2977

I think that part of the issue is that most peoples’ wealth is different than the wealth of someone like Bezos.

If the majority of your money is in things like physical objects, your home, your car, etc., and actual cash in your bank account, then your wealth is fairly stable and exists as tangible stuff.

There’s something different about money you have in the bank, and physical objects, compared to mountains of “wealth” that only exists on paper and is largely dependent upon the market’s perception of one stock’s price. There’s something about that kind of paper wealth which is less “real”.

2978

Well, it exists as tangible stuff that you can’t liquidate. Sell your house, you’re going to need somewhere else to live. Sell your car, you can’t get to work. As for stable, I direct your attention to 2008.

In a very real way, most normal people don’t have ‘wealth’. Counting their house as wealth is like counting their legs as wealth. And that is the difference between the wealth of normal people and the wealth of people like Bezos: Bezos can afford to liquidate some of his wealth with no impact whatsoever on his manner of living, and no threat to his life or livelihood or well-being.

2979

And yet they are able to live and use some form of that as if it is real.

Bezos has made however many millions in income, his wealth is 5-6 orders of magnitude beyond that. His lifestyle and spending are not commensurate with his income, but rather his wealth. He is able to engage in projects as if that wealth is a real thing. So if this paper wealth can be treated as real assets in terms of his lifestyle, I do not accept the premise that it can not be treated as real when measuring said wealth for taxation purposes.

2980

Yeah, but it ain’t the billions of Amazon stock that he lives on.

I think you are imagining this to be the case, but it’s not really. Bezos does not live a lifestyle and spend money commensurate with having a $200 billion net worth. What would that even mean?

If we are to take something as an example, like his founding and funding of Blue Origin… Bezos did that by selling Amazon stock. And those sales of stock were taxed.

Bezos’ lifestyle tends to be funded by sales of stock, which he pays capital gains on.

2981

Which, as far as I can tell, he pays the top rate of… 20% on. Vs the top marginal rate of 37% for income. So.

2982

The fix for this would be to eliminate the preferential rate for long term capital gains, and have it simply treated as income, if you believe that it’s bad to have capital gains treated differently.

2983

And that changes the fact that that he’s been able to work this system for 20 years now how, exactly?

2984

Something like this?

Somehow Bezos came up with half a billion dollars for a yacht. Seems like he’s…wealthy? And can cough up the liquidity for that kind of purchase? And is living the lifestyle of someone like that?

Or there is this. I haven’t bothered to total it up, but it looks like something on the order of half a billion in expenditures on…houses.

2985

Wealth like that is simply incomprehensible to many people. As demonstrated by people constantly failing to comprehend it. “It’s just money on paper…” is like Kramer talking about write offs.

2986

The fix for the horse that has already bolted cannot be solely to close the barn door.

2987

Bezos regularly sells stock (and yes, assumedly pays CG taxes on it)- a couple of billion dollars worth at a time. It was kind of funny, as when the idea of a wealth tax was first talked about, folks were like “Bezos’ wealth is tied up in his stock, if he had to sell a bunch to pay a wealth tax, the stock price would tank and he wouldn’t have a contolling share of amazon anymore”. And then he just sold 6 Billion, and then 14 Billion, etc. And the price still went up, and he’s worth more than ever, and the anti-wealth-tax folks found a new argument and shifted the goalposts again.

2988

I’m still waiting on the people who say we can ‘fix’ this by closing income tax loopholes to explain exactly how that would work. These fortunes grow largely with no income at all, and their size dwarfs the actual income of their holders by several orders of magnitude. You could tax almost every penny of anything that looked like income and it would still have no effect whatsoever on their fortune. What top marginal rates do you actually have in mind?

2989

I think on some level, we need to accept that different people have different requirements in terms of wealth inequality.

For me, and many others, I literally do not care if someone is richer than me… even if he’s insanely richer than me, like Bezos.

All I want is to get appropriate tax revenue to pay for the government systems I want.

Some folks want to prevent that level of wealth disparity. That’s fine, but it’s not something I care about or am interested in supporting.

