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The Golden Age of Hollywood Tax Avoidance (bloomberg.com)
75 points by graeme 17 days ago | hide | past | web | favorite | 171 comments



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.


Except that it stopped working that way about 30 years ago.

People will not move their money back if you halve the taxes on them because zero will always be 100% lower than whatever tax is currently in the US. Some poor country will always suck that up for a one time charge in order to get foreign money. The money which has left the US will never return, because it will never make financial sense.

These aren't complicated transactions anymore, your investment firm will do it for you as a service. They've already found all the legal "loopholes" and have back ups in place for when they're shut down, because that's another way to increase their profits. The simplistic "if you cut taxes it will happen less" concept just breaks when it's effortless, cheap, and will be more profitable the moment you have over X dollars (where X is constantly going down).


It's a balance between the tax rate and the return of investment that can be gained from moving the money back.

If the profits from investments available in some poor country is less than the profits in taking the money back - taxes then it does make sense to bring it back.


Exactly right.

How many billion dollars is Apple keeping out of the US for the sole reason of avoiding paying tax on it?


> How many billion dollars is Apple keeping out of the US for the sole reason of avoiding paying tax on it?

There is no point in paying tax on offshore money if they will immediately then spend it outside the US. There is no benefit to bringing the money onshore so why on earth would they do so?


Right.

Some people seem to assume that it's natural to build a phone in China, sell it in Italy, and then move the profit to the US and pay tax there. That assumption isn't good. There has to be a point to moving the money to the US.


The problem is that they move the money to the lowest taxing area. They redirect profits earned in the US through various carefully constructed loopholes (so it's not illegal, it's just questionably immoral) so that it looks as if it's earned in the Canary Islands or something totally bullshit like that.

It's not an exclusively US problem, it's a problem for any country in which Apple sells goods and services that has higher taxation rates than the lowest in the world.

I'm picking on Apple singularly here, but they're just a high-profile example of the many globe-spanning companies performing these tax 'minimization' (let's not get all slandery) acrobatics.

Designed in California. (4% tax paid in Ireland)


I don't quite understand what you're getting at here.

There are several kinds of taxes. Some are due at the time of something is sold, typically called VAT. Are you suggesting that Apple pays 4% tax in Ireland instead of paying the usual US VAT? I think not.

Some taxes are due later, when a company decides to have a profit. That can be the same year, but it doesn't have to be. It's entirely legal to save some or all of this year's income to spend on a planned investment in three years' time. If you want to build a new factory, or acquire some startups, you can put aside money from this years's income, and that happens with before-tax money. (The general principle is that if the owners are willing to defer their dividends, then the taxman defers the tax.) I know Apple has been doing that, keeping enormous sum of money in case it wants to acquire companies.

Are you suggesting that US companies shouldn't be permitted to save money for future investments? Or are you suggesting that foreign daughters of US holding companies shouldn't be permitted to save money for future investments? Or that the sums they save should have some sort of limit, e.g. "no more than x months' turnover"?


>That assumption isn't good. There has to be a point to moving the money to the US.

The point is, you are a US company, benefiting from US infrastructure, US diplomacy, US market, US government spending, even subsidies and tax cut rates, and so on -- so bring the money there -- but that's too much to consider for today's elites... The fact that you already took the jobs out (making the phone in China) just increased your margins on those revenues...

So, the point is, I dunno, corporate social responsibility?


Well, if corporate social responsibility is your central concern, why aren't you asking Apple to pay tax where the jobs are? The factories are in China, the workers are there, most of the parts are designed and made there, right?


>why aren't you asking Apple to pay tax where the jobs are?

Because it's an American company?

Similarly, I'm all for Huawei and Lenovo paying taxes in China.


That's a kind of "corporate social responsibility" that excludes the underpaid schmucks who work in the factories, and the cities they live in. I find that revolting.


>I find that revolting

That's because you have a job as it currently stands. If your job (and especially your whole sector) had gone abroad, you'd find the outsourcing PLUS tax evasion revolting. And as you'd be scrapping to pay the rent you'd wouldn't find particularly comforting that some consumer goods would be cheaper make this way...

That said, who said anything about the people "who work in the factories"? Strawman much?

The tax Apple saves from not paying it to the US isn't going to those "schmucks" (sic), so whether those people should be paid more (which I'm all for) is orthogonal to whether Apple should pay more taxes in the US instead of looking for legal loopholes

Let's see companies keep their "corporate social responsibility" to their own societies and countries first -- which they don't --, and we can talk about them "improving the world" at large afterwards...


I don't think anyone said that China can't tax the US company Apple for making products in China.


Where do you think those dollars are kept exactly? In safe boxes somewhere outside the US?


In company accounts in Ireland or the Netherlands, wherever the double Dutch Irish sandwich trail ends.

I'm not sure what your point is in asking that question.

Primarily, the answer is "out of reach of the US Government".


But invested in the US economy, that's the point.


It ain't


Even if Apple was just putting several billion dollars into a bank account somewhere (and that’s not what they are doing), what do you think the bank was going to do with the money?


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.


I was talking about avoiding taxes, which is legal, as opposed to evading taxes, which is illegal.

Though as C. Northcote Parkinson wrote, the higher the tax rates, the more people will engage in tax evasion. If it's high enough, it'll become the national sport.


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.


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.


It actually does, but for reasons not immediately obvious.

The type of thinking the parent poster spoke of, where you are "not the player, but the operator" is a fundamentally different type of thinking. It's much closer in fact to the desired mindset of an actual statesman.

