> In 2018, Warren Buffett had a net worth of $84 billion. The effective tax rate on his mountain of wealth? 0.006%—orders of magnitude lower than the tax rates paid by most middle-class families.
What tax rate do middle-class families pay on their net worth? 0% I believe, since we don't have wealth taxes?
Yeah, this is written in extremely manipulative language. What was warren buffett's income in 2018? We have income tax, not wealth tax. Plus, a lot of that wealth is likely 'in' his company, which is really just fake money. I mean, I know accountants look at it and there is some overlap for taxes when doing things like options and share grants and FMV, but really, a company is worth zero until you sell it, like most assets.
EDIT:
Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay.
This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.
To be fair though, we do have property taxes, and many middle-class families have a substantial fraction of their net worth tied up in their house and other real property.
Since most middle-class families have the bulk of their wealth in their primary residence, the effective tax rate is however much they are paying in property taxes divided by the equity in the home. In many cases this can amount to a sizable percentage of net worth.
Around 1%, in the form of property taxes. That's a tough number, though, because property taxes apply even when people are under water on their mortgages or rent.
The only wealth taxes the US has are property taxes. We all just think of wealth as the stuff that doesn't get taxed. The richer you get, the less of your wealth is taxable. The poorer you get, the more you pay wealth taxes.
In theory, we tax rich people when they convert their wealth to income. In practice, they all convert their wealth to income by borrowing against it, then dying, then having their estate pay their debts tax free.
How is this the top comment? It does nothing to move the discourse forward. You are trying to slam the brakes by homing in on some tricky terminology. I wish this kind of comment would get downvoted into oblivion anytime the topic of a wealth tax comes up, whether or not you agree with it.
The difficulty you are having in parsing out the comparison here is because the comparison is difficult to make (and possibly you are just trolling). How would you word this sentence to make it more clear? It is clear from the rest of the document that what is being compared is not the "wealth tax" on families, because as you said we don't have wealth taxes.
The comparison is what percentage of wealth do families already give to the government through taxes in general. Nowhere does it mention an existing "wealth tax". Most middle-class families build their wealth from a paycheck, while ultra-rich families can do so through other means that aren't taxed. Whether or not you agree that a wealth tax would be of benefit here, it's hard to argue against that point. And that is what your referenced quote is trying to elucidate.
This is something I have always been curious about but really not talked about in any of these studies.
(I am purposefully ignoring the companies not paying taxes since that I think is a valid issue if we are talking about income).
So Warren Buffet may have $84 billion in stocks and assets, but how much did he actually sell? How much money went from selling stocks to his bank account?
I think that number if far more important.
Yes it is true that we have excise taxes on cars and property taxes on homes, I feel like a just plain "wealth" tax is not the right solution.
I don't like the idea that the government can say, "you have X amount in stocks, you must sell a certain perfect so you can pay us in taxes". Which is what this sounds like to me? Or am I majorly missing something here.
Taking the Warren Buffet example, he would have to come up with 2.5 billion in taxes
They have no capital gains tax. Overall the wealth tax is a lower cost to individuals than the style of wealth taxes en-vogue in a lot of places now. Wealth taxes require liquidation of assets to pay, given the nature of wealth. When you liquidate assets, you pay cap gains tax and then have to pay the wealth tax. In Switzerland, you just pay the wealth tax. Basically, you have to be taxed to pay the tax in most places, where in Switzerland you just pay the tax without being 'double taxed'.
Liquidating assets to cover that tax works out to a lower overall tax burden on the individual than capital gains tax. Most nations that are mulling wealth taxes are considering them as an added tax layer, as opposed to the Swiss who use it as an indirect means to tax investments, rather than asking for a per-transaction gain payment. Nations that have done the approach that's opposite to Switzerland tend to reverse their wealth taxes, or see little benefit (France, for instance).
Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from?
It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.
> Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from?
The stock market.
> It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.
Without domestic ownership requirements, that will happen anyway, for instance: https://www.marketwatch.com/story/jeff-bezos-just-sold-nearl... ("Jeff Bezos has sold $6.7 billion in Amazon shares over the past week"). I reckon that's about 3% of his wealth.
And frankly, the wealthy have been expatriating US national assets for a long time, just not the paper financial ones. I don't see why we should be especially concerned with those, since what they mean is controlled entirely by US law.
I have noticed that politicians always use extremes (many standard deviations away from the average) to illustrate a population.For example, Warren Buffet wealth is in the top 10. Yet, Warren's policies target the top 1% (top 10 is the top 0.00033% of the top 1%). He is not representative of the top 1% in any way!! Show me the median and let's talk.
