There is a reason why rich prefer tariffs over a progressive income tax.
https://www.ntu.org/library/doclib/2024/02/2021-who-pays-2-....
But given that the organization who published that was founded by a Newsmax board member, I'm sure they're trying to paint a clear and unbiased picture of things.
People will invest as long as the taxes aren't worse than income taxes. We don't need this much "encouragement" because stock market returns are high enough already.
A salaried person has to bootstrap a company using income-taxed money, whereas a business person can engage in creative accounting whereby an existing business can invest in a new business practically tax free.
If your average income tax is 35%, you're paying a ~50% premium to acquire the same assets as someone who rolls over money from business to business. This includes real estate and everything else.
Since the existing income tax has lower rates for long-term capital gains than earned income, and the rich defer taxes in various ways or use various tax shelters so they're not even paying that, and payroll taxes (~40% of federal revenue) have a flat rate with an income cap, the conclusion then becomes completely the opposite. They don't pay the income tax as it is but they'd have to pay the tariffs like anybody else.
As a percentage of their wealth they will pay a lot less than the middle class or poor do when it comes to any consumption tax or tariff. Because once again, the system is stacked in their favor.
If I were to steelman that argument, I'd say getting rid of income tax takes the wind out of the sails of the "wealth tax" / "tax the billionaires" / "fix the loopholes" argument which seem to be gathering steam.
That it kills or underfunds government social-safety programs is a secondary bonus, and using it as an excuse for decapitating safety/oversight/enforcement agencies who get in the way of higher profits via "overregulation" is a tertiary bonus for those that believe in starving the beast that is central government.
The trouble there is that those arguments are incoherent.
If you invest in something and then sell the investment at a profit, the profit is a capital gain. You know how much it is because there was just a transaction, you can spend the money, it's currently in cash so you're not being forced to sell an illiquid or indivisible asset in order to pay the tax on it, if you're using an income tax then that's income.
If you invest in something and its value goes up, that's not income yet. You only have the asset, not its value in cash with which to buy anything or pay tax. The value could go back down at any time. There may not have been any recent transaction so there is no objective way to value it. How do you tax something of indeterminate value owned by someone who may not have any liquid assets? So it only becomes income when you sell it at a profit, and then never selling appreciating assets is a primary way the rich increase their net worth without having taxable income.
There hasn't been any sane proposal for how to do it otherwise. You have some startup founder -- and this is actually the primary vehicle for billionaires to exist -- who owns a company that is now maybe worth a billion dollars. Or they could go bankrupt next year, nobody knows. She doesn't have a billion dollars in cash, she just owns the company, which itself doesn't even turn a profit yet. The only place for the money to come from is to sell the company. To get from a million dollar valuation to a billion, a company has to double every year for ten years. If there is a 25% tax on the unrealized gain, the owner loses 12.5% of the company every year compounding which means before ten years they no longer control the company. Therefore every large company ends up being controlled by Wall St. or foreign investors. That seems like a bad outcome.
Ownership of the company is the thing the money then going to tax had been buying the taxpayer. It wasn't more yachts or houses, for that they'd have had to sell the shares and pay the tax as it is. So that's the primary thing the proposal would be changing about the economy: Corporate ownership moves from domestic individual founders to corporate investment firms and foreign nationals.
The real problem -- that there is a company the size of a country -- still exists, but now all of those companies are controlled by mercenary investment funds instead of only some of them.
The actual cash that went to the government didn't come from the owners nominally paying the tax, because they didn't have any cash. It came from the people buying the shares being sold, or holding the ones being devalued by increased selling, i.e. those Wall St. investment funds. But that's not their money. They get control of the companies when their fund owns them, but the money is from retail investors. It's everybody's 401(k) and pension fund. So that's who ends up paying the tax, because forcing the founders to sell increases the supply of shares which lowers the price which reduces the returns from everybody's retirement account.
The people making tax laws mostly understand this, which is why proposals like that haven't gone anywhere and hopefully won't. But wanting that to happen is the argument that moving this rake out of the way is bad because it would make it harder for someone careless to step on it and whack themselves in the face.
Yes, if you pick silly numbers any policy can be made to look silly. A wealth tax would never use a 25% rate because that would eliminate most of the wealth in a few years. Wealth taxes are always very low rates, i.e., 0.15% in Belgium, 0.5% to 1.5% in France (note: France did see a temporary outflow of billionaires when they first introduced this tax, but as the tax is on global worth, only complete expatriation would eliminate the liability); Italy has a wealth tax on non-Italian wealth of about 0.75%.
Corporate ownership moves from domestic individual founders to corporate investment firms and foreign nationals.
No, the opposite is true, since wealth taxes would penalize ownership through holding companies (greater wealth), and a wealth tax would also apply to foreign nationals owning U.S. assets. The most likely implementation of a wealth tax would be progressive (like it is in France), which would harm greater accumulations of wealth, i.e., corporate holding companies.
The people making tax laws mostly understand this, which is why proposals like that haven't gone anywhere and hopefully won't.
America already has wealth taxes. In many U.S. states (and especially a number of so-called "business friendly" red states), businesses already pay the equivalent of a wealth tax on top of their property taxes (the name varies from state to state; in some states they are called franchise taxes, in others "business privilege taxes", some call them "fees"). The rates are all far below 1%.
But we're talking about a tax on unrealized capital gains.
A wealth tax has entirely different problems. To begin with, there are major asset categories with no objective way to value them, so how do you even calculate it in the absence of a sale, or prevent those assets from being used as a tax shelter?
Then you're creating a large economic distortion because the tax isn't accounting for risk. A low-risk investment might have had an inflation-adjusted return of 0.1%, but now it's -0.4% and an institution that needs to maintain stability and avoid value loss is forced into riskier investments.
