When Clinton accused Trump of paying no federal taxes, he didn't deny it - rather, he said, "That makes me smart."

He wasn't the first rich sociopath to make that claim. Remember when Leona Helmsley told the press "only little people pay taxes?"

apicciano.commons.gc.cuny.edu/

1/

Today, Propublica published the first in a series of blockbuster analyses of leaked tax data from America's richest billionaires - some of whom have lobbies for higher taxes on the rich! - showing that the true tax rate for billionaires is 3.4%.

propublica.org/article/the-sec

2/

These records - which include tax data for Elon Musk, Warren Buffett, Jeff Bezos, Michael Bloomberg, George Soros, Carl Icahn and others - reveal that it's not just sneering boasters like Trump and Helmsley who avoid the tax the rest of us pay - it's the whole cohort.

3/

Much has been made of the "K-shaped" recovery from the pandemic-driven economic collapse, where the rich got richer and the poor got poorer, but when it comes to the 0.001%, this is far more pronounced. America's billionaires got *$1.2 trillion* richer during the pandemic.

Much of this wealth accumulation is due to the fact that poor people pay high taxes, while rich people pay low taxes.

4/

A household earning $70k pays about 14% in federal tax; In 2019, Michael Bloomberg made $2B and paid 1.3% of it in federal tax.

All this wealth-accumulation creates family dynasties, meaning that the rich stay rich, and the poor stay poor, and the only real social mobility is downward, as the middle class loses ground and slips down the ladder.

doctorow.medium.com/the-rents-

5/

A quarter of America's richest people owe their fortune to the orifice they emerged from, not the work they did. These heirs - Waltons, Mars candy scions, Estee Lauder's kid - are the new permanent aristocracy, uplifted by the invisible hand by virtue of their "good blood."

The Propublica report - from Jesse Eisenger, Jeff Ernsthausen and Paul Kiel - is valuable not just for the names it names, but for the tax-evasion tactics it explains and the historical context it provides.

6/

Whenever someone points out that Jeff Bezos is so rich that he could afford to give a living wage to his vast, precarious, food-stamp-dependent blue-collar workforce, someone inevitably points out that Bezos's wealth is in shares, not cash and is thus illusory.

7/

This is only partly true, and it obscures more than it illuminates. It's true that CEOs habitually draw nominal salaries - often $1/year - and are only "rich on paper," but this doesn't mean they're not immensely wealthy - rather, this is how they amass immense wealth.

8/

Here's how that works: the US only taxes capital gains (money you make from owning things, as opposed to doing things) when they are "realized" - that is, when you sell the asset that has appreciated in value. If you *never* sell your asset, you never pay tax on it.

So when an exec takes compensation in stock rather than cash, the exec pays no tax unless they sell the shares.

9/

But execs don't have to sell *any* shares in order to get millions or billions of dollars to play with. Rather, they can stake those shares as collateral on loans.

If an exec sells their shares, they'll pay a 20% capital gains tax. If they borrow against the shares, they'll pay single-digit interest rates. What's more, loans aren't treated as income, so *no* tax is paid on the loan.

10/

Follow

Even better, the *interest* on the loan can be treated as an *expense*, which you can apply to any money that comes in the door that you can't help but declare as income.

Working people borrow money because they can't afford to buy cars or houses or just close the gap between payday and an empty fridge. Rich people borrow because it lets them launder their income into tax-free loans.

11/

· · Web · 1 · 9 · 4

Here's the thing: this is *exactly* what critics of this system predicted would happen. In 1920, Rep Cordell Hull ("the father of income tax") warned that the Supreme Court's ruling in Macomber would let rich people "live upon the value" of stock "without ever paying" tax.

12/

Congress could have fixed the tax law, but it left this loophole open, along with other loopholes, like the "step-up in basis" rule that allows billionaires to pass on vast fortunes without ever paying capital gains taxes on them (the true origin of "good blood").

