Instead of Criticizing Billionaires Over Taxes, We Should Praise Them

Varth

4 years ago

Real property is taxed because it exists, is unique, and is not transportable to another physical location. The Sovereign exercises jurisdiction over the real property within its domain. Great news Serfs are no longer bound to the land.

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Anon1970

4 years ago

I never had a problem with Bill Gates becoming a billionaire. The programs sold by his company or bundled with my home computers over the years have been of tremendous value to me. I do have a problem with Steve Job’s estate being subject to little or no estate taxes after he died. As best as I can determine, his wife inherited billions of dollars of Apple stock without estate taxes being paid on this fabulous fortune. But that is not the fault of the billionaires but of our estate tax laws. Our income tax system has always favored married couples over single people.

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oee

4 years ago

These companies exist because of the INTERNET THAT GOVT CREATED!

The Google algorithm was funded by the National Science Foundation-govt money! The computer industry was created by govt. Used to crack the enigma machine and Eniac used to launch balistic. Read your history!

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Captain Ahab

4 years ago

Reply to oee

At the same time, we are seeing companies uniting with government to invade our lives. Was this the plan all along? For example, Apple, supposedly on its own volition, is now scanning your cellphones and computers for (hashes of) images that might be child porn. What’s next? scanning messages sent to websites like this?

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oee

4 years ago

The charitable contributions are TAX DEDCUTICBLE so they are not doing anyone a favor. You and I are paying for it.

Microsoft & Amazon

Benefit from public largess. It was the us govt that invented…the internet. They benefited from the fact that they are using a public good.

Amazon was able to grow because of a Supreme Court decision named Quill in 1976 which prohibited state to levy sales taxes on catalog sales if the entity did not have a precense in the state of sale.

You are DEAD WRONG AS ALWAYS. In fact you benefit by using the internet to spread your nonsene.

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Felix_Mish

4 years ago

Well, I think we can all agree that today’s tax subject has brought out a flood of spectacularly delusional thinking by those other guys who don’t agree with us.

Say, sport, toss me another cool one while you’re up, ’cause I got something profound to say. … Burp.

See, for the last 100 years, the feds have mostly divvied out money they got just from income taxes. But, lately, they’ve been sliding in a wealth tax to pay for – I dunno – half their take, now days? That wealth tax is in the form of what we call borrowing. ‘Cept borrowing is misleading. ‘Cause it’s never paid back! Just re-borrowed. And, the cost of collecting this wealth tax? Well, that’s accounted for. It’s called interest. Think of the interest paid on the national debt as kinda equivalent in function to the IRS’s budget plus the budget for all the income-tax-related overhead imposed on people and companies and such.

Now, I’m wondering. So long as that interest is paid to the feds, well, we’re talking about a very cheap taxation system, aren’t we?

And, the special beauty of this is those who pay the tax are those whose value is tied tightly to the US dollar. The dollar being what it is, plenty of foreigners pay to run the US government! Sweet.

Burp.

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Carl_R

4 years ago

Reply to Felix_Mish

Even better, when the interest rate is less than inflation, the interest cost is negative.

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Felix_Mish

4 years ago

Reply to Carl_R

Score!

And, so when printing, er, I mean, borrowing gets exuberant, inflation takes care of itself.

No, wait! That interest was going back to the fed kitty, so it makes money for the government. No reason to pay the fat cats, after all. But, if interest is negative, that means the fed loses money. OMG! This is such a tangled mess.

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Econoguy

4 years ago

We need to stop conflating percentages with absolute dollars. It confuses the discussion and distorts facts. No Mish, economic impact is not part of the current basis for the federal tax code. It’s a nice argument but it takes us nowhere. Where tax liability is de-linked from income, as in sales tax and property tax, the rich are indeed paying their share but so are many others. If you live in a state that has not placed caps on annual increases in property tax or placed caps on assessed or real market valuations, you could be seeing large increases in property tax liabilities and this applies to the rich, semi rich and moderately rich and I some cases, the coveted middle class. It’s no wonder that rents are going up. My former place in Portland, Oregon would require a base rent of $1800/month just to cover property tax and HOA fees! It’s not a surprise that states that do not rely primarily on income based taxes are over flowing right now in their respective treasuries.

