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[flagged] For Dell’s Billionaire CEO, Taxing the Ultra-Rich Is a Joke (inequality.org)
36 points by smacktoward 33 days ago | hide | past | web | favorite | 44 comments



https://en.wikipedia.org/wiki/Hauser%27s_law

Hauser's law is the proposition that, in the United States, federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, regardless of wide fluctuations in the marginal tax rate.[1] Historically, since the end of World War II, federal tax receipts as a percentage of gross domestic product averaged 17.9%, with a range from 14.4% to 20.9% between 1946 - 2007.[2]

So...yeah, marginal rates have been 70% or higher...but the Federal government has never successfully collected that much, due to write-offs, tax shelters, and other schemes that were largely closed in 1986 with...

https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986


20% is a third higher than 15% - that’s a pretty wide margin that actual taxes can swing. 70% marginal rate on a new higher top margin of only one kind of tax (income) obviously would not increase overall tax revenue by a tremendous amount. But even if it ends up having a minimal overall effect, it could still represent a significant shift in the distribution of taxes.


Honest question: if people like the one described in the article won't actually end up paying more in taxes due to an increase in their tax rate, why do they oppose it?


Because it leads to bad economic choices by the rich and that doesn't actually help anyone. Just recently we had a discussion on how those in Hollywood avoided the high marginal rates:https://www.bloomberg.com/opinion/articles/2019-01-29/hollyw...

With high marginal rates, the tax shelters the Hollywood rich invested in were less productive investments. Yes high marginal rates will lead to more CPA hours to get around the high taxes, but that is just an example of the Broken Window fallacy. When there is no way around them, very high rates will lead to dead weight losses to the economy as economic activity won't be done.


The answer is likely quite simple.

Because allowing for one idea would lead into another.

70% tax is a start. Not the end. The idea is to find where the "excess" income is taking place and add additional taxes in that area to direct the income into investment and services.

70% may be a start at ordinary income. But does it apply to investments? And then what's next?

I think the key question for Dell and others is: can you show proof that the current approach of lower taxes boost the average individual income of workers? Because right now we're seeing great numbers from Wall Street, but wages are still virtually flat year over year. How does the Dow continue to climb but workers' pay stay the same?



Adjusted for inflation, pretty flat:

https://fred.stlouisfed.org/graph/?g=l7U1


Way to end the graph in July 2018...extend the graph out to the edge and you see the wages start to rise again. And as long as unemployment stays low, we should expect wages to continue to rise.


because this Hausers law shows that the U.S. government doesn't have a revenue problem, it's collecting proportionately the same amount of money as it has been. there' a spending problem: we keep finding more and more ways to spend money.

this whole green new deal proposal is "lets go spend billions more dollars on XYZ" a lot of the mental pushback is what are you going to stop spending on today to pay for it? the answer: "nothing, we're just going to raise taxes"

i believe opposition to this is less about can the 1% afford the taxes or not, and more for principled spending


Plus, this idea that 70% off the top 1% is still nowhere near enough to pay for any of this. The numbers I've read suggest that taxing 70% of the $10mil+ earners would amount to around $80bil in revenue, assuming no changes to those earners' incomes as a result of the increased taxes... That's nearly nothing compared to this GND proposal.


What's wrong with investing taxes in growing the GDP?

Why does the funding of current projects affect you level of support for different projects? That's sunk cost fallacy.


Where's the proof that this would increase the GDP?


The article touches on a cultural shift in business leader salaries, saying that they didn’t demand as much because it would all go to taxes. Not sure how accurate that is, but if it were the case would that explain some of this phenomenon? Basically income would be shifted to lower brackets.


So what if tax revenue has been flat as a percent of GDP? That says nothing as to how the burden of that tax is allocated.


>So what if tax revenue has been flat as a percent of GDP?

Like with much data, it has to put in context with other data, but I am pretty sure most people don't know that fact.

As how that tax burden is allocated, do you think the rich paid more of a share of the taxes back when there were high rates?

