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You're quoting nominal rates and not effective taxation. The very wealthy don't pay their "marginal dollar" in "income tax" at a 37% federal bracket (plus stat

You're quoting nominal rates and not effective taxation. The very wealthy don't pay their "marginal dollar" in "income tax" at a 37% federal bracket (plus state), they pay it in capital gains tax at 20%. If they pay it at all, given that in fact much income at these levels is sheltered from tax entirely via international tricks. There's plenty of analysis out there showing how the very wealthy in the US pay less effective tax than middle class families. That's not "empty rhetoric". It's a genuine problem and something we should be trying to solve.

rayiner 6y ago
Capital gains is 20% federal plus state (13% in California). Germany’s capital gains rate is 30.5%, lower than California and New York. Regardless, there is just not enough capital gains income for that to matter. For example, Biden’s plan to tax capital gains as ordinary income for taxpayers making over $1 million per year is expected to bring in less than $50 billion a year in revenues. Eliminating the capital gains preference entirely would raise only $130 billion annually. As to the “very wealthy”—Tim Cook’s tax rate on his $135 million bonus a few years ago was 52%. The people you’re talking about aren’t even ordinary wealthy people: CEOs, movie stars, and the like. What you’re talking about the Warren Buffets of the world that make money through investments. But there’s just not very many of those people. The IMF estimates the global cost of individual tax avoidance at $200 billion per year: https://www.imf.org/external/pubs/ft/fandd/2019/09/tackling-global-tax-havens-shaxon.htm https://www.imf.org/external/pubs/ft/fandd/2019/09/tackling-.... Say half that is attributable to the US. That’s about the same as the cost of the deductions for mortgage interest and local property taxes. Federal, state, and local governments tax more than $5 trillion annually. One party is proposing new spending amounting to several trillion more annually. In the face of those numbers, talking about $50 billion or $100 billion issues with respect to the taxation of the very wealthy is indeed empty rhetoric. You hear a lot of talk about billionaires this and billionaires that. The total income of all billionaires in the US is $130 billion, or about 1% of all income. It just doesn’t matter very much what the tax rate is on people who comprise only 1% of the tax base. Spending 90% of your time talking about tax issues that could fund at most 10% of your proposed new spending is empty rhetoric. Meanwhile, German levels of taxation on the middle class, and a German-style VAT would raise trillions annually. Guess why nobody talks about that.
- lifeformed 6y ago
  I don't know why you say hundreds of billions of dollars isn't worth taking about, compared to trillions. $150B is 15% of $1T, a sizable chunk. And the total income of US billionaires being just $130B doesn't quite capture the complete picture, when their combined wealth is in the trillions, and their assets keep growing.
  - sandworm101 6y ago
    >> when their combined wealth is in the trillions, and their assets keep growing. Because capital gains, ironically, do not apply to gains in capital assets. They have to "realize" the gains as "income", usually by selling the asset. So a millionaire (stockholder) can become a billionaire without ever paying a cent in capital gains tax. Only when they sell the stock is it subject to taxation. This allows them to pay tax selectively. Even if they want a chunk of money all at once, they can take a loan against their capital assets. There is no income realized when taking a loan. They then selectively sell stock to pay down the loan, preferably in years when they are taking a loss in some other area, nullifying the taxable gain on the asset sale. Such tricks are why, for billionaires, paying capital gains tax is basically voluntary.
    - TheOtherHobbes 6y ago
      Indeed. Wealth tax != Income tax. You can grow your wealth without virtually no taxable income. It's real wealth - you can buy houses and yachts with it - but you don't need to pay tax unless you choose to. In reality most money at this level is made by speculation, and speculation is spectacularly under-taxed. For example Forex trading in the City of London moves $6.6 trillion of money around, every single day. A Tobin Tax of 0.1% on that would raise $2.5tn a year - which would almost instantly wipe out the UK's entire national debt. Of course you'd lose some transaction volume - you might earn "only" $500bn - but the principle remains. A lot of economic activity isn't taxed at all, mostly to the benefit of the rich. This has huge effects on the quality of life of most of the population. There's a principle you won't find in econ books, which is that in an industrial economy basic maintenance spending isn't optional. If you don't pay for good education, you pay for it in lost economic activity. Likewise for infrastructure. And health care. The idea that these are somehow nice extras that the population shouldn't expect because they're "too expensive" is so wrong it's borderline insane. Everyone pays anyway. You may as well organise this properly so the work gets done and prosperity increases, because the alternative is instability, loss of opportunity, and ultimately a real risk of complete social and economic collapse.
PaulAJ 6y ago
Anyone who thinks that it would be easy to raise government revenues by taxing the wealthy should read "Moneyland" by Oliver Bullough. Anyone who thinks that low tax rates on wealthy people isn't a problem should also read "Moneyland" by Oliver Bullough.

