 families pay a slightly lower rate, that is definitely not true for the top 1% or even 0.1%. From the Congressional Budget Office:

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The top 1% still pay a higher tax rate than everyone in the lower 99%. But if you want to look even closer, when about the top 0.1% or the top 0.01%?

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Yes, the top 0.01% pay a very slightly lower tax rate than the top 0.1%…but at those income levels, they can duke it out among themselves about whether or not that’s fair. But even the top 0.01% pays a higher rate than the lowest 99%.

So no, it’s not true that the wealthy pay less taxes in general.

2950

Because to be in the top 1%, you only need $4.4m in wealth, and we’re talking about a wealth tax that would kick in at a much higher level of wealth than that?

I feel like you’re not even trying here, Andy.

2951

This has been obvious for several years now. Why even bother?

2952

/hangs head in shame

2953

But that wealth tax is based on the premise that “the wealthy pay less taxes” than the lower income groups, which is absolutely not true in general, or even for the top 0.01%. And even if the top 400 families have a slightly lower tax rate overall, they’re still paying multiple orders of magnitude more than the lower income groups.

And by the way, you’re mixing up income with wealth, which just makes the discussion less clear…

2954

This is all based on the premise that for some reason, income tax should be proportional to wealth. Why? Income tax is proportional to income, not to wealth. No one pays income tax in proportion to their wealth.

So in once sentence, you say that we shouldn’t worry about taxes being fair. And then you immediately say what people “should” do, which implies fairness. So which is it? If people can’t complain about the fairness of the tax code, then why do you get to use fairness as a justification for changing it?

2955

Because you, in all your infinite wisdom, should realize that federal income tax is far from the only, or for most people, the largest source of tax they pay.

It’s almost as if this has been made clear in the post you replied to

It’s almost as if things like sales tax, gas taxes, car registration fees, etc. disproportionately contribute to a poor persons total tax paid, such that looking at the federal income tax rate is incomplete to the point of being disingenuous on the topic.

Also those charts I posted were not for only federal income tax rates so your post isn’t the gotcha you think it is.

2956

Let me give a specific example of how a wealth tax can really hurt people.

I hired Bill right out of college in the early 1990s, he was a great employee. In the late 90s, he was diagnosed with Hodgeon Lymphoma and the first round of treatment didn’t work, but thankful the second brutal round of Chemo worked. In 2000, shortly after I left Intel, Bill, left wanting to pursue his passion for music and photography. He had roughly $1 million dollar worth of Intel stock options so why not take some time off.

Bill and I lost contact but later became Facebook friends. Fast forward to 2018, after living in the Big Island, Bill was in Oahu, and I wanted to meet up. The story of Bill went from a millionaire to broke is unusual but hardly unique for Silicon Valley circa 2000.

First, a bit about taxes and stock options, before stock options were mostly replaced by Restricted stock units as incentives for engineers and executives in tech and other companies, there were two types of options; Incentive stock options (ISO) and Non-Qualified. For Non-Qualified stock options, the difference between the option price and the price of the stock when you exercise is treated as ordinary income, in 2000 the top rate was just under 40%. ISOs aren’t taxed when you exercised them, however, they are subject to Alternative Minimum Tax (AMT) the max AMT rate at the time was 28%. However, if you hold on to the stock you exercise for 1 year, then everything is treated as long-term capital gains which were 20% in 2000. So if you had $500,000 gains in ISO waiting 1 year would save $100,000 in taxes. So in many ways, stock options are like a wealth tax. You are taxed on your wealth at a particular point in time before you necessarily have cash in the bank.

Bill accumulated ~20,000 options (a mix of ISO and Non-Qualified) at an average option price of about $10, and Intel was trading at $60 a share in early 2000. He told me that he owed over $ 300,000 from exercising his stock to the Feds and $100K to California. Unfortunately, like many people in Silicon Valley, Bill believed that stock was only going to go up so he held on to all his stock… By Oct 2001, when taxes were due the stock was trading at $20, he set up a payment plan with the IRS, by the time he finally sold his stock in 2002 it was trading in the $15 range. All in all his $1 million in wealth turned out after interest and penalties to be $100K tax bill which he eventually negotiated for less.

Bill was somewhat fortunate, I knew plenty who exercised stock options during the dot com boom, and ended up paying a fortune on stock which was worthless a year later.

The fundamental problem with a wealth tax, is that wealth is often illusionary. It is subject to the madness of crowds.

If Bernie’s wealth tax (5%) had been around in 2000, Jeff Bezo would have owed about $4/share for Amazon in taxes. He’d owe another $.90/per share on Jan 1, 2002, the time he had have to pay his taxes for 2000, i.e. Oct 15, 2001. The stock was been trading between $6-10 share. (Gee if I had only been smart enough to buy Amazon back then.) So Bezos would have lost control of it.

Now sure a prudent businessman would have sold 5% of their stock in Jan 2000 to pay the taxes. But every entrepreneur and plenty of employees like Bill think the company stock is going up, so why not wait.

Losing all the money destroyed Bill’s confidence. He made between 20-40K a year, this century, and spent a lot of time sleeping on coaches and youth hostels. He lived with me for 1.5 years rent-free, before moving back to take care of his mom.