
When the Rich Said No to Getting Richer - tysone
https://www.nytimes.com/2017/09/05/opinion/rich-getting-richer-taxes.html
======
chollida1
I wrote this a few years ago in response to a similar piece:

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.

I don't think anything has changed.

~~~
tici_88
"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."

I disagree. I simple flat tax rate where everything is taxed at a single rate
would close every single one of the loopholes above, if only by making it
moot.

The fact that the rich can maneuver themselves into a much lower tax rate than
the average person presents a significant, unfair advantage in my opinion. A
flat tax rate would make things much more equitable. Plus it would asimplify
the tax code tremendously.

~~~
4c2383f5c88e911
A flat tax rate is not a good idea whatsoever; if you tax e.g. 20% of earnings
,do you believe people who earn $30k a year are impacted the same way as
people earning $200k or more? Sure, those who earn more pay more, but it hits
them in "extra" earnings, while the poor are taxed on money they need to
survive.

A (very) progressive tax rate with a few ways of reducing the tax based on
social (e.g. number of children, etc) criteria would probably work better
here.

~~~
0xcoffee
How about a flat tax rate, but have essential goods be tax free?

~~~
sp332
That seems like an income tax mixed with a sales tax credit? It sounds awkward
because income tax comes out of your paycheck but the sales tax is applied at
the point of sale. You'd have income tax withheld, buy food with the money you
have left over, get credited for the essential goods you bought, then pay
rent, then get a credit for that...

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quickConclusion
"The theory behind all those high-end tax cuts [...] was that it would unleash
entrepreneurial energy [...] The first half of that theory may well have come
true. Many of the world’s most successful companies are American — not only
Amazon, Apple, Facebook and Google, but also Exxon Mobil, Walmart, Johnson &
Johnson and JPMorgan Chase."

The article fails to mention that even when the tax code was 90% on the
highest earners, most of the successful companies were American, including
Exxon Mobil, GM, Ford, DuPont, AT&T...

Anecdotally, I don't think I have ever met anyone starting a business thinking
"If I don't make more than 2 million a year for myself, I won't have a
successful business." So increasing tax rate beyond a couple of millions a
year, or even before, seems a no-brainer to me, at least until everybody gets
healthcare and free education.

~~~
sol_remmy
> So increasing tax rate beyond a couple of millions a year, or even before,
> seems a no-brainer to me, at least until everybody gets healthcare and free
> education.

How much money do you think that will take? I'm willing to bet your estimate
is too low by a factor of 100. I've known multiple family friends who have
easily used $500k+ a piece in government healthcare.

~~~
quickConclusion
>How much money do you think that will take?

Most developed countries pay $3,000 to $4,000 per capita, according to
Wikipedia. US pays about $7,400 per capita. So that would be the costs I
guess. Beware there are more "capita" than taxpayers, and that all taxes are
not paid through income taxes.

Hopefully we can find ideas from other countries to pay less than current
prices.

[https://en.wikipedia.org/wiki/Health_system#International_co...](https://en.wikipedia.org/wiki/Health_system#International_comparisons)

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bko
> The theory behind all those high-end tax cuts — a theory that I once found
> persuasive, I admit — was that it would unleash entrepreneurial energy: The
> lure of great wealth would inspire business leaders to work harder and
> smarter, and the economy would flourish.

That's one reason I suppose but it's important to note that despite large
differences in top marginal tax rates, the percentage of tax revenue as a
percentage of GDP has stayed remarkably stable since the 40s. So perhaps
something else is going on.

[0]
[https://upload.wikimedia.org/wikipedia/commons/7/75/U.S._Fed...](https://upload.wikimedia.org/wikipedia/commons/7/75/U.S._Federal_Tax_Receipts_as_a_Percentage_of_GDP_1945%E2%80%932015.jpg)

~~~
sddfd
This is extremely interesting and deserves more attention.

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11thEarlOfMar
As CEO of GE, Jeffrey Immelt earned $17,744,236 last year.

GE has 330,000 employees.

If Immelt decided to take $0 and share his income equally with the remaining
GE employees, he'd increase each worker's income by $53.77 per year. That's
not going to do much to close either the wealth or income gaps.

Part of what we are seeing is simply that corporations are getting so much
larger than they've ever been in history. Therefore, the pay granted to the
CEO is for he or she to oversee larger and larger groups of people.

~~~
harryh
GE employed 304,000 people in 1955.

[http://247wallst.com/investing/2010/09/21/americas-
biggest-c...](http://247wallst.com/investing/2010/09/21/americas-biggest-
companies-then-and-now-1955-to-2010/2/)

~~~
11thEarlOfMar
Walmart employs 2,200,000 today.

McMillon's total pay is $19,800,000.

Per employee, that's $9.

