What "loophole" is being closed here? Having wealth?
The US used to have an income tax that was over 90% for the highest income bracket. Bringing it back would be a step in the right direction, but not enough, as non-income-based wealth would be untouched. If it was up to me, I'd tax wealth over $1 million at 90%. It's laughable that these billionaires are complaining at being taxed a mere 6% on wealth over $1 billion.
There are different kinds of incomes like capital gains which is a different discussion and one that many people agree with raising.
> "I'd tax wealth over $1 million at 90%"
You'll lose most tax income. Every entrepreneur will leave. And the middle class (which builds up more than that over a lifetime) will be decimated. It's a great way to crash a nation.
It's been a long time since I looked in to this, but it used to be the case that if you gave up your US citizenship while having a net worth of over $100,000, it was assumed by the government that you were doing so for the purposes of tax evasion, and they'd continue to tax you for the next ten years.
The same could be done here, with the government getting 10 bites of 6% at wealth over $1 billion if the billionaire tries to run away. Taxation could also be made retroactive, if there was a political will to do it.
If some entrepreneurs leave others will step in to take their place.
As for the middle class being "decimated", I doubt it, as the median net worth in the US is only around $70k.
The majority of Americans won't be affected by taxes on millionaires.
Your plan does not lift anyone up and create wealth, it brings everyone down and destroys it.
As far as creating wealth, I have no problem with it as long as it's shared. When it's hoarded by a tiny minority it leads to them having a greatly disproportionate concentration of power where they basically get to rule over the rest of us.
That's what I object to.
Nobody complains when the entrepreneur goes bankrupt from a failed business. Is society going to absorb those debts too then?
Wealth is power, but raising taxes is transferring it to politicians who already have political power. It's only being further concentrated, and that's a dangerous precedent that we can see from state-controlled economies like Russia and China.
There have been a number of articles posted to HN and elsewhere which argue that luck plays a great role in success. Furthermore, the rich need not be providing any value, as they could simply be ripping people off (with extremely egregious and famous examples like Enron or Madoff, but there are plenty of others, most of whom don't make the news), exploiting the poor (see Amazon's treatment of its warehouse pickers for another famous example that's pretty close to home.. or the use of sweatshop labor to build products the world round), or they could be bribing politicians to grant them favors in the form of laws that are beneficial to them or just outright government contracts which they don't deserve, or they could be manipulating consumers through advertising to buy stuff they don't need and otherwise wouldn't have wanted and that might not work anyway or have a variety of deleterious effects (like the endless list of quack cures throughout history which made their sellers very rich but the patients very sick)... the list goes on and on.
"Nobody complains when the entrepreneur goes bankrupt from a failed business. Is society going to absorb those debts too then?"
Remember the government bailouts of banks that were "too big to fail"?
"Wealth is power, but raising taxes is transferring it to politicians who already have political power. It's only being further concentrated, and that's a dangerous precedent that we can see from state-controlled economies like Russia and China."
I am against the concentration of power in the hands of politicians as well. There needs to be more, and more effective direct democracy in the US, rather than buring our heads in the sand and leaving up to the political class to worry about politics. That needs to be done hand-in-hand with a greatly improved education in civics, history, ethics, and reasoning, so people aren't so easily manipulated and mislead. In any case, there are lots of problems to solve, and the concentration of wealth is just one (though a critical part) of what needs to be done.
Ripping people off is already a crime. Exploiting the poor is a complex equation of personal choices and societal policies. Bribing politicians is an issue with govt politics (something I've stated several times). Poor corporate practices require regulation. Taxes do not solve any of these issues.
The bailouts were completely paid back with interest. It was one of the few examples of good govt spending and one of the best investments ever made. And it wasn't about saving a particular business but rather ensuring we don't go into a greater depression. Is that what you would've preferred?
Most Americans will never be a millionaire or a billionaire. This is statistics, not feelings. There's no point in them supporting policies enabling such disparity in the economic system.
You squeeze more from capital (who has been raking labor over the coals for the last 40 years) for labor. What's capital going to do, leave the country? We'll tax it on the way out, and we still get to keep the market if you want access to it from the outside.
Disclaimer: My politics are firmly in the democratic socialist camp. Allow success, but not too much, and make failure cheaper and less painful.
My point remains that if these policies don't change now, more taxes will change nothing while concentrating more money/power into a few political hands that have proven to be bad at spending it.
Not in most of California or any other 'wealthy' state, it wouldn't. I know people making $18/hr and more than half of their post-tax income is going to rent ALONE.
I'm the person paying literally the cheapest apartment rent in the entire county, because of being grandfathered in due to long tenancy. $1300/mo. Everyone else in the same complex, for fewer or the same amenities, pays easily $300 more. Rent everywhere else runs about $1800 and quickly rising.
$10 million is enough that you can take 2.5% every year as $250k of income, and spend 0.5% on the fiduciary wealth manager's fees, and still have investment distributions and interest on the principal that outpace inflation in the long term. A household of one or two people can live its entire lifespan on that, without ever trading hours of labor for cash again, and then pass the same privilege down to a single heir, until civilization collapses.
