Of course the super-rich are going to get coddled. If you are in a position of influence they can throw $100,000 to a million dollars your way to make sure you enact the policies they want. This can be in the form of consulting gigs or speaking fees or what have you.
Point is, the money is literally chump change to them.
> I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain
I've been in finance long enough to believe that this is true.
The problem is that the rich have the ability to take their income in alot of different ways.
Tax income more, they'll take it as dividends.
Tax dividends more, they'll take it as capital gains.
Tax capital gains, they won't realize their capital gains until they can offset them with realized losses or they'll just get bank loans again't their stock holdings.
Tax assets on death and they'll pass them o n in trusts.
Some will move money off shore if they think they can get better returns that way.
The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code.
Who would have thought 25 years ago that companies would buy other companies in different countries, not to acquire their products or markets, but to acquire their headquarters address to lower the tax paid in the US.
Is HFT a net benefit to the average American? Does the average American even care? It seems to me that HFT prevents the average American from having any participation in the process. Find a new business model.
Bonds have a cash value, tax that.
If they start only using IOU's hit them for unauthorized creation of currency under the National Bank Act of 1863 and the Legal Tender Act of 1862.
Yeah, except certain changing of money is considered unfair (ie: do you really want to be taxed if you give your friend a $50 in cash as a gift?), while other exchanging of money is considered good for the economy (ie: tax breaks on education-related expenses).
The loopholes aren't there by design, but the complications of the taxes are in there by design. We wish to encourage education and business (both education and business expenses are deductable). We want to encourage renewable energy (solar taxes, net metering, etc. etc.). We want to encourage home ownership (mortgage deductible), charitable giving (church donation deductibles, etc. etc.).
Taxes aren't complicated if you just fill out a 1040EZ. Taxes become complicated when you want to make sure you got all of the money back from deductibles and credits.
Isn't that the way it already is, for the most part? Granted there are some things that aren't taxed this way (land & food come to mind), but for the most part, as money flows through the system, it is taxed.
Buy a laptop for $1,000:
* That comes out of money you've been paid, presumably, so in 43 US states, you've paid income tax already on it, and your company has paid payroll taxes.
* 45 US states charge sales tax, so you pay sales tax.
* If you paid with a credit card, a cut of your transaction goes to the credit card company, who pays taxes on their profits from that transaction.
* The money is transferred to a bank account, and that bank is taxed on the profit that they make from that deposit.
* The laptop company pays taxes on the profits that they make from that laptop (depending on where they're located, but if it was sold in the USA, they pay taxes).
* Any shipping company involved moving that merchandise around paid taxes on the profits they made.
* The company that brought the laptop into the USA pays the import taxes/tariffs associated with it.
Just at a glance, every time something changed hands, it is taxed. And this doesn't get into things like excise tax, which are even more fun.
Gifts are taxed only if they are above $10,000. When you give money to your buddy to help pay for a meal, that isn't taxed (money changed hands, didn't it?).
Furthermore, there are lots of taxes out there that do not involve the movement of money. Property Taxes are when a municipality agent comes to your property, they make up a number that "sounds right", and then start charging you for it.
Furthermore, you aren't taxed when you buy or sell stocks or bonds. (Bernie Sanders wants to change that... cause he doesn't know how bad of an idea that is). You only are taxed on your GAINS: dividends and capital gains.
If you buy a stock at $100, then sell it for $110, you are taxed 15% on $10. Not on the $100 or $110 individual transactions. (In contrast, the Financial Trade tax Bernie proposes would be a tax on both the $100 AND $110 transactions)
How about taxing net worth of an individual? Calculated by market participants like they do today.
Tax 0,1% of net worth of those whose net worth exceeds say $10 million. Such people have to get assessment of their net worth and then pay their tax.
Of course they have incentive on doing slightly funny things with their net worth, but it is difficult to race them to the bottom in view of very large fines for crossing the line.
Of course people will skip citizenship then; but as long as they do business within country it is solvable too.
It's hard to call T-Bills an investment and many wealthy people have quite a few of them, or other investments designed to hold value with minimal ROI.
I've never understood why the capital gains tax rate is lower than the rate for normal income. Capital gains are basically money you earn for having money and not being an idiot with it. It's one of the major ways the rich get even richer just because they are rich and how the wealth gap widens.
From a 10,000 foot view it seems like it should be taxed at a higher rate than normal income, since theoretically the person had to actually work for their normal income which directly helped the economy and the country as a whole.
> the person had to actually work for their normal income which directly helped the economy and the country as a whole.
This is the Labor Theory of Value in another guise. Efficient allocation of resources is extremely important, and the LToV discounts that to having no value.
It would be way too easy to adjust your net worth, and assessing said net worth would be extremely difficult. Making the tax code harder and more complicated is probably not the answer...
Net worth, as in property value - mortgages? Most 'middle class' people have most of their net worth in their principal residence, so you'd be adding quite a shocking tax bill to a lot of seniors on fixed incomes who own their own house. That's the problem with Mark-to-market taxing.
You could start added loopholes to your "block loopholes" law, like "If you reside in the property, it's tax free", but then you hit problems like parents given their kids properties as tax shelters, and the like.