13/

When Propublica called billionaires for comment, they either got stonewalled (Elon Musk sent them a single "?" then ghosted), or heard bluster about "privacy invasions" or got responses like Warren Buffett's, about his plan to give away all his money.

That's more "good blood" nonsense: the idea that we should let people amass vast fortunes through monopoly and exploitation, so long as they - and not democratically accountable governments - then use it for social benefit.

14/

Elite philanthropy is no substitute for democratic programs. It's primarily a means for the ultra-wealthy to launder their reputations.

Take the Sacklers - made richer than the Rockefellers through the opioid epidemic's corporate mass murders:

pluralistic.net/2021/05/23/a-b

What's more, elite philanthropy is a vehicle for pushing "good blood" ideology. Bill Gates's foundation didn't just set out to eradicate malaria, but also public education.

pluralistic.net/2021/04/13/pub

15/

It recycled the materials it used to lobby against letting South Africa make its own HIV medicine to lobby against a covid vaccine waiver:

pluralistic.net/2021/05/21/wai

This report is the first in a series based on the anonymous leaked data. Propublica says its source was motivated by their stellar reporting on the IRS, which revealed the intense lobbying to weaken the agency's power to audit the wealthy.

pluralistic.net/2021/05/17/dis

16/

Instead, the IRS was perverted so that it primarily targeted poor people for audits, because they alone were weak enough not to resist the IRS's starved, resource-poor auditing division.

Propublica still has a lot of data to report out, but they're interested in hearing from other sources. In this supplemental article, they explain how IRS whistleblowers and others can securely leak more documents to them.

projects.propublica.org/tips/h

17/

And if you don't have time to digest the excellent story with its great explainers and graphics, Propublica's got a 7-minute read version:

propublica.org/article/the-sec

All of this leaves us with a question, though: what should we do about it? There's a Biden tax plan to raise taxes on the rich, but as Propublica points out, it will have virtually no effect on the "buy-borrow-die" mode of wealth accumulation.

18/

Two other proposals *would* have an impact, though: Ron Wyden has proposed a capital gains tax on unrealized gains:

finance.senate.gov/imo/media/d

And both Bernie Sanders and Elizabeth Warren have proposed wealth taxes:

cnbc.com/2021/03/01/elizabeth-

eof/

@pluralistic a 4th option exists... tax everyone less. In fact, get rid of "income tax" and move to a purely consumption based model. We currently tax money spent and money earned. money spent is much harder to avoid taxes on, especially when the tax is worked right into the cost of goods. Tax on money earned is easy for those with sufficient means to find ways to avoid.

@thatguyoverthere that is an asocial model that taxes the poor more than the rich, because the poor need to spend all their money whereas the rich do not. Same problem as VAT, see the Criticism section of en.m.wikipedia.org/wiki/Value-
@pluralistic

@kensanata @pluralistic I don't see how the poor would be taxed more if the rich are consuming more and tax is based purelyon consumption. We have sales tax now in most states, and it is applied to both the rich and the poor. We also already have a situation where the rich manage to lower their tax burden significantly more than middle and lower income brackets. I can't be angry for someone else for being capable of lowering their burden. I can hope for ways to lower my own burden.

@thatguyoverthere it depends on your goals. If you want to get more
money from the rich, then perhaps it would in fact help; but if your goal is wealth redistribution in the long term, then a consumption based tax is never going to be enough. @pluralistic

@kensanata @pluralistic also it isn't asocial to think governments are often wasteful and abuse the power they are given. I think the high tax burden many of us have is squandered by the people with control of the purse strings

@kensanata interesting. I agree with you that massive wealth accumulation is not healthy for society, but I don't trust the government to be in charge of redistribution when they are largely responsible for the problem. I also think that a free market provides each individual the ability to elevate their own status. I just don't think we've seen a free market, at least not in my lifetime.

@thatguyoverthere yeah, I disagree with so many of these points I don’t think it’s worth pursuing the discussion

@thatguyoverthere

... if the rich are consuming more ...

There's your false assumption right there.