~~~
harryh
I agree with your top level point about CEO pay not being significant compared
to corporate budgets. I'm just saying that companies that employ a lot of
people aren't exactly a new phenomenon.

~~~
11thEarlOfMar
What is material to me is the notion that somehow the wealthy are responsible
for the plight of the middle and lower class. In the US, the wealth that some
enjoy is a side-effect of the economy's behavior. The economy behaves in the
way it was designed* (not saying the designs are sound in all respects, but it
is intentionally designed and its behavior reflects that design).

I'm not convinced that the income/wealth gap itself is 'the problem'.
Therefore, taxing the wealthy at a greater level will not be 'the fix'.

What we want is for lower and middle income families to have more disposable
income, less financial stress, and overall better quality of life. I believe
that the most potent knob to affect that is the number of jobs available.
Increasing the number of jobs increases the demand for workers. Increasing
demand for workers increases the average pay. We can talk about the quality of
the jobs as well, but I believe the primary influence from a macro-economic
view is the number of jobs.

US unemployment is at a 10 year low[0]. So we should see pay (and inflation)
creeping up over the next few years, barring some unforeseen economic
disaster, and the lower and middle class will benefit.

[0]
[https://data.bls.gov/timeseries/LNS14000000](https://data.bls.gov/timeseries/LNS14000000)

* One illustration that keeps coming to mind: Two investors invest in the same instrument. That instrument returns 10% per year. They hold the investment for 5 years.

Investor A invests $10,000 Investor B invests $100,000.

At time 0 the 'wealth gap' is $90,000. At 5 years, A's investment is worth
$16,100 and B's is worth $161,000. The wealth gap has grown to $145,000. It
seems to me that people are making the observation that this gap is
increasing, and it is, but in reality, it's a natural manifestation of
capitalist economies. We've been in a bull market for 7 years, it's borderline
unprecedented, and one observable effect is that the gap in absolute $ between
rich and poor is increasing.

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aczerepinski
The business leaders who really matter are motivated by their passion and
curiosity, shaping their legacy, changing the world, etc. I don't think a
personal tax rate of 90% would stop the next Steve Jobs from doing important
work.

If we're talking about a class of people who don't enjoy their work and won't
keep at it without outsized financial incentives, I really don't think we're
describing visionaries that we depend on for realizing our potential as a
species. I'm 100% ok if hedge fund managers who underperform the market anyway
decide to close up shop and sip pina coladas all day.

~~~
TACIXAT
I dislike the myth that business leaders and entrepreneurs who are motivated
by money do not matter. There are plenty of income-motivated people who are
building meaningful products.

~~~
TheAdamAndChe
Sure, but income and wealth inequality is affecting our sociopolitical
stability. Should we really prioritize their success over the lower and middle
classes? How much higher should executive pay be compared to the workers? Why
should executives get tens of millions per year while the laborers make
$20-40k/yr?

~~~
TACIXAT
Not totally sure what you're responding to. I was just commenting on this
statement from the parent -

>The business leaders who really matter are motivated by their passion and
curiosity, shaping their legacy, changing the world, etc.

I agree though. Most laborers work 10x harder than I do. I'm just rewarded
from having some obscure knowledge. I do not necessarily agree that we should
be going after individuals though. I think corporations are the correct
target.

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chimeracoder
Like most treatments of this topic, when comparing tax rates from the 1950s
and 1960s to today, it fails to note that very few people actually _paid_ this
much higher marginal rates. Instead, the high taxation on the upper income
brackets encouraged companies to offer perks and benefits that would not be
classified as income, and the wealthy would take advantage of these instead.

Furthermore, yes, tax rates are lower today _if_ you exclude Social Security
and OASDI[0], but tax revenue as a percentage of national income is _higher_.
That's a sign that the higher tax rates did actually suppress economic
activity, and that both the government and its citizens are actually better
off with tax rates closer to what they are today than what they were 50-70
years ago.

[0] SS/OASDI tax rates have increased sevenfold since they were introduced in
the late 1930s

~~~
JumpCrisscross
> _the high taxation on the upper income brackets encouraged companies to
> offer perks and benefits that would not be classified as income, and the
> wealthy would take advantage of these instead_

An interesting anecdote on this is in the origin of American private health
insurance. It came about from war-era wage freezes. Companies wanted to
differentiate, were barred from doing so with price, and so shifted to
benefits [1].

[1]
[https://en.wikipedia.org/wiki/Health_insurance_in_the_United...](https://en.wikipedia.org/wiki/Health_insurance_in_the_United_States#History)

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mywacaday
I wonder how many more jobs would actually be created if CEOs pay was funneled
into R&D or expansion or how many job cuts would have been avoided through the
years

~~~
harryh
In 2016 GE (for example) spent 5.5 billion on R&D. Their CEO Jeffrey Immelt
made about 20 million.

I don't think a 0.363% increase in the R&D budget would make much of a
difference.

~~~
waisbrot
So, if I could hire 20 researchers and spend $1m/year each on their salaries
and equipment... your guess is that I would accomplish nothing?

~~~
topgunsarg
If you couldn't have managed that with $5.5Bn then why does an extra $20M
help?

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aaronchall
I don't understand the obsession with financially successful people.

If you have ambitions for financial success, learn a skill that is in high
demand or find another way to create value for society.

If you have no ambitions for financial success, you have no right to go around
complaining about the success of others.