2990

To say that the above is naïve doesn’t even begin to cover it.

2991

It’s not about “someone richer than me”.

Your post is another example of how people can’t comprehend the levels of wealth being discussed.

2992

The best way to do this is to do 4 things:

1)carefully scrutinize all the ways of accessing/transferring assets and legally classify them as taxable events that cause a gain of the asset to be realized and taxed.
2)eliminate the preferential treatment of capital gains (a phase out for high incomes above half a million is the way I would do it) plus reasonable rules on spreading gains/losses to allow for reasonable adjustment of sudden spikes
3)raise marginal rates on high incomes (including both earned income as well as capital gains) with several steps along the way from our current $400K/37% marginal up to something in the 60% to 70% marginal rate for really high incomes (over $10-15 million is my threshold).
4)continue all the efforts at improving enforcement, coupled with research and response to tax avoidance/evasion techniques, updating the above laws as needed

If you do those things, you are going to capture a great deal of the gains in assets, which is the primary driving factor behind these massive increases in wealth over time.

I feel like a solid approach as I outlined will accomplish much of what liberals desire in regard to high wealth individuals.

In addition, on the more general topic of wealth inequality we also need to be looking at enforcement of rules about conflicts of interest, abuse of charity and trust rules, leveraging money for political power, better regulation on monopolies and bundling.

I’m not averse to a wealth tax but I have two areas where I think some of the current left’s focus on wealth taxes is oversold:

1)I don’t feel we’ve come anywhere close to making best use of our existing income tax system and it is riddled with loopholes and preferences for the wealthy that need to be addressed, along with a substantial increase in progressivity at the upper end.

2)I also don’t feel a wealth tax will magically solve all the problems we have with tax avoidance and tax evasion - many of the techniques used to hide or shield income from tax can be applied to wealth (manipulation and exploitation of trust rules for example, along with many others). Also there are transition costs to enacting a new system as well as frictional costs and on top of that some well known uncertainties.

I’m willing to entertain the idea of a wealth tax, but only as a modest supplement to what I’ve outlined for income taxes, and even then I don’t consider it a silver bullet.

There is no silver bullet, but we have to start with better enforcement, plugging all the loopholes to “realizing a gain”, better progressivity, and phasing out the preferential treatment of capital gains. That’s where we should focus.

2993

Let’s look at a simple example of a $1b fortune which grows at a rate of 10%. Let’s call the entire 10% taxable income (it won’t be, but let’s assume the best case for income tax reach). So the income to be taxed is $100 million. Let’s apply the 70% top marginal rate to the entire amount (it won’t apply that way, but again, let’s assume the best case for income tax reach). So the owner of the fortune pays $70 million in taxes and the fortune still grows by $30 million (3%) less the owner’s living expenses.

Income taxes alone can’t stop or reverse that concentration of wealth. You’re going to need something else.

2994

The implicit assumption you’re making in all of this is that the “fair” tax burden is paying taxes based on a percentage of your wealth. Our system of taxation is based around income (and a whole host of other things), so it shouldn’t be surprising that tax payments scale relative to income.

If you’re going to scale everything to wealth, you might as well go to McDonald’s and complain about their hamburger prices. After all, someone on minimum wage pays 1/10,000th of their wealth to buy a hamburger, while a millionaire pays 1 millionth of their wealth to buy a hamburger! Do McDonald’s prices unfairly favor the rich? Or is this just a mathematical oddity that occurs when you calculate things in proportion to a varying amount?

The answer is: That’s how math works. If two people make the exact same income and pay the exact same tax, but person A spends less and saves $10,000 a year, then person A will continually be spending a smaller percentage of his wealth when he buys the same things as person B. If you’re saying that it’s unfair that person A spends a smaller percentage of his wealth, then you’re just saying that it’s unfair that person A actually saves money instead of spending it.

2995

Wow. You are right. The marginal utility of a dollar diminishes with the more you have. You know, it would probably be a good idea to build a tax system with that in mind.

2996

Saw this the other day:
A million seconds is 11.5 days.
A billion seconds is 32 years.