The wealthy "consume" less as a proportion of total wealth than the poor or middle class.
Much of the wealthy's actual use of money delivers usefruct without being classified as "consumption", and hence, isn't taxable.

Your suggestion is simple, popoular, older than dirt, and entirely flawed.

</thread>

@kensanata @pluralistic

@dredmorbius @kensanata @pluralistic I never said they spend more as a proportion of total wealth. I don't see how that's relevant. My owning something doesn't entitle someone else to part of it.

A person with no wealth has an easy time spending 100% of their earnings whereas a person with plenty of wealth will find that a lot more difficult. If I make 30 - 50 k per year it's very likely I also own less and spend significantly less money per year than someone that earns that in a month.

@thatguyoverthere If:

Taxation is based on spending, and ...
Spending decreases relative to wealth, then
Taxation is regressive and reduces with wealth, therefore

∴ The proposed tax scheme amplifies extant wealth inequality.

QED

@kensanata @pluralistic

@dredmorbius @kensanata @pluralistic why focus on the spend to wealth ratio so much? It seems like an attempt to use manipulative statistics to suggest that a consumption model would not work.

A wealth based model sounds like it would make it much harder for people to elevate their economic status since as soon as they begin to be able to store more wealth, more is being taken from them.

@dredmorbius @kensanata @pluralistic this article came across my feed yesterday in rebuttal of the propublica article. They seem to suggest a model similar to what I believe would be better for insuring class mobility, and they've taken the time to put together some of the reasoning behind it.

savingjournalism.substack.com/

@dredmorbius @kensanata @pluralistic
Here is the authors explanation for one reason why trying to tax unrealized gains might be a bad thing.

> When you have to pay taxes on an asset you own, where do you get the money to pay those taxes? In many cases you’ll have to at least partially liquidate the asset (e.g., sell some stock). And if you force lots of shareholders to do this (especially at roughly the same time), you cause the value of that stock to fall — perhaps by a lot.

@thatguyoverthere The mechanism is explained in the ProPublica article: the wealthy use assets to acquire loans, treating interest expense itself as a tax write-off.

If you're taxed on held assets, securitise the assets in the same way, and pay taxes out of the borrowed funds. If your wealth isn't also working for you in creating real income (directly or indirectly), it's net deadweight.

The bonus is that 1) the asset values decrease due to carrying costs (much as with a land-value tax) and of course 2) the ever-growing wealth ratchet ProPublica discusses stops.

That Substack piece is an unhinged rant, starting from its title.

@kensanata @pluralistic

@dredmorbius @kensanata @pluralistic The use of loans is an effort to get around income tax. It does nothing to combat consumption tax. If there were no income tax the incentive to get around it would go away.

If you don't think people would just store their wealth somewhere else or figure out creative ways to avoid paying a wealth tax, I don't really know what can be said.

If there are any specific points where the "rant" becomes unhinged (beyond the spicy title) that'd be helpful.

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@thatguyoverthere Consumption taxes are inherently regressive (impacting the poor more than the wealthy) for precisely the reasons outlined in Doctorow's thread above (and the source ProPublica articles): The rich spend proportionately less of their wealth.

It's axiomatic: spend less than you accumulate, grow wealth.

What needs to be taxed is WEALTH, rather than income. In most of the West, we're so inculcated in the notion of "income tax" or "sales tax" that the notion of a wealth tax is entirely alien. But a wealth tax is precisely the most efficient and progressive (weighing more heavily on the wealthy than the poor) tax, a point championed by Adam Smith, David Ricardo, Henry George, and Milton Friedman in their support of a land value tax, where land itself is a principle form of wealth.

@pluralistic

@thatguyoverthere @pluralistic an income tax is already an economic activity tax; someone paying you for your labor and resources is not fundamentally different than you paying for the labor and resources in the price of goods

Tax on income is only easy to avoid for the wealthy because we've supplied a bunch of exceptions for wealthy folks to use. That's not a property inherent to an income tax

Problem: There are poor people. Solution: Give money to poor people. NOT a solution: Give money to government.