Your goal isn't (or shouldn't) be to maximize the fortune you (as the operator) or you as the player after having made your changes as an operator reap, but to put in place a fair and equitable mechanism through which the collective needs of the populace (even when the populace is at odds with itself through stalemate or least harmful actiom) are served in a sustainable and resource efficient manner.


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.


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.


“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes” (New York Judge Learned Hand).

If people abuse tax exemptions and deductions, it makes sense to ask why those exemptions and deductions exist. But it doesn’t make sense to me to demonize the taxpayers. Especially since I doubt many celebrities (Bloomberg’s target) actually make any of these tax decisions on their own. They hire accountants to worry about that while the celebrities show their concern and political bona fides in public.


Unfortunately we're in the opposite of a capital-constrained environment. There is far more capital chasing yield than there are worthwhile investments to make.

That plus financialization of everything has short-circuited part of the money treadmill. Too much is circulating at the top with too little at the bottom, where most spending is done.

Businesses need more customers with more money in their pockets, not more tax cuts.


In Capitalism 2.0 the fed interest rate is always negative probably like -10% and the wealthy are forced to always circulate their money to avoid simply losing it all in like 10 years. And that's globally a thing. You use it or lose it... even if it's barely making a return. Why? Because the market is now efficient and the wealthy will simply sit on their money or earn a marginal interest on it rather than spend it.


Money is worthless if it isn't moving. In a real way, it's better for the economy if investments are made that turn out poorly, but reallocate funds to someone who will spend them since odds are that spenders transactions will lead back to your own coffers anyway.

What you run into though, is an action economy problem. How do I spend potential billions in a way that it isn't just getting tied up in overly constrictive savings schemes?

I.e. how do I get people paid so they can buy? This is the paradox of chasing growth. A company that pays it's workers enough to allow them to consume to increase overall market health won't be the fastest grower, but enables market growth as a whole.

The economy doesn't need bubbles. It needs stable growth. Like baking bread. Not enough sugar or water, and the yeast can't make the bread rise.

Too much capital, funneled through businesses optimizing for max on paper growth at the expense of workers spending power is the same as starving that yeast, since it's the spending power being exercised which fuels company revenues.

The economy is rapidly approaching a sort of hostage taking situation. Capital holders want yield, but businesses want more capital, but can't deliver it because they're sacrificing their employees spending power to fuel their growth numbers on paper.

If current trends continue to the extremes, labor simply won't find employment worthwhile. Automation has staved off the rate of collapse of, but in the long run, it can't replace everyone else and won't magically restabilize the system.


That's an interest point, all the articles have been discussing negative rate as an extreme measure that's meant to be temporary without justifying why.

Maybe negative rate is a better solution than wealth tax.


It’s extreme because it reverses a basic economic principle (money is more valuable now than later). You lend me $100 today and I pay you $90 in one year.

The idea is to force people to let go of their long term saving goals and spend now, because saving will make you lose money, thus making the economy grow.

It doesn’t seem to work as predicted though (countries doing that aren’t growing). Furthermore, people with access to other types of investment will just switch instead of spending their money.

In the end I believe this works as a sort of stealth taxation that affects poor people the most, because they don’t have access/knowledge/risk tolerance to more sophisticated forms of investment.


> i.e. the higher the tax rates, the more contortions people will engage in to avoid those taxes

Citation needed. E.g. Ireland has only a 10% corporate tax rate, but we still see corporations headquartered there engaging in contortions to avoid paying even that much.

I would rather suspect the kind of person who avoids a 70% tax also avoids a 50% tax or a 30% tax, and vice versa.


While yes, your last point is correct. And I think everyone should do everything in their power to lower their taxable income (Anything else, in my opinion, is irresponsible.) - So I absolutely think that people would continue to avoid a tax regardless.

But you're comparing corporate and individual income tax.


>And I think everyone should do everything in their power to lower their taxable income (Anything else, in my opinion, is irresponsible.)

Somehow how we don't apply the same logic to other things that we laws for, but that we can bypass (either because its difficult to catch us or because we only violate the spirit of the law).

E.g. "I absolutely think that people should continue to throw waste to the countryside if they can be sure nobody's watching and they wont be caught.".


He's not saying break the law.

Throwing waste in the countryside is both legally and morally indefensible. Lowering one's taxable income using legal means is neither.


Either the law about tax is bad, so it should be repealed.

Or the law is ok, and bypassing it with scheming is "morally indefensible", even if the schemes are legal.


Or the law is being strictly applied as it's written. If people don't like it, it can be changed through the legislative processes.

You're using the word "bypass" as though it means to break the law. He's using it to mean that he's following the law strictly in order to pay less taxes. Those two interpretations are not compatible.


Every law has a letter and a spirit.

Assuming a law is morally correct, trying to find loopholes to legally bypass its spirit, makes you a jerk.


A lot of the time it's hard to see any other "spirit" to those "loopholes". The "oil depletion allowance" in the article is described as "Meant to give incentives to drill for oil" - isn't that exactly what it did? If I do the things that the government offers tax incentives for, so as to reduce my tax payments, isn't that exactly the point of those tax incentives?

I have a tax-advantaged pension, tax-advantaged life insurance, and commute on a tax-advantaged bicycle. I believe all those things are in the spirit of my country's tax law - isn't the whole purpose of tax breaks on pension contributions to encourage people like me to put more money into their pensions?

Similarly I have no idea what the spirit of a rule giving capital gains different tax treatment from regular income could be, if it isn't to encourage people to form companies and take dividend payments instead of getting paid normally. Why on earth that's something Congress would want to encourage, I can't imagine, but presumably they passed that law for a reason.


To answer your final question, I think that the intent is to stimulate long term investment (investments held over a year are taxed significantly lower than those held less than a year) -- this tends to boost the economy and grow businesses, which create more jobs etc.

