4 ms·

For Dell’s Billionaire CEO, Taxing the Ultra-Rich Is a Joke

36 points by smacktoward 8y ago

chrisco255 8y ago
https://en.wikipedia.org/wiki/Hauser%27s_law https://en.wikipedia.org/wiki/Hauser%27s_law Hauser's law is the proposition that, in the United States, federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, regardless of wide fluctuations in the marginal tax rate.[1] Historically, since the end of World War II, federal tax receipts as a percentage of gross domestic product averaged 17.9%, with a range from 14.4% to 20.9% between 1946 - 2007.[2] So...yeah, marginal rates have been 70% or higher...but the Federal government has never successfully collected that much, due to write-offs, tax shelters, and other schemes that were largely closed in 1986 with... https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986 https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986
- leesec 8y ago
  So if we re-implement the 70% marginal tax rate now that these schemes are closed...?
  - raiyu 8y ago
    Technically no, because the 70% marginal tax rate would be on earned income while a significant portion of wealth is taxed through capital gains. The tax code is very large, so you can implement a 70% marginal rate on earned income and capital gains, but that will just shift accounting elsewhere. Alternatively, we could get better at our costs. Actually look to balance the budget by decreasing military spending, rein in pharma companies and healthcare costs, and then if needed raise taxes to make up the difference. It would have a much better effect, because increasing the taxes on the wealthy would do nothing to adjust healthcare spending, high cost of drugs, a lack of investment in our infrastructure.
  - deleted 8y ago
    [deleted]
- nkingsy 8y ago
  The article touches on a cultural shift in business leader salaries, saying that they didn’t demand as much because it would all go to taxes. Not sure how accurate that is, but if it were the case would that explain some of this phenomenon? Basically income would be shifted to lower brackets.
- saghm 8y ago
  Honest question: if people like the one described in the article won't actually end up paying more in taxes due to an increase in their tax rate, why do they oppose it?
  - flavmartins 8y ago
    The answer is likely quite simple. Because allowing for one idea would lead into another. 70% tax is a start. Not the end. The idea is to find where the "excess" income is taking place and add additional taxes in that area to direct the income into investment and services. 70% may be a start at ordinary income. But does it apply to investments? And then what's next? I think the key question for Dell and others is: can you show proof that the current approach of lower taxes boost the average individual income of workers? Because right now we're seeing great numbers from Wall Street, but wages are still virtually flat year over year. How does the Dow continue to climb but workers' pay stay the same?
    - chrisco255 8y ago
      Wage growth is not flat: https://www.bls.gov/news.release/pdf/realer.pdf https://www.bls.gov/news.release/pdf/realer.pdf https://www.cnbc.com/2018/10/31/wages-and-salaries-jump-by-3point1percent-highest-level-in-a-decade.html https://www.cnbc.com/2018/10/31/wages-and-salaries-jump-by-3... https://www.bbc.com/news/business-45448323 https://www.bbc.com/news/business-45448323
      - CalChris 8y ago
        Adjusted for inflation, pretty flat: https://fred.stlouisfed.org/graph/?g=l7U1 https://fred.stlouisfed.org/graph/?g=l7U1
        chrisco255 8y ago
        Way to end the graph in July 2018...extend the graph out to the edge and you see the wages start to rise again. And as long as unemployment stays low, we should expect wages to continue to rise.
- itsdrewmiller 8y ago
  20% is a third higher than 15% - that’s a pretty wide margin that actual taxes can swing. 70% marginal rate on a new higher top margin of only one kind of tax (income) obviously would not increase overall tax revenue by a tremendous amount. But even if it ends up having a minimal overall effect, it could still represent a significant shift in the distribution of taxes.
- elliekelly 8y ago
  So what if tax revenue has been flat as a percent of GDP? That says nothing as to how the burden of that tax is allocated.
  - opo 8y ago
    >So what if tax revenue has been flat as a percent of GDP? Like with much data, it has to put in context with other data, but I am pretty sure most people don't know that fact. As how that tax burden is allocated, do you think the rich paid more of a share of the taxes back when there were high rates? In 1980 the highest federal marginal rate was 70%. The top 10% paid 49% of federal income taxes in 1980 and the bottom 50% paid 7% of federal income taxes. In 2015, the top 10% paid paid 70% of federal incomes taxes and the bottom 50% paid 3% of federal income taxes. (http://www.ntu.org/foundation/page/who-pays-income-taxes http://www.ntu.org/foundation/page/who-pays-income-taxes)
Matticus_Rex 8y ago
Any discussion that doesn't even broach the topic of actual tax incidence is superficial at best, and probably just negligent. You can't really say if X worked at a societal level if X didn't do what it sounds like it did and literally applied to around half a dozen people.
subjectHarold 8y ago