A low rate is also self-defeating. If you use 0.5% against typical assets with a 10% annual return, it's equivalent to an income tax rate of only 5%, but you're still incurring all of the administrative complexity and still have non-trivial perverse incentives. But if you raise the rate to the level that "pay their fair share" normally implies, the perverse incentives become exponentially worse.
> No, the opposite is true, since wealth taxes would penalize ownership through holding companies, and a wealth tax would also apply to foreign nationals owning U.S. assets.
So now you're back to applying the tax to everyone's retirement account and not just "billionaires" and have given domestic businesses a competitive disadvantage in attracting foreign investment.
You want foreign investors to give you their money because otherwise they invest in competing companies in other jurisdictions. What you don't want is for them to get a controlling interest in your companies at a discount.
> In many U.S. states (and especially a number of so-called "business friendly" red states), businesses already pay the equivalent of a wealth tax on top of their property taxes.
And those taxes cause existing problems for them, e.g. companies then avoid setting up capital-intensive businesses in those jurisdictions. See also Land Value Tax debate.
This isn't new ground that nobody has thought of before. A number of countries already have wealth taxes. Unrealized capital gains are wealth, not income. They would be subject to a wealth tax until realized, and only subject to a capital gains tax when realized. This is why wealth tax rates are so low.
there are major asset categories with no objective way to value them, so how do you even calculate it in the absence of a sale, or prevent those assets from being used as a tax shelter?
Your paragraph assumes something that isn't true. The problem of how to value assets for taxation is older than electronic computers, and decades ago tax authorities set forth rules/guidelines for valuing difficult-to-value assets. In a nutshell: there are a variety of ways to value such assets, and as long as the valuation of an asset is reasonable within the rules of the governing jurisdiction, the tax authority will accept it (or be forced to accept the valuation by a court).
If you use 0.5% against typical assets with a 10% annual return, it's equivalent to an income tax rate of only 5%, but you're still incurring all of the administrative complexity and still have non-trivial perverse incentives. But if you raise the rate to the level that "pay their fare share" normally implies, the perverse incentives become exponentially worse.
This also isn't true. Again...wealth taxes already exist, and they're administratively easier to implement then income taxes. They're also not intended to replace income taxes; they're intended to supplement income taxes by taxing the people who are wealthy enough that they don't need to earn income.
applying the tax to everyone's retirement account and not just "billionaires" and have given domestic businesses a competitive disadvantage in attracting foreign investment.
Yes, if you choose to implement a wealth tax on everything that would be true. It's a good thing that policymakers in the countries where wealth taxes already exist used their brains and decided to have minimum wealth thresholds for their wealth taxes.
There have been proposals to tax unrealized capital gains as income. Those proposals are what the comment you replied to is arguing against.
> The problem of how to value assets for taxation is older than electronic computers, and decades ago tax authorities set forth rules/guidelines for valuing difficult-to-value assets.
"The places that attempt this have rules" is not actually a solution. The typical solution is to only apply such taxes to asset classes that are relatively easy to value, like real estate.
But that in itself creates a lot of nasty distortions, like exacerbating the housing crisis. Local government gets tax revenue from real estate, so they get more if real estate is expensive, so they're on board with raising the cost of construction to drive up scarcity. The higher taxes reduce investment (i.e. construction) until rents increase to cover the new higher construction costs in addition to the taxes, and now people are homeless and unable to afford housing. Meanwhile capital moves from local real estate construction and other local businesses that would have to pay the higher real estate costs into global capital markets, reducing local jobs.
And it still doesn't answer the question. How do you value a closely held startup that may grow or fail? How do you value bespoke art? How do you value a contract to pay $100,000 from a foreign company at risk of default? If it's subjective then it's a tax shelter. "Have the courts decide" doesn't explain how you expect them to make their decision.
> wealth taxes already exist, and they're administratively easier to implement then income taxes.
That's not saying much, income taxes are some of the most administratively expensive taxes to implement, and your argument is to use them in addition to rather than instead of income taxes, so the costs are cumulative.
> It's a good thing that policymakers in the countries where wealth taxes already exist used their brains and decided to have minimum wealth thresholds for their wealth taxes.
Your claim was that it would be paid by investment funds. Investment funds easily have enough assets to meet any plausible threshold, but they're owned by middle income people, so are you taxing them or not?
How is "progressive wealth tax" supposed to work for corporate entities? If a massive foreign conglomerate owns a minority of the shares of a tiny foreign company which owns shares of a domestic company, is the tiny entity subject to the tax? What if the foreign country doesn't make ownership structures public? What if the conglomerate doesn't own any part the tiny entity or the entity is a human but the conglomerate has a long-term options contract to buy the shares for a fixed price?
"There are rules for what to do" isn't an explanation. If the rules create tax shelters, you have problems. If the rules create perverse incentives in order to prevent tax shelters, you have different problems. There doesn't appear to be a sensible implementation.
What you've suggested for getting around the wealth tax amounts to various forms of tax fraud. That's a crime punishable by many years in jail on top of having to pay the tax avoided, plus penalties, plus interest. Most people aren't Wesley Snipes, and they're not going to risk their freedom to pay taxes. If they really don't want to pay taxes, they'll do what a number of French people did when the wealth tax was first introduced: they'll move to a country without a wealth tax.
(Also: courts can issue withholding orders, stop payments, etc., to domestic counterparties under their jurisdiction. This is a tried and true remedy that's been around longer than either of us has been alive.)
Which of course, they do.
Poor people are people like us (or sometimes are us), some are quite prudent and would love to make an investment that pays, even if it's small.
And yet the US is pretty unique amongst countries in treating capital gains as wholly different from earned income, and taxed significantly less if at all.
Even as someone who benefits from it, I've yet to see a good argument as to why a working stiff should pay more taxes than someone who makes their income from investments. That's inherently regressive.
consider all of these VCs throwing away money on things like uber. would it be better if they just kept it in a savings account (because of no financial benefit of investing)? most investments don't pay off, so you need a push, the push is that long term capital investments are taxed less.