I am surprised people bite at this manipulative narrative. It seems to me that it discredits their arguments right away. In that sense, voter education would go a long way.
> The Ultra-Millionaire Tax would apply to the wealthiest 100,000 households in America and generate at least $3 trillion in revenue over the next decade—all without raising taxes on 99.95% of American households.
> I am surprised people bite at this manipulative narrative.
I suspect it's people believing what they want to believe. When Elizabeth Warren comes along and says, "you can have everything you need: healthcare, food, clothing, housing, all without having to work at a job you hate, and all we have to do is agree to take a little bit from a few people who won't even miss it", a lot of people who do work at a job they hate and stress about how much healthcare, food, clothing and housing they have or might have in the future don't really see much downside in saying, "yeah, sure, let's try it".
What if we mandate that all workers must get part of their compensation in the form of company shares so that if the company explodes in value, it's not just the executives that become billionaires and the workers are just still going paycheck to paycheck? This seems common in the tech world but not so much in other companies.
I don't think this would actually be better for the workers? ceteris paribus, it's better to be paid in cash than stock. stock can be better if it enables a higher TC, or the number of shares is locked in before a major jump in valuation, but at the low end of pay I think most people would prefer to minimize variance over maximizing EV.
I wonder if that’s been tried before. Maybe there’s some point of reference for the outcomes of that approach. Maybe it could be tried on a local basis and then evaluated before a complete overhaul of the largest single nation economy?
If I had to guess, I don’t think it would work out very well. Unless you imprison the wealthy. Then their wealth wouldn’t be mobile.
This would be a great idea to apply lean startup methodology. If it works, we’ll, that’d just be…unprecedented!
It's always interesting that this issue keeps coming up, whereas Islam solved it over 1400 years ago through the Zakat system.
An extremely reasonable 2.5% would be owed on money sitting in the bank for one lunar year (it's a form of "wealth tax" if you will). It has been documented that in Iraq during the Ummayad period where everyone paid their share of Zakat, there were no more poor people left to accept it.
And that's it, no income tax or messing around with it. It works.
Livestock and produce have a separate calculation, but most of us here are not in that business.
The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws.
> The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws.
What would if the winning team always ended up writing the rules in such a way to where they were always winners and only winners could write next years rules?
In the UK (and I'm sure elsewhere), inheritance tax is the main vehicle to try and avoid dynasties being created once one person has accumulated massive wealth.
As others have said, it is income that is taxed, there will be plenty of people who own capital (e.g. inherited a large country house) and who don't have the cash to pay a tax on it and presumably it would seem unfair to force them to sell it (and hope they get decent money for it) in order to pay a tax on it.
One answer would be a federal sales tax, combined with a Universal Basic Income.
The UBI would be equal to the amount of the tax on up to some minimum income level (say, 50k / year). In other words, everyone gets a monthly check that is essentially a rebate on their sales tax up to the income threshold.
That's simple, loophole-free, and avoids the privacy invasion that accurate income tax collections require.
In theory, a 3% wealth tax makes the life of a billionaire difficult. You have like a 60% tax rate for fed/state/local. You make maybe 8% by being safe in your investments. If you pay taxes on your income, get that 8% reduced to 6% by 2% inflation and then your left with a 3.6% YoY gain (6% * 60%) before a 3% wealth tax wipes you out down to 0.6%.
But you still don't have to pay taxes on your gains with this bill. You can take out a loan on your new assets at a 2-3% rate and its reduced to around 1% with inflation. Now you don't have to pay taxes because a loan on the principal value doesn't cause a taxable event with the step up in value. You just sell enough to cover your interest liabilities and pay taxes on that.
I wish they'd address WHY these rates are so low by attacking people and companies that aren't being productive with their capital by building things people want. Why attack a people or a company with a wealth tax if they are paying low rates because they spend most of their revenue on building the business. Capitalism is about rewarding good allocators of capital.
Why would it be 60% for stocks? It’s not regular income. It’s capital gains. You’re looking at much lower rates for ltcg.
These rules also only apply to people with $50M+ and only to amounts over that $50M. I don’t think almost anyone should have that level of wealth in the world - it’s clearly created at the cost of others.
It gives no details on what loopholes would be closed, and then conflated that with tax cheats and that a well funded IRS will solve both.
A well funded IRS will just be rubber stamping the compliant tax reducing methods faster. Although most constituent's experience with the IRS is retroactive and adversarial, wealthier people's experience with the IRS is pre-emptive and collaborative. It is a totally different experience.
I don't get the impression that the people and organizations identified here would ever be subject to these taxes, even if the law was passed without any debate.
