
The Golden Age of Hollywood Tax Avoidance - graeme
https://www.bloomberg.com/opinion/articles/2019-01-29/hollywood-stars-didn-t-pay-90-percent-tax-they-created-loopholes
======
WalterBright
Left unsaid by the article is that the tax shelters the wealthy invested their
money in, were less productive investments. When Reagan lowered the tax rates
in exchange for eliminating the tax shelters, the wealthy then moved their
investments to more economically productive endeavors.

This makes for a more productive economy overall.

I.e. the higher the tax rates, the more contortions people will engage in to
avoid those taxes, and economic prosperity will correspondingly suffer.

~~~
rbg246
This argument relies on that it is impossible to stop rich people from
successfully evading tax.

I find it hard to believe in the age of tracking that we live in now that
banks and consumer transactions that it wouldn't be hard to implement proper
tax evasion tracking across borders. This is purely an issue of there being no
political will to do this.

It would be even easier to just cut off the tax havens from the global economy
- make it illegal for banks to conduct transactions with those banks /
branches located in those havens, strand those assets from the global economy
destroying the value of those bank accounts.

~~~
e3b0c
Imagine that we are designing an MMORPG world. We know that individual player
would seek to maximize their "gains" and to advance their ranking in the game
as a part of the gaming experience. Meanwhile, as the game operator, we don't
want the inequality to be too extreme between the top players and the casual
players so that no hopes for the newcomers to advance their ranking, which
hurts their gaming experience and they would quit for other games. But is it a
_wise_ idea to brute-forcibly transfer the 'wealth' of the most hardcore,
talented, or just luckiest players to the others to make the game more
enjoyable for the bottom players?

If we were thinking about it in a way that "you're not one of the players, but
the designer of the game," and you want the game to be sustainable and
reputable, I believe the answer would not just that simple.

~~~
JauntyHatAngle
I'm not sure that makes for a good analogy.

That is a game, I enjoy flaunting wealth over people and using my ungodly
strong power I've worked hard for to stomp on people in a game.

But I don't want to live on a monopoly board, or squash people into oblivion
in real life. Games are quite often about direct competition.

While there is some argument for making sure not to kill the motivation of
hard workers due to equalising society too far, I don't think the US is close
to that level, and the scale is far, far in the other direction.

Also, forcibly taking isn't correct, it's a progressive tax on income not a
raid.

I don't think this analogy works for a meaningful conversation.

~~~
e3b0c
My point is not about how an individual player gets their enjoyment from the
game. Some players would want to beat every other to the death, even in the
real world.

My point is individual player tends to complain how the game sucks from _his_
standpoint without second-thought about the consequences to others, to the
system, or even to themselves in the long run. I am more concerned about the
non-leaner responses from changing the incentive structure. For instance, what
would it turn out if, let's say, a gaming event where 90% of your income (EXP,
game money, skill points, etc.) would be redistributed to others in the period
of that event? Would anyone get excited about it? or people would say, "we
gonna work on other things and wait for the freeriding," which is the most
rational, economical decision for personal resource management. I would expect
that every player of the game would spend more time with their family and we
see drastically decreased MAU of the game as a result.

~~~
JauntyHatAngle
Ah yes, I misunderstood your point.

Perhaps because I tend to think of policy in terms of overall implication
rather than from my own standpoint.

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pmoriarty
It's probably unthinkable for a lot of people these days, but the US once had
an income tax for those in the highest tax bracket of over 90%.

~~~
agent008t
Given that we are on HN, it is probably safe to assume most people here work
in tech, earning 2x-3x the median salary or more. Would you actually want to
be taxed at 90%?

~~~
AlexTWithBeard
I don't mind paying 90% on a top portion of my income.

But before we start collecting more money, I'd like to see existing money used
wisely.

New York City spends about 30k per homeless. And it's still not possible to
walk a couple of blocks in Midtown without stumbling upon a homeless person
sleeping rough.

New York subway has a budget of 8+ billion. London tube is about 2 billion.

I can keep going, but from the above I'm sure if we tax everyone at 101% the
government will still manage to run a deficit...