We have a basic problem at the federal level. Income based applications of tax rules have many legal outs if your income is not W-2 based. Your legal outs if it is W-2 based is almost nil. And a funny thing happened on the way to the last federal income tax reduction. While the marginal rates were indeed lowered, the effective rate reduction was pronounced at the upper end as the income tiers were quietly tinkered with too. Paul Ryan had little to say on this topic. But who actually wants to look at income tax tiers anymore? Certainly single filers should as they are being hit big time at both the state and federal level. Who pays taxes and how much is a big issue. But our basic tax structure, federal, state and local is all over the map. At the federal level, it is also all over the map even if the data is telling us that the top brackets are paying a big percentage share. We have a big problem: bottom tiers pay little as far as income tax ; the mid to upper income W-2 earners are hit hard and the very top are under contributors in an absolute level when isolating just income as a basis of taxation.

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Casual_Observer2020

4 years ago

The tax code needs to be rewritten to favor productivity growth. Then and only then will true growth return to the real economy. Right now we have and had a single monolithic tax system that treats all profits as equal. The FIRE economy is not real or productive. Neither is education or most basic health care. Until the system starts rewarding productivity growth over other funny money, then nothing will really change. The best way to deflate this asset bubble is to have a tax code that takes money and invests it. Most money now is a mal-investment with money chasing after asset values and very little in the way of real businesses with productivity growth.

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Captain Ahab

4 years ago

Reply to Casual_Observer2020

So education that prepares the engineers, inventors, business owners etc, is non-productive? And the doctors, nurses, hospitals etc, that keep the employees alive is non-productive? And the FIRE category, which plays such a big role in the allocation of capial and management of risk–that’s also non-productive? Give me a break.

Now, if you said the breakdown in capitalism–mal-investment, low productivity etc. is the DIRECT RESULT of the Fed…

That said, if there is ONE sector that is less than optimally productive it is…. GOVERNMENT. Indeed, it is government that reduces the productivity of the rest of the economy.

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numike

4 years ago

blah blah blah blabba blah

it comes down to: “If you cant dazzle them with brilliance, than baffle them with bullshit”

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shamrock

4 years ago

As a follow up, taking Warren Buffet as an example, pro publica says he averaged $5m in taxes each year from 2014 to 2018. It’s reported that was about 17% of his “income”. His net worth is around $80-100b in that time, so Buffet paid around 0.5% ($1 out of every $200) of his wealth in taxes each year. You think that’s his “fair share”? I don’t.

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Casual_Observer2020

4 years ago

Reply to shamrock

The other way to skin this cat is with a corporate AMT of 7%. Basically if your corporate assets made money (even if that money is held in a fund), unless you are an individual, you must pay a corporate tax of 7% per year. There is no getting around this unless you LOSE money. No loopholes, no nothing. These “companies” that are basically individuals are escaping taxes at every turn. The way around this is to subject them to corporate AMT.

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StukiMoi

4 years ago

Just tax property. Anything else is nothing but an invitation to spy, and to shift costs for the fundamental service government provides, property protection, onto others. Subsidizing the idle, at the expense of the productive.

Property taxes are self enforcing (if you don’t tell the government you own it, they won’t help you protect it), hence efficient as whatnot. Something NO activity (sales, income, excise..) tax will ever be. Hence won’t create an industry of completely zero productivity tax minimizers. Meaning, al those people could do something useful and productive with their lives instead.

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Mish

4 years ago

Reply to StukiMoi

Taxing property is not right at all. It implies you never own anything.

F That

Our property taxes in Illinois were 15,000 a year on a $400,000 home.

F that too

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shamrock

4 years ago

Reply to Mish

Other than the welfare state, the majority of government expenses goes to protecting property. Why is it not reasonable to tax the property? Of course a better system would be to let property owners get their own police and fire protection, but there still needs to be a government run court and prison system, as well as a national defense.

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Mish

4 years ago

Reply to shamrock

How much pensions and salary are we paying police and fire?

There should not be public unions.

Otherwise, you have a reasonable point. But I also see nothing wrong with volunteer fire departments. That too would cut costs.

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StukiMoi

4 years ago

Reply to Mish

“It implies you never own anything.”

No, it doesn’t.

It only recognizes that in order for you to “own” something, someone has to protect that claim. That protection is not free. Someone has to pay. Why on earth should that someone, be anyone other than the guy “owning” the stuff?