Also pretty sure savings interest is taxed as capital gains.
We have observed close to two decades of rapid asset price inflation that can very reasonably be argued outstripped actual productive activity. Rent seeking isn’t something that should be incentivized either and is ultimately a very corrosive behavior in our economy, politics and society.
The people who don't are the billionaires or nearly billionaires, but they also don't pay the existing income tax because they have teams of tax lawyers and deploy international shenanigans. And then an "income tax" which they pay on $20,000 of declared income is not actually taxing them more than a consumption tax at the same nominal rate on all the cars and boats the billionaire buys the same as the cardiologist does.
The argument used to be that low tariffs enabled shifting work to where labor and environmental laws were weaker, reducing demand for American labor. Effectively subsidizing pollution and human suffering.
But then someone came along and agreed. Can't believe something that he agrees with.
The opposition to tariffs doesn't stem from a kneejerk reaction to a certain someone wanting them. It comes from economic consensus.
Implementing targeted tariffs in a way that spurs domestic labor and secures vital industries is common practice.
What's not common practice or beneficial are the broad tariffs we're levying, which come from a place of ignorance. The implementers literally didn't think retaliation would happen, but it is/will. All these are accomplishing is increasing the cost of goods.
Democrats think lots of things that are "economic consensus" do not accurately describe how the world works in practice, or fails to capture important values. "Economic consensus" also is that VAT is the most efficient form of taxation and that capital gains taxes are harmful.
People love cheap shit. They absolutely love it.
Walmart and globalism didn't put Benny's General Store underwater, consumers choosing cheap shit did.
I don't know on what scale your clock runs on, but Bill Clinton's "Third Way" campaign was 35 years ago. China's admission into the WTO was under the Clinton administration. If 5 minutes is a generation, America isn't 2 hours old yet on your clock.
I thought the support was bipartisan? For instance: https://en.wikipedia.org/wiki/United_States%E2%80%93China_Re...
Maybe we should be questioning a system that demands a house double in value in a few years.
Edit: Uh oh, downvoted by people who apparently think either people who earn $300k - $1MM+ aren't "rich" or that they don't pay income taxes. Lol.
Let’s say you make $1 million per year and your net worth is $20 million.
Elon Musk spending $1 million dollars is equivalent to you spending $50.80.
That would be equivalent to the median earner ($42,000) spending 10 cents.
Someone who earns $1 million a year would have to be alive for 393,000 years to earn Elon Musk’s net worth as salary.
The difference between the 1% and the 0.5% is massive. The difference between the 0.5% and the 0.1% is even bigger.
Don’t forget that a billionaire is a millionaire 1000 times over, and the richest billionaires are hundreds of billionaires.
Then you are unambiguously extremely rich.
Yes there are people orders of magnitude richer, but yes you are orders of magnitude richer than the median American. Money is no longer a daily consideration to live a 100% comfortable and healthy (to the extent money can pay for it) life.
I am well aware of how much more obscenely wealthy the ultrawealthy are. That doesn’t make a $20MM net worth or $1MM/yr household middle class.
They could retire immediately and live on that net worth but their standard of living would be greatly impacted by doing so rather than continuing their income-generating activities.
They could face major financial consequences by spending their money frivolously or losing it in a lawsuit. They have a low enough amount of money that they could gamble it away or lose it all in a bad business investment.
I think that makes them much closer to the middle class than the truly wealthy who cannot lose their fortune even if they tried their hardest and have essentially no feasible way to have their standard of living lowered. For example, if Twitter shut down after Elon bought it, there would be no detectable difference to his lifestyle or buying power. There is no amount he could gamble at a casino where he would lose his fortune.
No they don't
> They can’t get their names on institutional buildings.
This has never been the purview of the "merely rich."
> I think that makes them much closer to the middle class than the truly wealthy
Sure they are closer to the middle class than the ultrawealthy, but that does not make them either not-rich or middle class.
I take rich/wealthy to mean a much higher social class than $1 million in annual income. That type of income would be like a husband and wife who are doctors working as employees with a boss bossing them around and working long hours.
If you’re a W2 employee like that I don’t think you are rich/wealthy.
it's sad that HN is privy to propaganda and misinformation as well. ask anyone on the street if 500K income is rich, and they will say yes.
"*Only*" That is a lot of money for most people. How the other half live!
> The threshold to enter top 10% is only 180K
Yes. I was doing it when I was earning less than that as a contractor in the UK. I can tell you how it generally works in the UK:
* You set up a LTD company.
* You pay yourself a minimum salary where you pay the bare minimum tax this is approximately £13000 the last time I checked. I think you can pay any other "directors" this as well, you basically make your significant other one.
* Anything related to work becomes an expense e.g. parking tickets, mileage on your vehicle, laptop, computer software etc. So you don't pay this, the company does and thus you get a tax relief.
* You pay yourself dividends from your LTD company. You pay yourself the bare minimum and leave as much as possible in the company. These were taxed at a far lower rate that the equivalent money if you worked perm.
* You pay your pension via the company (this is tax free upto £60,000 IIRC).
In the US how it is exactly done will be of course different as the taxes are structured differently but I know for a fact that people are doing similar in the US.
A person paid on a W2 can’t do these things no matter how big their salary is.
I give an example of how you would do it in the UK. Similar restructuring can be done in the US.
The tax system really favors two groups: private equity and founders, both of whom make their money primary through capital appreciation.
Umm. Tim was taxed there for selling his shares. Not a salary. His Salary I don't think is mentioned in the article you linked. As of 2022 it was $3,000,000, he was getting ~$47 million that year in stock compensation, which I doubt he gets taxed on unless he sells it.
https://9to5mac.com/2024/01/11/tim-cook-total-pay-compensati...
He is definitely restructuring his income to be tax efficient.
> The tax system really favors two groups: private equity and founders, both of whom make their money primary through capital appreciation.
Maybe. But that is irrelevant to the original question.