I have given up with the long answers. The US had a marginal rate this high before: wrong, this doesn't reflect tax paid which, for the top 1%, is only down slightly since mid-1960s (and not worth anywhere close to what the US needs). Other countries do this successfully: wrong, other countries are far less progressive than the US with many more paying top rates. The lazy "we can be Sweden" thinking also indicates a fairly weak understanding of political theory. Assuming no reductions in revenue, the only solution is raising taxes substantially on the wealthy below 1%. Simple.
- onion2k 8y ago
  Let's assume you're right and the US really hasn't ever had a marginal tax rate of 70% in the past. Introducing it now would be the first time it's ever been done. What's wrong with trying new things?
  - subjectHarold 8y ago
    That is fair, I didn't explain that. But it is fairly simple: progressive tax systems don't reduce inequality. The US already has one of the most progressive tax systems in the world? Is it working? The US is one of the most unequal countries in the world. Look at other similar systems, are they working? Also, no...they are also amongst the most unequal in the world. More broadly, this is totally out of step with what is happening everywhere else in the world. The US is still trying to catchup even after Trump's tax cut, the issue is that US has a tax system that is from the 1950s when capital movements between nations were essentially banned. That kind of works for the US as the dominant world power but it is becoming more unsustainable as time goes on. Great, try new things...but what is being proposed isn't a new idea. It is more of the same. The US system is already the most progressive, it already doesn't work, and the idea is to go even further. The new idea, which is being vigorously rejected, is to just do something that actually works. Crazy, right? You don't need to believe in crazy conspiracy theories, you don't need to re-invent taxation...just do the stuff that works.
    - dragonwriter 8y ago
headmelted 8y ago
I see where people are coming from when they dismiss high marginal rates out of hand, without giving the honest answer as to why: No-one who is caught by them will pay them. If I'm Michael Dell, and my marginal rate is 70%, or 90% or even 100% (whatever) then I'm incentivized to take that money in another way, be it in stock, deferred bonuses, or even in leaving the capital in the business without issuing a dividend. The reason this is such a problem is that regardless of whether you manage to close every conceivable loophole, you're still talking about personal taxes. The corporation is making the lion's share of the money, and that's where the tax would need to be applied to raise the revenues required by the Green New Deal. Thing is, that's never worked for a state because the biggest companies are multi-national corporations that can (and do) shift their taxable income to the most favourable jurisdictions, which is why nation states keep trying to undercut each other on CT rates (Apple and Google are notorious for the lengths they go to in order to avail of this, for example). The state can't close that kind of loophole because it doesn't have the authority to (unless it goes down the road of sanctioning other countries due to their tax rates). I've not seen a solution to wealth distribution yet that acknowledges that we exist in a global economy, regardless of local policies (however well intentioned they are). Thing is, most people don't really seem to want wealth re-distribution to anyone poorer than them. Unless you're planning to pay a living wage to everyone in India/Thailand/China/wherever then why shouldn't they undercut your taxation rates as much as is needed to attract local jobs?
- charlesdm 8y ago
  If it accounts to investment income, then the easy solution is tot borrow against your equity. Better to pay 2% interest a year than to pay 70% on realising a gain.
- elliekelly 8y ago
  You could tax corporate dividends, stock buybacks, stock splits, reverse stock splits, mergers, acquisitions, and spin-offs. Major corporations won't de-list from the NYSE/NASDAQ for tax savings.
zapnuk 8y ago
His main argument besides 'name a country where this has ever worked' was that he is a philanthropist. He alleges that his foundation would have contributed more (in terms of $$$) than a 70% marginal rate. He further feels more comfortable deciding where/how to help by himself instead of giving the money to the gouvernment. Just because some billionares use their money in good faith, how many of the >5.000.000$/year behave the same? Do they help, buy overpriced luxury goods they don't need, or park their money in some financial product. His foundation does much work outside of the USA. That's commendable, but it's not up to the individual to decide what they fund. For a good reason. He really came as arrogant and uninformed. And where was the push back from the host? [1] http://www.youtube.com/watch?v=NR_lictGa5g&t=1m50s http://www.youtube.com/watch?v=NR_lictGa5g&t=1m50s
- ardy42 8y ago
  > Just because some billionares use their money in good faith, how many of the >5.000.000$/year behave the same? Also billionaire philanthropy probably wont tackle the problems or solutions that will help society but hurt billionaires. https://www.youtube.com/watch?v=d_zt3kGW1NM https://www.youtube.com/watch?v=d_zt3kGW1NM

