For Dell’s Billionaire CEO, Taxing the Ultra-Rich Is a Joke
inequality.org
inequality.org
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...
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.
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?
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
Why does the funding of current projects affect you level of support for different projects? That's sunk cost fallacy.
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.
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)
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?
Major corporations won't de-list from the NYSE/NASDAQ for tax savings.
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?
Also billionaire philanthropy probably wont tackle the problems or solutions that will help society but hurt billionaires.
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.
What's wrong with trying new things?
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.
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...
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).
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.
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.
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.
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).
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.
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.