He can then leverage those stocks BTW to receive loans, which he won't pay taxes on as they are a debt. Then he can make use of the stock without selling it, and then use that extra income to invest in other things that will generate him additional income/capital or whatever.
There are even more tricks you can do at that point, where on paper you are technically making a loss and never pay a cent in tax.
There is ofc the loan loophole, but it doesn't mean that they don't get any other income, on which they are taxed on. It is just that, if you calculate their total package, compare to an average worker they pay significantly less taxes *proportionally* because a disproportionate amount of their "income" (some of which could hardly be called income but that is another subject) are in some form that are taxed less.
In 2022 Google's CEO made $2 million in salary and $218 million in stock awards.
so what - the loan has to be paid off, and the stock will inevitably be sold and taxed. there is no scheme to get away from paying taxes forever without dying, and that scheme (that one that involves dying), is the same one that benefits an average person w.r.t estate tax.
No, it's not. 2 points:
1. Average people don't pay estate tax, because only a teeny portion of estates make over the exemption amount.
2. I realize point one is a separate issue from what you're referring to, which is the step-up in basis at death. But that tax strategy of taking out loans to cover your lifestyle so you can pass on appreciated assets with a low basis is only possible for people with a huge amount of assets to begin with (i.e. people who already have enough to completely love off their assets without working).
Haha, good one. Good luck with that, you’re up against the most powerful and influential people and their lobbyists. Others have already tried. Maybe if the U.S. were a democracy instead of a plutocracy.
I only think it fails because Democrats have horrible messaging. Republicans branded it a "death tax", when I think it should be called the "aristocracy prevention tax".
Your average person has no idea how the estate tax works (i.e. they think it applies to them). In the late 1800s/early 1900s the UK implemented what is perhaps the largest nonviolent transfer of wealth by instituting large estate taxes on their aristocracy and landed gentry.
Over time, though, the lions share of Sundar's increase in wealth will come from appreciation of his stock, which will be in the form of capital gains. "Average" people don't have this luxury because they simply need to spend much more of their money to live, and thus most of their income (or increase in wealth) comes from a job.
FWIW I think a much fairer system would be to tax capital gains at income tax rates, but index the basis to inflation.
[1]: https://www.healio.com/news/hematology-oncology/20220928/avo...
If you mean top 0.5%, then sure, nearly all of their money typically does not come from regular income.
If you mean top 10% then not really, most people in that bracket will be paying substantial income tax.
it seems to me that rich people already pay plenty:
https://taxfoundation.org/data/all/federal/latest-federal-in...
only referring to income taxes here. not anything else.
Especially given the things that these individuals often do with their wealth.
The cutoff for this is probably more in the top 1 to 0.1% range.
This notion is not something that only poor communists subscribe to (out of selfinterest/delusion), see e.g.
of course, this is how a progressive tax system works inevitably. thus, my point and question is, how are rich people not already paying their fair share? by all data available with respect to [income taxes], they already pay a ton, no?
That’s a key part of the argument though. Once someone reaches a certain level of wealth, should it get easier or harder to keep growing that wealth?
I say this in terms of value to society. Is having some extremely, extremely rich individuals of value to the US?
yes. restated, is it good or bad that the USA has rich people? clearly it is good. if it were bad, then there would be evidence that countries with no rich people are better, but there is no such evidence.
That's not the question. Having rich people is one thing; having extremely, extremely rich people is another. We're talking about people that are worth the entire annual economic output of entire medium-sized metropolitan areas of the US and Canada, not the guy you knew from college who became director of sales at a software vendor and lives in a neighborhood with a golf course.
I'm not sure what "fairness" means to you? A fixed amount, per capita? Would you then throw everyone not making the cut into some kind of debtors prison, or working camp?
I'd argue that income is a decent enough proxy for how much utility a person derives from tax expenditures: Just protecting that income would be pretty much exactly proportional in a full anarcho/wild-west civilisation (can see this in unstable countries, where you often have a scale between "have to regularly pay off someone" to "need a private militia" to keep your gains).
Depends on how you value the service of protecting that wealth. Prooperty rights enforced by the state, and the more property one has, the more one benefits from that.
> no way the top 10% receive 3/4 of the services
I think the argument is that the main service USA taxes pay for is defending property and keeping order (via force and infrastructure) such that property rights are honored. The rich have disproportionate property, so they receive disproportionate service.
all 50 states already levy property taxes on real estate so that's already accounted for separately
If you've asked this question in good faith, perhaps isolating and over-defining "income" or "property" is limiting your understanding of the broader question we're responding to: do rich people pay more or less tax compared to the value they get from government? Most here seem to be in agreement that rich get more value from our government than poor do because they have more at stake.
The richest people are not paying the “income tax” your link refers to. They often have trusts and things and do daily expenses from loans and other tricks.
Bezos and Musk, for example, paid $0 income tax https://americansfortaxfairness.org/wp-content/uploads/ProPu...
do you disagree with my point, when talking only about income tax?
I really don't understand how borrowing against shares isn't counted as realizing the stocks. I mean, apart from rich people lobbying against it and such.
If I buy some stocks for $100 and sit on them until they're worth $1000, if I sell them for $1000 or take a $1000 loan against them, I've realized the $900 gain and I should pay taxes on that either way.
If the stock value drops below $1000 (or to $0), would you get your tax $ back?
If paid $1000 for the stock, then took a loan and paid interest on it, then paid taxes on the $900 gain, and now the stock is worth $0. Now all I get to take is a loss on the $100. Bad deal.
If you don't want to gamble then sell the stocks, that way you are not surprised by later changes.
Again, if you didn't want to accept that risk you could have just sold the stocks instead of taking a loan.
This isn't much different from taking a loan against a house, and then due to external circumstances the house drops in value, say a landfill next door. You're not getting back the property tax you paid.
I could have reasons for not wanting to sell it. Maybe I don't want to boost up my income for the year and be subject to even more taxes or loss of benefits (i.e. ACA). Or maybe I want to keep the dividend stream.