List is as an AMT. Also, $10 million * 0.1% = 10,000$ which is a tiny tax bill at that wealth level. If your paying less than 10k and have 10 million then somewhere something broke down.
IMO, you would need a much higher number. A 0.5% wealth tax AMT would = a 25% tax on a 2% ROI or 8.3% on a 6% ROI.
From an economic standpoint this is actually a good idea. People with lot's of unreolised income are often stuck with unproductive assets because selling them incurs a large tax bill. With this you can sell a reasonable chunk of your assets without incurring extra tax.
What's wrong with seniors getting hit with a slightly larger tax bill? Besides, you could alwaysexclude the primary residence from the wealth tax to lessen the burden.
It would either generate additional revenue or have them move to an area with cheaper houses/properties to avoid paying it, which would make space for young professionals who otherwise would not be able to afford it.
I'm also venturing to speculate that a lot of seniors are NIMBYs, facilitating the lack of affordable development and re-zoning, in which case that's another argument to get them the hell out of their expensive suburbia.
Mostly because the seniors have spent their working lives building their savings (hopefully) to be able to retire, and have a very fixed income -- they can't look forward to getting another job, getting a raise, etc. Seniors as a whole are a very vulnerable group, which I think is one of the reasons that their voter turnout is so high.
Think about what that'll do to your retirement. Presumably you're saving and such, and want to get to a point where you can live comfortably (not extravagantly) when you retire: a trip a couple times a year, the ability to take your grandkids to get ice cream, etc. A tax bill can be devastating to your retirement savings & therefore lifestyle.
Think of Europeans, mathematically the idea that Europeans will ever retire doesn't make sense. It'd require 80% or 90% income tax, maybe even more, because there aren't enough kids to split the burden on.
Even in the US this is true, except to a less extreme extent. The systems the current seniors have put in place make sure few of the current workers will retire.
So why do they deserve it ? They voted in governments that fucked us, so why wouldn't we get to fuck them ?
How about starting by taxing many people's main part of wealth, their house, at market value (i.e. no Prop 13)? Let's not let perfect get in the way of good..
The problem with that is that many people bought their houses back when they were much, much cheaper. So doing that would cause many, many people to be forced from their homes only for the crime of being one of the early people in an area that later became popular.
Any policy that would cause people to be forced from their homes just because should be viewed as a failure.
> Any policy that would cause people to be forced from their homes just because should be viewed as a failure.
I have a really really hard time feeling bad for people who bought homes in the bay area in ~1980. They won the lottery. Their home grew 10% y/y for 30 years outpacing inflation by a significant margin. They got a 30 year tax break while their income likely outpaced inflation as well because they live in an extremely good job market. That house they bought for 100k is now worth 1.7 Million. They can sell the home, move basically anywhere else in the country, and retire on the remaining gain. Yeah, I'm having a hard time feeling too bad for them.
On the other hand, the person who moved to SF in 1980 and decided to rent, I feel bad for them. Unless they found a rent controlled apartment, they've seen their rents grow 10% y/y, and if they found a rent controlled apartment they probably got evicted when the owners of the property sold it, and the new owners decided they wanted to redo the property as condos.
Lets just call it what it is, rent control for rich people. Then maybe we'll talk about it sensibly and realize that it's a horribly thought out plan.
>>I have a really really hard time feeling bad for people who bought homes in the bay area in ~1980. They won the lottery.
>>On the other hand, the person who moved to SF in 1980 and decided to rent, I feel bad for them.
Instead of punishing people for being successful. The latter people should ponder on their foolishness, instead of blaming other people for being more intelligent.
Last time I check making good decisions about one's future is not a vice.
If only home ownership weren't correlated with generational wealth. Then we'd have a meritocracy, and you could dismiss people renting as bad decision makers. In the real world, people rent because they can't afford to buy a home.
>>In the real world, people rent because they can't afford to buy a home.
In real world, you can always bootstrap your way to a decent nest egg, whether its a retirement fund or a home. It takes time, and it takes hard work. But is very possible and a lot of people do it.
If you can't, then evaluate your spending patterns seriously. I haven't met any person yet who didn't have wasteful expenditure that couldn't be eliminated.
More often than not its not the means/resources, its lack of resourcefulness. People in general don't have the motivation to take steps towards solving a difficult problem, and the discipline to suffer through a grind and see it through to the end. This of course is a very different problem, the responsibility of which starts and ends at a individual alone.
>I haven't met any person yet who didn't have wasteful expenditure that couldn't be eliminated
People who are poor or improvised deserve to live a life that also allows them to have something enjoyable, including hobbies. It shouldn't beconsidered a lack of discipline that an impoverished person could maybe enjoy their life once in a while. It's depressing how much one can expect a life of misery of they're poor.
However, that location X is not always feasible to move to and work from. So it's worthless to discuss all location X. Instead, you should be focusing on locations Y, which are.
Why the hell should they have to move, though? They bought a home in that area because they wanted to be there. Why should they be forced from their home because you have some kind of hard on for punishing people who got lucky?