Sigh... Wealth taxes don't work. Almost every single European country that had a wealth tax repealed theirs. The fact that Senator Warren is continuing to try to push a wealth tax shows how poor her policies are.
My understanding is that these ultra rich people have their wealth tied up in investments, so they never "see" any income despite their investments' massive growth. To get cash and buy things, they simply take out loans at super low interest rates using their investments as collateral. Basically, it's cheat codes.
It's probably why CEOs also like to take super low salaries.
What I don't understand is how their stock gifts or dividends don't trigger more taxes or why their taxes are indeed so damn low.
Somehow any new measures will end up penalizing the middle class either directly or indirectly and not touching the ultra wealthy despite the politicians claiming loudly otherwise.
[+] [-] csallen|4 years ago|reply
What tax rate do middle-class families pay on their net worth? 0% I believe, since we don't have wealth taxes?
[+] [-] iammisc|4 years ago|reply
EDIT: Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay.
This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.
[+] [-] avalys|4 years ago|reply
[+] [-] alasdair_|4 years ago|reply
[+] [-] mrkurt|4 years ago|reply
The only wealth taxes the US has are property taxes. We all just think of wealth as the stuff that doesn't get taxed. The richer you get, the less of your wealth is taxable. The poorer you get, the more you pay wealth taxes.
In theory, we tax rich people when they convert their wealth to income. In practice, they all convert their wealth to income by borrowing against it, then dying, then having their estate pay their debts tax free.
[+] [-] knowledge-clay|4 years ago|reply
[+] [-] ramblinrose|4 years ago|reply
The difficulty you are having in parsing out the comparison here is because the comparison is difficult to make (and possibly you are just trolling). How would you word this sentence to make it more clear? It is clear from the rest of the document that what is being compared is not the "wealth tax" on families, because as you said we don't have wealth taxes.
The comparison is what percentage of wealth do families already give to the government through taxes in general. Nowhere does it mention an existing "wealth tax". Most middle-class families build their wealth from a paycheck, while ultra-rich families can do so through other means that aren't taxed. Whether or not you agree that a wealth tax would be of benefit here, it's hard to argue against that point. And that is what your referenced quote is trying to elucidate.
[+] [-] nerdjon|4 years ago|reply
(I am purposefully ignoring the companies not paying taxes since that I think is a valid issue if we are talking about income).
So Warren Buffet may have $84 billion in stocks and assets, but how much did he actually sell? How much money went from selling stocks to his bank account?
I think that number if far more important.
Yes it is true that we have excise taxes on cars and property taxes on homes, I feel like a just plain "wealth" tax is not the right solution.
I don't like the idea that the government can say, "you have X amount in stocks, you must sell a certain perfect so you can pay us in taxes". Which is what this sounds like to me? Or am I majorly missing something here. Taking the Warren Buffet example, he would have to come up with 2.5 billion in taxes
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] d--b|4 years ago|reply
[+] [-] aidenn0|4 years ago|reply
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] temp8964|4 years ago|reply
[+] [-] downWidOutaFite|4 years ago|reply
[+] [-] sna1l|4 years ago|reply
https://www.bloomberg.com/news/articles/2021-02-16/swiss-wea...
[+] [-] trutannus|4 years ago|reply
Liquidating assets to cover that tax works out to a lower overall tax burden on the individual than capital gains tax. Most nations that are mulling wealth taxes are considering them as an added tax layer, as opposed to the Swiss who use it as an indirect means to tax investments, rather than asking for a per-transaction gain payment. Nations that have done the approach that's opposite to Switzerland tend to reverse their wealth taxes, or see little benefit (France, for instance).
[+] [-] avalys|4 years ago|reply
It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.
[+] [-] tablespoon|4 years ago|reply
The stock market.
> It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.
Without domestic ownership requirements, that will happen anyway, for instance: https://www.marketwatch.com/story/jeff-bezos-just-sold-nearl... ("Jeff Bezos has sold $6.7 billion in Amazon shares over the past week"). I reckon that's about 3% of his wealth.
And frankly, the wealthy have been expatriating US national assets for a long time, just not the paper financial ones. I don't see why we should be especially concerned with those, since what they mean is controlled entirely by US law.
[+] [-] evilos|4 years ago|reply
[+] [-] ninja3925|4 years ago|reply
I am surprised people bite at this manipulative narrative. It seems to me that it discredits their arguments right away. In that sense, voter education would go a long way.
[+] [-] evilos|4 years ago|reply
To be top .5% in 2020, a household needed a net worth of $17,557,208. The top .1% bracket started around $43,207,732.