After all, you always have the option of not paying, hence not getting government help protecting your property. Perhaps get some sandbags and a pile of ammo instead. Works like a charm in most of Afghanistan. Worked pretty well in the US as well, back in the day.

But if government is going to protect your property, why on planet earth should someone else be forced to be footing the bill for them doing so?

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Varth

4 years ago

Reply to Mish

Real property is taxed because it exists, is unique, and is not transportable to another physical location. The Sovereign exercises jurisdiction over the real property within its domain (Any Sovereign that does not is not a functioning government – many countries have this and the warlords do quite well). Great news, Serfs are no longer bound to the land. Will be happy to discuss with you why property taxes are good – at a certain level it compels transfers of ownership for nominally more productive use.

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Captain Ahab

4 years ago

Reply to StukiMoi

The problem begins with ‘the fundamental service government provides.’ For example, the DMV. Ever been to get a driver’s license? Car registered? Notice the sloth-like behavior? Now, multiply that through every government department, Federal, State, and Local. Ever had to get a problem resolved at the IRS? IMHO, they may be the worst of all, sloths with low IQ.

Here’s how to fix the tax problem. Start with a 20% across-the-board cut in government bloat. If service decreases, the next year’s cut another 10%. Limit total government expenditures (Fed, State. Local) to a maximum of 20% of annual real GNP. no matter what. Arrange the taxes any way you want–the amount ‘stolen’ will never be more than 20%.

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StukiMoi

4 years ago

Reply to Captain Ahab

“Limit total government expenditures (Fed, State. Local) to a maximum of 20% of annual real GNP. no matter what. Arrange the taxes any way you want–the amount ‘stolen’ will never be more than 20%.”

Problem is, the money spent complying with mandates and arbitrary laws; which are just as much government expenditures, simply slightly obfuscated to fool the drones; will very quickly eat up the rest of the 80%.

Look at US healthcare: At least as effectively socialized, hence inefficiently rendered, as in the more formally “socialized medicine” world. Government mandates effectively forcing people to contract with nominally “private” entities, are just as much government as if the entities were nominally “public.” Only difference being, the former makes it easier to fool the easily fooled into accepting transferring peoples money to favored connected leeches; by pretending they are “executives”, “shareholders” etc. of something other than thinly disguised theft rackets adding no value at all.

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Carl_R

4 years ago

I believe that the data in the chart above is seriously wrong. Why? Because a significant amount of taxes that are paid are paid by businesses, including big and small, plus by landlords. Those, in turn, can’t really “pay” taxes, since they are not consumers – i.e., they don’t pay the taxes in alternative of consumption. Rather, businesses and landlords are tax collectors, rather than payers; they do remit the money to the government, but they turn around and include it in their prices, and collect it from their customers and tenants.

Thus, when you buy a package of toilet paper at the grocery, and the price is $10, of which perhaps $3 reflects taxes paid by various corporations along the way, who then collect it back from you. When you check out and another $1 is added for sales tax, you paid a total of $11, $7 for the paper, and $4 in taxes. When you pay $1500 in rent for your apartment, the landlord passes perhaps $200 of that through to the government in the form of taxes on the property.

If you compute the taxes paid by the bottom 20%, and include all those pass through taxes that businesses collect from the end consumer, I believe that the percentage would be much, much higher than 2%, and in fact, higher than the 2.8% that is their share of income. In fairness, though, when looking at this, you should subtract government entitlements from the taxes paid to get a net, in which case the bottom 20% would almost certainly be negative. In other words, they pay far more taxes as a percentage of their income, but they get more benefits than they pay in taxes. Still, when you do the same thing for higher brackets, where they are not getting many government entitlements, the total taxes may be regressive rather than progressive, which is because corporate taxes are so regressive.

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Mish

4 years ago

Reply to Carl_R

Again,

I would not tax food, medicine, and some clothes items in my proposal.

That would apply across the board and thus be fair to everyone.

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Carl_R

4 years ago

Reply to Mish

I agree. I also think that the best taxes are consumption taxes, and that they can easily be progressive. They used to be called “luxury taxes”, but there should be a very high tax on consumption of big ticket items, and the bigger the ticket, the higher the tax should be. Buy a sailboat, pay a luxury tax. Buy a yacht, pay a large amount of luxury tax. Buy a grossly excessive yacht (Bezos), and pay a massive tax. Similarly, buy a cheap wine, pay a tax, buy and expensive one, pay a large tax.

