Evidence from leaked account data on how elites use offshore banking [pdf]
brookings.edu
brookings.edu
https://www.amazon.com/Dictators-Without-Borders-Power-Centr...
Personally I think the correct response is to tax things rich people like in those countries. Specifically housing, high end cars etc.
Putting beneficial owners on real estate makes total sense.
The London real estate market and maybe real estate dealers perhaps benefit. Most citizens of UK don't benefit from parts of London being actually empty for purposes of investment.
The recycling of third world dollars back to the West has been ongoing since the "patrodollars" of the 1970s. Those who get a piece of those dollars benefit, the average citizen Western nations haven't benefited from the tremendous economic imbalance this has created.
1. A loan is treated as repatriating any offshore foreign income that you might have;
2. We need to eliminate it at least tackle transfer pricing / profit shifting. One way to do that is to apportion profits based on revenue.
3. Residential units owned by corporations need to be taxed higher; and
4. Owning property in a country or state should make you a tax resident of that jurisdiction.
How should that work in practice?
Should a person who owns homes in Connecticut, California, New York, D.C., Virginia, Florida, Alps, Paris, Hong Kong, London, Etc be paying state taxes in every jurisdiction? I'm asking in earnest, and want billionaires to pay significantly more in taxes per dollar of gains and wealth than, e.g. Americans making median income, but how can that be enforced when it's less expensive to bribe/extort a politician/party than it is to pay their fair share?
The also know what they are doing instead of trying to reverse engineer it like these studies are.
But aren't they in bed with the companies using these schemes?
I have noticed nothing "pejorative" in the language used in the document. I'd be more pejorative myself. The individuals with accounts are described clinically - "high net worth individuals". The ethics of using the leaked data is examined.
The situation that individuals with these accounts may be committing crimes is also described dispassionately. It is a fact that these accounts are often used for the crime of tax evasion. Do you want to dispute this fact? Or do you want language that tries avoid any mention of this likelihood? That would be less "pejorative" I suppose.
Edit: OK, the Mel Brooks quote is an exception to the generally clinical language. But by that point the author has made their case and should get at least a little cookie.
First page after the abstract
"It is this information asymmetry that gives rise to a host of problems" as opposed to benefits?
This study is fairly balanced but chooses to only focus on illegal tax evasion by the wealthy and corrupt behavior of public officials. Instead of legal tax deferment or avoidance.
What 'benefit' is derived from Congolese President's ability to have 'hidden' accounts on the Isle of Man, instead of accounts that are available to be scrutinized by Congolese authorities?
Like I said, its actually strange to focus on corrupt behavior of public officials to say another country is the problem and not the corrupt official. A reason this is strange that you might not have considered is that more universally respected countries such as the US and the UK offer the same opaque tax evading capabilities to non-citizens as the smaller countries they complain about. As well as access to international markets. So focus on the corrupt person, or educate on how to use more competitive jurisdictions instead of being manipulated into the small country tax haven meme. Its just larger economic unions exempting themselves from scrutiny and saying other countries are the problem.
? That is not a 'benefit' of hidden bank accounts.
"US and the UK offer the same opaque tax evading capabilities to non-citizens"
They don't really. Nations have tax treaties to avoid this kind of stuff. While there are loopholes etc. it's not going to be a good idea to keep stolen money in London, it will get frozen.
"So focus on the corrupt person" - the corruption is enabled by banking secrecy. A big focus on corruption is going after hidden networks.
You are conflating several concepts:
If you don’t want assets frozen then don’t use banks, they haven't been necessary for an entire decade. Bearer-everything is back in vogue.
Why is every second reply in this comment thread trying to deflect away from the documented widespread, commonplace fraud that constitutes a wealth transfer away from common taxpayers?
The history of state revenue sources has been much broader than the last 100 years of worrying about whether everyone is getting hosed equally. High tax jurisdictions who will never balance their budget are in a quagmire of their own design, and they lack the consensus mechanisms to do anything about it. They are failed states in this regard and that has nothing to do with rest of the world.
What happened to innocent until guilty?
Hell I've got an account in an offshore jurisdiction. I guess I need to go do some introspection about my "crime of tax evasion"...
Courts disagree.