In 1980 the highest federal marginal rate was 70%. The top 10% paid 49% of federal income taxes in 1980 and the bottom 50% paid 7% of federal income taxes. In 2015, the top 10% paid paid 70% of federal incomes taxes and the bottom 50% paid 3% of federal income taxes. (http://www.ntu.org/foundation/page/who-pays-income-taxes)


So if we re-implement the 70% marginal tax rate now that these schemes are closed...?


Technically no, because the 70% marginal tax rate would be on earned income while a significant portion of wealth is taxed through capital gains.

The tax code is very large, so you can implement a 70% marginal rate on earned income and capital gains, but that will just shift accounting elsewhere.

Alternatively, we could get better at our costs. Actually look to balance the budget by decreasing military spending, rein in pharma companies and healthcare costs, and then if needed raise taxes to make up the difference.

It would have a much better effect, because increasing the taxes on the wealthy would do nothing to adjust healthcare spending, high cost of drugs, a lack of investment in our infrastructure.


I see where people are coming from when they dismiss high marginal rates out of hand, without giving the honest answer as to why:

No-one who is caught by them will pay them.

If I'm Michael Dell, and my marginal rate is 70%, or 90% or even 100% (whatever) then I'm incentivized to take that money in another way, be it in stock, deferred bonuses, or even in leaving the capital in the business without issuing a dividend.

The reason this is such a problem is that regardless of whether you manage to close every conceivable loophole, you're still talking about personal taxes. The corporation is making the lion's share of the money, and that's where the tax would need to be applied to raise the revenues required by the Green New Deal.

Thing is, that's never worked for a state because the biggest companies are multi-national corporations that can (and do) shift their taxable income to the most favourable jurisdictions, which is why nation states keep trying to undercut each other on CT rates (Apple and Google are notorious for the lengths they go to in order to avail of this, for example). The state can't close that kind of loophole because it doesn't have the authority to (unless it goes down the road of sanctioning other countries due to their tax rates).

I've not seen a solution to wealth distribution yet that acknowledges that we exist in a global economy, regardless of local policies (however well intentioned they are).

Thing is, most people don't really seem to want wealth re-distribution to anyone poorer than them. Unless you're planning to pay a living wage to everyone in India/Thailand/China/wherever then why shouldn't they undercut your taxation rates as much as is needed to attract local jobs?


If it accounts to investment income, then the easy solution is tot borrow against your equity. Better to pay 2% interest a year than to pay 70% on realising a gain.


You could tax corporate dividends, stock buybacks, stock splits, reverse stock splits, mergers, acquisitions, and spin-offs.

Major corporations won't de-list from the NYSE/NASDAQ for tax savings.


His main argument besides 'name a country where this has ever worked' was that he is a philanthropist. He alleges that his foundation would have contributed more (in terms of $$$) than a 70% marginal rate. He further feels more comfortable deciding where/how to help by himself instead of giving the money to the gouvernment.

Just because some billionares use their money in good faith, how many of the >5.000.000$/year behave the same? Do they help, buy overpriced luxury goods they don't need, or park their money in some financial product.

His foundation does much work outside of the USA. That's commendable, but it's not up to the individual to decide what they fund. For a good reason.

He really came as arrogant and uninformed. And where was the push back from the host?

[1] http://www.youtube.com/watch?v=NR_lictGa5g&t=1m50s


> Just because some billionares use their money in good faith, how many of the >5.000.000$/year behave the same?

Also billionaire philanthropy probably wont tackle the problems or solutions that will help society but hurt billionaires.

https://www.youtube.com/watch?v=d_zt3kGW1NM


Any discussion that doesn't even broach the topic of actual tax incidence is superficial at best, and probably just negligent. You can't really say if X worked at a societal level if X didn't do what it sounds like it did and literally applied to around half a dozen people.


I have given up with the long answers. The US had a marginal rate this high before: wrong, this doesn't reflect tax paid which, for the top 1%, is only down slightly since mid-1960s (and not worth anywhere close to what the US needs).

Other countries do this successfully: wrong, other countries are far less progressive than the US with many more paying top rates. The lazy "we can be Sweden" thinking also indicates a fairly weak understanding of political theory.

Assuming no reductions in revenue, the only solution is raising taxes substantially on the wealthy below 1%. Simple.


No amount of tax increase alone is going to address a $22 trillion debt. Reducing the size of the state will be required.