rayiner 6y ago

Capital gains is 20% federal plus state (13% in California). Germany’s capital gains rate is 30.5%, lower than California and New York. Regardless, there is just not enough capital gains income for that to matter. For example, Biden’s plan to tax capital gains as ordinary income for taxpayers making over $1 million per year is expected to bring in less than $50 billion a year in revenues. Eliminating the capital gains preference entirely would raise only $130 billion annually. As to the “very wealthy”—Tim Cook’s tax rate on his $135 million bonus a few years ago was 52%. The people you’re talking about aren’t even ordinary wealthy people: CEOs, movie stars, and the like. What you’re talking about the Warren Buffets of the world that make money through investments. But there’s just not very many of those people. The IMF estimates the global cost of individual tax avoidance at $200 billion per year: https://www.imf.org/external/pubs/ft/fandd/2019/09/tackling-global-tax-havens-shaxon.htm https://www.imf.org/external/pubs/ft/fandd/2019/09/tackling-.... Say half that is attributable to the US. That’s about the same as the cost of the deductions for mortgage interest and local property taxes. Federal, state, and local governments tax more than $5 trillion annually. One party is proposing new spending amounting to several trillion more annually. In the face of those numbers, talking about $50 billion or $100 billion issues with respect to the taxation of the very wealthy is indeed empty rhetoric. You hear a lot of talk about billionaires this and billionaires that. The total income of all billionaires in the US is $130 billion, or about 1% of all income. It just doesn’t matter very much what the tax rate is on people who comprise only 1% of the tax base. Spending 90% of your time talking about tax issues that could fund at most 10% of your proposed new spending is empty rhetoric. Meanwhile, German levels of taxation on the middle class, and a German-style VAT would raise trillions annually. Guess why nobody talks about that.

lifeformed 6y ago
I don't know why you say hundreds of billions of dollars isn't worth taking about, compared to trillions. $150B is 15% of $1T, a sizable chunk. And the total income of US billionaires being just $130B doesn't quite capture the complete picture, when their combined wealth is in the trillions, and their assets keep growing.
- sandworm101 6y ago
  >> when their combined wealth is in the trillions, and their assets keep growing. Because capital gains, ironically, do not apply to gains in capital assets. They have to "realize" the gains as "income", usually by selling the asset. So a millionaire (stockholder) can become a billionaire without ever paying a cent in capital gains tax. Only when they sell the stock is it subject to taxation. This allows them to pay tax selectively. Even if they want a chunk of money all at once, they can take a loan against their capital assets. There is no income realized when taking a loan. They then selectively sell stock to pay down the loan, preferably in years when they are taking a loss in some other area, nullifying the taxable gain on the asset sale. Such tricks are why, for billionaires, paying capital gains tax is basically voluntary.
  - TheOtherHobbes 6y ago
    Indeed. Wealth tax != Income tax. You can grow your wealth without virtually no taxable income. It's real wealth - you can buy houses and yachts with it - but you don't need to pay tax unless you choose to. In reality most money at this level is made by speculation, and speculation is spectacularly under-taxed. For example Forex trading in the City of London moves $6.6 trillion of money around, every single day. A Tobin Tax of 0.1% on that would raise $2.5tn a year - which would almost instantly wipe out the UK's entire national debt. Of course you'd lose some transaction volume - you might earn "only" $500bn - but the principle remains. A lot of economic activity isn't taxed at all, mostly to the benefit of the rich. This has huge effects on the quality of life of most of the population. There's a principle you won't find in econ books, which is that in an industrial economy basic maintenance spending isn't optional. If you don't pay for good education, you pay for it in lost economic activity. Likewise for infrastructure. And health care. The idea that these are somehow nice extras that the population shouldn't expect because they're "too expensive" is so wrong it's borderline insane. Everyone pays anyway. You may as well organise this properly so the work gets done and prosperity increases, because the alternative is instability, loss of opportunity, and ultimately a real risk of complete social and economic collapse.

PaulAJ 6y ago

Anyone who thinks that it would be easy to raise government revenues by taxing the wealthy should read "Moneyland" by Oliver Bullough. Anyone who thinks that low tax rates on wealthy people isn't a problem should also read "Moneyland" by Oliver Bullough.