Warren's wealth tax makes me feel like she doesn't really understand how most wealth is held by billionaires. It's extremely illiquid, held in company stock, private business, wealth funds, private equity, and other things that don't allow someone to easily pay her 6% wealth tax ever year. It also would fundamentally change how businesses are owned in America. Imagine Bezos having to sell off 6% of his Amazon stake every year...eventually he wouldn't be the major shareholder any more. Mutual funds would become the large shareholders of every business since they would get to avoid this tax. The stock market would tumble (in my opinion), as there would always be a constant "sell" pressure on the market.
Now, she's an incredibly smart woman and I'm sure she does know exactly how it's held and its problems, which just makes me think she's trying to grab headlines with her platform without any real plans on how to do it. (Which seems to fit with her pattern on her platform anyway).
Married couple with household net worth of $100,000—the median level in the United States
Pays zero tax because they are below the $50 million threshold
Married couple with a primary and vacation residence and substantial retirement savings for a household net worth of $20 million
Pays zero tax because they are below the $50 million threshold
Extremely successful small business owner of a $30 million business as well as additional assets for a household net worth of $40 million
Pays zero tax because they are below the $50 million threshold
Hedge fund manager with a net worth of $500 million
Pays a 2% tax on the $450 million in net worth above the $50 million threshold, producing a total annual liability of $9 million
Heir with a net worth of $20 billion
Pays a 2% tax on the $950 million between $50 million and $1 billion, and a 3% tax on the remaining $19 billion, for a total annual liability of $589 million.
She's sufficiently smart to know that a wealth tax won't have the impact you describe. In the same way that X% corporation taxes don't pull in anything like the revenue that you'd naively expect.
Your argument is, essentially, an "everything else being equal" one. But it won't be. Company structures, trusts etc will be restructured to best deal with whatever the new laws state. As they do with the current laws.
Of course, the corollary is that she's also well aware that it won't raise anything like the money that's suggested but, from her perspective, that's not a problem either. In fact, the opposite. Bringing in a wealth tax that the wealthy avoid is probably close to ideal: deliver on your promise and still have the bogeyman. Result.
What I think is genuinely interesting is that the whole idea of a wealth tax is now considered to be electorally sensible. That's a huge change from a decade or so ago and, potentially, makes way for much more radical policies to be touted without the usual faux-shocked response.
"Yet he is now the latest affluent American to warn that Senator Elizabeth Warren’s plan for much higher taxes on the rich would be bad not just for the wealthy but for the rest of America, too."
I've watched the clip several times now and this is horrible characterization by this journalist. The title of this piece even seems to be click bait-y. We're starting to have a national conversation about more heavily taxing billionaires again but so much of the media is pumping this up into a "the Populists are going to eat the rich" kind of hysteria.
I find it interesting that individual journalists are also terrified of this. Like, do we really think the current system is a sustainable system 50 years into the future?
Seems like a lot of billionaires on hacker news given the comments. The past two Republican presidents have pushed for and gotten massive tax "reforms" that reward these same people and cost the treasury massive amounts of new debt. Seems like just reversing all of the "reforms" would be fairly simple to implement and return the lost revenue without even needed to do anything new.
Most billionaires don't have ordinary income in the same way workers do. If they really wanted to target billionaires, they would increase taxes on long term capital gains and dividends, and eliminate the carried-interest loophole.
I'll almost certainly never be a billionaire. But I will probably do well enough, because I've learned how to live below my means and how to invest. Doing this properly will make anyone relatively wealthy after a reasonable working career.
The system works. These days, we have low unemployment, rising wages and a great market for retirees. It's not a good idea to mess with it.
Most of these billionaires' net worth are not liquid cash, they're in shares of the companies they founded/own. Jeff Bezos' $111B net worth, for eg, is mostly in $AMZN stock. The way a 6% wealth tax accrues, if he does nothing productive with his money, he would have to pay $6.67B the first year...and then a similar amount every year after that. After 20 years, $111B would turn into $32B — a ~71% tax rate over that time period.
And because most of his wealth is tied up in his stock, he would have to liquidate large portions of $AMZN to pay the yearly wealth tax bill. That kind of sustained mass influx of supply of $AMZN shares on the stock market would wreak havoc on its stock price, which would reverberate through retirement/pension funds. Few would gain from it.
If you took all of Bill Gates' wealth, you could fund the US Federal government for about 8 days. Not 8 days every year, 8 days total, one time. If you took all of the Forbes 400 wealth, you could fund the federal government for about 8 months. The upside is 8 months of runway, and the downside is that you would destroy decades of created wealth (wealth is not zero-sum), a tide which has lifted a lot of other boats, particularly those of the upper-middle class.