To the rest-- yes, that's how I see it as well.


If the "spirit" of the law, is at odds with the letter of the law, and the letter of the law is an attempt to do things that are not constitutional, then it doesn't really matter what one calls someone over following the law.


Not even sure what this means. The spirit of the law ("pay your tax to contribute to the country's budget") is not at odds with the letter. And neither is it unconstitutional.


"pay your tax to contribute to the country's budget" is a massive trivialization of the issue.

Taxes are a highly complex system with thousands of rules on what is taxable and what is not, what income must be declared, what deductions are allowed, what investments count as pre-tax and what investments count as post-tax, etc etc etc.

It's not "pay your tax", it's "follow a massive set of regulations that determine what taxes you owe and then pay those taxes".

I assume you fill out your forms and take deductions that are appropriate as allowed by the law, right? If you do, you're violating the "spirit of the law" as you've stated it -- but no one believes that because it's a ridiculous position to take.


Well the article talks about "collapsible corporations", so the corporate tax rate can be relevant to individual income. I'm not aware of anywhere with a 10% rate on individual income, but I'd bet on seeing the same kind of behaviour from rich individuals in such a place.




Sure; that's not really any good for comparing rates of tax avoidance though.


The problem is that labor productivity has grown tremendously while real wage has barely grown. So putting the money into “more economically productive investments” did not result in workers getting anything close to a fair share of the returns (for which their labor productivity is the primary creator, and the percentage of which they are responsible for is growing rapidly).


Economic prosperity will only suffer if the difference in investment productivity overshadows the benefits of getting the taxes in the first place. Which seems highly doubtful!

(and maybe not even then - from the decreasing marginal utility of money, the "suffering" per dollar is much lower for the rich vs receivers of tax funded social benefits)


> When Reagan lowered the tax rates in exchange for eliminating the tax shelters...

We got skyrocketing wealth inequality leading to a near breakdown of the political and social order 30 years later.


What's the argument for how inequality skyrocketed as a result of the reduced tax rate, and how inequality caused a "near breakdown of political and social order?"


Rising income inequality is essentially defined as rich people getting more money. Lowering taxes on the rich gives them more money.

That’s a pretty direct mechanism of action, not sure what else you need. However if you’re genuinely seeking answers there’s plenty of data on how regressive policies have led to increased inequality, it’s not a secret.

As for validating the second part I recommend turning on your television.


Asserting there is a breakdown of the social order is quite different from asserting what caused the breakdown. There was an awful lot of social strife in the 1960s, for example, which had those high tax rates.


The social order is only “broken down” if you only get your news from television. Things can get unbelievably worse.


You are analyzing one aspect of the system in vacuum, and probably conflating correlation and causation. You, and nobody else don't really know what higher taxation over last 30 years would bring. More tax havens, which are really everywhere these days? Which is an effect I can confirm from my home country (higher tax -> higher avoidance/optimalization -> less taxes to the state). Lower the taxes, and tax office actually collects more cash for a given year.

Rich are not dumb, they will not just sit and watch some state eat their wealth and getting nothing tangible back, in contrary. I know I would too, if for nothing else then my future kids and their kids.


Nothing tangible?

Maybe we can herd them up and drop them in Somalia so they can get familiar with some of the tangible benefits of a stable society with a well funded and functional government.


I assume you are trolling for fun/boredom and in reality don't have this naive and outright dangerous early soviet-style mindset. Or maybe you do (and don't share basic values of western civilization), and then I would kindly ask you a favor - could you please relocate to North Korea, at least for some time? I struggle to find any other similar paradise on the face of earth these days, they seemed to crumble despite their apparent greatness but this one is still holding a bit and showing off to those evil capitalists how masses cleverly run the show... right.

When I meant tangible returns, it is in vein of giving say 4 millions $$ to the state and seeing nothing actually coming back in form of better roads, schools and hospitals or anything else in the area they live. The money just disappears in bottomless bit called state budget, where corrupt officials take a cut or two, then it gets paid either in salaries of state employees (which many view as ineffective bureaucrats) or in messed up overpriced contract work to maintain/improve, of course only to overly friendly companies.

It is a bit of a caricature of functional western society but so is some evil uncle Scrooge, reality looks a bit differently. The more we move towards this caricature the more real the culprits on both sides will be, including types you like yourself to pose in.


Who's talking about the Soviet Union? I'm talking about Northern Europe. It's not like there aren't examples of countries with effective social services and very high rates of marginal taxation for the highest brackets.

I recommend visiting Copenhagen, it's amazing. I've seen dozens of people in this thread explain why that type of taxation system can't exist. But I've like actually seen it happen in real life.

On the flip side there are literally zero places with a genuinely limited government where it's safe to be a billionaire.


>...for the highest brackets.

The US has a more progressive tax system than just about any OECD country. Those northern European countries no longer have the close to 100% confiscatory tax rates they sometimes had because they end up hurting the country - what they do have are high effective rates that much of the country pays.


> Lowering taxes on the rich gives them more money.

> Therefore, lowering taxes on the rich causes “skyrocketing inequality”.

Did I get your argument right? Seems to be missing a premise or two.


Here are two premises: (1) Extraordinary money confers extraordinary power. (2) It is a proper role of government to put reasonable limits on the power of wealth.

Sadly, the American government now works on a revised version of (2), i.e.: It is a proper role of wealth to put unreasonable limits on the power of government.


The federal government is more powerful than at any time in history. I'm curious what you consider unreasonable limits imposed by rich people.


Limits on protecting the earth.

Limits on (i.e. near elimination of) enforcement of anti-trust laws.

Limits on limiting the power of money in politics.

Limits on enforcement of civil rights laws.