All raising taxes does is give more money to government, fuck the government, I’m not supporting anything that gives them more money. If you care about the poor institute UBI. Yes, some poor will waste the UBI, but some won’t. As opposed to giving money to government, where ALL the money will be wasted.

muh inflation

Fuck your inflation the government already has the printing presses running 24/7 we already have infinite hyperinflation and debt and bailouts and none of us ever see a dime for it but the rich. At least with UBI the inflation will go towards helping people and not bureaucrats.

@darrenpmeyer @thatguyoverthere @pluralistic @alcinnz @dredmorbius

@search_social @darrenpmeyer @alcinnz @dredmorbius @pluralistic @thatguyoverthere
>wow, poor people
>institute a self-perpetuating AI whose prime directives are "help the poor people" and "ensure your continued existence"
>it's farming poor people for funding
>who could have predicted this

invest in my green energy farms where we raise pitbulls to turn into biodiesel

This is why I said UBI and not WELFARE. The “U” stands for UNIVERSAL so that there is NO welfare trap.

@s8n @alcinnz @darrenpmeyer @pluralistic @thatguyoverthere @dredmorbius

@search_social @alcinnz @darrenpmeyer @pluralistic @s8n @dredmorbius but who distributes the universe? Where do they get the money? How transparent will it all be once put into action.

Why not just give everyone a job instead of throwing money at them? Full employment go FWOOOOM :pepega:


@search_social @s8n @alcinnz @darrenpmeyer @dredmorbius @pluralistic @thatguyoverthere
@s8n @Elfie @alcinnz @darrenpmeyer @dredmorbius @pluralistic @search_social @thatguyoverthere one drawback is something we are seeing the beginnings of now - there aren't enough people to do all the menial shit jobs that need doing that don't automate well. grocery stores that used to stay open to 1am and have cashiers the whole time are closing at 11 and forcing you to use the self checkout after 9 even if you have a whole cartload of stuff.

fast food places have 1 or 2 people doing everything and are taking forever.

a lot of people took their free money and bought gamestop stock or crypto and made a profit, and don't feel the need to work shit jobs for shit wages anymore.

I don't blame them. I'm in the same boat. But you can't run a society like this.

Good thing I hate this current society and want it to die. But the new society we create is going to have to figure out an answer to the technology obsoleting a large portion of labor problem. And capitalism isn't it, nor is communism, nor is ludditeism (you can't put the genie back in the bottle)
@s8n
Unskilled labour and labour camps for those who truly are too retarded and lazy to work to develop a better attitude

Think of summer camp but you sweat like a bitch everything hurts and if you refuse to go you get jailed

Many women used to go, although those women were certainly stronger physically and mentally than the 21st century man... Nonetheless I'm fairly sure the numale will probably survive :02_smile:

@alcinnz @darrenpmeyer @pluralistic @search_social @thatguyoverthere @dredmorbius
Husky Test_1623511475653_BGKCYFUEPN.jpg
@Elfie @alcinnz @darrenpmeyer @dredmorbius @pluralistic @search_social @thatguyoverthere yeah I don't think this is where we want our effort we need something with a higher kill percentage

Why not just give everyone a job

If X gives Y a job then Y receives money and X receives authority. The government giving people jobs would imply the government receiving authority and I refuse to give the government any more authority. Instead if people who receive UBI have good ideas for jobs they can use their UBI to fund such jobs. Yes, some of them will waste it, but this is still better than the government which will waste ALL of it.

Where do they get the money?

The printing press, same place all the endless free 1% and bureaucrat money has been coming from already.

but who distributes the universe?

The system that keeps track of if we pay our taxes can also keep track of if the government paid our UBI.

How transparent will it all be once put into action.

Well either your bank statement shows you received the money or you didn’t.