Our retirement system isn't sustainable. Most people have literally nothing saved in their 401ks, etc. It also assumes a growing economy. The system is already in a failure state, we're just ignoring it.
I thought Gate's commentary was on Warren's proposal for a 2%/yr tax on all assets (not income) in excess of $50m.
The article instead seems to be entirely about marginal tax rates.
A wealth tax has a lot more implications than changes to the marginal tax rates on income and capital gains-- it has different economic effects and requires far more invasive interactions from the government.
E.g. the content of Gates' home is largely his own private business, but under a wealth tax will he have to account for all his possessions and report them to the government? If not, then why wouldn't the tax be avoidable by buying expensive art?
In the past, including recently, Gates has been pretty consistent about supporting higher tax rates for the wealthy, in particular citing estate taxes and capital gains as areas that deserved focus. (https://www.cnbc.com/2019/02/13/bill-gates-suggests-higher-t...).
To me this suggests that NYT is just trying to create a bad guy opponent to make a boring policy discussion sound like something that requires pitchforks.
There are currently three New York Times articles on the front page of HN. None of them are particularly interesting or well-written. I really don’t see why this is necessary.
I would be happy if the New York Times was banned from this site. An awful lot of low quality and off topic content from there seems to constantly make it to the front page here.
I think there are plenty of billionaires who would agree that taxes need to be higher, but they disagree specifically with the taxing mechanisms being proposed by Warren and Sanders, namely the wealth tax.
Take everyone's favorite startup founder, Adam Neumann, of WeWork. Under Warren's plan, he would have been worth around 14 billion last year, based on a 30% stake in a $47 billion "valuation". So he'd owe close to a billion in taxes, when in fact, he was worth far less. And even if $47B was the correct valuation, there's not a great mechanism for him to actually get the liquidity to pay taxes.
So higher taxes on billionaires? I'm all for it. But we need realistic proposals to make it happen.
Then the taxes would've property shown the valuation of that company.
You're taking a whole system and applying it to a single variable and saying it doesn't make sense. WeWork should've never been worth that much and an inability to pay taxes would've shown that.
The fact that the tax rate for the very rich has been reduced that much over the decades (not just in the US) shows how much they have corrupted the political process.
Yes, the tax rate has been reduced, but since Reagan became President, the US has been on an unprecedented 40 year economic growth. The same can't be said for Europe, England, or any other country with giant top bracket marginal rates.
The reason wealthy don’t need to pay their fair share of taxes is due to all the tax loopholes. The solution to that is not adding more complexity in our taxes. The solution is to remove loopholes and make taxes as simple as possible. For a certain well known income, there should be a certain well known tax rate. And, after a certain minimum, there should be almost no ways to get deductions from that tax rate.
The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 (PDF)). The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
I wonder how countries like Norway and Switzerland implement their wealth taxes if this is absolutely impossible. It's true that more countries use an inheritance tax which has a similar effect to a wealth tax.
We've got low unemployment (record low for African Americans and Hispanics), rising wages, and a strong stock market.
Why mess with things now? I'd understand it if someone wanted to monkey with things when the economy was awful. But why mess with it when things are good?
> The available evidence strongly suggests that taxation exerts a minor influence on innovation.
No citation given.
> Congress has slashed taxation three times in the past four decades, each time for the stated purpose of spurring innovation and investment and growth. Each time, the purported benefits failed to materialize.
No citation given.
> President Trump initiated the most recent experiment in 2017. The International Monetary Fund concluded in a recent report that it had not worked.
This NYT piece is about individual income tax, whereas the IMF article exclusively analyzed corporate tax cuts.
> Decades of episodic tax cuts have left the government deeply in debt
Yes, though nobody in the article (or in the broader political arena) is all that interested in paying them off.
> The wealthiest Americans are paying a much smaller share of income in taxes than they did a half-century ago. In 1961, Americans with the highest incomes paid an average of 51.5 percent of that income in federal, state and local taxes. Half a century later, in 2011, Americans with the highest incomes paid just 33.2 percent of their income in taxes, according to a study by Thomas Piketty, Emmanuel Saez and Gabriel Zucman
There is no source for the 1961 number. That study says that the tax rate on the top 0.001% increased 185% from 1946-1980 and decreased 3% from 1980-2014. [1]
---
Aside from the typically bad NYT coverage, a point seldom brought up in many articles is the current income tax burden of the wealth relative the rest of the country.