The primary form of investment firms (PE firms) rely on an "onshore" feeder, for certain countries taxable persons to invest into, and an "offshore" feeder for everyone else as well as those same countries non-taxable persons (charities, retirement plans) to invest into. The offshore feeder typically being an offshore corporation taxed only at the entity level, in a place that does not levy tax on the kinds of transactions conducted, and in many cases also means banking and brokerage accounts offshore. But it also means banking and brokerage accounts onshore under the name of the offshore entity, because it is completely legal and the relevant financial professionals are completely familiar with it.
Status in our society is based on understanding whose opinion matters, and that is the executive and judicial branch, while the legislative branch and head of states pretends to act like they are in an adversarial relationship with people that keep their money.
I see. And the innocent ones? Just acceptable collateral damage in your guilty by association campaign?
The irony is that likely you and everyone else probably has a fair chunk of their net wealth flowing through these types of structures via their pension/insurance.
Pension funds don't just hop onto Robinhood app and buy a 100MM basket of shares. It gets structured through places like these. Same for large chunks of the cross jurisdiction M&A activity.
Unfortunately it's all confidential so the people that know can't talk, and everyone else has knowledge/opinion made up entirely out of clickbait and stuff like this...someone patching together a "how the elites screw you" article based on patchy partial leaks. The notion of patching together something that is global based on one leak from one bank in one jurisdiction is comical in itself. It's like looking at the left rear tyre of a car and speculating that cars are probably all scams because you can't see what makes it move forward.
The information asymetry is insane and 99.99% of the world is on the wrong side of it.
Alas...rage on hn
I'll add that to my reading list alongside the 'climate change' reports written by the global petrochemical industry, and the reports written by hedge-fund traders on what really happened in the 2008 financial crisis.
I'm telling you, and everyone, that the entire phrasing of "leaks" and "secret" and "loopholes" is either complete clickbait or the musing of the completely ignorant, and both of those outcomes means you should go to the actual source of truth instead of bothering with this wealth-porn.
And yet you want to argue that. Plato-esque.
that has nothing to do with client data, which is "secret" even in the "I overpaid my percentage of taxes onshore by not deducting anything" world
Where I think we have a significant difference of opinion is whether something should be done to rectify the question of hiding assets offshore.
I do personally hate ignorance and always had high marks on reading comprehension, our conversation was exclusively congruent with me saying a different source of truth conforms to reality and the authorities in this reality.
We get a bunch of random political parties, promising to "tax the rich" and stuff, we get new laws... and what happens?
- The poor already pay very little tax - no change there
- The rich avoid the tax by doing shady stuff (who remembers the panama papers.. or this.. or many other stories like these)
- I, the middle class engineer get fucked by the taxes, and I get fucked hard, and not in fun way.
Edit: I think I hit a nerve.
Why fail to fix one over the other?
Whether their proposed changes will actually work is another question, but it’s wrong to say there’s no attention there and that the debate is only about raising taxes.
I can’t say I understand the downvotes I received for saying that.
Billionaires (put together) in the US hold something similar to 1 year of federal tax receipts, for example. Tax them into the ground and you get 1 year of revenue.
Raising taxes is an admission that current tax policy, and the other side of the coin, the government spending policy, are awfully designed.
Of course there has never been a competent design since taxes always need to be higher to "reduce" the ever increasing wealth gap higher taxes were supposed to be tackling in the first place.
Just for once we could try something different maybe?
Fwiw we feel like middle class but we’re really in the top 5% or higher. We’re the rich people these taxes and politicians talk about.
The ultra rich/wealthy are a red herring, there’s only a few 10k of them of them. Only 614 people are billionaires.
7 figure income (salary) puts you in top 0.35% ... that’s 1,120,000 Americans. Not a whole lot.
edit: top 10% starts at $125,000 salary
Where does the middle class top off? $125,000/year individual income puts you in top 10%. Pretty normal for a software engineer. Is that middle class?
Depends on the location and cost of living?
And no I'm not saying you should just offset income by exactly the CoL. Obviously being in a prime location has its own benefits too. But you can't just assume the benefits cancel the extra cost of living either; they certainly don't cancel for everybody. The balance is somewhere in between. (I don't have a formula.)
Is there some other kind of millionaire?
It's one thing to say you have a million dollars to your name. The difference is that one person has to sell everything they own to command that value while someone else just calls their broker to have it liquidated from their rainy day fund.