If you make the tax system substantially less progressive, as in Sweden or other often mentioned examples, I think it is quite possible to reach a sustainable level.

I partly agree though in that US spending really makes no sense. Other countries that raise more revenue are generally quite targeted in their spending, the US govt is not...at all. It makes no sense to say that the solution to bad spending is to generate more revenue...but it is also not particularly clear that there is any desire to think about how to spend more effectively, outside of slashing everything.

Btw, just generally this reflects how far the US is behind when it comes to intellectual discussions on policy. Most (but not all) discussions about these topics in the US take intellectual force from anti-scientific dogma. Elsewhere, politics has become an evidence-based study of the merit of policies. The former approach just isn't sustainable, the level of poverty in the US is quite shocking (to this outsider's perspective).


We were on track to pay off the debt 20 years ago. The debt is substantially higher now but nothing has fundamentally changed.


The difference between what it takes to pay down a moderate debt and what it takes to pay down a truly massive debt is a fundamental difference.


The debt is about 3x higher in real dollars, and about 2x higher relative to GDP. That doesn’t seem like the sort of change that would take you from “moderate” to “truly massive.”


Now we enter the area where almost no commenters understand how sovereign currency debt works, and what is required for a healthy economy.

It would take a mini-treatise to summarize what's wrong with this statement, so suffice it to say that there are several scenarios where such a debt is absolutely healthy and encouraged, and no one should use it as an excuse to put their foot further on the neck of the lowest rungs of socio-economic status.


The chief complaint is that many people have almost no money and a few people have almost all the money. Where is this money? It is in bank accounts. Where does the money in the banks comes from? The banks borrowed the money from the central banks. Where did the central banks get the money from? The central banks borrowed it from themselves. How will the central banks pay themselves back? They central banks hold, among other assets, a large quantity of US Treasury bonds. The central banks pay themselves back whenever the US government pays interest on its bonds. If we want people to have more money, then the banks need more money from the central banks, and the central banks need a larger quantity of US Treasury bonds. If we want to redistribute money using taxes, we probably would want even more US Treasury bonds to be issued.


According to https://www.ssa.gov/policy/docs/ssb/v75n1/v75n1p1.html we reached peak social security surplus back around 2008, and cross the line into deficit real soon now. So instead of having extra revenue that can be spent, the budget now has to take into account redemptions of special social security bonds to fund current operations. From the Social Security Administrations perspective they have years of funding because of the trust fund. From a congressional perspective its a double hit to the budget No Surplus + have to pay back redemptions now.

So this was a wonderful time to give a trillion dollar tax cut to corporations.

I do not know how you reduce the size of the state with the baby boom bubble entering retirement. The paranoid part of me thinks the secret solution will be a 1918 Influenza resurgence that disproportionately takes out people over 70. Solves Social Security and Medicare expenditure at the federal level and the pension problem at the state and local level.


Debt isn’t a problem in reality. Especially as the world’s reserve currency. If that ever becomes not the case, we’ll the whole monetary system will be touched. I would google modern monetary theory. I think that is the future more or less.


Let's assume you're right and the US really hasn't ever had a marginal tax rate of 70% in the past. Introducing it now would be the first time it's ever been done.

What's wrong with trying new things?


That is fair, I didn't explain that. But it is fairly simple: progressive tax systems don't reduce inequality. The US already has one of the most progressive tax systems in the world? Is it working? The US is one of the most unequal countries in the world. Look at other similar systems, are they working? Also, no...they are also amongst the most unequal in the world.

More broadly, this is totally out of step with what is happening everywhere else in the world. The US is still trying to catchup even after Trump's tax cut, the issue is that US has a tax system that is from the 1950s when capital movements between nations were essentially banned. That kind of works for the US as the dominant world power but it is becoming more unsustainable as time goes on.

Great, try new things...but what is being proposed isn't a new idea. It is more of the same. The US system is already the most progressive, it already doesn't work, and the idea is to go even further. The new idea, which is being vigorously rejected, is to just do something that actually works. Crazy, right? You don't need to believe in crazy conspiracy theories, you don't need to re-invent taxation...just do the stuff that works.