Do I care if Bezos has a lot of money, so long as he keeps reinvesting it, hiring more people? No. But, when he starts spending it on his own consumption, he should pay a tax based on the amount of consumption.

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Captain Ahab

4 years ago

Reply to Carl_R

Don’t forget to include the untaxed gov’t/non-gov’t benefits people receive as ‘income’. BTW, if you do the math with ‘benefits’, the vast majority of immigrants NEVER pay for themselves. Think of it as a loss leader–maybe their grandkids will pay for themselves.

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Carl_R

4 years ago

Reply to Carl_R

Just to be clear, I’m not opposed to corporate taxes. I favor them. I think we should increase corporate taxes, and eliminate income taxes for anyone with income under $80,000, which would reduce the paperwork for millions of Americans. They’d actually pay more taxes, but be oblivious, and not realize they were paying them, and would pay their “fair” share without complaint.

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Casual_Observer2020

4 years ago

What we actually need is the 7% corporate AMT to apply. This is fair and the minimum cost that companies can pay for things like roads, airports and other infrastructure. I believe Amazon paid no corporate taxes for a couple of years. It is high time more loopholes got closed no matter how many “jobs” they create. Until recently, most Wal-mart employees were still on public assistance.

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Mish

4 years ago

I added a significant addendum regarding a better tax structure – Something I have proposed before.

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Eddie_T

4 years ago

Reply to Mish

Thanks.

Realize that I admire entrepreneurs and the good things they do. But it’s a complicated situation, and the evolution of the business model over our lifetime has been a trade-off in many ways.

Mom and Pops still employ half the people in the country who have jobs, but when all the Mom & Pops shut down last year it barely made a dent in the payroll picture…..because far and away, the lions share of wages come from corporate payrolls.

This makes some people’s lives better and easier, but it makes the country on the whole far less resilient, because we no longer really have much in the way of local economies…..no local retail, no local food production, no local energy sources……etc.

Walmart killed main street and Amazon is killing Walmart. What do we do if the monopoly provider of all things gets mismanaged and run into the ground? Where will we buy our toilet paper then?

We are also increasingly without ties to kinfolks, the land, local cultural traditions and the benefits of extended families. Gen Z is the most depressed generation in history. They don’t know why they’re alive. Everywhere you look, nihilism has replaced work ethic and hope.

So…..we are so dependent on BAU, that an end to an economic system that depends on unlimited y.o.y. growth forever….in a world with demonstrably declining resources…..is a bug looking for a windshield.

So that’s another reason I think modern life here in the heart of the empire is a mixed bag.

Would a fair tax structure make me a happier guy? It damn sure would, but it wouldn’t solve nearly all the problems we have in this corporate controlled environment. We have made corporations too strong…..that much I’m sure of….how to fix it now? I have no clue, and I really don’t expect it to get fixed.

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Carl_R

4 years ago

Reply to Eddie_T

Define “fair”. That’s the problem. We all want a “fair” tax structure, but no two people can agree what that is. Would it be fair for the top 1% to pay 90% of all taxes? 75%? 30%? 20%? And, why did you pick that number?

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Eddie_T

4 years ago

Reply to Carl_R

It’s not that difficult…..

If I pay half what I make to the combined various taxing entities that want a piece of my hard-earned money, then I think it’s reasonable for me to pay a bit less…..and for the Gods of Industry (like Donald J. Trump for instance) to pay SOMETHING.

Bezos paid zero personal income tax in two of the last 20 years from what I read. In the year of his unfortunate divorce, he paid no tax and hit the government up for a $1000 tax credit for each of his 4 kids.

That, Carl is obscene.

I’m not whining about nickels and dimes here.

What bothers me is not people making lots of money…what bothers me is that opportunity for ordinary people to prosper, and for hard-working, decent, smart people to bootstrap themselves and make a better life….is no longer nearly as easy as it was when my father was a young man…..it’s even harder than when we were young.

This is largely due to successful lobbying by the minions of the corporate rich in this country.

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Casual_Observer2020

4 years ago

Reply to Carl_R

If the top 1% have 90% of the net worth of the entire country, then you could have it indexed to how much they own. If they own less (e.g. they are distributing more profits to employees and shareholders) then they can pay a lower rate).