But more to the actual point. To the extent a concept of “paper wealth” exists it should be confined to things that are genuinely unable to be converted into real money at all. For example stock options in a seed stage company are genuinely illiquid and may never be worth anything ever to anyone.
People living in a million dollar house and saying it’s not really wealth and shouldn’t count sound pretty out of touch to the rest of the world that doesn’t get to live in a million dollar house.
https://en.wikipedia.org/wiki/Paper_wealth
If you're sitting in a house and it has appreciated in value because it's 2005 and you are in Sunnyvale then you've acquired paper wealth. You didn't upgrade your home, you didn't make it nicer. It's the same home you bought for $300k. It's just now magically worth $1.2m because the world continued spinning.
Sure, that probably sounds great if the person wanted to sell the home and move into a place where home values have remained largely unchanged. But if that person either likes where they live or wants to stay reasonably close, the increased value of their home basically doesn't affect their life - they purchased something that was of modest wealth and now people think it's worth more.
If you bought a gumball for $0.25 and now people think it's worth $1m should you get taxed as a millionaire even if you never intend to sell it? Would it seem reasonable that the rest of the world thinks that you're out of touch because they don't get to have million dollar gumballs?
Yes it does. They don’t have to move. The people who aren’t rich and haven’t been able to own real estate have to leave the area when property values skyrocket.
$10m is a substantial bound. Above that threshold, we can expect financial fortitude.
Have a look at what inconveniencing just 400 of them would do (they would still be billionaire after) https://mkorostoff.github.io/1-pixel-wealth/
And they own half the country.
Also the companies who employ these engineers aren't making that much money to burn. That's just my hunch, I haven't done a thorough research.
If you want to make more money you become a manager. Developers are just like electricians or brick layers.
They also don’t have the FAANG to create tons of value from software.
Scale can be like a force multiplier for engineers. Makes them deliver more value and employers are able to pay them more.
Seems for Google the value is actual money and for a startup it is a potential future earning? Yet the startup developer in San Francisco is still (presumably) paid 200k or more? If that startup fails, was the developer overvalued?
I value the service of my local council's binmen more than most developers' output (including my own). Doesn't mean they get paid the big bucks.
Another part of the equation: in today’s age of massive aggregation around a few gigantic tech monopolies in the US, those few companies are able to pay large salaries because they derive a lot of value from their employees. But the reality of compensation is not very dissimilar between the US and other locations once you remove FAANG from the equation. FAANG companies employee a very highly selectively chosen segment of software developers who can command high value, but are also a tiny slice of the market. But the majority of software engineers in America are not employed in FAANG or compensated that way.
I think middle class is about where your money comes from than the amount of your money. If you are primarily deriving your income from from working for a company you don’t control, then I think you are middle class.
What if you invest 70% of those 500,000 because your CoL is only 150,000. Still middle class?
Cold hard cash is an asset if you use it like an asset. Well okay, your cold hard lucrative skills are the asset in this case.
Assuming you are completely dependent on the salary for support, you are high income working-class intelligentsia.
> What if you invest 70% of those 500,000 because your CoL is only 150,000. Still middle class?
Assuming the returns from those investments are as important to your ability to get by (even if you aren’t touching them currently, but they ade backstopping your labor income), then you’ve achieved middle-class (petit bourgeios) status, instead of merely working class.
> Cold hard cash is an asset if you use it like an asset. Well okay, your cold hard lucrative skills are the asset in this case.
“Skills to do labor that is valued by capitalists” are assets, sure, but they are the assets determining success within (and perhaps at the extremes the potential to move out of) the working class. Ownership of transferrable capital assets defines the difference between the working class and the higher classes in a capitalist economy.
That’s the classic definition of working class.
Having a roughly equal (in terms of importance) split between capital and labor dependence for income (such as by applying your labor to your own capital as an independent small-business owner or yeoman farmer) is the traditional middle class.
The burden of proof is on you then. For you to be able to say that, you'd have to enumerate all possibilities and then provide evidence why each wouldn't work. In the meantime, it seems obvious things could be better without needing to be perfect.
I am sure some figure out ways, but you have to go in dodgier places.
This is a new development is the last 10-20 years, so there is progress. It should help people trust the system is getting fairer.
