This is an unfortunate story, but I would suggest that this is atypical for people with a million in wealth (which again, is not who we’re talking about), absurdly common for the average minimum-to-moderate-wage worker, and absolutely unheard of for people with billions in generational wealth (which again, is who we’re talking about when we talk about wealth taxes). That inequality is what the whole thread is about.
Sad stories of people who got taxed too much are missing the point. Everyone - not just the moderately wealthy - should be able to live decent lives, appropriately balanced between work and family and leisure. We can make that a reality by expanding the social safety net in various ways, and we can pay for it by coming up with ways to reverse the obscene concentration of wealth that has taken place over the last several decades.
I agree with your goals. I think even moderately wealthy should should pay more taxes, and certainly the fabulous wealthy should pay even more. I just think that wealth taxes is particular inefficient and easily gamed tax. To start with I’d levy on tax on anytime you receive cash or an asset. The Disney heiress, she should have paid a tax when Walt died and put her in the will. No differentiation should made between capital gains and wages, they are all taxed the same. The only exemption is you only have to pay taxes on profits. Buy a house for $200K and sell it for $300K you owed tax on the 100K.
Your employer gives you free health care or a company car, pay a tax.
Now there would be some modest exemption just to lessen the regulator burden. A $1,000 to 10,000 exemption for gifts. Maybe $100k for selling your house, twice in a lifetime (once for each parent) you could have a modest 100K to 1 million exemption for an inheritance. But pretty much any dynastic billionaire would’ve started with about 1/3 less money. Does Bezo pay more? no but his kids would have a lot less.
It could well be gamed, but given that we’re talking about, like, a couple thousand people in the US at most, I’m not sure it would be inefficient, especially compared to the expected revenue. 😊 Also, hard agree on massive taxes on inheritances.
In the end, though, the tax system can only be gamed if it’s written in such a way that it can be gamed. I’m not so cynical as to believe that there are shadowy backroom deals explicitly to create loopholes, but it’s pretty obvious that when you have wealthy people writing your laws, they are consciously or unconsciously going to write them in ways that favor or exempt themselves.
Sorry, had no real time before now.
No, it’s what a lazy idiot can up with, one who can’t even remember the details of many tales where guarantees weren’t actually from the loaner, or where loan deposits and debts end up in different companies, both of which where the loans were very much not paid (and who knows how the loan was approved in the first place). Or however they’re doing CumEx these days.
And, yet, with that lazy stupid thing I made up, it wouldn’t take that much to live comfortably where I am. If you don’t realize all funds are converging to the same tulips and investment loses would be the least of anyone’s problems if a crash would significantly cut enough to wipe a significant part of that past profit, I don’t know what to tell you. Even ignoring the power of capitalists having about the same bets who don’t like to lose, the let it fall attitude of the 30’s that let it cascade freely doesn’t exist anymore.
Sure, someone always loses when changing to a system that still doesn’t care about health, full employment, labor rights, and all that. And some wealth tax fixes none it, but the right question (other than why don’t we actually fix the things that don’t work, instead hacky band-aids), is whether people would be less likely to be homeless and bankrupt.
But, yes, in the end, it’s not going to fix this:
and consequently, this:
(Household debt to GDP)
What percentage of people’s taxes are federal income tax, compared to all other tax types? Obviously federal income tax is not from the only tax people pay, but I assume you have the data on how much most people pay in other taxes, showing that federal income tax is not the largest tax.
Even the Saez/Zucman data that you provided shows that the top 10%, the top 1%, and even the top 0.1% pay a higher overall tax rate than any other income percentile below them. Sure, the taxes paid by the very very ultra wealthy may be slightly lower at 23% (again, as the federal tax data confirms), but that’s still 23% of a very very high number.
Right, but the results from your charts and the results from the federal income tax rates from the CBO show the same thing: The overall tax rate is higher for the top 10% than for any group below it, higher for the top 1% than any group below it, and higher for the top 0.1% than any group below it. The only group where the tax rate dips slightly is specifically for the top 400 highest earners.
Yep, that’s the group we’re talking about that would be affected by a wealth tax. Congrats, you’ve now caught up to the rest of the group. You might be the slowest kid in the class, but, um, … yeah.
Personal callouts aren’t making this forum a better place.
Oh, yes, that’s the problem here.