Removal of limits on ownership of broadcast station licenses and cross-ownership of broadcast station licenses and local monopoly newspapers.

Limits on the availability of justice to the non-wealthy because of the high cost of participating in almost any application of the law.

Limits on the ability of those not on the contributors' list to get a meeting with their congressperson.


I'm afraid if you compare the power of federal government over the decades, the things it has decided are in its purview (and hence power) have steadily expanded.

For example, recently the government decided it had the power to force me to buy health insurance from the only provider in the county. That went to the Supreme Court, who decided sure, ok.

A large increase in surveillance powers happened after 9-11.

A more historical increase in power was the government deciding it has the power to tell me what I could and could not voluntarily ingest.

Do you know that the US government did not originally have the power to print money, levy income taxes, or engage in civil asset forfeiture by accusing your property of committing a crime?

And on and on.

Note that I'm not commenting on whether these powers are good or bad. But they definitely are powers that have accrued to the government since the US was founded.


You two are talking about different kinds of power. You're talking about the power of the government over average people, and the parent is talking about the power of the government over large corporations.

9/11 resulted in fewer rights for you and me, but it didn't take anything away from Bayer. On the other hand, antitrust regulations have been slowly eroded for decades.


> recently the government decided it had the power to force me to buy health insurance

What I think you meant to say is that the government decided to impose a tax on you if you decide not to.

When the government forces you to do something, you’ll know.

At root, of course, the entire argument comes down to taxes, and people’s desire not to pay them, but still wanting a stable and orderly society with a strong functional government.

Same as it ever was.


More powerful than the time during which it allowed people to legally own other human beings?

Or when it forcibly relocated people to reservations across the country?

Or when it put people into concentration camps because of a war we were fighting at the time?


Immensely more powerful than at any of those points you have written. Today at a push of a button it can eliminate most of the world as we know it. Remember, it had to fight civil war to prevent people owning other people.


The parent is referring to legal power, not military power.


Legal power without means to enforce it is meaningless, hence the civil war when the government was weaker in the past.


It's still an orthogonal question. We can rephrase more specifically: "is the legal purview the federal government over residents of the United States at its greatest extent since the founding of the country?"


The answer is unambiguous yes. There has never been more laws, more agencies, more regulation, more government employees and so on.


If you're only counting number, sure. But there's not a single regulation we have now that impacts lives more than the ones we used to have that said other people could literally own you.


I would be very interested to hear where premise 2 comes from.

I can speak only for America, but that premise does not appear anywhere in our Constitution.


Neither of those premises makes the argument valid.


“They would have the poor be poorer, provided the rich were less rich!”


> What's the argument for how inequality skyrocketed as a result of the reduced tax rate

You need a map to figure out how rich people keeping more of their income and and paying less into shared services reinforces inequality?


We got skyrocketing wealth inequality solely due to the breakdown in the value of the dollar after it became unlinked in 1971 and with the Fed system becoming an asset inflation device for people with capital. Take a look at any commodity priced in dollars after 1971, as though wages were going to keep up with that dramatic real inflation.

Just try keeping up with even 3% inflation if you're a median wage worker. Meanwhile, the rich can easily beat that inflation and move their capital around pursuing higher returns. Inflation massacres workers over time.

If you have 0% inflation, and your wages go up 3% per year, you can make some real progress in a society over 20 years. If you've got even just 2% inflation, and 1% net real wage gains, you're going to struggle to get anywhere once recessionary set-backs are accounted for.

While that 2%-3% inflation is eating your wage growth and pushing up consumer prices, it's also rapidly destroying the real value of your primary middle class asset: your house.

The Fed loves persistent inflation because it debases the national debt, which is drowning the US Government. It's terrible for the average person.


There's a good point in here about wage inflation, but if you get a graph of CPI inflation then 1971 hardly jumps out and there were a number of much higher periods before that.


https://www.youtube.com/watch?v=pdR7WW3XR9c

EDIT: I would make my comment more substantial, but Margaret Thatcher made my comment better than I could.


Saying that the incomes have improved in 11 years is hardly an argument worth repeating outside the ultra-short-term pithy-insult points scoring arena that is parliament.

In 1979 the average house cost 18,785 GBP and the average wage was 4,198, whilst in 1990 the average house price was 56,365 and the average wage was 11,820.[0]

The average house price increased 300% whilst the average wage increased 282%.

It's a grossly poor resolution comparison, but it shows that, using this metric alone, just looking at averages alone (somewhat problematic in itself), wages increased more slowly than housing.

[0]: http://thedesignlab.co.uk/costofliving2015/ukupdate.php?uid=...


Agreed. This is the argument behind the Laffer Curve [1]. As has been shown again and again, when you lower tax rates the total tax take by the state increases.

[1] https://www.investopedia.com/terms/l/laffercurve.asp


There is absolutely no factual support for the Laffer curve and never has been, it’s always been a tool of right wing propaganda.

When you raise marginal tax rates revenue goes up. Same as it ever was.


The original article proves the Laffer curve, no? People take action to avoid paying less tax when tax rates become extortionate.


The Laffer curve is a numerical relationship between tax rates and revenue.

It suggests that lowering tax rates will lead to increases in revenue. That’s a factual prediction and it isn’t true.


It is not unconditionally true.

Your characterization of the Laffer curve is an unfortunate misunderstanding which was widely propagated by Reagan’s political opponents. (Which was not helped by the fact that the Reagan administration, either due to incompetence or malice, propagated incorrect interpretations itself)

What the Laffer Curve expresses is that there is a certain amount of taxation where, if taxation is further increased, the actual government revenue will decrease rather than increase, due to growth in tax avoidance and evasion.