Any tax on wealth would have similar effects: You own a business with notional value $2M? Pay X% of that each year, whether or not the business generates that amount in cash. You are a retiree with $2M in CDs or bonds, generating your retirement income? Pay taxes on the capital before you feed/clothe yourself. Etc, etc. Yes, property taxes may impact the middle- or non-1%-upper-class more than a wealth tax, and [a modest degree of] shelter is a basic human need, but market-based property taxes are significantly easier to implement (how to value privately-held businesses? how to deal with offshore assets?). Perhaps good + implementable > perfect + unachievable.
Oh that's easy, as the hypothetical rich guy in the equation; I personally own nothing but the many, many companies I work for own the stuff I personally use.
As the hypothetical rich guy; as an employee I own none of these companies, it's a tangled web of ownership of companies owning companies. But sadly none of them make any profit and have very little in terms of capital. I even have to shut down a few every year due to failure, er... I mean companies have to shut them down, but the good news is I, um... they, create new companies every year! I'm a job creator! As long as we don't consider the tax consequences of such creation.
The fundamental conflict is that capitalism needs capital to move as freely as possible in order to grow while taxation requires control over the flow of capital. Governments balance these antagonistic requirements. The scale always dips in favor of capital until social cohesion starts to deteriorate.
The narrative that capital and government are natural enemies is deeply flawed. It didn't actually exist in quantity until the Hearst newspapers set it alight. Sure, you had the Wobblies and all, but they were considered lunatic fringe.
Taxation is (ab)used, IMO, to promote normative ideas far too much. It should simply be a way to pay for government, nothing more, nothing less.
If it could be deployed to promote normative ideas cheaply, and there was general consensus about what norms to promote it'd be different. But there's too much ardent BS from both sides to trust this mechanism - it would be much more honest to withdraw from it.
This is doable, with tools from economics but using norms to derive other norms is a good way to end up with entangled and bizarro systems. Just getting people to agree on Coase's interpretation of externalities seems nearly impossible. We have partial technocracy, with ideological shims rather than stern empirical underpinnings.
Capital and government aren't enemies. Government is the thing that supports the relations that give capital power. However, government is in a balancing act between the working class and the capitalist class. Government is not in conflict with capital, government is the mediating body that balances the conflicts of capitalism.
Calling the Wobblies the lunatic fringe is accepting propaganda uncritically. The labor movement, and the IWW was a key institution of the labor movement, was radical, but not fringe and has been persistently defamed for decades.
> Taxation is (ab)used, IMO, to promote normative ideas far too much. It should simply be a way to pay for government, nothing more, nothing less.
What is the role of government? Everything the government does is normative.
> This is doable, with tools from economics but using norms to derive other norms is a good way to end up with entangled and bizarro systems. Just getting people to agree on Coase's interpretation of externalities seems nearly impossible. We have partial technocracy, with ideological shims rather than stern empirical underpinnings.
You are being far too optimistic believing there could be a technocracy without ideology. That kind of thinking only can give you a blind spot for your own ideology. Technocracy these days usually means the kind promulgated by neoliberalism, but it has also been pushed as part of authoritarian command economies like the USSR. What exactly is a "full" technocracy supposed to be?
> Just getting people to agree on Coase's interpretation of externalities seems nearly impossible.
And irrelevant. Coase theorem only applies when transaction costs are minimal. They are not minimal in real life. They can't be. Coase theorem theoretically nice and practically useless. Coase's most substantial contribution to economic theory is how people organize in the presence of transaction costs, not how nice everything would be without them.
To my ear, "full" technocracy would be purely empirical, without any reliance on ideology that cannot be shown to be critically necessary. In all other cases absent a clear and present danger, when empirical clarity is unavailable, the only action is to do nothing. And I'd be prepared to accept consistency with the legal code as a version of "empirical". Prohibition had some measure of empirical support, but was legally completely indefensible.
Alleged "Soviet" technocracy just wasn't - it subsumed all science to the One True Theory which was Communism. Indeed, it's the poster child for what I'd be against. I mean Lamarckianism? It has to be real science.
The Coase theorem explicitly excludes consideration of transaction costs, in the same way constants get dropped in differential equations.
But my native tendency is to underplay externalities anyway, because it's too hard to get intersubjective agreement on them. This goes to this peculiar property of norms to get weird when attempts to stack them on top of each other occurs. How was it that "state's rights" led to lynchings anyway? Because they linked "Southern Honor" and States Rights in this incoherent manner to produce Jim Crow. Sixth-graders - most of them - could argue that away.
Finally, what is the role of government? To enforce and modify law. The minimal role is to enforce land claims, prosecute criminal acts and enforce contracts. Actions of government should not create norms. Anything you can manage beyond that should be a source of skepticism.
This misses a crucial point: higher taxes by definition transfer resources from private investments to public investments. But we know that too much public investment is inefficient ( Brazil, Soviet Union, Venezuela, etc ). So we need to make just the right amount of public investment and no more, and leave the rest to be invested by private sector. Tax rates should be set accordingly
1) Seeking "tax shelters" through investment. Very inefficient, however.
2) Factors other than the tax system. Correlation != causation, IOW. The U.S. had (something approximating) the only standing industrial infrastructure in the world post-WWII. It's also worth noting that the Kennedy tax cuts probably released a lot of pent-up economic energy. Similar tax cuts under different circumstances may not have the same effect - there had been widespread privaiton in the US from 1929 until the '50s, and this sort of acted as a "second stage" booster.