A slight dip in the percentage rate for that group still has them paying a higher percentage than 99% of Americans, so saying they’re paying “less” or “not paying their fair share”. They’re paying slightly less (percentage-wise) than the top 0.1%, that’s it.
Thanks for this post. I certainly feel for your friend. That said, I can’t really grasp what happened to him or how it relates to a wealth tax.
If he had done a standard exercise / sell when he left Intel, he would have received the value of the shares less the exercise price and owed a tax on the gain. This is pretty much like any exercise of stock options I’ve ever seen, including the ones I’ve done myself back in the day. They are zero-risk guaranteed gain actions offset by a higher tax basis on the gain.
If instead he exercised the options and held the shares rather than sold them, he was basically gambling (like any investor) on the future price of the shares. In his case he was doing it with the hope of saving money via the more favorable tax treatment.
I don’t think any taxable event occurs in either case until you actually sell the shares, so I don’t really know how your friend ended up owing the IRS a ton of money without making any gain on the shares at all. But it doesn’t seem to have anything to do with a wealth tax, and in any event what he did was unusual, at least in my experience.
I don’t really follow Amazon closely enough to know the share price or Bezos’ share of the pile from one year to the next. I assume what you’ve written here is correct: that a 5% wealth tax in 2000-2002 would have cost Bezos his controlling interest in Amazon. I assume that he had no other liquid assets or convertible assets he could have used to avoid selling Amazon shares. I assume he could not have borrowed the money at favorable terms and paid it back later.
Assuming all that, my response is…so what? I don’t believe that a situation that leaves Bezos still the largest shareholder means Bezos gets ousted from executive control of the business. I don’t believe in the idea of irreplaceable supermen, so even if it cost him executive control of the company, I don’t believe that means the company dies. I do believe in the power of demand, so even if the company did die, other companies would have come along to deliver the same things Amazon ended up delivering. Maybe they would have done it better, and maybe it would have resulted in less of a monopoly and no uber-rich space traveler. Nobody knows, but regardless Bezos himself would have remained….rich.
Edit: certainly there will be some losers resulting from a wealth tax on the ultra-rich. That’s the motivation for doing it: reducing the size of these fortunes and preventing them from continuing to grow and further concentrate wealth into the hands of fewer and fewer people. But the losers are not going to be the ordinary rich, or the merely very well off, because the tax won’t apply to them.
Banzai
2967
So the chart that separates by income group (not wealth) says that the people with the most income pay the most.
Again, duh. That’s how a progressive income tax system works. Has nothing to do with the conversation about a wealth tax.
The problem isn’t with income tax. The problem is that the top .1% of wealthy in our country don’t have income that is anything close to comparable with their wealth, unlike all of us pleebs, where income is a big part of our overall wealth.
It truly seems like you are deliberately arguing about something completely different from what the rest of us are talking about, since we keep saying the same things and you keep arguing completely different points.
I get it, you don’t want to tax wealth. That’s also fine, but I see no reason not to based on what you have posted, and plenty of reasons to do so.
The charts that CraigM posted above, in this post:
…had charts talking about what the top 400 families paid in taxes, where they were specifically separated out by income group. And continuing the discussion about that group, Rothda said:
If we’re talking about the top X families by wealth, that’s a very different group than the top X families by income. But when someone brings up the top X families by income (complete with charts) and we start discussing that group, I’m not “arguing about something completely different from what the rest of us are talking about”. I’m specifically talking about the group that he brought up.
I think part of the problem is that the language is so nonspecific. When someone says “the wealthy pay less taxes”, does that mean:
- The top X% by income pay a lower dollar amount than the bottom Y%?
- The top X% by income pay a lower percentage of their income than the bottom Y%?
- The top X% by overall wealth pay a lower dollar amount than the bottom Y% by wealth?
- The top X% by overall wealth pay a lower percentage of their income…?
- …pay a lower percentage of the overall tax burden…?
- …pay a higher percentage of the overall tax burden, but a lower percentage than they used to pay…?
There are so many different ways of looking at this data that it’s hard to even agree on what we’re talking about, as this discussion shows.
Enidigm
2970
I think it’s an issue like as seen with certain posters above - call it Khan 2D thinking, gold bug, or monkeysphere thinking, whatever - but a lot of people have a really hard time understanding complex systems. It’s why people don’t like “fiat” currency - because they don’t understand it. They understand gold, they can hold it in their hand, they can put it in their mouth. Why is this rectangular piece of paper worth more than gold? They don’t understand it.
