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?"
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%.
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.
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.
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.
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.
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.
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.
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:
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.
It recycled the materials it used to lobby against letting South Africa make its own HIV medicine to lobby against a covid vaccine waiver:
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.
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.
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:
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.
Two other proposals *would* have an impact, though: Ron Wyden has proposed a capital gains tax on unrealized gains:
And both Bernie Sanders and Elizabeth Warren have proposed wealth taxes:
@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.
@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.
@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
... 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.
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.
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.
> 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.
@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.
@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.
@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.
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.
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.
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.
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:
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.
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:
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.
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 (https://joindiaspora.com/posts/20937383#df8c1800ab2701399f60005056264835). This has objection has some merits, and I'd like to draw attention to it.
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: https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/Chapter_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.
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.)
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.
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 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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