It any case it's already overcomplicated, and I don't think we need to make it moreso by giving the govt another opportunity to take yet another slice of a transaction they had nothing to do with.
Not to mention, the lender that gave me a loan has to give the govt a slice of their income, which comes from me.
> This isn't much different from taking a loan against a house
The difference is that houses rarely lose 100% of their value. Normally they hold their value or thereabouts.
That said, why should we expect a direct relationship between increased tax burden and services received? You're not paying for services like a vendor, you're paying "society" in a sense.
That’s a key part of this discussion and argument. So once someone has the money, let’s just ignore it.
the only true way to do it is to tax upon realization, which is already what happens.
None of this is new or novel.
Why not?
A highway between Illinois and Ohio doesn't help me. It does help say the CEO of Walmart.
When you're invested into large parts of the USA, anything the government does helps your bottom line. When you're not then majority of the services the US does doesn't help you.
Do you think there's a reason they limited their breakdown to top 1% instead of listing the contributions from the top 0.1%? I sure do.
I never mentioned these people.
I hope you're just confused about what everyone is saying, and not being intentionally disingenuous.
> if the link had a 0.1% bracket it would show that the even smaller group pays an even higher percentage of the total income tax revenue relative to their size.
That's exactly the point: in absolute values, if you have a lot of concentration of wealth, those will come out to be most of the tax base. That doesn't mean that proportionally they are paying the same. As a matter of fact, someone that makes 100k being taxed 20% is actually more onerous than someone that makes 1M being taxed 20%. This is why most countries try to have a progressive tax system.
You said "... why do people believe the rich don't pay their fair share when the top 10% pay almost 3/4 of the taxes... "
I'm suggesting talking about the top 10% is misleading because when people talk about the rich not paying their fair share, they're not talking about the master electrician in your home town that broke $180k working overtime. You conflated the rich with the top 10%, but your grouping includes a whole lot of people that most of us wouldn't consider rich.
To answer your question about why people believe the rich don't pay their fair share, you either need to look at a different figure than the top 10% (which invalidates the 3/4 of the taxes portion) or you need to say everyone (including married couples filing jointly) making $178k MAGI is rich. I don't think people at large agree with the latter, so the rest of your question is premised on the wrong set of numbers. That may answer the question you posed initially.
Why?
Because that enormously expensive army we're maintaining is protecting mostly their stuff. Setting aside the fact that, say, poor people, have no money; why should the poor pay an equivalent share to protect the wealthy person's property?
I'm not really sure what you're trying to argue for/against here. Yes, people in the top 10% of income-earners collectively pay the majority of income taxes, dollar for dollar, and yes, we've been hearing variants of what Jonathan Chait called "The Stat" for years: the highest-earning 1% of taxpayers pay 40% of all income taxes.[1] As Chait points out, "'The Stat' is literally true, but it is deeply misleading." For instance, FICA is not a progressive tax; it's a flat tax that stops being collected at around at around $150K of income. Somebody making $80K pays way, way, way more FICA as a percentage of their income as somebody making $800K does.
While I'm not suggesting we need a wealth tax, start burning down mansions, etc., etc., it's at least worth considering the possibility that America has a tax system which disproportionately favors the wealthy. That multimillionaires and billionaires pay, dollar for dollar, more taxes than the shift manager of your local Jersey Mike's does is not some kind of slam-dunk argument against said possibility.
[1]: https://nymag.com/intelligencer/article/fact-check-richest-1...
How do you measure that?
The state protecting me and my assets is of value to me. However the state protecting Musk and Musks assets is rather more important to him.
Who do you think should be paying more? The poor?
Because the top 10% are not rich.
Only the top ~0.5% are rich. The reality is that the vast majority of that 3/4 of taxes is paid by the middle class.
Put another way, the top 10% is mostly 6 figure salaries, not 7 figure salaries, and certainly not 8 or 9 figure salaries.
I think the real distinction is people who work for a living, and people who own for a living.
They do have a cooling effect on the economy though, so perhaps the other motivation for keeping them around was to prevent run-away inflation. While Tariffs can raise the cost of goods, they do not in-and-of-themselves create inflation unless you attempt to pump money back into the economy to repair the damage being caused by your tariffs.
We get into fights with a family member and don't want to look soft so we punch them back and then avoid them. We create more and more distance and relationships fall apart and then we get more lonely.
So as it hurts personal relationships, it hurts political-economic relationships. We want to punish China with tariffs, and it's like punching our enemy in the face and hurting our own hand. And then they punch us back and hurt us and their own hand. Self- and other-defeating attempts at solutions.
I'd say the weaker approach is to punch and/or run. The stronger approach takes the punches and still tries to work with the other person, recognizing how we help each other.
I recently posted about how tariffs are a sneaky way to introduce VAT—a system that ultimately hurts the middle class—and my post was heavily downvoted. Why? I assume it’s because certain media outlets push the narrative that VAT is good and tariffs are bad (I love how they say Norway has VAT so it has to be something great), while others claim the opposite.
In the end, no matter which side wins the debate, it’s the middle class that pays the price.
Widening the already enormous inequality gap that exists in the US, at a time when Luigi Mangione became a popular hero, isn't going to end well.
But it doesn't work in a real market economy, for many reasons already stated. It doesn't just hurt our people but the world economy as a whole.
Tariffs can be good, but you wont find politicians using them correctly. They can be used to protect newly growing businesses from foreign competition - but they are often used in the opposite, protecting large businesses.
Or sales taxes, or VAT, for that matter.
Tariffs in agriculture, automotive, and all sorts of other things have benefitted corporations and people with a lot of money and cost people who need to buy those things. (I hope I can say that without getting into whether those tariffs also serve the greater good)
> Mostly rich people like low tax and low meddling with trade.
That's imprecise. America's rich are often unmoved when it's pointed out that their employees pay more taxes than they do as a percentage of income. I'm sure that they like it when their taxes are low.