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Captain Ahab

4 years ago

Reply to Eddie_T

BTW, those small businesses who employ ‘half the people’ are a large part of the non-tax-paying cash economy, either by withholding income or personal purchases on the business account. The most often used justification: I don’t pay myself a salary.

Incidentally, Walmart did NOT kill America, and neither did Amazon. The people killed America in a constant search for lower prices and efficiency.

I do agree with inherent problems in ‘growth forever’ . As long as growth is predicated in terms of ‘more stuff’, and not ‘more quality of life’, the Earth will continue to suffer.

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Carl_R

4 years ago

Reply to Captain Ahab

As a small businessperson, I am offended at that. There are some small businessmen who cheat, and some large one, and some government employees as well. That’s why we have an IRS. Once upon a time, small business was the backbone of America, the source of much of the middle class. Not so, anymore. It’s all about big business and government. Covid showed that small business is irrelevant. All of us got crushed, and it made not even a blip in GDP.

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Casual_Observer2020

4 years ago

Mish you miss the point as to why these companies should be broken up. They are all double dealing and violating all kinds of existing antitrust laws. I have no issue with how most of these companies started but they are not that anymore. You can’t even think about starting a similar platform for any kind of competition because of the market power they have obtained through violation of antitrust laws which are not enforced.

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Casual_Observer2020

4 years ago

Everyone should get the same amount of stock as the CEO. We can all be billionaires ! LOL.

The real question here is for these billionaires, what percentage of work did they do to MAKE THE PRODUCT and NOT JUST THINK OF THE IDEA. The answer is closer to zero. For this reason, I think there should be more equitable distribution of stock options and restricted stock units that are handed out. At most companies, this is still very skewed toward the board of directors and senior management. Of course you would only know this if you actually worked at one of these places.

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StukiMoi

4 years ago

Reply to Casual_Observer2020

Most of them make no product, and have no idea…..

Entrepreneurship, ideas and efficient making are all great. But in our financialized dystopia, even bona-fide smart guys with great ideas and execution, like Page/Brin, owe far and away most of their current billions to none of that, but rather to central bank redistributing other people earnings their way by way of asset pumping. Neither of those Googlers would be poor even in a Fed free world, but neither would their life’s work be sullied by the knowledge that 90% (+/-) of their wealth stems not at all from creating actual value. But rather on simple theft by The Fed.

And that’s those two. Exceptions to the upside if there were ever any (Much vilified Koch family being another, increasingly rare, example of someone doing at least something useful in exchange for it all). If you look at any “Billionaire list”, most have done nothing, understood nothing, created nothing, and had no idea about anything whatsoever. Instead being handed _all_ their billions purely by way of Fed redistribution to its favored classes of FIRE racketeers, ambulance chasers, regulation and mandate profiteers, patent trolls and others of those non-productive ilks. That’s what the real “billionaire lists” are filled with. The Googlers being little more than a red herring, at this point in The West’s decay onto nothing more than a financialized dystopia.

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Doug78

4 years ago

Back to Hard-Core Libertarian channel.

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Cocoa

4 years ago

Because Bill Gates made bad products and took good products off the market using predatory means.

Google offers free and you get what you pay for…they spy on you and sell your info.

All of these guys make money off of stock options and insider dealings…not salaries. It’s hard to tax them proportionately when the system has a flat fee for capital gains. I am sure they pay enough on their wages, since it’s usually very small part of their wealth.
France tried a “wealth” tax on the appraised value of their assets(which either had taxes paid on already OR they have unrealized gains on those assets) so the wealth left the country. If you owned assets over 1.5 million in euros. How dumb was that?

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Carl_R

4 years ago

Reply to Cocoa

The US has a “wealth tax” that applies to some of the assets of corporations, in the form of real and personal property taxes. Buy a new printer or server, pay tax on it for 5-7 years. Buy a desk, or a manufacturing robot, pay taxes for 10 years. These are at the county level, by the way. They don’t apply to financial assets, though.

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shamrock

4 years ago

It’s almost impossible to say how much “the 1%” pay in taxes because they pay tax on declared income, not wealth. For example, there is no question that Buffett and Bezos are in the 1%, but if they only have $250k in income then they are paying very little and they wouldn’t show up as being in the 1% that year.