36 points by smacktoward 8y ago

https://en.wikipedia.org/wiki/Hauser%27s_law https://en.wikipedia.org/wiki/Hauser%27s_law Hauser's law is the proposition that, in the United States, federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, regardless of wide fluctuations in the marginal tax rate.[1] Historically, since the end of World War II, federal tax receipts as a percentage of gross domestic product averaged 17.9%, with a range from 14.4% to 20.9% between 1946 - 2007.[2] So...yeah, marginal rates have been 70% or higher...but the Federal government has never successfully collected that much, due to write-offs, tax shelters, and other schemes that were largely closed in 1986 with... https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986 https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986

leesec 8y ago
So if we re-implement the 70% marginal tax rate now that these schemes are closed...?
- raiyu 8y ago
  Technically no, because the 70% marginal tax rate would be on earned income while a significant portion of wealth is taxed through capital gains. The tax code is very large, so you can implement a 70% marginal rate on earned income and capital gains, but that will just shift accounting elsewhere. Alternatively, we could get better at our costs. Actually look to balance the budget by decreasing military spending, rein in pharma companies and healthcare costs, and then if needed raise taxes to make up the difference. It would have a much better effect, because increasing the taxes on the wealthy would do nothing to adjust healthcare spending, high cost of drugs, a lack of investment in our infrastructure.
- deleted 8y ago
  [deleted]
nkingsy 8y ago
The article touches on a cultural shift in business leader salaries, saying that they didn’t demand as much because it would all go to taxes. Not sure how accurate that is, but if it were the case would that explain some of this phenomenon? Basically income would be shifted to lower brackets.
saghm 8y ago
Honest question: if people like the one described in the article won't actually end up paying more in taxes due to an increase in their tax rate, why do they oppose it?
- flavmartins 8y ago
  The answer is likely quite simple. Because allowing for one idea would lead into another. 70% tax is a start. Not the end. The idea is to find where the "excess" income is taking place and add additional taxes in that area to direct the income into investment and services. 70% may be a start at ordinary income. But does it apply to investments? And then what's next? I think the key question for Dell and others is: can you show proof that the current approach of lower taxes boost the average individual income of workers? Because right now we're seeing great numbers from Wall Street, but wages are still virtually flat year over year. How does the Dow continue to climb but workers' pay stay the same?
  - chrisco255 8y ago
    Wage growth is not flat: https://www.bls.gov/news.release/pdf/realer.pdf https://www.bls.gov/news.release/pdf/realer.pdf https://www.cnbc.com/2018/10/31/wages-and-salaries-jump-by-3point1percent-highest-level-in-a-decade.html https://www.cnbc.com/2018/10/31/wages-and-salaries-jump-by-3... https://www.bbc.com/news/business-45448323 https://www.bbc.com/news/business-45448323
    - CalChris 8y ago
      Adjusted for inflation, pretty flat: https://fred.stlouisfed.org/graph/?g=l7U1 https://fred.stlouisfed.org/graph/?g=l7U1
      - chrisco255 8y ago
        Way to end the graph in July 2018...extend the graph out to the edge and you see the wages start to rise again. And as long as unemployment stays low, we should expect wages to continue to rise.
itsdrewmiller 8y ago
20% is a third higher than 15% - that’s a pretty wide margin that actual taxes can swing. 70% marginal rate on a new higher top margin of only one kind of tax (income) obviously would not increase overall tax revenue by a tremendous amount. But even if it ends up having a minimal overall effect, it could still represent a significant shift in the distribution of taxes.
elliekelly 8y ago
So what if tax revenue has been flat as a percent of GDP? That says nothing as to how the burden of that tax is allocated.
- opo 8y ago
  >So what if tax revenue has been flat as a percent of GDP? Like with much data, it has to put in context with other data, but I am pretty sure most people don't know that fact. As how that tax burden is allocated, do you think the rich paid more of a share of the taxes back when there were high rates? In 1980 the highest federal marginal rate was 70%. The top 10% paid 49% of federal income taxes in 1980 and the bottom 50% paid 7% of federal income taxes. In 2015, the top 10% paid paid 70% of federal incomes taxes and the bottom 50% paid 3% of federal income taxes. (http://www.ntu.org/foundation/page/who-pays-income-taxes http://www.ntu.org/foundation/page/who-pays-income-taxes)

Matticus_Rex 8y ago

Any discussion that doesn't even broach the topic of actual tax incidence is superficial at best, and probably just negligent. You can't really say if X worked at a societal level if X didn't do what it sounds like it did and literally applied to around half a dozen people.