It does not mean that lowering taxes will necessarily increase government revenue (which is obviously false). It means that, past a certain point, increasing taxation is futile.

However, determining where the point beyond which increases in taxation lead to diminishing returns lies is hard and there is no reliable way to do it.


That's correct. Which means you're saying the same thing as me, which is that the Laffer curve is incorrect, because it actually is. It's hard to misunderstand a graph relating two numbers.

The curve posits a relationship between two variables. But there's data on this, and the curve doesn't hold, we've never seen the backside of the curve where lowering rates has increased revenue. And God knows people have tried, there are many who would love to find empirical evidence of this. They haven't.

Agreeing that "past a certain point, increasing taxation is futile" doesn't validate that curve. That point could well be a 99.2% marginal rate for all we know. We haven't seen it.


I mean, you have essentially stated that the Laffer curve is correct.


The Laffer curve isn't defined by the phrase "past a certain point, increasing taxation is futile"

It's defined by an actual curve. That's why it's called the Laffer curve.

It could be a linear relationship with a ceiling. In which case it would not be the Laffer curve, it would be a straight line meeting another straight line. Which is different.

Regardless, the defining characteristic of the alleged curve is that it slopes backwards on itself, therefore lowering taxes will increase revenue. That phenomenon has not been observed in the wild.


That it has not been observed in the wild (which is arguable) does not mean that it is not real.

It is quite obvious that a tax rate of 0% would lead to no revenue. It is also obvious that a tax rate of 100% would not lead to the full expected revenue, as people would need to evade taxes in order to be able to survive.

If we assume that tax revenue is a continuous function of tax rate, there must be an inflection point.

The Laffer curve is indeed a curve, but which curve it is is not specified by the theory. The theory simply follows from the argument I have outlied above. It is not a specific curve, it simply states that, if we take tax revenue to be a near-continuous function of tax rate, it must not be a monotonic function, but instead have an inflection point.


I disagree. It's a prediction that has been true many times.


My understanding is that Reaganomics / trickle-down economics has been fairly widely proven to be ineffective.

I understand that the idea is to grease the wheels of the economy by making more capital available for a company to spend on wages, R&D, recruiting; basically plowing it back into the company for reasons of growth.

It's a valid theory, in a vacuum, and maybe the reality of it was more valid in the 80's than it is now, in the times of uber-capitalism, double-digit growth requirements quarter by quarter and "shareholder value at all costs". But these are the times we're in, and tax breaks will improve the bottom line which will be reflected in the quarterly results and compared to the previous quarter and the previous financial year, and the current quarter will be declared a success and justify bonuses to executive management out of whatever is left over once the shareholder dividend has been determined - reflective, of course, of the improved bottom line. It's unlikely to reach anywhere near the low end of the hierarchy; it doesn't trickle very far down due to the very nature of how large businesses operate.

In terms of creating jobs, well, that will only happen when there's enough work to justify it, and in an economy that requires some form of stimulation, well, it's unlikely to occur until a number of cycles of stimulation have been in place. And if my opinion / experience of trickle-down economics, as described above, is close to "real world", then there's minimal bottom-end stimulation going to occur at all.

You're not wrong in your statement:

the higher the tax rates, the more contortions people will engage in to avoid those taxes

But how can that possibly be considered as justification or "the right way of looking at it"? It's a fucking disgrace and a dereliction of responsibility to the community in which they operate.


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%.


While I think it is absurd for the government to take a marginal 90+% from anyone's paycheck, regardless of whether they could "afford" it, it's worth noting that that tax bracket started at aprox $2 mil in today's dollar


> While I think it is absurd for the government to take a marginal 90+% from anyone's paycheck, regardless of whether they could "afford" it, it's worth noting that that tax bracket started at aprox $2 mil in today's dollar

i.e., a vastly lower level than where the proposed 70% top rate would kick in.


Still not fair. Furthermore, taxation should be created out of neccesity, and should not just be thrown around for anything. If we really need the extra tax dollars figure out a way to allocate some money from other parts of the budget instead of increasing the tax willy nilly. Also, it is absurd that anybody would have to give away more of their legally earned income than they get to keep.


By our collective grace are people permitted to be so successful. Not one of our most successful billionaires would be where they are today without the people around them. The fairness/absurd thing doesn't really fly with me because of this.


This strikes me as incredibly entitled. Do you think you deserve part of Jeff bezos's money because you voluntarily bought something from Amazon?

>"By our collective grace are people permitted to be so successful"

While I fundamentally disagree with you, if this applies to rich people, why doesn't it apply to everyone? Why shouldn't the government take 90% of your income? The logical conclusion to your position is communism. Nobody may have more than another because we all helped equally to build Amazon (no we didn't).

The reason I disagree with your statement is that nobody participated in another's success unwillingly. It is not by "grace", it is by mutually beneficial transactions. Yeah you can make the argument that Amazon relies on the entire society around them to run: people to build and maintian roads, people who build and maintain and drive trucks, people who make cardboard and tape, people who buy from Amazon, etc etc etc. But here is the thing: all those people have been paid in the process. A fundamental principle of capitalism is that two rational actors only ever make a transaction if both people find it to be beneficial. Again, this is why I find it so entitled to claim some stake in Amazon's success when, by definition, you've already been compensated for your participation.


> Do you think you deserve part of Jeff bezos's money because you voluntarily bought something from Amazon?

No. But I think that if Jeff Bezos wants to live in a world where people don’t climb over the gates of his mansion and eat him then he better make sure to contribute enough to ensure an orderly, well functioning, and somewhat equitable society.

This dynamic is as old as civilization itself. The rich can claim to be entitled to whatever they want, but it’s only by the grace of the masses that they avoid the guillotine. Literally.