3) A general cultural civic-mindedness. I recently listened to a presentation of Devon Energy's CEO, and his father started a fund in energy and wanted it structred as a registered security , one of the first , and was told "you don't need to do that" by the SEC, but he persisted because he felt that was better.
He then contrasted that now with people spending lots of money to avoid SEC regulation. That highlights the level of culture shift since then.
The problem is that private investments maximize ROI instead of utility. This is why the financial sector keeps growing without actually contributing more to society. It's the easiest place to make more profit. That's why many kinds of investments, the ones with low financial ROI, must be made by the government.
The higher the marginal tax rate is, the more 'friction' there is moving money from a lower performing investment to a higher performing one. I.e. it produces less optimal investing, and that is less good for the economy.
The other problem with higher tax rates on investment is one winds up with less money to invest. There's a non-trivial economic cost to that as well.
If the generated taxes flow back into the economy by building roads, bridges, etc. - that is considerably better than sitting in an offshore bank account.
You'd have to construct a model where you guess the impact of the taxes vs. the impact of potential investment of the same money otherwise. I suspect this is harder than it looks because it isn't discussed much ( although it could be that people simply repeat their ideology rather than trying to make it empirical ).
Not all bridges and roads are equally valuable. And in some areas, the dominant method of financing new roads is through tolls. I once estimated the number of man-years per day lost to congestion on I75 in Dallas around 1985 . It was quite the figure.
all tax is economic friction. But, no one has figured out better ways to fix certain problems with markets, like the free rider problem, monopolies, transaction side effects.
Surely by that logic we should give up trying to tax the rich altogether.
The rich will always try to dodge taxes, but we can make it harder, say for example by spreading it out over different forms of income and consumption.
We should also be looking at the international stage to diminish the value of tax havens, offshore companies etc. I think many countries are beginning to realise that ever lower taxation rates are a race to the bottom.
an issue comes up though when someone is a net consumer in their country, but exports their taxability to some other country. its No big deal for CountryX to have tax rate of 1% on assets it has no liabilities against. Meanwhile CountryY (of origin) is spending lots.
Another option could be to charge a reasonable tax rate and make it as easy as possible to pay. This would reduce incentives to find ways to avoid tax, as those alternatives have costs as well. Wealthy people are the most mobile in society.
I think it's good that countries compete on things like tax rates and good governance. No person or company should be beholden to any one government.
Is the tax rate not reasonable right now? Is there any evidence that lowering the tax rate would make companies less likely to try to avoid paying taxes?
This is why land value tax makes the most sense. Land cannot be moved offshore, it cannot be converted into another form, it can only be bought, sold, leased, rented, or otherwise built upon. All of the things you do to land affect its (unimproved) value and this will be reflected in the tax rate.
The hard part is figuring out how to calculate land values. The good news is that we can find an algorithm to agree on and then put it in force, avoiding all the jiggery-pokery that goes on with taxes and accounting regulations.
That's not a good idea. If your tax rely heavily on land, you tax the farmers who create food, while tech companies such as Google and Facebook won't pay much.
> The problem is that no tax code can close all loop holes
It's really a question of political will.
Just think about the amount of resources the US spends on the "war on terror" or the "war on drugs" compared to the "war on tax evasion."
If the US gov wanted to reform the tax code and enforce everyone paying their fair share, they most certainly could.
The real issue, in my opinion, is that certain people have disproportionate influence in the legislative and rulemaking process, alas, we have the system we have.
> Just think about the amount of resources the US spends on the "war on terror" or the "war on drugs" compared to the "war on tax evasion."
Not sure if you're trying to be sarcastic but many consider the "war on terror" and the "war on drugs" complete failures and a poor allocation of resources.
I agree. It reads like I'm positing them as models of success which wasn't my intent.
I'm just saying that the US gov has tremendous financial resources. Take a small drop ($10B) of those misallocated resources and you can triple the IRS' annual enforcement budget.
The DEA is a tiny fraction of the drug war budget. Add to it half of the $74bn spending on the federal and state prison systems, a good 10-20% of the $100bn spend on county/metro police departments, a chunk of the cost of the Coast Guards... soon we are talking about real money.
"The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code."
What if this is the entire tax code:
All US citizens must pay a tax of 40% of all the money they receive from any other entity for any reason.
I haven't thought through the wording completely, but if we replace the convoluted tax code with a MUCH much simpler one, lots of these problems would go away.
Perhaps, but I bet other problems could be found. My general point is that while I'm sure a lot of the complexity is unnecessary, a decent amount of it is there for a good reason.
I know, but playing along with the thought experiment, how do you account for things like VAT and service-specific levies? Property, income, inheritance, capital gains - all relate to the acquisition of value, so they fit the model in a distal sense.
This concept already exists, and is called a Flat Tax. The problem is it's regressive, which is the opposite of what the current tax code is attempting to do.
A flat tax rate, in its most basic form is neither progressive nor regressive, but simply proportional. I'd take that over the currently implemented progressive* tax.
*Progressive as long as you ignore the primary sources of income for the wealthy.
A flat tax is socially regressive, even if it is mathematically proportional. The marginal utility of 100€ is totally different at 370€/month compared to 10000€/month.