More than 90% of individual income taxes come from the top 1% of taxpayers. [2]
I can't find that number for billionaires specifically, but some quick searching and math estimates that $9T from billionaires taxed at 23% accounts for $2T of $10T individual income tax.
So < 0.001% of individuals pay 20% of the income tax.
Makes me wonder what the opt-referred to "fair share" actually is.
I prefer to think of it as, let's tax the people who benefit 10000 times more from the current system or who have probably a million times more influence than the average person. They certainly didn't work 10000 times harder and I don't think anyone should have the influence they do.
> The specific proposals by Ms. Warren and one of her rivals, Senator Bernie Sanders, to impose a new federal tax on wealth are innovations that require careful consideration.
The NYT and myself have a very different definition of “innovation”.
Even if "innovative" was just a synonym of "original", it's not even an original idea, as many European countries have already tried a wealth tax -- and I'm fairly certain every country that has tried it has repealed it not long after.
A person is a person and all of us must be equal - until it comes to paying things. Then it's ok to burden the rich for paying for dramatically more than their fair share.
When one runs out of other ideas, and can't extract money from the bottom 50% of US citizens who do not pay taxes, yet want to continue spending instead of cutting entitlements - treating rich people as another revenue source will continue.
A while ago, I was curious about the relationship between income taxes and growth in the US, so I looked up the data... and I was unable to find any clear relationship!!!
As one of many possible examples I could give, below is a table I compiled showing the highest marginal federal income tax rate and year-over-year real GDP growth in the US since 1950. Can you find a relationship?
My conclusion, so far: There's a tremendous amount of theory, and rhetoric, and posturing, and straw-man arguments... but very little or ZERO actual evidence that national economic growth is impacted one way or another. (In fact, in many cases the data shows higher economic growth during periods of higher taxation at the top of the income distribution.)
The increasing lack of a mass market consumer base for capitalist goods & services also threatens economic growth. In other words it does society more economic good for everybody to be able to afford a dishwasher than for a few people to be able to afford luxury goods. We've had decades of rather low tax rates and decades of rather low growth and no solutions given other than to double down on the low-tax investment-first strategy.
Low taxes sure bolster economic growth in the short term and bolster investment but they also lead to forms of societal decay like income inequality which leads to crime which leads the more demand for order which leads to cementing the accumulation of power. Left unchecked the powerful will accumulate resources out of line with their actual merit to society through the leverage of their existing capital. We're in a situation now where it's increasingly obvious how the rich are overcompensated relative to their productive output but countries race to the bottom to compete for their capital. If this race to the bottom were not happening every country would be better off taxing the wealthy more fairly but we're in a tragedy of the commons situation.
Tax on wealth (earnings which were already taxed once) will lead most shareholders to do the math and skip over to Canada or Europe if profitable. Especially companies ran in a remote/asynchronous manner.
[+] [-] bluedevil2k|6 years ago|reply
Now, she's an incredibly smart woman and I'm sure she does know exactly how it's held and its problems, which just makes me think she's trying to grab headlines with her platform without any real plans on how to do it. (Which seems to fit with her pattern on her platform anyway).
[+] [-] chishaku|6 years ago|reply
Examples
Married couple with household net worth of $100,000—the median level in the United States
Married couple with a primary and vacation residence and substantial retirement savings for a household net worth of $20 million Extremely successful small business owner of a $30 million business as well as additional assets for a household net worth of $40 million Hedge fund manager with a net worth of $500 million Heir with a net worth of $20 billion https://elizabethwarren.com/ultra-millionaire-tax/[+] [-] lucozade|6 years ago|reply
Your argument is, essentially, an "everything else being equal" one. But it won't be. Company structures, trusts etc will be restructured to best deal with whatever the new laws state. As they do with the current laws.
Of course, the corollary is that she's also well aware that it won't raise anything like the money that's suggested but, from her perspective, that's not a problem either. In fact, the opposite. Bringing in a wealth tax that the wealthy avoid is probably close to ideal: deliver on your promise and still have the bogeyman. Result.
What I think is genuinely interesting is that the whole idea of a wealth tax is now considered to be electorally sensible. That's a huge change from a decade or so ago and, potentially, makes way for much more radical policies to be touted without the usual faux-shocked response.
[+] [-] ngcc_hk|6 years ago|reply
Btw it takes about 8 years to reduce the wealth to 60%. That will do the balance and you can have another president by then. It is not forever.
[+] [-] randogogogo|6 years ago|reply
I've watched the clip several times now and this is horrible characterization by this journalist. The title of this piece even seems to be click bait-y. We're starting to have a national conversation about more heavily taxing billionaires again but so much of the media is pumping this up into a "the Populists are going to eat the rich" kind of hysteria.