If one is against taxes, and uses lack of enforcement as a reason, I smell dishonesty.
What is your definition of "middle class"? Someone making $400k is most certainly in the top 1%.
What tax changes have occurred so far in the past few decades that are significantly affecting you? I would genuinely like to know
Under a federalist, state-first system, the federal government shouldn’t consider mandated transfers to state (including administrative subdivisions) government which plays the primary role in the conditions of local commerce which enables income as part of the free income of a taxpayer subject to taxation (this also avoids federal taxes altering the calculus of net benefit in state democratic decisionmaking on tax and spending.) In a federal-first, centralized system, ignoring state taxes consistently makes sense. In either case, a limited SALT deduction has no principled justification, and is simply an effort to use the power of federal tax policy to put a federal thumb on the scales of state decisionmaking to get the successful states whose economic success makes them net contributors to the federal government to adopt tax and spending policies more like those characterizing the politically-overrepresented but less successful states that are net drains on federal resources, leveling the playing field by making every place suck equally, so at least the former can’t make the latter look so bad any more, while advancing the Norquistian vision of shrinking the size of government to where it can be drowned in a bathtub, without concern for thr consequences, because ideology.
On the plus side, between the limit on SALT deduction and the increased standard deduction, the mortgage interest deduction is almost effectively dead; which is something that has needed to get removed, but nobody wanted to do it. Now it's technically there, but almost useless, so best of both worlds.
Maybe it will make ca/ny think twice about having such high tax rates…
IMO the SALT deduction is a horrible thing and allows state governments to become way too bloated.
Also, making 400K does not make you rich. In California, you are actually bringing home around 200K with high cost of living in areas where an engineer might make that much, whereas the top 1% (measured by household wealth instead of income) still has a net worth of ~$10M.
$400k can buy you an entry-level home in cash, or a 10% deposit on that $4M mansion across town. Most choose the latter.
In other words, you have accumulated 1/10000 the wealth of your FAANG employer.
Calling that lifestyle "rich" just serves to muddy the water. This is soundly in the category of upper-middle class and decades away from being financially independent.
Tell them at the end of the year you’re going to give them the next nine years of paychecks as a Christmas bonus and then ask them if they feel financially independent.
Tell that hypothetical average American to buy a mediocre house in Sunnyvale and see what reaction you get.
Nobody cares what lifestyle $400k can buy in Mississippi because very few people are making that much in a locale that cheap.
Or, 90 minutes from Sunnyvale, an amount of time they are keenly aware of as they commute there every day to clean the clothes, cook the food, and maintain the real estate of the “not rich” people you are describing.
> Tell that hypothetical average American to buy a mediocre house in Sunnyvale and see what reaction you get.
They would say I’m sorry I can’t, because the prices of those houses have been bid up by the rich people who currently live there and make $400k a year.
> Nobody cares what lifestyle $400k can buy in Mississippi
People in Mississippi do. They also get a say in setting tax policy for the U.S. which is the topic of current discussion.
This is completely independent of CoL. There are very, very few Americans who will ever be able to seriously consider doing this.
A little perspective is always a good thing.
A federal sales tax with exemptions for basic necessities (food, rent, school supplies, etc.) would make so much more sense, as already exists in 7 states at the state level.
In this way you don't have to worry about whether income was earned offshore or onshore, if you're buying stuff or services here or importing stuff, you get taxed on it.
Even with the exemption for basic necessities, a person who earns 100x what you do will probably spend on the order of 5-10x more than you, thus making the tax very regressive.
If you make $50k plus COLA for your entire career but one year your stock options materialize and pay $400k, are you rich?
If you're making 400k post-tax, sure. If that's pre-tax income, however, you're not making 4M after 10 years.
After federal taxes you're making closer to $286k, roughly. This is just for the privilege of being a US citizen - even if you don't necessarily spend the majority of your time in the country.
Assuming this is a CA software engineer, it's closer to $250k. This is just for the privilege of having a tax basis in CA.
Assuming you actually do live in the Bay Area as a single bachelor and would like the privilege of having your own apartment that you don't have to share with others (remember, you're "rich") a nice unit to yourself will run you roughly $3k/m -> $24k/y. So we're much closer to $225k/y.
Even assuming this person has no car, no social life, and no metabolism we're still running at roughly half of your projections. Which is still a fair chunk, to be sure. But it's still half of their money going towards the privilege of obtaining money.
