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.
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).
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.
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?
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.
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)
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"?
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?
Because it's an American company?
Similarly, I'm all for Huawei and Lenovo paying taxes in China.
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'm not sure what your point is in asking that question.
Primarily, the answer is "out of reach of the US Government".
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.
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.
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.
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.
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 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.
Perhaps because I tend to think of policy in terms of overall implication rather than from my own standpoint.
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.
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.
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.
Maybe negative rate is a better solution than wealth tax.
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.
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.
But you're comparing corporate and individual income tax.
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.".
Throwing waste in the countryside is both legally and morally indefensible. Lowering one's taxable income using legal means is neither.
Or the law is ok, and bypassing it with scheming is "morally indefensible", even if the schemes are legal.
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.
Assuming a law is morally correct, trying to find loopholes to legally bypass its spirit, makes you a jerk.
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 the rest-- yes, that's how I see it as well.
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.
(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)
We got skyrocketing wealth inequality leading to a near breakdown of the political and social order 30 years later.
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.
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.
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.
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.
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.
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.
> Therefore, lowering taxes on the rich causes “skyrocketing inequality”.
Did I get your argument right? Seems to be missing a premise or two.
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.
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.
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.
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.
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.
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?
I can speak only for America, but that premise does not appear anywhere in our Constitution.
You need a map to figure out how rich people keeping more of their income and and paying less into shared services reinforces inequality?
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.
EDIT: I would make my comment more substantial, but Margaret Thatcher made my comment better than I could.
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.
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.
When you raise marginal tax rates revenue goes up. Same as it ever was.
It suggests that lowering tax rates will lead to increases in revenue. That’s a factual prediction and it isn’t 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.
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.
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.
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 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.
i.e., a vastly lower level than where the proposed 70% top rate would kick in.
>"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.
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.
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.
I think you malign the penguins, sir.
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.
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.
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.
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”.)
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 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.
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.
>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.
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.)
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.
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.
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
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.
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...
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.
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.
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 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.
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.
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.
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.
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.
As a start, do you actually have a link that can back that up?
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.
>> 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.
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.
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.
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.
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:
>...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.
>...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.
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.
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.
Why are you so biased? High rates of taxation is not bad policy. Bad policy is far more nuanced than that.
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, 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.
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.
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?
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.
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.
In some cases yes, but often no.
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.
> 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