@Elfie @alcinnz @darrenpmeyer @dredmorbius @pluralistic @s8n @thatguyoverthere

@chuculate @Elfie @alcinnz @darrenpmeyer @dredmorbius @pluralistic @s8n @search_social @thatguyoverthere they would be upset if you said they are agrarian. agrarian carries a whole division of people whos job it is to farm and all the tyranny that follows (grain, security, bread lords.)

permaculture is like, engineered hunter-gathering.
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@search_social
You are assuming that people will be smart enough to use the money wisely instead of wasting it and staying at home smocking weed

You already can see the effects of such idea on the states were people refuse to go to work because they are getting free money

You are also assuming inflation doesn't exist nor does the stock market, I hope you can understand this is silly without having to explain you

And lastly you are assuming this will be trasparent which is just silly. People will be payed, the banks are more or less omnipotent but what will happen is that as inflation grows people's earnings will remain below the inflation value by a small margin that will go straight into the elites, exponentially increasing the wealth gap to extreme and absurd levels

The idea of a UBI also creates a banker social credit score that will guarantee nobody ever gains more wealth or influence than the established elite because they'll control all the income nation wide

Its just gonna be cancel culture on steroids, they will become gods more or less
@alcinnz @darrenpmeyer @dredmorbius @pluralistic @s8n @thatguyoverthere
Husky Test_1623515254966_HOFVOADAAD.png

You are assuming that people will be smart enough to use the money wisely instead of wasting it and staying at home smocking weed

No, I explicitly acknowledged every single post that some people will waste it. What I am assuming is that the percent of people who will waste it is less than the percent of government bureaucrats that will waste it, which is a safe assumption considering 100% of government bureaucrats will waste it.

You already can see the effects of such idea on the states were people refuse to go to work because they are getting free money

Free money is just that - free. No strings attached, as in universal basic income. Welfare is not free money, welfare is money paid only on the condition that you do not contribute to society. What a stupid condition, right? This is called the welfare trap, and UBI avoids it.

You are also assuming inflation doesn’t exist

No, I explicitly acknowledged every single post that our government is already hyperinflating our currency every year to pay the 1% and bureaucrats. We are already inflating and no one is going to stop it the only question is are we inflating to invest in our citizenry or are we inflating to invest in the 1% and bureaucrats.

@Elfie @alcinnz @darrenpmeyer @dredmorbius @pluralistic @s8n @thatguyoverthere

There are a number of arguments, most are too extensive to fit concisely in an HN comment. Pointers to some might be useful.

At the extreme you have the "utility monster" or "freedom monster" problem. Existential Comics explores both graphically and entertainingly:

existentialcomics.com/comic/8

existentialcomics.com/comic/25

Much of Adam Smith's Wealth of Nations actually addresses the issues of inequality and the dynamic between wealth and power: "Wealth, as Mr Hobbes says, is power." That's one of the shortest and most direct sentences in a book given to long and complex writing.

The Spirit Level is a book-length exploration of the problems of inequality and highly-unequal societies.

en.wikipedia.org/wiki/The_Spir

worldcat.org/title/spirit-leve

Thomas Picketty's works (Capital in the Twenty-First Century and Capital and Ideology) fit into this discussion.

Oxfam have a set of suggestions as well, notably Branko Milanovic's The Haves and the Have-Nots:

politicsofpoverty.oxfamamerica

(From: news.ycombinator.com/item?id=2)

@pluralistic

A huge part of the dynamic feeding the inequality engine is the abilty to leverage wealth to acquire loans used for expenditures:

If you own a company and take a huge salary, you'll pay 37% in income tax on the bulk of it. Sel stock and you'll pay 20% in capital gains tax --- and lose some control over your company. But take out a loan, and thesse days you'll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn't consider them income. Banks typically require collateral, but the wealthy have plenty of that.

(From ProPublica's article.)

(Loans can also be used to acquire more wealth, of course, too.)

This means that the low-interest, high-liquidity monetary policy regimes of the past 14 years, since the beginning of the 2007-8 Global Financial Crisis, are also feeding the inequality boom.

@pluralistic

Sticking with Cory's "The Secret IRS Files" thread for a bit...

I've seen a lot of discussion, little of it elucidating, and that from both supporters and negators of this work.