Unfortunately, given the geopolitical necessity, the question is moot. The people of the United States, regardless of what they might claim, do not actually want reindustrialization. It's easy enough to prove: are Americans willing to either accept wage decreases in line with non-Americans, or accept price increases that would cover the cost of paying American wages? The answer is definitively "no", and thus reindustrialization cannot happen. (But machines, you say. Those machines work just as well in China as in America, staffed by Chinese techs who will work for less. This solves nothing.) Americans want to eat their cake and have it too, and unfortunately this is not how reality works.
But no politician ever got elected by telling the electorate that what they want is incompatible with reality. No, if the electorate wants a pony, you promise them a pony, and then when the pony fails to show up you blame it on... let me check today's notes... woke DEI communist pony salesmen.
The answer is not "definitively" no. Trump ran on tariffs and definitively won. And I know many people (myself included) who would happily "accept price increases that would cover the cost of paying American wages". Most of these people are low/middle income Trump voters. Trump won the $30k-100k voters a year. Harris won all other income brackets.
The prominence of the inflation narrative and outrage over egg prices indicates otherwise. Nobody would be happier than me to see my country, my state, and my city all have healthy manufacturing sectors for locally-sourced essentials, but import taxes won't do that unless you're also willing to strategically subsidize industries for 20 years or more, and nothing about the current admin shows they have any grasp of long-term strategy.
Trump started his first bout of tariffs in 2018, long before any surge in inflation.
The TLDR cause was the pandemic. Basically supply chain broke down and didn't recover as fast as demand did.
The surge in egg prices is due to bird flu. Again, nothing to do with protectionism.
> but import taxes won't do that unless you're also willing to strategically subsidize industries for 20 years or more
Again, if you just open your mind and read the actual history in America on this topic, you can see that tariffs did indeed bolster American industry, again just read the wiki on it [2]
[1] https://en.wikipedia.org/wiki/2021%E2%80%932023_inflation_su...
[2] https://en.wikipedia.org/wiki/History_of_tariffs_in_the_Unit...
You can simply nationalize manufacturing in critical industries. If you're not willing to go that far then throw incentives at failing industries to compensate for the higher cost of labor, so they can still compete on US soil.
This was Biden's philosophy with, say, Intel.
The benefit of nationalization (or at least subsidies) is that it doesn't need to pass the tax on to the consumers, and you can pay for it with a tax on oher things (e.g. billionaires) instead.
I'm not sure if this works. If anything, I'm strongly against it. Below are my data points:
- Chinese dynasties never managed to breed those amazing horses as European did. Since the Song Dynasty, despite government-run horse breeding programs that imported Ferghana horses, these amazing steeds degenerated into those typical Asian stunt horses within just a few generations.
- Look at China before 1980s. Everything was stated owned, and all the sectors were miserably corrupted, inefficient, and there was no innovation whatsoever. In fact, Soviet Unions managed to do the same. Yes, they had amazing researchers to make engineering and scientific breakthroughs, but ultimately they could manufacture efficiently. I hate to say this, but the reality was that nobody took China seriously at that time.
- Look at Britain. They ran their industries into ground, especially their auto industry, with a semi-state-owned approach.
- Look at how the US ran its defense industry. And look at Boeing. Or how expensive it is to build a battleship. It is not even state-owned, but just state-paid with cost-plus pricing.
In the end, state-owned industries will fail to incentivize its workers.
But are there any locally produced Windows laptops? No company is going to spin up local production for some tariffs that Trump might decide to reverse next week (a-la-Canada).
And even if they stay during Trump they might get killed in two or four years if the gov shifts sides.
Taxes are already a certain percent. It doesn't make any sense to tax more or less percent to people over certain amount of money.
At the end, poor people dont want to work because they will lose all benefits and get taxed. Middle class people don't want to earn more than certain amount because they will get taxed more.
Because progressive taxes are reliant on certain income (value) or wealth, inflation makes people to pay more taxes over time.
The population being taxed via tariffs instead of income/capital gains is a net gain for wealthy people always, because they spend a much smaller fraction of their income, and a significant portion of the "tariff-base" is fixed-cost like.
Consider an iphone or a washing machine: Basically everyone is gonna pay those tariffs once, it does not matter if you work a construction job or own a whole city block.
Yes, tariffs increase prices somewhat for consumers. But they encourage domestic production and domestic jobs. Ask yourself—are Americans better from importing cheap Chinese crap than they were in the 1960s when stuff was made in America?
Absolutely we are
If you are a middle class person with a salary in the US you are likely paying upwards of 80% in taxes if you include second- and third-order taxes.
Your rent could be $1000 instead of $2000 if your landlord's income wasn't taxed so much. Your Chipotle meal could be $6 instead of $12 if the franchise owner and their commercial property landlord weren't taxed so much, let alone the workers.
Why do people believe rich people again?
Rich people already do that. Do you think the average "wealthy" person has their wealth in a vault full of gold like scrooge mcduck?
If you want to go that far, you could argue that almost every dollar in circulation eventually goes through the tax system at some point, so taxation is nearly 100%! Of course, this is nonsense that doesn't tell you anything useful.
* ~14k in federal income tax * ~6k in state income tax (varies by state) * ~6k for social security * ~3k for property tax (varies by location and property value) * ~1k for medicare
That's 34%. It's hard to imagine another 46% on sales tax, tariffs, usage tax, car tag, etc. You could argue for another 7k (7%) in second order payroll taxes, but I don't know what you could consider a "third-order" tax. Please enlighten me.
How much of that is left over for your landlord to spend? When they spend it, how much of that money is going towards paying yet other peoples' taxes? Those are your third order taxes.
For every $1 you make, about 3 steps down the spending chain, only $0.2 is in the hands of the people and $0.8 is in the hands of the IRS. That's what I meant by an 80% taxation rate.