$250k/year is a reasonable and sufficient retirement income. $10M is a plausible sum to accumulate through labor-selling alone, for one or two people each working for 2000 hours/year over 40 years, at an average combined rate of $175/hr, all while spending $100k/year on expenses and devoting $250k/year to savings. It does not blatantly flaunt the "diligent and/or intelligent work generates wealth" story.
The temporarily embarrassed millionaires all around the US can plausibly get there, if nothing else goes wrong, and they don't even have to cut expenses down, if they get paid enough per hour.
$250k/year is about 4x the median household income in the US. It can support most lifestyles less profligate than a person addicted to luxury travel, high-stakes gambling, top-shelf companionship-for-hire, or ultra-pure cocaine. And $250k/year can still be spent wisely and effectively by one household.
The thing about the government spending the money poorly is that they are still actually spending it. Spending is better for the poor than investing. When you spend money, the person you trade it to can go on to spend all of it themselves. When you loan it to them, or invest it, they have to give it back someday; it has strings attached. So the advantage of the wealth tax is in taking money that is not being spent, and putting it back into genuine circulation.
So then I take this reasonable number, and pad it by one order of magnitude, to absorb the edge cases that are still reasonable in person, but look bad on paper. Start the tax at $100 million in accumulated wealth, and tax 2.5% of everything in excess of that. Then deduct from that tax the payer's total spending (not loans or investments) in excess of $2.5 million, which is money that will count as someone else's income. If they can spend that much, the government doesn't have to spend it for them, and that spending will get taxed at a higher rate anyway, as income.
The rich and powerful also tend to associate mostly with their own kind, which will skew their world view and priorities.[1]
The unspent money can also be used as collateral or leverage to earn more money.
Finally, the unspent money can be passed on to heirs to create an aristocratic class who inherit their status -- something the US founders were explicitly trying to avoid when founding the country. Unfortunately, the wealthy have found ways of subverting their intent.
[1] - For an example, see the excellent Born Rich documentary, made by one of the heirs to the Johnson and Johnson fortune, where he interviews all his friends, who were also born in to extremely wealthy families.
Most people spend 9 hours a day walking down to the river (commuting), filling their vessels (working), and carrying them back home (commuting). Some people also have an at-home cistern that they pour their vessels into (savings) that provides a buffer beyond the home's immediate needs.
A smaller number of people have gigantic reservoirs (rich). They don't go down to the river themselves to fill up. There's no way they could carry enough with their own buckets to fill even a fraction of the volume of their reservoir. Instead, other people pour in a little every time they make a trip to the river, perhaps as part of a deal to supply larger buckets, or shoulder yokes, or carts.
The big private reservoirs remove water from the normal water cycle. When people use the water, it flows back into the river somewhere downstream. Sometimes different stretches of the river experience droughts or floods, and that is what those little at-home cisterns are good for. During a drought, the river narrows, and not everyone is able to fill their vessels all the way. And those giant reservoirs--which aren't actually being used, but instead protected against leakage, siphoning, and evaporation--each slightly reduce the water flow downriver.
During a drought, some people may resort to begging water from a private reservoir owner. And if they have stout legs and shoulders, the owners agree: you can take a little of my water, if you promise to give more of it back later (loans). Sometimes, even in good times, someone will get water from a reservoir, because the reservoir is closer, and they need more than they can personally carry, and they promise to put more water back into the reservoir later (investment).
But as the water is locked up in private reservoirs, the river slows to a trickle, and only the rich can drink without pledging some of their future water-carrying capacity to someone else. The reservoirs grow larger; the river shrinks smaller.
Water that is used returns to the river. The poor and middle class need the river, as it is their only way to drink without mortgaging their future away to a rich person.
You might already see the problem here. The river comes from water that has been used and recirculated (spent!). When someone uses reservoir water, and pledges interest or investment return on it, they are committing to put more of the circulating public river into the unmoving private reservoir.
The only way to refill the river from the reservoirs, and keep it in circulation, is for their owners to use more water. Or for armed river rangers to order them at gunpoint to drain some of it back into the watershed. There is a little natural rainfall, and a little from people melting glaciers a little bit at a time by holding chunks of ice under their armpits, amounting to about 2% or 3% of the known volume of liquid water, but all those existing reservoir pledges have already exceeded that influx.
If we have no privacy left, you monitor all that you do on any foreign or local card/transfer etc (you ban crypto and put insanely high fines/prison on using it) and if that seems not to match what you reported as income/capgains/etc, you get an audit. What is the point of being rich and evading taxes if you cannot spend it? And if you move it to foundations etc, at least you cannot get to it, nor can you family if they live in this (fictional?) country as they would have to explain the same things.
In a society (probably a democracy?) where people value privacy and non-draconian laws, I cannot figure out how to make this work. Besides having educated and patriot people who actually would choose to pay taxes for the greater good. But these people do not start on their own (Bill Gates example of not minding to pay more tax) and they usually believe they can do better things with their money (for humanity). And that is usually not the case or way too biased; their right if taxing is paid fairly, but if evading, a problem.
The problem is how govt spends money, not how much it collects.
And how does taking money from the billionaire help the people that can’t meet physical needs?