~~~
agent008t
Given that not a single person here has protested against the idea of a 90%
marginal tax rate, but some have expressed concerns about the funds being
spent inefficiently, why not impose a voluntary tax on ourselves and agree to
donate to charity 90% of earnings over a certain amount?

Surely there are some very good charities that do work in the area you are
most interested in - e.g. homelessness, educational scholarships, poverty in
general?

The added bonus is that a society where people voluntarily donate 90% to
charity is a much better society than the one where people get taxed. It means
a lot more when something is done voluntarily, and it changes the perceptions
on the side of the people receiving the help.

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CPLX
So what. There’s tax avoidance and loopholes now too.

Whatever. The premise still holds fine, we could drastically increase marginal
tax rates at the top end and the world wouldn’t blow up.

And to the extent we used that money to make the social contract more stable
via health care and education or similar, there would almost certainly be net
gains to national efficiency and income.

~~~
opo
The actual tax burden has basically gone opposite of what you imply in your
many messages. The top 10% paid 49% of taxes in 1980 and the bottom 50% paid
7% of income taxes. In 2015, the top 10% paid paid 70% of incomes taxes and
the bottom 50% paid 3%. ([http://www.ntu.org/foundation/page/who-pays-income-
taxes](http://www.ntu.org/foundation/page/who-pays-income-taxes)) The "top
marginal rate" means very little by itself. What matters is the effective rate
which takes into account the credits/deductions that are allowed, the other
lower marginal tax rates, etc.

Confiscatory high tax rates just result in politically connected groups
getting tax breaks, lots of money spent in less productive ways to avoid the
high rates and if those can't be done you get dead weight losses from economic
activity that isn't done. There is a reason countries moved away from
confiscatory high rates.

~~~
bitcoinbutter
Comparing what the top 10% paid vs bottom 50% is silly. The issue at hand is
wealth inequality. Clearly the top earners are paying much more in tax from a
clear dollar to dollar perspective. They own all the wealth.

Taxes are one of the only ways to curb wealth inequality within a capitalist
system. Any other ideas? The problem is that wealthy people can afford to set
up multinational tax avoidance schemes to avoid actually paying the amount
they should be paying.

One solution is to just jack up the rates. If 90% marginal rate on paper only
actually results in 45% being collected, then that's still better than 39%
marginal rate on paper vs. 15-20% truly collected.

Taxes and public spending are obviously not perfect, there are plenty of
inefficiencies throughout. Corruption must be targeted rigorously, otherwise
inequality will actually increase. But there needs to be a constant effort to
reduce wealth centralization.

~~~
opo
>...Comparing what the top 10% paid vs bottom 50% is silly.

That isn't what was done. The comparison is over time. The claim is often made
that the rich paid far more of a share of the taxes until Reagan lowered the
rates. The data shows otherwise.

>...Clearly the top earners are paying much more in tax from a clear dollar to
dollar perspective. They own all the wealth.

That is a somewhat simplistic and misleading way of describing the income tax
system. Income is not the same as wealth, etc. but also the US has a more
progressive tax system than just about any of the OECD countries. The top 10%
in the US make about 33% of the market income and pay 45% of the income taxes:

[https://taxfoundation.org/news-obama-oecd-says-united-
states...](https://taxfoundation.org/news-obama-oecd-says-united-states-has-
most-progressive-tax-system/)

>...One solution is to just jack up the rates. If 90% marginal rate on paper
only actually results in 45% being collected, then that's still better than
39% marginal rate on paper vs. 15-20% truly collected.

There are reasons NO countries institute such policies for long. It isn't
because high rates haven't been tried, it is because it ends up hurting the
country. You need only look at France's experiment with a 75% marginal rate
and a wealth tax in 2012 and was dropped in 2015.

>...French economist Eric Pichet in a recent academic paper has found evidence
of capital flight as a consequence of the French wealth tax, namely, that it
has cut French GDP growth by 0.2% per year.

[https://www.forbes.com/sites/jonhartley/2015/02/02/frances-7...](https://www.forbes.com/sites/jonhartley/2015/02/02/frances-75-supertax-
failure-a-blow-to-pikettys-economics/#153b6a375df2)

>...But there needs to be a constant effort to reduce wealth centralization.

This probably isn't the only criteria that people should be concerned about.
If the top 50 tech companies in the US had been started in Europe instead of
the US, that would have measurably lowered the wealth inequality in the US but
most people would say the US is better off being a tech leader.