I suspect that while hiding behind principles they only sorta-kinda understand, most of the people who - not out of self interest but self identification - reject a wealth tax don’t understand how real wealth today is accumulated. They still see kings and castles, see reeves coming down the lane with large sticks demanding a share of their “wealth” because the lord says-so. They don’t understand it. Didn’t I already pay the lord once this year? Why do i have to pay again?
We’re going to figure out how to get navigate100 years of economic and government changes necessary to save the world when the complexity of these problem and their solutions are beyond the ken of the majority of voters.
It relates to wealth tax because his friend was taxed based on paper gains that hadn’t actually been realized (sold) yet. And in his case, when the stock dropped, he owed taxes that were more than the stock was actually worth.
As he explained, there are certain stock options where you are taxed when you choose to exercise the options, not when you sell them. So you have an option at $10, and then you exercise at $100. You now owe taxes on that $90, even though you haven’t sold the shares yet. And if the stock drops over the following year (say, there’s a housing crisis or a stock crash), you may end up with a share worth $20 but you still owe $35 in taxes. That’s what happened to his friend.
But if you just purchase shares and sell them normally (like any investor), you are only taxed on the actual money you receive when you sell them. These stock options are something totally different.
So you admit that you don’t know how those options work and don’t understand what happened to his friend…but you’re still confident that it’s a rare occurrence.
What he’s saying is that Amazon was around $70 in 2000, and had dropped as low as $8 in 2001 around when taxes were due. So a 5% wealth tax would be assessed based on the $70 value, but by the time the taxes were due it would actually be close to 50% of his wealth being taxed. And especially in the early days of Amazon, Bezos was basically fully invested in Amazon, so there were no other shares to cash out to cover half of his net worth, and no bank would give him a loan of hundreds of millions of dollars to pay a tax bill.
This is a much better way of expressing these concepts than I’ve come up with despite similar bouncing around my head for a while now. Well said.
And people also act like someone who has millions in stock is somehow “hoarding” money, instead of understanding that it has a paper value that isn’t actually realized until it is sold. Or they see a paper gain one year and say “Why did that guy make millions of dollars and not pay any taxes??”, without realizing that the same person lots millions of dollars on paper for the previous few years. Make a bunch of money when the stock market goes up? You should give us some of that money. Lose a bunch of money when the market goes down? No one cares.
Banzai
2974
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People who have the highest income pay the highest income tax.
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The wealthiest people pay a very small percentage of their overall wealth when compared to the pleebs in income tax despite paying a high income tax rate.
3.Profit. The wealthy that is. Forever and ever, while paying a smidge compared to what everyone else pays as a percentage of their wealth.
This is the problem and the best solution I have seen is a wealth tax. If you have 70 percent of the wealth, why aren’t you paying 70 percent of the taxes? Cause income is what matters and not wealth? Ha. Ha Ha.
I think one of the fears is that people have gamed the system for multiple decades, hidden away money while the GOP ran things, and caused multiple loop holes.
And now, people want to correct the issue. It’s like a Bank Robber getting a clean get away, got past the guards, and is finally free and clear, yet some how, still getting punished by some other means indirectly that doesn’t have to do with the Bank Robbery.
It feels unfair to these people that some how, they should have to pay their fair share, almost retro actively, after having spent so much time setting up the rules to get them to the place they are now. After all, they did the work, they paid off the proper super pacts and Political Parties. They ‘won’. You can’t now, round up all the horses that got out, and put them back in the barn.
But, that is kind of the point to the wealth tax. To level the playing field a bit, to have people that accumulated wealth while bypassing the usual avenues in which the accumulation of wealth is taxed (wages and other income) pay their fair share, even if it’s after the fact.
It doesn’t even have to be a morality play. We don’t have to conclude that the titans are monsters in order to justify a wealth tax. We just have to recognize that extreme concentration of wealth in the hands of the few is bad for society and democracy, and that taxing income can never have the effect of reducing extreme wealth.
That’s really the point about MacKenzie Scott. She has surely given away more money than she would ever have been taxed by even the most aggressive approach to income tax, and the value of her fortune still nearly doubled over that period of time.