No systems perfect but you can keep adjusting it to keep up with tax avoiding innovations. Something should probably be done at the moment to make it harder for multinationals to claim all their profits were made in Ireland or wherever.
Buffet himself declares that he pays a 17.4 percent rate on taxable income. His staff, like Bosanek, pay an average of 34 percent. The IRS publishes detailed tax tables by income level. The 2009 results show that the average taxpayer paying Buffet’s 17.4 rate earns an adjusted gross income between $100,000 and $200,000. But an average taxpayer in Bosaneck’s rate (after downward adjustment for payroll taxes) earns an adjusted gross income of $200,000 to $500,000. Therefore Buffett must pay Debbie Bosanke a salary well above two hundred thousand.
Is it me, or does that not make any sense? The average tax payer of that percentage makes that amount, therefore she must make that amount? Am I supposed to believe this man doesn't know how averages work? Because the alternative is he's being very disingenuous.
The way the progressive tax rates work in the US, you truly have to get to a pretty high level of adjusted gross income to average 34%. In 2011 the highest tax bracket was 35%, so you couldn't even pay 34% until you earned $379,151 or more.
Given that you'd only pay 35% tax on the money earned above $379,151, so it'd take a pretty darned high income to bring your total tax rate up to 34%.
For federal taxes, yes. Was there a distinction by Buffet that he was referring to her federal tax burden, and not her combined federal and state burden? Nebraska's and New York (the places I figure she's likely to live/work out of) both seem to have state income tax rates between 6-7%. It's significantly easier to hit the 28% federal tax rate.
Sheesh, the worksheet[1] to compute your tax burden if you make more than $106k is annoying. I was just looking for an algorithm of some sort. From the under $106k table, it looks to be about 5%. That plus NY state taxes seems to put it on par with CA as a whole. That said, San Francisco appears to have an additional 1.5% flat income tax rate, which can raise the tax rate for high earners (well over $200k) in SF to close to 15% for combined state and local taxes.
"Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent. "
Except that it doesn't explain how somebody who makes $60k could be taxed at 30%. That's just not how taxes work. It doesn't work even if he's only talking about marginal tax rates, and that would also mean he's switching from total tax rate for himself to marginal tax rate for his secretary.
So unless his secretary is sending in extra voluntary donations, it's hard to to imagine how both of these things can be true.
He might be including the employer's share of FICA tax.
If you're single and your AGI is $60,000, your taxable income is $49,700 (or lower, if you itemize deductions). You'll pay $8218.75 in Federal income tax, $3081.40 in social security, and $720.65 in Medicare, for a total of $12020.80 (24.2%). If you include the employer share of social security and Medicare, it comes out to $15,822.85 (31.8%).
He probably should have mentioned it if that's what he really did, but those taxes are real. Ask someone who's self-employed.
"Buffett calls for an increase in all types of taxes – income, dividend and capital gains. That would be a nice triple layer of protection against any newcomers, and still preserve all – 100% – of the $47 billion he’s accumulated until now."
If Buffett was really willing to pay more taxes, he could just stop using loopholes to avoid paying hundreds of millions every year. Or stop litigating with the IRS to get to pay less. He doesn't want "the rich" to pay more taxes. He wants other (less) rich people to pay more taxes.
In the United States there are about 500 billionaires. There are also 150 million U.S. gun owners in a declining middle class where dead end temp work is a lifestyle for a large part of the population and basic social well-being and security is an "issue". I can tell you from first hand experience, when you are in that state ... you are not in your right mind. If I was one of those 500 people I would be very paranoid.
My understanding is that there's a few uber-rich that push for reform specifically because of this (or at least they use this argument on their less agreeable brethren). Being rich is only useful if there's enough stability to allow that fortune to be used.
on taxation, I always believe that "you" should make the tax reasonable enough to render its avoidance obsolete. Close all loopholes with flat laws and just force them. On the other hand there will always be some corrupted official to create another loophole in the process...
Unfortunately, this always runs into the problem of the elites influencing politics and policy, so all the loopholes will never be closed and there never will be 100% effective enforcement (as the Panama papers shed some light on).
I bet there were people in the 1850s saying the exact same thing.
They could of done and allowed the banking system to collapse and cost all Americans billions instead of making a profit for the public on the bailout. That said I can see an argument for what they did in Norway where if the government has to bail out a bank, they get to own it.
Warren, shut your hypocrite mouth until you start writing checks to the US Treasury that cover the gap between whatever you're taxed and whatever you think you should be taxed.
Even then, STFU. You have no right to dispose of the lives of others.
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[ 0.37 ms ] story [ 177 ms ] threadPoint is, the money is literally chump change to them.
I've been in finance long enough to believe that this is true.
The problem is that the rich have the ability to take their income in alot of different ways.
Tax income more, they'll take it as dividends.
Tax dividends more, they'll take it as capital gains.
Tax capital gains, they won't realize their capital gains until they can offset them with realized losses or they'll just get bank loans again't their stock holdings.
Tax assets on death and they'll pass them o n in trusts.
Some will move money off shore if they think they can get better returns that way.
The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code.
Who would have thought 25 years ago that companies would buy other companies in different countries, not to acquire their products or markets, but to acquire their headquarters address to lower the tax paid in the US.