~~~
undersuit
> You need only look at France's experiment with a 75% marginal rate and a
> wealth tax in 2012 and was dropped in 2015.

Comparing France to the US in this situation is wrong. If people making more
than $10 million a year or with a wealth of more than $50 million are going to
leave the United States we have ways to handle this, namely the Expatriation
Tax, which France doesn't have. You need to compare France to an equal
situation like the US State of New Jersey applying a higher income tax and
losing their state citizens to fellow states in the collective federal
territory of the United States.

~~~
opo
>...If people making more than $10 million a year or with a wealth of more
than $50 million are going to leave the United States we have ways to handle
this, namely the Expatriation Tax, which France doesn't have.

I wouldn’t necessarily expect many people giving up citizenship, but I would
expect (as the article talks about) politically connected groups getting tax
breaks. I would also expect lots of money spent in less productive ways to
avoid the high rates and if people can’t avoid the tax, there will be dead
weight losses from economic activity that isn't done.

>...You need to compare France to an equal situation like the US State of New
Jersey applying a higher income tax and losing their state citizens to fellow
states in the collective federal territory of the United States.

No state has ever tried such a bad policy, but if they did, I would imagine
moving would be on the mind of everyone who might be affected by wealth taxes
and 75% rates.

~~~
undersuit
No state but New Jersey. [https://www.wsj.com/articles/new-jerseys-tax-gift-
to-florida...](https://www.wsj.com/articles/new-jerseys-tax-gift-to-
florida-1530481356)

Why are you so biased? High rates of taxation is not bad policy. Bad policy is
far more nuanced than that.

~~~
opo
>No state but New Jersey. [https://www.wsj.com/articles/new-jerseys-tax-gift-
to-florida...](https://www.wsj.com/articles/new-jerseys-tax-gift-to-
florida..).

Most people would agree that raising the max tax rate from 8.97% to 10.75%, is
not anything like raising the max tax rate from 45% to 75% - never mind that
France also instituted a wealth tax.

>...Why are you so biased? High rates of taxation is not bad policy.

All I’ve done is give evidence that countries have learned that very high
confiscatory tax rates are counterproductive. (Much as the original article
about Hollywood tax avoidance discusses.) You haven’t said what you mean by
“high rates of taxation” or give evidence why you think they are good - it
isn’t clear why you are accusing anyone else of being biased.

------
ableal
In case someone else goes after "[William] Holden insisted that Columbia pay
him no more than $50,000 a year", there's a concise biography here:
[https://www.britannica.com/biography/William-
Holden](https://www.britannica.com/biography/William-Holden)

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thefourthchime
Ah tax avoidance. Richer you are, the better you get at it.

~~~
gadders
The richer you are, the more you stand to gain from it, so the more worthwhile
it is to do. And the more worthwhile to get expert advice.

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crb002
Curious. Regan got burned as an actor with the obscene rates. Never viewed him
as having a personal beef before, now it makes sense.

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peteretep
This is not a strong article. Consider:

> the top 0.01 percent in the 1950s paid not 90 percent but closer to 45
> percent of their income in taxes

I suspect 45% is a solid multiple of what rich people pay today