If taxes were lower, all of your stuff including rent could be vastly cheaper.
There are countries with far better infrastructure that have less taxes. The US loves spending tax dollars on a bunch of inefficiencies and meddling in the affairs of other countries I will never live in, with my money.
I will say that what you spend your money on has a huge impact of how much the IRS gets at the end of the day. For an extreme example, if you give the money to a 501c then it's not taxed, and there are several ways the 501c could spend the money that wouldn't be taxed....
Maybe if they taxed me less, I donate more to 501c's that do more per dollar than the government does.
A landlord who rents to you at BELOW the cost of the mortgage + property taxes + maintenance may have his reasons (appreciation) but overall that's not a sustainable activity.
Perhaps the most obvious is gas taxes or CRV taxes on cans, those get passed along directly. If you doubled gas taxes tomorrow, the price paid at the pump would rise - it wouldn't just be absorbed by the company.
Now conversely, when you drop taxes, that doesn't necessarily immediately get passed along, but if there is competition, it eventually will.
Those slippery bastards.
If that tax doubled next year, what would happen?
From the landlord's bank account, hopefully.
It could have gotten there in any number of ways. Rent is the most obvious, but there's also the landlord's own paycheck, their spouse's paycheck, other investment income, social security payments, alimony and child support payments, gambling winnings, inheritances, loans.
> If that tax doubled next year, what would happen?
If it's a tight property market, rents go up. If housing is plentiful, or the local job market is in decline, the landlord eats the loss.
It comes from me.
> If that tax doubled next year, what would happen?
It would cut into his maintenance budget, utilities would break down, and I'd start paying rent into escrow until he ponied up.
Or he'd raise the rent by no more than 10%
The rich don't pay income taxes. They have capital gains.
Corporations pay taxes on income. If you don't charge corporations income tax, then you have to charge workers even more income tax to make up the difference. I guess that's better for "the poor" somehow?
> if you include second- and third-order taxes.
This is a phoney concept.
> Your rent could be $1000 instead of $2000 if your landlord's income wasn't taxed so much.
More likely your rent would stay $2000 and your landlord would keep more of it.
This is ridiculous. Plenty of people who most Americans would call "rich" pay income tax.
If you earn, say a $300k - $1MM/yr salary, you are rich compared to most Americans in most areas, and you pay tons of income tax and potentially zero capital gains depending on how you manage your finances.
If you earn $1m/year you have high income and a path to become wealthy quickly. But you aren't actually wealthy in my eyes unless you have the asset portfolio to match.
Yeah no shit, by circular definition of "doesn't pay income tax."
> I was talking about "generational wealth" people.
That's obviously not the same word as "rich."
Ah so then you did get my meaning the first time. Which means pointing out that some people who may or may not have assets also pay high taxes on their salaried income was unnecessary.
> That's obviously not the same word as "rich."
High income isn't rich. "Rich" is someone who has a lot of assets and wealth. That's literally the dictionary definition of the word.
"Rich and paying no income tax" -> largely the top end of the top end. The vast majority of rich people pay lots of income tax.
I'll go out on a limb and guess that you land in the category that most Americans consider rich, but you think attention should really be directed towards the ultrawealthy. Totally reasonable and capital gains obviously needs to be the center of that discussion, but let's not try to get there by just moving the line of what "rich" is and helping people delude themselves into thinking $300k+/yr is middle class.
There's ire directed at high income earners who pay high income taxes? This is news to me. Why exactly?
> just moving the line of what "rich" is
Again that's the dictionary definition of rich. But never mind that. This segment of the "rich" (if you want to call them that) is already well-taxed on their salaried income - we both agree. What's left to say about them?
Standard arguments about inequality? CEOs for instance attract much ire from their pay, often in the form of comparisons to their pay relative to the janitor working there or whatever.
It's a useless discussion - the questions should be what needs to be done, and THEN figure out how to pay for it, if necessary.
After all, an easy argument against the OP is that if my "blue collar job" is saved by a tariff, I won't CARE that I'm spending 10% more on laptops, as I still have the job!
Profit of a company is small percentage of the moving money. Like 50c of $6 chipotle meal is profit and not all of that goes to the owner. Taxing owner at 50% rate instead of 25% would only increase cost a few cents. Same with landlords, there are fixed costs and loan costs that reduce profit. 100% of paid rent is not direct profit...
Actual issue of the progressive tax is truely rich people using tax evasion tactics to avoid it by structuring their income so that it belongs to some other tax category that doesn't have progressive tax.
Trickle-down economics aka Reaganomics. Companies don’t change based on cost, they charge based on what the market will accept. If the market has people willing to pay $12 for a burrito and their costs lower, they’re going to charge $12 for burritos and keep the profits. Fast food restaurants will often have discount meal wars, but notice that it’s only promotional pricing that’s changed — promotions end when they’re not useful anymore and regular menu prices largely move in one direction. If costs and availability are unpredictable, like they were with fresh produce during the pandemic, they’d probably just stop selling the product rather than having to repeatedly raise and lower the cost, which is why McDonald’s got rid of salads.
The rental market in the US is increasingly dominated by larger corporate players that leave units to sit empty rather than lower their prices because lowering a price on one unit lowers the market value overall, which makes other nearby units less valuable. Rent maximizing platforms are even doing this among independent landlords and they’ve been criticized by the FTC for doing so.
Reaganomics is just a plausible ruse to get non-rich people to support policies that largely benefit the rich and large corporations.
That's assuming those things are sold at cost rather than a significantly higher market value.
But market value can go way above costs, and does sometimes.
An interesting aspect of this is rental costs in VHCOL areas; often the rents are WAY, WAY below the mortgage cost of the same property.
I'm a landlord, and lol no, that's not how that works.
The rent my agent decides to charge on my behalf is decided by what the market will tolerate. They're always pushing to raise it, until there's nobody around who wants to pay the higher number. It's very much a number-go-up dynamic — I even had to explicitly tell them not to raise it during the pandemic when they wanted to, when the UK cost-of-living crisis was in the news.