Admittedly it is pretty simple example but my point is the loopholes are not on accident, it's by design.
Such people don't have to work in "money", they can pass shares or bonds or IOUs.
Edit: fix stupidity
Bonds have a cash value, tax that.
If they start only using IOU's hit them for unauthorized creation of currency under the National Bank Act of 1863 and the Legal Tender Act of 1862.
The loopholes aren't there by design, but the complications of the taxes are in there by design. We wish to encourage education and business (both education and business expenses are deductable). We want to encourage renewable energy (solar taxes, net metering, etc. etc.). We want to encourage home ownership (mortgage deductible), charitable giving (church donation deductibles, etc. etc.).
Taxes aren't complicated if you just fill out a 1040EZ. Taxes become complicated when you want to make sure you got all of the money back from deductibles and credits.
Buy a laptop for $1,000:
* That comes out of money you've been paid, presumably, so in 43 US states, you've paid income tax already on it, and your company has paid payroll taxes.
* 45 US states charge sales tax, so you pay sales tax.
* If you paid with a credit card, a cut of your transaction goes to the credit card company, who pays taxes on their profits from that transaction.
* The money is transferred to a bank account, and that bank is taxed on the profit that they make from that deposit.
* The laptop company pays taxes on the profits that they make from that laptop (depending on where they're located, but if it was sold in the USA, they pay taxes).
* Any shipping company involved moving that merchandise around paid taxes on the profits they made.
* The company that brought the laptop into the USA pays the import taxes/tariffs associated with it.
Just at a glance, every time something changed hands, it is taxed. And this doesn't get into things like excise tax, which are even more fun.
Gifts are taxed only if they are above $10,000. When you give money to your buddy to help pay for a meal, that isn't taxed (money changed hands, didn't it?).
Furthermore, there are lots of taxes out there that do not involve the movement of money. Property Taxes are when a municipality agent comes to your property, they make up a number that "sounds right", and then start charging you for it.
Furthermore, you aren't taxed when you buy or sell stocks or bonds. (Bernie Sanders wants to change that... cause he doesn't know how bad of an idea that is). You only are taxed on your GAINS: dividends and capital gains.
If you buy a stock at $100, then sell it for $110, you are taxed 15% on $10. Not on the $100 or $110 individual transactions. (In contrast, the Financial Trade tax Bernie proposes would be a tax on both the $100 AND $110 transactions)
He is demonstrating a point here people. "Simple taxes" are unfair. Taxes are complicated because real life is complicated, and we wish to be fair.
Tax 0,1% of net worth of those whose net worth exceeds say $10 million. Such people have to get assessment of their net worth and then pay their tax.
Of course they have incentive on doing slightly funny things with their net worth, but it is difficult to race them to the bottom in view of very large fines for crossing the line.
Of course people will skip citizenship then; but as long as they do business within country it is solvable too.
Nobody in the USA has the balls to propose or implement this.
It does make sense though. Why tax the guy making money? You should tax the guy hoarding it!
Call it all wealth and throw a % on it. Make it progressively increase up and 0% on anything less than $X. We could call it a Robin Hood tax.
This will also have the incentive of causing the wealthy to invest in riskier things. Ex: 5% growth doesn't make sense with a 6% wealth tax.
EDIT: Moved some sentences around.
I've never understood why the capital gains tax rate is lower than the rate for normal income. Capital gains are basically money you earn for having money and not being an idiot with it. It's one of the major ways the rich get even richer just because they are rich and how the wealth gap widens.
From a 10,000 foot view it seems like it should be taxed at a higher rate than normal income, since theoretically the person had to actually work for their normal income which directly helped the economy and the country as a whole.
This is called 'investment'.
It takes a lot of effort and time to be good at it.
Also as long as inflation exists, one will need investments.
This is the Labor Theory of Value in another guise. Efficient allocation of resources is extremely important, and the LToV discounts that to having no value.
Market does assessing net worth pretty good today.
I haven't said a word about making tax code harder. You can remove a LOT of tax code with this change.
You could start added loopholes to your "block loopholes" law, like "If you reside in the property, it's tax free", but then you hit problems like parents given their kids properties as tax shelters, and the like.
IMO, you would need a much higher number. A 0.5% wealth tax AMT would = a 25% tax on a 2% ROI or 8.3% on a 6% ROI.
From an economic standpoint this is actually a good idea. People with lot's of unreolised income are often stuck with unproductive assets because selling them incurs a large tax bill. With this you can sell a reasonable chunk of your assets without incurring extra tax.
If there are unlikely seniors on fixed incomes with houses worth more than $10M, then they may pay this tax with shares in said house.
When their heirs come into possession of that house, they have to buy those shares back. 15 years of tax will be 1,5% market price.
It would either generate additional revenue or have them move to an area with cheaper houses/properties to avoid paying it, which would make space for young professionals who otherwise would not be able to afford it.
I'm also venturing to speculate that a lot of seniors are NIMBYs, facilitating the lack of affordable development and re-zoning, in which case that's another argument to get them the hell out of their expensive suburbia.
Think about what that'll do to your retirement. Presumably you're saving and such, and want to get to a point where you can live comfortably (not extravagantly) when you retire: a trip a couple times a year, the ability to take your grandkids to get ice cream, etc. A tax bill can be devastating to your retirement savings & therefore lifestyle.