So now you're a highwayman, killing people if they don't give you what you want? I don't want to live in that society. That's not "fairness". That's entitlement.


You already do live in that society.

People have made it pretty clear over thousands of years and seven continents that if you don't share the spoils of society reasonably they will eventually storm the castles, mansions, or government buildings and put everyone's head on a spike.

The rich should never get too confused about the fact that they are alive because the masses are choosing not to kill them and take their possessions, not the other way around.

Billionaires are pretty outnumbered, it's not a fair fight.


"seven continents"

I think you malign the penguins, sir.


Even Shackleton faced a mutiny at one point. Those governing always need the consent of the governed, it’s as close to a universal law of human nature as we’ve got.


Good luck Robespierre!


Did you ever consider working for the mafia. You both have very similar world views.


The right to have your legally earned income is one given to you by society. It's not something that arose out of natural order, or given by God if you are a believer.

It is not absurd at all that society thinks you shouldn't have this right if it is at the expense of others. Society can take all the wealth it wants from you if it thinks there is a problem to be solved. Poverty for example.

Taxes are tool at civil society's disposal to tackle problems. Considering them immoral that they should only be used as a last resort is absurd.

It quite funny that we consider property more important than people's lives. In the current political climate, going to warnis easier than rising taxes.


The system where anything can be taken from you by a higher power in the name of a “greater good” is called Tyranny, not “Society”.


> The system where anything can be taken from you by a higher power in the name of a “greater good” is called Tyranny, not “Society”.

But all property relies on the state alienating (or ratifying a predecessors alienation) of material—and thus the natural freedom enjoyed by every member other than the one favored by the alienation with regard to that material—from the commons to some particular party, in the most beneficent case—where it is not overtly solely for the private good of the recipient and/or the state decision-maker—at least notionally because doing so will indirectly serve the public good.

So, all systems with property are, thus, by the standard you have proposed, Tyranny at best.


No. People had possessions long before the state ever arose. It was just that they could only possess that which they could defend themselves.

The state allows for people to possess material things without needing to provide for the defense of those possessions.

It is incredibly naive to assume that anything ever belonged to "the commons". "The commons" are a spook. At best, some material possessions would have collectively belonged to a tribe - which would brutally massacre anyone who tried to take it from them or get brutally massacred in turn - and others would be unclaimed.


> People had possessions long before the state ever arose.

Having a possession isn't the same as having property. Property is the legal right to deny other people some set of actions regarding a thing.

That people did things before the state arose also, in any case, doesn't establish a right to those things. People were, after all, deliberately killing each other without provocation (often to secure possessions) before the state arose, too (by any definition where “before the state arose” is a coherent concept, which it arguably is not under one of the more common ones used), but virtually no one argues on that basis that theft and murder are natural rights.

> It is incredibly naive to assume that anything ever belonged to "the commons".

No, it's not: the commons consist of everything in which no one is vested exclusive proprietary rights (and if there was no commons, then instead of alienation from the commons property—which unquestionably often involves conversion of something in which the property holder did not ab initio have a property interest—would generally involve theft from someone in particular rather than alienation from the commons; that property involves state-licensed alienation from the commons is the only alternative to “property is theft”.)


"Property is the legal right to deny other people some set of actions regarding a thing."

People often denied other people some set of actions regarding things even without the state-enforced legal right to do so. As I said, the only thing the state changes is that people do not need to defend their property themselves.

If, for instance, I raise a sheep for a few years expecting to be able to use its wool and milk, it is in my best interest to stop other people from using its wool and milk, as they have not participated in the raising of the sheep.

Therefore, I would declare myself proprietor of the sheep, and would obviously stop other people from taking its milk and wool, in order not to deprive myself from the benefits I have acquired through my own work and effort.

This is not "state-licensed alienation".


>The right to have your legally earned income is one given to you by society. It's not something that arose out of natural order, or given by God if you are a believer.

NO!

The right to the fruit of one's labor is a basic human right! The form the fruit of one's labor takes is irrelevant.

It basically boils down to the right to private property or to be able to have ownership of things. What you legally own is yours. If you grow a tomato in your garden it's your tomato. If you trade that tomato for a dollar it's your dollar. If you help someone grow tow tomatoes and they give you one it's your tomato. If you help someone grow a ton of tomatoes and they give you money it's your money.

We just so happen to tolerate society (via the government) skimming some off the top because the benefits (i.e. everything taxes pay for) far outweigh the cost.

Pretty much every society ever recognizes the right to private property. Taxes in various forms are an exception to that rule.

To proclaim that it is the other way around and that society owns everything by default and one may only keep what society lets them is basically the same as medieval Europe where the land and everything on it (people included) and all wealth generated by it are property of the lord by default and he/she can do with them as he/she pleases (only the lord is replaced with "society").

Taxes are an important part of a functioning modern society but people would do well to remember that private property is the rule and a forced contribution to the group fund is the exception not the other way around.


It is debatable of course.

But the current consensus is that property is not fundamental to the existence of a human. The term property doesn't appear once on https://en.wikipedia.org/wiki/Universal_Declaration_of_Human....

Following your tomato example, you grew the tomato on some land and the plant absorbed nutrients from the land. Who gave your the right to do that? Do you own the nutrients?

How did humans come to own land? Was everybody born with their piece which they chose to trade? Of course not.

What we call property came about over thousands of years due to complex interactions between people. There is a concept of fairness to getting to keep what you made. But, there is nothing simple or fundamental about it.


>Following your tomato example, you grew the tomato on some land and the plant absorbed nutrients from the land. Who gave your the right to do that? Do you own the nutrients?