The tax I get charged doesn't change what my tenants pay at all.
This is assuming you are buying goods that are outside of the country. Most consumption weekly is things like food, drink, disposable items and not things like computer hardware which is refreshed every few years normally.
> There is a reason why rich prefer tariffs over a progressive income tax.
I am not rich and would prefer Tariffs over income taxes (I am in the UK). I would rather save the that gets taken every month from the taxman and I could afford to buy myself a nicer property. I could also make the conscious decision to make sure I purchase items produced in the UK which presumably for food, drink (at least) I would wager is produced in the UK and thus would be cheaper than things produced outside of the country.
As for progressive taxes they actually make it more difficult to earn more money even at a near minimum wage. When I worked at a super store (Tesco) many years ago, If I worked a few hours overtime, I would go over income band for that month and it effectively made working that shift a waste of time. I am including my time to commute which was a 30 minute cycle and not wanting to have to stack onions. So I didn't bother working overtime as a result. Neither did many of my colleges. Granted I normally would get a check back at the end of the year from HMRC as I would have over-payed for the year, but when you are living month to month, I would always prefer the cash in my pocket as the end of the tax year is an eternity away in comparison.
It's a rigged game, if anything they would use tariffs to cut the progressive rate not the base tax rate anyways.
Trying really hard to refrain from a snarky response, because this analysis is 100% incorrect. First, where do you think a substantial portion of food, drink and disposable items in the US comes from?
More importantly, though, the entire economic rationale of import tariffs is to allow domestic producers to charge more. It doesn't matter if you just "buy American", because if the competition that American producers face is now 10% more expensive, these producers will raise prices. Or, if more charitably, foreign goods were making American-made products uncompetitive, American producers can now come in and make those goods, but only at the higher prices.
Again, the entire point of tariffs (at least from the perspective of "we want to bring production back to this country") is to raise the price of goods across the board so American producers can be competitive.
Also, you misunderstand how progressive taxes work. When you make more and go into "the higher income band", you're not taxed more on ALL your income, just the portion that is in the new band (at least in the US). Yes, there have been cases in the US e.g. with welfare where if people made above a certain amount their welfare was cut off, but those have all been highlighted as examples of poor tax policy that have largely been fixed.
it's interesting also this document about total consumption that excludes from the count foreign sourced items (scroll to the last pragraph for a summary) https://www.commerce.gov/sites/default/files/migrated/report...
applies in the UK too where GP is (source: my own repeat self assessments).
I was talking about how a similar policy would affect me in the UK where far more food is domestically produced.
> More importantly, though, the entire economic rationale of import tariffs is to allow domestic producers to charge more. It doesn't matter if you just "buy American", because if the competition that American producers face is now 10% more expensive, these producers will raise prices. Or, if more charitably, foreign goods were making American-made products uncompetitive, American producers can now come in and make those goods, but only at the higher prices.
You can adjust your consumption much more easily than you can adjust your income tax. If you want to be in the lower band of progressive income tax.
> Also, you misunderstand how progressive taxes work. When you make more and go into "the higher income band", you're not taxed more on ALL your income, just the portion that is in the new band (at least in the US). Yes, there have been cases in the US e.g. with welfare where if people made above a certain amount their welfare was cut off, but those have all been highlighted as examples of poor tax policy that have largely been fixed.
I do already understand this. You don't understand what I was telling about how it affected my wages that month. Once I went over the band, the increase in tax was enough to make working the overtime not worth it, as I would maybe get a few hours of OT. It would only be worth it, if I was working lots of OT ... which I couldn't do because I was studying.
It also stops me from bothering to get a higher salaried job. I am at the highest pay before you go into the 50% band. So if go from £55,000 to 65,000, that £5000 of the extra £10000 will be taken by the taxman. A £65,000 job has a lot more expectations than a £45-55k job. The extra stress and hours that will be expected isn't worth the extra £5000 which over the year is an extra £415 month.
All you've done is describe the tradeoffs in whether working harder is worth the extra money to you.
If the income tax didn't exist at all, I would keep all of the £65,000 and it would be totally worth working those hours. The extra £13-16k a year would allow me to pay off my current apartment in 3-5 years, not 10-15 and then I could get a lower paying job anyway and work less sooner. So the trade off IMO would be totally worth it.
This isn't even getting into stuff like steel and aluminum, and other core manufacturing goods.
Good luck opting out of all that to avoid the tariffs.
Re: energy independence, US was not "energy independent" in that we didn't import any energy. We were (and still are) energy independent in that we produce more than we consume, much of which is exported (which makes money for US corporations). Tariffs threaten those export relationships, and it's not trivial to just ship electricity wherever it's needed. It's far easier for us in the North to get electricity from Canada than to ship it in from the desert or something.
[0]: https://tradingeconomics.com/united-states/imports/canada
The biggest issue I have when having these discussions is that people assume that the situation currently is what will always be. Part of rationale behind the Tariff is that you increase domestic production. Obviously it isn't going to happen over night, but the cure for high prices, is high prices as this will create the incentive for people to domestically produce.
> Re: energy independence, US was not "energy independent" in that we didn't import any energy. We were (and still are) energy independent in that we produce more than we consume
Right so you could meet the energy needs right?
> Tariffs threaten those export relationships, and it's not trivial to just ship electricity wherever it's needed. It's far easier for us in the North to get electricity from Canada than to ship it in from the desert or something.
It may not be. However the entire point is to create a incentive to solve these problems domestically.
Did you miss the part where I talked about how you can’t just magically ship electricity wherever it’s needed?
I literally started off my previous reply by prefacing my frustrating around discussions of this type where people assume the current situation is going to stay in place as is. Sure in the short term things maybe negatively affected however in the long term there are benefits, one which is often over looked is a more robust domestic supply chain, which was a real problem back in 2020.