Even in the US this is true, except to a less extreme extent. The systems the current seniors have put in place make sure few of the current workers will retire.
So why do they deserve it ? They voted in governments that fucked us, so why wouldn't we get to fuck them ?
Any policy that would cause people to be forced from their homes just because should be viewed as a failure.
I have a really really hard time feeling bad for people who bought homes in the bay area in ~1980. They won the lottery. Their home grew 10% y/y for 30 years outpacing inflation by a significant margin. They got a 30 year tax break while their income likely outpaced inflation as well because they live in an extremely good job market. That house they bought for 100k is now worth 1.7 Million. They can sell the home, move basically anywhere else in the country, and retire on the remaining gain. Yeah, I'm having a hard time feeling too bad for them.
On the other hand, the person who moved to SF in 1980 and decided to rent, I feel bad for them. Unless they found a rent controlled apartment, they've seen their rents grow 10% y/y, and if they found a rent controlled apartment they probably got evicted when the owners of the property sold it, and the new owners decided they wanted to redo the property as condos.
Lets just call it what it is, rent control for rich people. Then maybe we'll talk about it sensibly and realize that it's a horribly thought out plan.
>>On the other hand, the person who moved to SF in 1980 and decided to rent, I feel bad for them.
Instead of punishing people for being successful. The latter people should ponder on their foolishness, instead of blaming other people for being more intelligent.
Last time I check making good decisions about one's future is not a vice.
In real world, you can always bootstrap your way to a decent nest egg, whether its a retirement fund or a home. It takes time, and it takes hard work. But is very possible and a lot of people do it.
If you can't, then evaluate your spending patterns seriously. I haven't met any person yet who didn't have wasteful expenditure that couldn't be eliminated.
More often than not its not the means/resources, its lack of resourcefulness. People in general don't have the motivation to take steps towards solving a difficult problem, and the discipline to suffer through a grind and see it through to the end. This of course is a very different problem, the responsibility of which starts and ends at a individual alone.
People who are poor or improvised deserve to live a life that also allows them to have something enjoyable, including hobbies. It shouldn't beconsidered a lack of discipline that an impoverished person could maybe enjoy their life once in a while. It's depressing how much one can expect a life of misery of they're poor.
No, not really. Especially given housing prices now.
You have now to choose between growing your house value or nurturing your career.
Taxation is (ab)used, IMO, to promote normative ideas far too much. It should simply be a way to pay for government, nothing more, nothing less.
If it could be deployed to promote normative ideas cheaply, and there was general consensus about what norms to promote it'd be different. But there's too much ardent BS from both sides to trust this mechanism - it would be much more honest to withdraw from it.
This is doable, with tools from economics but using norms to derive other norms is a good way to end up with entangled and bizarro systems. Just getting people to agree on Coase's interpretation of externalities seems nearly impossible. We have partial technocracy, with ideological shims rather than stern empirical underpinnings.
Calling the Wobblies the lunatic fringe is accepting propaganda uncritically. The labor movement, and the IWW was a key institution of the labor movement, was radical, but not fringe and has been persistently defamed for decades.
> Taxation is (ab)used, IMO, to promote normative ideas far too much. It should simply be a way to pay for government, nothing more, nothing less.
What is the role of government? Everything the government does is normative.
> This is doable, with tools from economics but using norms to derive other norms is a good way to end up with entangled and bizarro systems. Just getting people to agree on Coase's interpretation of externalities seems nearly impossible. We have partial technocracy, with ideological shims rather than stern empirical underpinnings.
You are being far too optimistic believing there could be a technocracy without ideology. That kind of thinking only can give you a blind spot for your own ideology. Technocracy these days usually means the kind promulgated by neoliberalism, but it has also been pushed as part of authoritarian command economies like the USSR. What exactly is a "full" technocracy supposed to be?
> Just getting people to agree on Coase's interpretation of externalities seems nearly impossible.
And irrelevant. Coase theorem only applies when transaction costs are minimal. They are not minimal in real life. They can't be. Coase theorem theoretically nice and practically useless. Coase's most substantial contribution to economic theory is how people organize in the presence of transaction costs, not how nice everything would be without them.
Alleged "Soviet" technocracy just wasn't - it subsumed all science to the One True Theory which was Communism. Indeed, it's the poster child for what I'd be against. I mean Lamarckianism? It has to be real science.
The Coase theorem explicitly excludes consideration of transaction costs, in the same way constants get dropped in differential equations.
But my native tendency is to underplay externalities anyway, because it's too hard to get intersubjective agreement on them. This goes to this peculiar property of norms to get weird when attempts to stack them on top of each other occurs. How was it that "state's rights" led to lynchings anyway? Because they linked "Southern Honor" and States Rights in this incoherent manner to produce Jim Crow. Sixth-graders - most of them - could argue that away.
Finally, what is the role of government? To enforce and modify law. The minimal role is to enforce land claims, prosecute criminal acts and enforce contracts. Actions of government should not create norms. Anything you can manage beyond that should be a source of skepticism.