subjectHarold 8y ago

I have given up with the long answers. The US had a marginal rate this high before: wrong, this doesn't reflect tax paid which, for the top 1%, is only down slightly since mid-1960s (and not worth anywhere close to what the US needs). Other countries do this successfully: wrong, other countries are far less progressive than the US with many more paying top rates. The lazy "we can be Sweden" thinking also indicates a fairly weak understanding of political theory. Assuming no reductions in revenue, the only solution is raising taxes substantially on the wealthy below 1%. Simple.

onion2k 8y ago
Let's assume you're right and the US really hasn't ever had a marginal tax rate of 70% in the past. Introducing it now would be the first time it's ever been done. What's wrong with trying new things?
- subjectHarold 8y ago
  That is fair, I didn't explain that. But it is fairly simple: progressive tax systems don't reduce inequality. The US already has one of the most progressive tax systems in the world? Is it working? The US is one of the most unequal countries in the world. Look at other similar systems, are they working? Also, no...they are also amongst the most unequal in the world. More broadly, this is totally out of step with what is happening everywhere else in the world. The US is still trying to catchup even after Trump's tax cut, the issue is that US has a tax system that is from the 1950s when capital movements between nations were essentially banned. That kind of works for the US as the dominant world power but it is becoming more unsustainable as time goes on. Great, try new things...but what is being proposed isn't a new idea. It is more of the same. The US system is already the most progressive, it already doesn't work, and the idea is to go even further. The new idea, which is being vigorously rejected, is to just do something that actually works. Crazy, right? You don't need to believe in crazy conspiracy theories, you don't need to re-invent taxation...just do the stuff that works.
  - dragonwriter 8y ago

headmelted 8y ago

I see where people are coming from when they dismiss high marginal rates out of hand, without giving the honest answer as to why: No-one who is caught by them will pay them. If I'm Michael Dell, and my marginal rate is 70%, or 90% or even 100% (whatever) then I'm incentivized to take that money in another way, be it in stock, deferred bonuses, or even in leaving the capital in the business without issuing a dividend. The reason this is such a problem is that regardless of whether you manage to close every conceivable loophole, you're still talking about personal taxes. The corporation is making the lion's share of the money, and that's where the tax would need to be applied to raise the revenues required by the Green New Deal. Thing is, that's never worked for a state because the biggest companies are multi-national corporations that can (and do) shift their taxable income to the most favourable jurisdictions, which is why nation states keep trying to undercut each other on CT rates (Apple and Google are notorious for the lengths they go to in order to avail of this, for example). The state can't close that kind of loophole because it doesn't have the authority to (unless it goes down the road of sanctioning other countries due to their tax rates). I've not seen a solution to wealth distribution yet that acknowledges that we exist in a global economy, regardless of local policies (however well intentioned they are). Thing is, most people don't really seem to want wealth re-distribution to anyone poorer than them. Unless you're planning to pay a living wage to everyone in India/Thailand/China/wherever then why shouldn't they undercut your taxation rates as much as is needed to attract local jobs?

charlesdm 8y ago
If it accounts to investment income, then the easy solution is tot borrow against your equity. Better to pay 2% interest a year than to pay 70% on realising a gain.
elliekelly 8y ago
You could tax corporate dividends, stock buybacks, stock splits, reverse stock splits, mergers, acquisitions, and spin-offs. Major corporations won't de-list from the NYSE/NASDAQ for tax savings.

zapnuk 8y ago

His main argument besides 'name a country where this has ever worked' was that he is a philanthropist. He alleges that his foundation would have contributed more (in terms of $$$) than a 70% marginal rate. He further feels more comfortable deciding where/how to help by himself instead of giving the money to the gouvernment. Just because some billionares use their money in good faith, how many of the >5.000.000$/year behave the same? Do they help, buy overpriced luxury goods they don't need, or park their money in some financial product. His foundation does much work outside of the USA. That's commendable, but it's not up to the individual to decide what they fund. For a good reason. He really came as arrogant and uninformed. And where was the push back from the host? [1] http://www.youtube.com/watch?v=NR_lictGa5g&t=1m50s http://www.youtube.com/watch?v=NR_lictGa5g&t=1m50s

ardy42 8y ago
> Just because some billionares use their money in good faith, how many of the >5.000.000$/year behave the same? Also billionaire philanthropy probably wont tackle the problems or solutions that will help society but hurt billionaires. https://www.youtube.com/watch?v=d_zt3kGW1NM https://www.youtube.com/watch?v=d_zt3kGW1NM