IMO.
[+] [-] aaomidi|6 years ago|reply
[+] [-] coldcode|6 years ago|reply
[+] [-] tcbawo|6 years ago|reply
[+] [-] RickJWagner|6 years ago|reply
I'll almost certainly never be a billionaire. But I will probably do well enough, because I've learned how to live below my means and how to invest. Doing this properly will make anyone relatively wealthy after a reasonable working career.
The system works. These days, we have low unemployment, rising wages and a great market for retirees. It's not a good idea to mess with it.
[+] [-] vippy|6 years ago|reply
[deleted]
[+] [-] bhupy|6 years ago|reply
And because most of his wealth is tied up in his stock, he would have to liquidate large portions of $AMZN to pay the yearly wealth tax bill. That kind of sustained mass influx of supply of $AMZN shares on the stock market would wreak havoc on its stock price, which would reverberate through retirement/pension funds. Few would gain from it.
If you took all of Bill Gates' wealth, you could fund the US Federal government for about 8 days. Not 8 days every year, 8 days total, one time. If you took all of the Forbes 400 wealth, you could fund the federal government for about 8 months. The upside is 8 months of runway, and the downside is that you would destroy decades of created wealth (wealth is not zero-sum), a tide which has lifted a lot of other boats, particularly those of the upper-middle class.
[+] [-] notacoward|6 years ago|reply
Not at all. He'd just have to sell that stock to someone else, with no operational effect whatsoever.
[+] [-] aaomidi|6 years ago|reply
Our retirement system isn't sustainable. Most people have literally nothing saved in their 401ks, etc. It also assumes a growing economy. The system is already in a failure state, we're just ignoring it.
[+] [-] nullc|6 years ago|reply
The article instead seems to be entirely about marginal tax rates.
A wealth tax has a lot more implications than changes to the marginal tax rates on income and capital gains-- it has different economic effects and requires far more invasive interactions from the government.
E.g. the content of Gates' home is largely his own private business, but under a wealth tax will he have to account for all his possessions and report them to the government? If not, then why wouldn't the tax be avoidable by buying expensive art?
In the past, including recently, Gates has been pretty consistent about supporting higher tax rates for the wealthy, in particular citing estate taxes and capital gains as areas that deserved focus. (https://www.cnbc.com/2019/02/13/bill-gates-suggests-higher-t...).
To me this suggests that NYT is just trying to create a bad guy opponent to make a boring policy discussion sound like something that requires pitchforks.
[+] [-] aaomidi|6 years ago|reply
Gates barely has a normal income. What he does have is a ton of wealth that a lot of us see as something broken in the system.
You could cure cancer and you still shouldn't have THAT much wealth.
[+] [-] keiferski|6 years ago|reply
[+] [-] deadbunny|6 years ago|reply
[+] [-] gho77|6 years ago|reply
How are they all to be seen as not well written? Too many comma splices?
Are they factually accurate and you don’t agree with the tone?
Are they factually incorrect and you like the tone?
“Knee jerk hot take” is pretty unnecessary.
[+] [-] 1helloworld1|6 years ago|reply
[+] [-] lackbeard|6 years ago|reply
[+] [-] chadash|6 years ago|reply
Take everyone's favorite startup founder, Adam Neumann, of WeWork. Under Warren's plan, he would have been worth around 14 billion last year, based on a 30% stake in a $47 billion "valuation". So he'd owe close to a billion in taxes, when in fact, he was worth far less. And even if $47B was the correct valuation, there's not a great mechanism for him to actually get the liquidity to pay taxes.
So higher taxes on billionaires? I'm all for it. But we need realistic proposals to make it happen.
[+] [-] aaomidi|6 years ago|reply
You're taking a whole system and applying it to a single variable and saying it doesn't make sense. WeWork should've never been worth that much and an inability to pay taxes would've shown that.
[+] [-] Tepix|6 years ago|reply
[+] [-] bluedevil2k|6 years ago|reply
[+] [-] sinatra|6 years ago|reply
[+] [-] mcphage|6 years ago|reply
Simplicity in taxes is where all the loopholes come from. Taxes become more complicated in order to close the loopholes.
[+] [-] sfg|6 years ago|reply
[+] [-] bfieidhbrjr|6 years ago|reply
Yeah and what was inflation? And what was Reagan doing to fix it? It wasn’t all economic unicorns and rainbows in the 70s to 80s transition.