2) Factors other than the tax system. Correlation != causation, IOW. The U.S. had (something approximating) the only standing industrial infrastructure in the world post-WWII. It's also worth noting that the Kennedy tax cuts probably released a lot of pent-up economic energy. Similar tax cuts under different circumstances may not have the same effect - there had been widespread privaiton in the US from 1929 until the '50s, and this sort of acted as a "second stage" booster.
3) A general cultural civic-mindedness. I recently listened to a presentation of Devon Energy's CEO, and his father started a fund in energy and wanted it structred as a registered security , one of the first , and was told "you don't need to do that" by the SEC, but he persisted because he felt that was better.
He then contrasted that now with people spending lots of money to avoid SEC regulation. That highlights the level of culture shift since then.
https://research.stlouisfed.org/fred2/series/FYFRGDA188S
The other problem with higher tax rates on investment is one winds up with less money to invest. There's a non-trivial economic cost to that as well.
Not all bridges and roads are equally valuable. And in some areas, the dominant method of financing new roads is through tolls. I once estimated the number of man-years per day lost to congestion on I75 in Dallas around 1985 . It was quite the figure.
The rich will always try to dodge taxes, but we can make it harder, say for example by spreading it out over different forms of income and consumption.
We should also be looking at the international stage to diminish the value of tax havens, offshore companies etc. I think many countries are beginning to realise that ever lower taxation rates are a race to the bottom.
If we didn't have that, taxation rates would be a race to the top.
I think it's good that countries compete on things like tax rates and good governance. No person or company should be beholden to any one government.
The hard part is figuring out how to calculate land values. The good news is that we can find an algorithm to agree on and then put it in force, avoiding all the jiggery-pokery that goes on with taxes and accounting regulations.
Worth reading: http://kaalvtn.blogspot.co.uk/2013/01/r-farmers-will-all-go-...
This is refuted by the existence of tax free municipal bonds. Tax rates most definitely affect investment choices and strategies.
It's really a question of political will.
Just think about the amount of resources the US spends on the "war on terror" or the "war on drugs" compared to the "war on tax evasion."
If the US gov wanted to reform the tax code and enforce everyone paying their fair share, they most certainly could.
The real issue, in my opinion, is that certain people have disproportionate influence in the legislative and rulemaking process, alas, we have the system we have.
Not sure if you're trying to be sarcastic but many consider the "war on terror" and the "war on drugs" complete failures and a poor allocation of resources.
I'm just saying that the US gov has tremendous financial resources. Take a small drop ($10B) of those misallocated resources and you can triple the IRS' annual enforcement budget.
I was curious so I looked it up.
2016 IRS budget: $10.6 billion [0]
2015 DEA budget: $2.0 billion [1]
[0] http://thehill.com/policy/finance/263767-irs-scores-year-end... [1] https://www.justice.gov/sites/default/files/jmd/legacy/2014/...
What if this is the entire tax code:
All US citizens must pay a tax of 40% of all the money they receive from any other entity for any reason.
I haven't thought through the wording completely, but if we replace the convoluted tax code with a MUCH much simpler one, lots of these problems would go away.
*Progressive as long as you ignore the primary sources of income for the wealthy.
There's nothing new about offshore tax havens - cf Switzerland.
http://www.forbes.com/sites/paulroderickgregory/2012/01/25/w...
Edit: maybe that source isn't as good as I remember, but other sources seem suspicious over the factual accuracy of Buffet's claims.
http://www.politifact.com/truth-o-meter/article/2011/sep/21/...
http://www.factcheck.org/2011/10/shes-no-buffetts-secretary/
Is it me, or does that not make any sense? The average tax payer of that percentage makes that amount, therefore she must make that amount? Am I supposed to believe this man doesn't know how averages work? Because the alternative is he's being very disingenuous.
Given that you'd only pay 35% tax on the money earned above $379,151, so it'd take a pretty darned high income to bring your total tax rate up to 34%.
1: https://www.tax.ny.gov/pdf/current_forms/it/it201i_nys_tax_c...
"Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent. "
So unless his secretary is sending in extra voluntary donations, it's hard to to imagine how both of these things can be true.
If you're single and your AGI is $60,000, your taxable income is $49,700 (or lower, if you itemize deductions). You'll pay $8218.75 in Federal income tax, $3081.40 in social security, and $720.65 in Medicare, for a total of $12020.80 (24.2%). If you include the employer share of social security and Medicare, it comes out to $15,822.85 (31.8%).
He probably should have mentioned it if that's what he really did, but those taxes are real. Ask someone who's self-employed.
I took home 66% of my gross income.
http://techcrunch.com/2011/08/15/screw-the-rich-heres-how/
"Buffett calls for an increase in all types of taxes – income, dividend and capital gains. That would be a nice triple layer of protection against any newcomers, and still preserve all – 100% – of the $47 billion he’s accumulated until now."
If Buffett was really willing to pay more taxes, he could just stop using loopholes to avoid paying hundreds of millions every year. Or stop litigating with the IRS to get to pay less. He doesn't want "the rich" to pay more taxes. He wants other (less) rich people to pay more taxes.
Rich people are not comfortable with the fact that it should easy for others to get rich, how useful would their current position be, if it were?
I bet there were people in the 1850s saying the exact same thing.
Even then, STFU. You have no right to dispose of the lives of others.