> But it is fairly simple: progressive tax systems don't reduce inequality.

Ceteris paribus, they do (and certainly inequality has gotten worse in the US since Reagan's tax burden shift reduced tax progressivity), but particularly progressive tax systems are often pared with spending systems with less downward redistribution (or more upward redistribution) than those they are compared with, which counteracts the effect of greater tax progressivity; the US has less downward-redistributive spending than many other developed-world systems. [0] And obviously the tax system alone has less impact on inequality the smaller share of the economy taxation represents, and while the US tax system may be unuusally progressive, but it is also unusually light for the developed world (representing, at all levels of government, about 1/4 of GDP, compared to the OECD average of around 1/3.) [1]

OTOH, the people pushing for more progressive taxes in the US today aren't pushing for that alone, they are pushing for more downwardly-redistributive spending funded by the taxes, as well, and mostly also for taxes representing a greater total share of the economy, as well.

[0] https://www.economist.com/united-states/2017/11/23/american-...

[1] https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe...


I agree. As I have said elsewhere, US spending is also unusually bad. But I have seen nothing to suggest that the tax-hike crew have any good ideas about spending either. Their idea seems to be "let's just be Denmark", this is exceptionally dumb ("you can't be like Denmark" is the first lesson in most comparative policy analysis courses).

And the issue with progressive systems is that all other things aren't equal. Great, something works in theory...no-one cares. If you are analysing policy, it isn't economics, no-one cares about theory...all that matters are results. Progressive tax systems don't work.

The idea of upward and downward redistribution also sounds like something beloved of theoreticians. Something is only upward or downward re distributive after the fact. The US needs to find its own path (as an example: the idea of a "single payer" health system is just preposterous).


> But I have seen nothing to suggest that the tax-hike crew have any good ideas about spending either. Their idea seems to be "let's just be Denmark”.

I've seen none where this is the case.

> And the issue with progressive systems is that all other things aren't equal.

You can compare situations where things outside of the tax system are, if not perfectly ceteris paribus, at least more comparable than in normal country-v.-country comparisons, like comparing the US before Reagan's tax burden shift to the US after. And when you do that, suddenly progressivity and inequality become opposed. It's only when progressivity is offset by something that mitigates it's ability to drive down inequality that it doesn't have that effect.

> Progressive tax systems don't work.

But they do. The fact that they can (and in the case of the US absolutely do) have their effects offset by larger effects of other aspects of policy that are directed at opposing ends doesn't mean they don't work, it means that if you want reduced inequality, you can't crank those opposed policies up when you crank up progressivity, you need to at worst leave them alone or, better, dial them down.

> The idea of upward and downward redistribution also sounds like something beloved of theoreticians.

It's simple fact if you take money in and send money out, you are either sending the average dollar back to someone who has greater, equal, or less wealth, income, or whatever measure you are concerned about than the person the average dollar came from.

> as an example: the idea of a "single payer" health system is just preposterous

That isn't really an example that clarifies and supports your conclusion, since it is itself an unsupported and equally controversial conclusion to the one it is offered to support.


I think you need a longer answer than this, because the marginal rate was indisputably higher than this before.


http://gabriel-zucman.eu/files/PSZ2017.pdf - my reply was sufficient, you are just having trouble because it doesn't match with whatever you conclusion you jumped to without data.


Your own link states that there used to be a 70% marginal rate.


I think he means effective marginal rate. 70% is nice and all, but when you are able to deduct 40% of that, is it really higher than 30%?


“Effective marginal rate” is a nonsense phrase. We can discuss marginal rates or effective rates but you can’t combine the two.

I assume the other commenter is doing the standard, “that rate doesn’t really count because nobody really paid it.” Which is a perfectly good point, but it’s not accurately expressed by pretending that marginal rates weren’t that high.


You can absolutely compare effective marginal rates; if you have effective rate data by income level, you can calculate from that effective marginal rates, which are simply the effective rate on the difference between the nth and (n+1)th dollar.

OTOH, because one of the big ways this is manipulated is by income that isn't “counted” as income, getting good data from which to estimate effective marginal rates is tricky and you end having to make assumptions that are hard to validate.




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