This wealth tax doesn't kick in until 50M USD.
https://dqydj.com/average-median-top-net-worth-percentiles/
[+] [-] X6S1x6Okd1st|4 years ago|reply
Huh? 0.05% is 20x smaller than 1%
[+] [-] ulkram|4 years ago|reply
[+] [-] commandlinefan|4 years ago|reply
I suspect it's people believing what they want to believe. When Elizabeth Warren comes along and says, "you can have everything you need: healthcare, food, clothing, housing, all without having to work at a job you hate, and all we have to do is agree to take a little bit from a few people who won't even miss it", a lot of people who do work at a job they hate and stress about how much healthcare, food, clothing and housing they have or might have in the future don't really see much downside in saying, "yeah, sure, let's try it".
[+] [-] outlace|4 years ago|reply
[+] [-] leetcrew|4 years ago|reply
[+] [-] vnchr|4 years ago|reply
I wonder if that’s been tried before. Maybe there’s some point of reference for the outcomes of that approach. Maybe it could be tried on a local basis and then evaluated before a complete overhaul of the largest single nation economy?
If I had to guess, I don’t think it would work out very well. Unless you imprison the wealthy. Then their wealth wouldn’t be mobile.
This would be a great idea to apply lean startup methodology. If it works, we’ll, that’d just be…unprecedented!
[+] [-] azth|4 years ago|reply
An extremely reasonable 2.5% would be owed on money sitting in the bank for one lunar year (it's a form of "wealth tax" if you will). It has been documented that in Iraq during the Ummayad period where everyone paid their share of Zakat, there were no more poor people left to accept it.
And that's it, no income tax or messing around with it. It works.
Livestock and produce have a separate calculation, but most of us here are not in that business.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] rlewkov|4 years ago|reply
[+] [-] bradlys|4 years ago|reply
What would if the winning team always ended up writing the rules in such a way to where they were always winners and only winners could write next years rules?
[+] [-] X6S1x6Okd1st|4 years ago|reply
[+] [-] lbriner|4 years ago|reply
As others have said, it is income that is taxed, there will be plenty of people who own capital (e.g. inherited a large country house) and who don't have the cash to pay a tax on it and presumably it would seem unfair to force them to sell it (and hope they get decent money for it) in order to pay a tax on it.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] kogus|4 years ago|reply
The UBI would be equal to the amount of the tax on up to some minimum income level (say, 50k / year). In other words, everyone gets a monthly check that is essentially a rebate on their sales tax up to the income threshold.
That's simple, loophole-free, and avoids the privacy invasion that accurate income tax collections require.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] useful|4 years ago|reply
But you still don't have to pay taxes on your gains with this bill. You can take out a loan on your new assets at a 2-3% rate and its reduced to around 1% with inflation. Now you don't have to pay taxes because a loan on the principal value doesn't cause a taxable event with the step up in value. You just sell enough to cover your interest liabilities and pay taxes on that.
I wish they'd address WHY these rates are so low by attacking people and companies that aren't being productive with their capital by building things people want. Why attack a people or a company with a wealth tax if they are paying low rates because they spend most of their revenue on building the business. Capitalism is about rewarding good allocators of capital.
[+] [-] bradlys|4 years ago|reply
These rules also only apply to people with $50M+ and only to amounts over that $50M. I don’t think almost anyone should have that level of wealth in the world - it’s clearly created at the cost of others.
[+] [-] vmception|4 years ago|reply
It gives no details on what loopholes would be closed, and then conflated that with tax cheats and that a well funded IRS will solve both.
A well funded IRS will just be rubber stamping the compliant tax reducing methods faster. Although most constituent's experience with the IRS is retroactive and adversarial, wealthier people's experience with the IRS is pre-emptive and collaborative. It is a totally different experience.
I don't get the impression that the people and organizations identified here would ever be subject to these taxes, even if the law was passed without any debate.
[+] [-] sour-taste|4 years ago|reply
[+] [-] lvl100|4 years ago|reply
Crypto.
Sorry I couldn’t help myself.
[+] [-] figers|4 years ago|reply
[+] [-] puchatek|4 years ago|reply
[+] [-] anderson1993|4 years ago|reply
[+] [-] Bhilai|4 years ago|reply
How is this possible? Why does Elon Musk pay less taxes than an average person who works in Tech?
[+] [-] bmitc|4 years ago|reply
It's probably why CEOs also like to take super low salaries.
What I don't understand is how their stock gifts or dividends don't trigger more taxes or why their taxes are indeed so damn low.
[+] [-] lvl100|4 years ago|reply
[+] [-] bassman9000|4 years ago|reply
[+] [-] rednerrus|4 years ago|reply
[+] [-] cscurmudgeon|4 years ago|reply