If you could somehow take the top 100 wealthiest people in the United States, get their tax returns and see how much taxes they actually paid, that would be a better measure.

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Eddie_T

4 years ago

Reply to shamrock

So….good comment, but now I think you’re aiming high.

The .01% is a good place to draw the line….and that would include several tens of thousands of people, not just the top 100.

The real inequality takes off once people hit a net worth of roughly 10 million.

My own earned income over the past 20 years has been roughly 6X the salary Jeff Bezos drew as CEO of Amazon. Most of the taxable income he has is money he paid to security services that the company can’t write off, roughly 1.6M a year.

https://www1.salary.com/Jeffrey-P-Bezos-Salary-Bonus-Stock-Options-for-Amazon-Com-Inc.html

For Mish and anybody else, take a look here to understand why I don’t go ga-ga over how much tax billionaires are paying. I have a sneaking suspicion I’ve paid as much or more than most of them, and I’m a guy who gets up and goes to work every day to earn my bread. No stock options.

https://review.chicagobooth.edu/economics/2017/article/never-mind-1-percent-lets-talk-about-001-percent

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anoop

4 years ago

very disappointed with this post, mish. if they have fooled you, that explains why they have fooled the whole world. i am not happy with big tech because they are monopolies that *squelch* innovation. the only innovation that they are doing nowadays are in the areas of mass surveillance and lobbying for sneaky laws that kill any chance of competition.

the solution is not in tax, but enforcement of existing laws against monopolies. other than that, there is no hope.

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StukiMoi

4 years ago

Reply to anoop

The solution is in LESS laws. Not more. Monopolies, aside from natural ones which are efficient hence “good”, arise because of laws. Not from lack of them. Absent laws enshrining its monopoly, even The Fed wouldn’t be a problem, since anyone else could print dollars for their buddies just as easily as The Fed can….

If “big tech” squelch innovation, it’s because IP protection laws are excessive. Preventing any old Chinese, or American, or Russian/Palestinian guy from taking the best parts, improving on it and selling it at a discount, without a concern in the world about lawyers, courts and other heavy handed byproducts of totalitarian states.

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Captain Ahab

4 years ago

What about netting gov’t benefits received from total taxes paid? In which case, how much of the ‘bottom’ category pay negative taxes?

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Art Izagud

4 years ago

Progressive is just tear it down Bolshevism. It cares little for rationality and primarily for power. It appeals to the disempowered and is generally a check on the powerlessness of being exploited by crony capitalist forces. Of course crony capitalists, their apologists, and rationalists in general don’t get this though, so they become even more righteously abusive and ideological, even in the face of bread lines and homelessness to the point of creating a class that has nothing to lose, and so just wants to destroy and start over. This is what we are seeing and will continue to see. While I wont be joining the Progressives in their subconsciously destructive intentionality, I cant say that I blame them, and welcome a karmic hit to the materialistic status quo that rationalizes building adversaries and limiting Liberty for mcmansion lifestyle and soulless statistical safety.

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Captain Ahab

4 years ago

At 12:00 noon, today, the House reconvenes to pass the $3.5 trillion boondoggle. Enough said.

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Eddie_T

4 years ago

“Despite attempts to minimize taxes, the top 1% pay 24.1% of all taxes. The top 5% pay over 40% of all taxes.”

But how does the bottom of that 1%, who are barely above middle class, compare with the top .01%, as a percentage of all taxes paid?

I complain all the time about journalists doing this, which is aiming too low, and conflating high income middle class people like doctors and lawyers, with the real rich, who are hedge fund managers and billionaire entrepreneurs and the intergenerational wealthy.

Of course billionaires don’t pay much income tax at all, considering their real take, which is not income at all , but ROI. They can build tons of equity and borrow it back and never pay a dime in tax.

So this is quite deceptive, I’m sorry.

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whirlaway

4 years ago

Reply to Eddie_T

Exactly. The net worth of the bottom of the top 1% is about $11 million i.e. barely double-digit millionaires. Even the bottom of the top 0.01 percent is at $371 million. IOW, that person is not even a billionaire. One has to go to 0.001 percent and below to see the real billionaires.

So Mish is being obtuse, and I would say, deliberately so.