>Who gave your the right to do that? Do you own the nutrients?

If I lend you a pen and expressly state that I want it back when you're done and you use some of the ink in the pen that's to be expected.

If I rent you land it's foreseeable that you might grow something on it and unless our agreement stipulates that you can't it's implied that you can.

When property is in the hands of someone else we don't bother controlling for the common use cases. If I let you borrow my pen I expect you to write with it. If I sell you a pen it comes with the ink in it. If I rent you land I can expect you to grow something on it. If I sell you land it comes with everything therein.

We specifically negotiate for the uncommon use cases (e.g. mining/timber rights)

>How did humans come to own land? Was everybody born with their piece which they chose to trade? Of course not.

This is a sideshow and not material to the conversation.

Pretty much all land in the world is owned by someone or some entity. There is a chain of ownership. If you go back far enough the land was owned by whoever was there first.


> The right to the fruit of one's labor is a basic human right

Perhaps, but income isn't the fruit of your labor, it's the product of exchange of that fruit through mechanisms provided and protected at public expense and through limitations on natural liberty by the State.

Also, all actual things (tangible and intangible) in which legal property interests exist involve a mix of fruit of individual labor and either material alienated from the commons or the state-granted privilege of restricting others natural freedom (or possibly both of the latter.)


The top tier rate was that high to pay for WWII. The rate didn't go similarly high for Vietnam, Desert Storm/Shield, or Afghanistan/Iraq because we have played shell games to cover the cost, with the net result being huge national debt and the social security fund being low enough that it may not be able to continue full payments through my lifetime.

Wars cost money. Taxing the wealthiest the most keeps wealth in investments and productive companies while securing the lower and middle class to provide demand with their lower rates. If you want low taxes on the wealthy, avoid allowing a geopolitical situation in which war occurs, and don't enter into them unnecessarily.


> The top tier rate was that high to pay for WWII.

It went back up above 90% for 1950-1963 after a brief dip into the 80s.

> The rate didn't go similarly high for Vietnam, Desert Storm/Shield, or Afghanistan/Iraq because we have played shell games to cover the cost

It was never less than 70% during Vietnam; though you are right it wasn't up into the 90%+ range if, as many people wrongly do, you count the US war in Vietnam from the Gulf of Tonkin.

Desert Shield/Storm was an extremely brief war without a major post-conflict occupation.


Don't forget they don't take 90% from all your income - you pay it in thresholds:

UK for EG (figures approx as I dont have time to look them up).

First 11k 0% 11k to 44k 20% 45k and up 40%

So yes I pay 40% tax, but still take home a hell of a lot of my monthly paycheque


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%?


If that would help result in a society where people are more educated, relaxed, healthier, and feel like they are part of a community, then yes.

Technology and the efficiencies of scale are allowing fewer people to do more and whether they deserve it or not is not the question. The question is what kind of society do we want to live in.


Full honestly, I don't even make a braggable amount in the greater HN group (if I posted my TC on Blind I'd probably be laughed out of the room) and I wouldn't mind my paycheck to be taxed 90% above a treshold in which I live comfortably, especially if through government programs I can live comfortably on less with minimal guilt that other people are living uncomfortably(or even being essentially worked to death) while working harder than me.


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...


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.


1. Due to the way marginal rates work, no one would have their entire income taxed at 90%. 2. Yes, I would love to make enough money that my top marginal rate is 90%


Would you actually want to be able to walk on LA/SD/SF streets without tripping over homeless tents and empty needles?


Did you even read the article? The entire writing addresses this point.


This gets parroted out frequently by people who think it's a cute quip. This article, however, explains why the situation was much more complicated than can be explained in a one-liner.


In what way was it more complicated? The top marginal tax rate was ~90% and high earners used a number of means to structure their income to avoid paying that, just as they do today with a far lower rate. I don't think anyone who makes this observation thinks that people were less motivated to lower their tax burden when it was substantially larger.


What the article meant was that the 90% tax rate was on paper, but people didn't pay it because they structured their income into tax shelters to avoid paying it.

Those tax shelters were removed by Reagan in 1986 as part of the deal to lower the marginal rates.

Another tax shelter not mentioned in the article was the "3 martini lunch" where people charged their lunches off to the business, so it was taxed at the lower business rate. This tax shelter was removed as part of that deal.

In England, with their high tax rates, it was common to have the businesses provide cars for the employees for the same reason - tax avoidance.

Tax avoidance is also why in America today people prefer to pay for their health insurance as a business expense rather than a personal one.


> What the article meant was that the 90% tax rate was on paper, but people didn't pay it because they structured their income into tax shelters to avoid paying it.

This is also true with a 39.6% top marginal rate.

The specific structuring methods have changed with tax policy (which has not all been closing loopholes; new favorable tax options available primarily to the rich have been opened up, as well), but “people, especially rich people, structure income for tax avoidance” didn't go away as maximum marginal rates dropped.


It was greatly reduced. Higher rates mean it becomes profitable to invest in crummier shelters. Lower rates means the shelters have to be much better.

It goes back to do you want wealthier people to invest in improving the economy, or shuffling money around in marginal investments?

I.e. do you want them investing in SpaceX, or some offshore shell game?

Besides, something like half of the government tax money comes from very wealthy people.


But tax shelters aren't just manna sent down from Heaven to small island nations. They're products of the tax code- what we tax and how much.

If "tax shelters" are nonproductive, that doesn't say much of anything about the tax rate directly- it's an orthogonal issue. If we're taxing things that we want more than things we don't want, that's the problem!