[+] [-] formercoder|6 years ago|reply
[+] [-] chishaku|6 years ago|reply
https://www.irs.gov/businesses/small-businesses-self-employe...
The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 (PDF)). The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
[+] [-] nbanks|6 years ago|reply
[+] [-] RickJWagner|6 years ago|reply
Why mess with things now? I'd understand it if someone wanted to monkey with things when the economy was awful. But why mess with it when things are good?
[+] [-] onion2k|6 years ago|reply
[+] [-] dudul|6 years ago|reply
[+] [-] kauffj|6 years ago|reply
http://archive.is/i60kZ
[+] [-] owlninja|6 years ago|reply
[+] [-] acdha|6 years ago|reply
[+] [-] obituary_latte|6 years ago|reply
[+] [-] unknown|6 years ago|reply
[deleted]
[+] [-] paulddraper|6 years ago|reply
> The available evidence strongly suggests that taxation exerts a minor influence on innovation.
No citation given.
> Congress has slashed taxation three times in the past four decades, each time for the stated purpose of spurring innovation and investment and growth. Each time, the purported benefits failed to materialize.
No citation given.
> President Trump initiated the most recent experiment in 2017. The International Monetary Fund concluded in a recent report that it had not worked.
This NYT piece is about individual income tax, whereas the IMF article exclusively analyzed corporate tax cuts.
> Decades of episodic tax cuts have left the government deeply in debt
Yes, though nobody in the article (or in the broader political arena) is all that interested in paying them off.
> The wealthiest Americans are paying a much smaller share of income in taxes than they did a half-century ago. In 1961, Americans with the highest incomes paid an average of 51.5 percent of that income in federal, state and local taxes. Half a century later, in 2011, Americans with the highest incomes paid just 33.2 percent of their income in taxes, according to a study by Thomas Piketty, Emmanuel Saez and Gabriel Zucman
There is no source for the 1961 number. That study says that the tax rate on the top 0.001% increased 185% from 1946-1980 and decreased 3% from 1980-2014. [1]
---
Aside from the typically bad NYT coverage, a point seldom brought up in many articles is the current income tax burden of the wealth relative the rest of the country.
More than 90% of individual income taxes come from the top 1% of taxpayers. [2]
I can't find that number for billionaires specifically, but some quick searching and math estimates that $9T from billionaires taxed at 23% accounts for $2T of $10T individual income tax.
So < 0.001% of individuals pay 20% of the income tax.
Makes me wonder what the opt-referred to "fair share" actually is.
[1] https://www.nber.org/papers/w22945.pdf Table 2
[2] https://taxfoundation.org/summary-latest-federal-income-tax-...
[+] [-] thrower123|6 years ago|reply
The worst problem with these tax proposals is that they won't even raise half as much revenue as they need for the programs they are supposed to fund.
[+] [-] mattbuilds|6 years ago|reply
[+] [-] acdha|6 years ago|reply
[+] [-] seibelj|6 years ago|reply
The NYT and myself have a very different definition of “innovation”.
[+] [-] fastball|6 years ago|reply
[+] [-] czbond|6 years ago|reply
When one runs out of other ideas, and can't extract money from the bottom 50% of US citizens who do not pay taxes, yet want to continue spending instead of cutting entitlements - treating rich people as another revenue source will continue.
[+] [-] cs702|6 years ago|reply
As one of many possible examples I could give, below is a table I compiled showing the highest marginal federal income tax rate and year-over-year real GDP growth in the US since 1950. Can you find a relationship?
My conclusion, so far: There's a tremendous amount of theory, and rhetoric, and posturing, and straw-man arguments... but very little or ZERO actual evidence that national economic growth is impacted one way or another. (In fact, in many cases the data shows higher economic growth during periods of higher taxation at the top of the income distribution.)
Sources:Year-over-year real GDP growth: https://fred.stlouisfed.org/graph/?g=pssP
Tax rates: https://www.taxpolicycenter.org/statistics/historical-highes...
[+] [-] TheOperator|6 years ago|reply
Low taxes sure bolster economic growth in the short term and bolster investment but they also lead to forms of societal decay like income inequality which leads to crime which leads the more demand for order which leads to cementing the accumulation of power. Left unchecked the powerful will accumulate resources out of line with their actual merit to society through the leverage of their existing capital. We're in a situation now where it's increasingly obvious how the rich are overcompensated relative to their productive output but countries race to the bottom to compete for their capital. If this race to the bottom were not happening every country would be better off taxing the wealthy more fairly but we're in a tragedy of the commons situation.
[+] [-] crb002|6 years ago|reply
[+] [-] criddell|6 years ago|reply