Among the few interesting observations is that unrealised wealth gains are difficult to assess (joindiaspora.com/posts/2093738). This has objection has some merits, and I'd like to draw attention to it.

#TheSecretIRSFiles #IRSFiles #SecretIRSFiles #WealthTax #inequality

@pluralistic

1/

A tax basis should be:

Equitable, assessed according to ability to pay.
Certain, rather than arbitrary
Convenien to pay
Efficient to enact

I'm not just making these up, Adam Smith has discussion in Book V, Chapter 2, of his Wealth of Nations: en.wikisource.org/wiki/The_Wea

@pluralistic

#inequality #WealthTax #SecretIRSFiles #IRSFiles #TheSecretIRSFiles

2/

Where income is at least in theory precisely denominated wealth appreciation is not transational, but is based on assumptions, notably:

Of asset holdings themselves.
Of the market value of those holdings.

Both are subject to uncertainty.

@pluralistic

#TheSecretIRSFiles #IRSFiles #SecretIRSFiles #WealthTax #inequality

3/

For some time, I've come to view the "FIRE" sector of the economy, finance, real estate, and insurance, as having the common thread of risk. That is, each is based on the premise of assessing both the current market value and the associated uncertainty regarding that, of a portfolio --- debt and assets, real estate property holdings, insurance policies, in each specific case. Whilst all economic activity embodies some degree of risk, it's in the FIRE sector that risk seems to be the principle, possibly only manageable component. Actors within the sector attempt risk management through diversification, information, modeling, prediction, outcomes management, expectations management, legislated liability or immunity, and direct management of both activities and entities engaged in the sector.

Notions of economic value are then inherently notions of risk. (Among numerous other confounding factors.)

@pluralistic

#inequality #WealthTax #SecretIRSFiles #IRSFiles #TheSecretIRSFiles

4/

The "but it's difficult to measure" argument has also been applied, for the record, to other forms of wealth accumulation common to high-net-worth (HNW) individuals, notably stock options. The response has been to note that such options clearly have some value, though the precise valuation may not be presently knowable. Because that value has a risk component.

The ... risk ... noted by the person raising this objection was that taxation of more assessible assets might result in a flight to even less readily assessed assets further compounding the problem.

@pluralistic

#TheSecretIRSFiles #IRSFiles #SecretIRSFiles #WealthTax #inequality

5/

I see a few possible options here:

Time-average asset value. If there's uncertainty in the present-year value of assets, use a rolling average (e.g., 2, 3, 5, .. , years) to asses value, and tax based on that. Future-weighting asset inflation might be discouraged by progressively taxing higher rates or quantities of appreciation --- better to realise tax on five years of 10% gains rather than a single year of 62% gains.
Yes, asset deflation could then be applied toward tax credits. Similar logic would apply.
Where a range of values is given, the tax basis is assessed at the high end of the range.
Liquidity events trigger tax settlement, including arrearages, again at progressive rates. Keeping current and accurate is encouraged.
Costs in computing taxable value and tax amount are assessed to the specific taxpayer in question, or institutions holding or facilitating such asset holding or transfers.
A crude and old mechanism was for stamp taxes on assets of value. Implementing this in a modern age might prove difficult, but as an example , ancient Chinese paper money required stamp taxes to be recognised as legitimate, effectively a tax on holding paper wealth.
There are a reasonably finite number of attractive asset shelters: real estate, stocks, bonds, derivatives, collectibles, and the like. Taxation of these, either in holding or transfer, increases carrying and exchange costs. Ultimately this should reduce the asset value of these investments, and return wealth to the common weal.

@pluralistic

#inequality #WealthTax #SecretIRSFiles #IRSFiles #TheSecretIRSFiles

6/end/

@pluralistic You know what happens when you ask the IRS to tackle the problem of US wealth getting hidden overseas? They don't attack the massive corporations, Microsoft I read put a stop to that, they attack working class people who are already paying taxes in their new countries.

Incidentally the US is now the new taxhaven for the rest of the world.

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