The tax rate sets, among other things, how strong of an incentive folks have to do things that are taxed less. Right now, some unproductive and sometimes downright absurd things are taxed less. Playing with the tax rate just sets how big of a problem that is- to eliminate it, you need to do meaningful incentive engineering.


Maximizing the tax rate on the most productive investments isn't good incentive engineering. But that's exactly what those high marginal tax rates are aimed at.

Another way to look at it is look at the extremes. Nobody is going to spend much effort avoiding a 1% tax. They'll expend a heluva lot of effort avoiding a 99% tax.


Yes, that's what the article talks about, and how the rich avoided it legally.


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.


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) 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.


That mostly happened because the top 10% is today capturing a much higher percentage of GDP compared to 1980. What is really important isn't who pays more taxes, but who can benefit from all the wealth that is produced.


>That mostly happened because the top 10% is today capturing a much higher percentage of GDP compared to 1980.

As a start, do you actually have a link that can back that up?



Interesting chart - it shows inequality slowing rising over the decades, but it can't tell you how much of the total market income the top 10% received. According to the OECD, the top 10% in the US now make about 33% of the market income and pay 45% of the income taxes. It would be interesting to find how that compares to 1980.

[flagged]


Do you have anything more substantial than an ad hominem to demonstrate that this statement is wrong or misleading?


Yes.

He says “the actual tax burden has...” but then cites something that doesn’t discuss the tax burden at all, but rather certain marginal income tax rates.

FICA is also a percentage tax on income and it’s part of the tax burden. As are many other taxes.

The word tax burden has a specific meaning and it’s not being used correctly here. It’s easy to spot because anti tax lobbyists have been making this intentional “mistake” in their argument for decades.


The original article is about federal income tax rates. In one of your messages there was this comment by you:

>> When Reagan lowered the tax rates in exchange for eliminating the tax shelters... >We got skyrocketing wealth inequality leading to a near breakdown of the political and social order 30 years later

We have been talking about federal taxes in the linked article and in this discussion. It is disingenuous of you to now move the goal posts. That is a much more complex discussion since you need to add in all the other taxes paid - all of which have changed over time, but had little to do with Reagan.


FICA is a federal tax on income.


So are estate taxes, gift taxes, etc. What about it? It isn’t what the article or we are talking about. It is disingenuous of you to now move the goal posts.


>It’s easy to spot because anti tax lobbyists have been making this intentional “mistake” in their argument for decades.

Look this smaller number of people pay more in total taxation than this larger number of people, and I'm going to use this "fact" to malign all taxation even though it's the intended effect of progressive taxation.


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.


Let's not conflate wealth with income. Generally, you get income by providing a service to the market in excess of that income (as perceived by the market, which can be wrong).

If you have really high taxes, the only way to get rich is to be born rich.

High estate taxes make a ton of sense from a social perspective. High income taxes, much less so.


>...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...

>...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...

>...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.


> 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.


>...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.


No state but New Jersey. https://www.wsj.com/articles/new-jerseys-tax-gift-to-florida...

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


>No state but New Jersey. 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.


No one is comparing the top vs the bottom. The comparison is what the top and bottom pay now vs what they paid then


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

No, the world would not blow up. But you'd generate basically zero revenue. People that make $10 million a year are mostly not making that in the form of cash compensation. And those that are have the leverage to demand different forms of compensation. Which they will immediately do. The person that person that makes that kind of money that also doesn't have the power to say "pay me in equity now, thanks" is extremely rare indeed.


> But you'd generate basically zero revenue.

Extraordinary claims require extraordinary evidence, which you’re not providing.

If you keep all else constant then raising the tax rate will raise revenue. Your narrative about how all else will not be held constant isn’t compelling.

Whatever mechanisms you describe for tax avoidance are only marginally different at 35% than 70%, making your hypothesis of zero obvious fiction.


Did you read what I said? People in the bracket you're targeting don't get paid in cash. It's not a scheme, it's not theoretical, it's a fact.


Then by your logic they aren’t paying any tax now either. So raising the rate won’t change anything. If so why not just do it for fun?

Either they pay tax now at a certain rate or they don’t. Your premise that raising the rate won’t change the tax bill is based on your theory that whatever they’re paying now is just by their grace and free will?


Because it hurts the economy. As I said previously, 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.


Some countries have some haven't.

The top marginal tax rate in Denmark is over 60%

I've been there, it's awesome, everything works super great, and the country consistently ranks as the happiest population on the planet. They also have a great economy.

Meanwhile I've lived in the US for almost five decades and watched as the billionaire class has lobbied successfully for lower taxes, offshoring, financialization of everything, and criminalization of debt, leading to vast swaths of the country condemned to permanent economic misery, increased xenophobia and political instability, declining standards of healthcare, and an out of control problem of education debt for the next generation.


A difference is that the US is a much more progressive tax system, - the tax rates in Denmark are much flatter. This gives Denmark much more income from taxes per person.

So far none of the politicians in the US arguing for very high rates in the US are arguing that the bulk of the country should pay them.


I think you have intellectual blinders on, as you refuse to respond to logical arguments and ignore valid points.


Doesn't income tax apply to equity grants too? (Genuine question.)


For options, not really:

https://www.investopedia.com/articles/active-trading/061615/...

In some cases yes, but often no.


I receive non-tradeable options from my employer. My understanding is that the value of the option is taxed as income upon exercise (or sale of stock, for statutory options). There are games to play about which tax year to exercise in, but no getting around the income tax. Can you explain how income tax is avoided with options?

The only potential tax avoidance I see is:

(1) avoided income tax by flexibility in timing of the exercise/sale

(2) potentially avoided capital gains tax if the value of the option grows before exercise/sale

In neither case do I see a way to get around income tax on options given as compensation for work.


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


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


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.


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


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




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