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tbergerson

4 years ago

There is a balancing act between taxing people and fostering innovation for sure. Google has been highly innovative. So too the others (ok, well maybe not Facebook). Taxing the rich because they are rich surely does threaten to kill the goose. On the other hand it is undeniable that the gap between the wealthy and the not has grown to dangerous levels. The share of output going to labor has dropped and the share to the very very rich has increased a great deal. FRED has nice charts on that.

But, for me the solution is obvious. One of the oft-stated pet peeves is Buffett’s. Why does the secretary pay more than the billionaire in rates. Because…capital gains. There is no principled reason why this should be. But there is a historical practical reason. The problem is double-taxation. Corporations are state created entities deemed to be persons in some legal respects that allow for limited liability and the pooling of capital to undertake ventures for profit. By some it is considered one of the most important inventions in all of human history. But they are merely fictitious stand-ins for actual people who ultimately own them through shares.

If you tax the earnings of a corporation when they are earned, and then you also tax both the capital gains and dividends to the actual people who hold shares, you are taxing the same earnings stream twice. The downside of that is it becomes less appetizing to employ capital in corporate undertakings. But the functioning of the economy and the creation of jobs for labor relies on such undertakings. So the left, who never saw anything they didnt want to tax, and the right made a compromise. Tax the corporate earnings, but then tax the distributions (whether capital on selling shares or dividends) at a lower rate. And voila you have a perennial political issue for everyone to run on for their base. Brilliant.

The solution is to NOT tax the corporation, but tax dividends and cap gains at ordinary rates (with a suitable discount for cap gains due to inflation over the longer term). That way the rate is the same for all in any bracket and labor and capital are equalized in their treatment, which makes moral sense. But given that politicians rarely care about actually solving problems, and in fact usually prefer not to as they then have no issues with which to bludgeon their opponents (there is a name for this in political theory I cannot recall) this seems unlikely to happen.

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whirlaway

4 years ago

“For starters, billionaires do pay taxes but through legal avoidance techniques minimize them. “

And the “legal avoidance techniques” exist because E = mc-squared ?! LOL. No, they exist because the billionaires (who own the government) want them to exist.

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Captain Ahab

4 years ago

Reply to whirlaway

For example, an oil company spends billions in exploration and drilling. The vast majority of those costs are not expensed, but are taken over time (many years) as depreciation and depletion allowances against revenue received from oil sales. Let’s eliminate all such ‘legal avoidance’ allowances. And then what?

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whirlaway

4 years ago

Reply to Captain Ahab

Depreciation allowances are mainstream tax law. I am talking about carve-outs that only help the big corps and the billionaires.

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dbannist

4 years ago

It makes as much sense to criticize the rich for paying no income taxes as it does to criticize the poor for paying no capital gains taxes. You cannot pay taxes on money you never made, whether you are rich or poor. In reality, the rich pay most of the taxes in the USA. It’s a straw man argument that the rich pay no income taxes. That’s clearly cherry picked data, strategically chosen by the left to win the poor to their side via their ignorance.

I do believe America is in trouble when more people are demonizing the rich and allowing the poor to live without working. Both of those conditions are ripe for disaster.

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StukiMoi

4 years ago

Reply to dbannist

“I do believe America is in trouble when more people are demonizing the rich and allowing the poor to live without working. Both of those conditions are ripe for disaster.”

America is in trouble because the poor don’t work. And neither does the rich. In financialized dystopias, all outcomes are a result of redistribution by the money printers. Work is…, a…, huh??

Living off of rent in a world where potential competitors are barred from building and offering cheaper and better accommodation, or from “investments” backstopped and pumped up by central bank redistribution, off of “court judgements”, “regulatory compliance” etc., is no more “working” than schlepping it to a welfare office is. The de facto welfare checks, as always paid for by funds stolen from the productive, which the former groups of leeches get to collect, tend to be a lot bigger, though.

End result is, someone has to pay for it all. And the only someones who can, are the dwindling number who still bother doing real-, not make-, work. As in, the ones creating actual value. The cost, to them, of carrying the rest of the dregs drive up their costs. Until they can no longer compete. At anything whatsoever. Which is America anno now. A useless clownshow living solely off of burning seedcorn built up by bygone, pre financialization-theft, generations.

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threeblindmice

4 years ago

“If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.” – the Left.

“I hate the rich more than I love the poor.” – Also the Left.

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Instead of Criticizing Billionaires Over Taxes, We Should Praise Them

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