Stop fetishizing successful people who deprecate their success. Some, like
Warren Buffet, are disingenuous and fairly transparent panderers. Others, like
George Romney here, may well be sincere. But they achieved success by creating
value and making careful and studied decisions about the allocation of
capital.

> Quite often in the pursuit of more wealth, they trample on the little guys,
> leaving them to struggle more.

Show evidence.

> Or through fraud, graft, and knowing who to bribe (see "campaign finance").

Show evidence. Not baseless allegations.

~~~
jimbokun
"But they achieved success by creating value and making careful and studied
decisions about the allocation of capital."

Or through fraud, graft, and knowing who to bribe (see "campaign finance").

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slowmovintarget
The damning phrase in the article is "which has left less money for everyone
else."

The economy is not a zero sum game.

~~~
waisbrot
It's not zero-sum, but it's also not the case that your money and mine are
unrelated.

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makecheck
When people talk about complex tax codes and the “end of the quarter”, they
don’t really consider how these things have evolved into farms of nearly-
enslaved workers (accountants). Such horrendous workplaces _do_ exist inside
big companies: the job is to figure out how to pay the least tax, and time is
of the essence. I knew someone who worked as such a finance person, at a
contracting company for the oil industry, 7 days a week from 6 AM to midnight.
Oh, he had a day “off” every few months but that was only because the quarter
had just ended and literally the next day they started a new march of
insanity, all for the numbers. Dozens of workers, hundreds; they all swore at
each other, it was a disaster of over-stress and anger, and it was actually
more common to find divorced people there than not.

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program_whiz
Guess I'm the only one that thinks you should just keep your money if you earn
it? The article begins by talking about Romney's character and how he didn't
try to take every possible dollar, then tries to attribute this to progressive
tax codes. Maybe the "problems" we have are due to the erosion of basic
virtues, and trying to make an airtight "system" where no one trusts anyone
and we assume total greed and power hunger by every citizen is doomed to
failure. Also there's little evidence that charging higher taxes is helping
anyone (note highest spending by government in history, wages and income
stagnant) -- guess its a given in this forum that higher taxes are assumed to
be good...

~~~
acuozzo
> keep your money if you earn it

Earned? My ass.

A fortune amassed from profits skimmed off of HFT isn't earned and produces
nothing of value.

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fulminatorz68
Hard to make $$ in a country that worships established wealth without getting
into the old boys club. You can make great money with a good idea but working
two jobs for 170K gets old.

~~~
JustSomeNobody
Probably not as old as working 2 jobs for 17K. Perspective.

~~~
fulminatorz68
I'd suggest the same (perspective) to you. I understand fully what you are
trying to say but this world is not about pity and never has been. It is about
making the best of things and helping who you can as you can while remaining
sane.

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qaq
I think the thing we keep forgetting is if "everyone" makes more the only
thing that is going to change is housing and food prices and you will gain 0.

~~~
onion2k
If everyone makes $10,000 a year more then rich people will barely notice.
Poor people would be able to afford to heat their homes and buy insurance. I
think everyone who's poor would consider that much a gain.

~~~
conductr
So the energy and insurance tycoons are the big winners?

Also - What makes you think poor people will make such practical spending
decisions? I hardly believe they will buy insurance. More likely to buy nicer
food/dining out/entertainment and nicer cars/clothes/signals of wealth. Again,
this materializes mostly as profit in companies owned by the rich.

------
joedevon
I was surprised when I clicked the link that I saw text there. Expected an
empty page. :p

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common_
There is only one real tax on the wealthy: a revolution in which all property
rights are reset. Everything else is a war between the wealthy themselves to
redistribute things in their favor.

~~~
sol_remmy
And there you sit with probably $50k-100k in assets while the average African
has less than one thousand dollars.

If you truly wanted the "revolution" to be fair, then all the money would go
to third world countries and you'd be left with $3000. But nope, you actually
want to be allowed to steal from the rich so you can live an American middle
class life without having to work.

~~~
waisbrot
The parent post didn't say "and I'll benefit from this". Why can't they have
made an honest post -- a truly fair economy would start with most citizens of
first-world countries losing everything we've got.

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sharemywin
I'm not sure why so many people look up to the rich. They fail at kinder-
garden. I have to work very hard to help my 4 year old to understand how to
share.

If your using money to keep score your probably using the wrong system to keep
score.

I've been using weight watchers lately and keep score with the right system
helps a lot.

~~~
neonhomer
> If your using money to keep score your probably using the wrong system to
> keep score.

I think another side of the problem is 99% of people who are not rich are
using the same score and since they are "losing" they hate the rich. If we all
stop using money as the score we'd all be better off.

~~~
sordidasset
What quantifiable system of keeping score is as universally applicaple as
money? Money is an awful way to keep score on a global scale, but it seems to
be the best we have.

~~~
wu-ikkyu
What does the score of money measure?

~~~
sharemywin
I think that's the point. It's a great way to trade trinkets. It's an ok
system for other things. It's horrible for tracking role models and life work.
Taxes are a "quick fix"