EDIT: just saw this bit
> I get that COL lowers that, but if you are making 400K you're not renting
This depends, as buying is not always superior to renting, especially when you're talking a house. A house is a pretty big investment - so much so that a lot of financial circles still spend a lot of time between "get a home, what isn't equity is a tax write off" and "just rent, no surprise expenses, remain more liquid, invest the difference between your rent and a typical mortgage in the market".
The last time I was looking in the South Bay area, average prices for a 2 bedroom home in a suburb were ~$1.2m. This is a $240k down payment and ~$7.3k monthly (15 year conventional, down to ~$4.7 for 30 year but we're outside of the "10/20 years" we described above and paying more interest for it besides).
If we account for all that, we're looking at much closer to $190k being available to us after the privilege of living and working (that's adjusting for the taxes, but it's not so clean as interest is a sliding scale over the years) - just now we have a place to ourselves that cost us around a year or two of savings time just to start the house purchase and a recurring expense that's over double the nearby rent. This is largely not favorable to the majority of people unless they're wanting to lay roots. That said, given people seem to be leaving I'd imagine housing prices will become less steep in a matter of years; albeit whether it makes it more reasonable to buy than rent for those not looking to stay for 15+ years remains something of an open question.
I'll make up some numbers to make it simple. Let's say there's 2 brackets. Everyone who makes under $399,999.99 pays 0% tax. And everyone who makes over $400k pays 90% tax. You make $400k. How much do you owe the taxman? Did you know it's only 90 pennies out of $400k? The first $399,999.99 you make is in the 0% bracket. It will always be taxed at that rate. Only the amount over that ($1) will be taxed in the next bracket.
Now in reality, we have 7 tax brackets. This is how much you really pay, assuming filing single for 2020.
$9875 of $400k @ 10%
$30,250 of $400k @ 12%
$45,399 of $400k @ 22%
$77,775 of $400k @ 24%
$44,049 of $400k @ 32%
$192,649 of $400k @ 35%
You wouldn't even make enough to pay anything into the 7th bracket @ 37%.
Personally, I believe yes, we need to raise taxes on the uber rich just to slow their growth. NO, it will not affect you who make $400k (which is already wealthy compared to most of America!) And add more brackets while we're at it. There was a time in America where the uber rich had a 94% tax bracket. I'm not saying we need to go that high. But 37% and too many deductions is a joke.
So a tax increase at 400K will indeed affect someone who makes 400K (or maybe ~450K, or someone who files jointly) now or in the ensuing years when they get raises to combat inflation. The brackets never keep up with inflation, because the government uses CPI to pretend like there isn't much inflation. The highest bracket in 1913 was 1 million dollars (NOT ADJUSTED FOR INFLATION).
[1] https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco...
[2] https://www.pewresearch.org/social-trends/2020/01/09/trends-...
Note: I'm not saying correlation = causation; just an interesting phenomenon to notice.
The point is that the distribution of tax rates is broken, with no statement made about the rates themselves.
Lower taxes makes it less expensive for the rich to pay the government.
Look at housing and food costs to see how the middle class are affected, they don't get welfare, social housing, or food stamps.
If you are in between (say) my salary and 400k, no amount of increase in the price of food is going to be a problem for you unless you are ludicrously bad with money. I'm not in favour of wanton taxes aimed at "the rich" as a political manoeuvre, but let's not be blinkered here.
CoL increase maybe not a problem, but its still an increase, if you're trying to tax the rich, you've hit the wrong target.
After a certain rate, as taxes rise, revenue falls. Feds keep spending, when they realize projected income will fall short, the goal line moves from 400K to 200K, then 100K, etc.
We should lower taxes and close the 1000's of loopholes, I would bet revenue goes up.
And I learned a new word today, "wanton"!
That might be true of new taxes/tax increases created by those doing the bidding of the truly wealthy. In fact, it is true.
But that's true of all possible new taxes, and increasing taxes on those with earned income over $400k will have ZERO impact on those who earn less (in terms of their own taxation).
We should put effort into compliance, instead of increases.
Further, with current inflation rates, $400k will be solidly middle-upper class in a few years from now.
In some places $400k can give 8 families this life. In others not even one. It depends.
Can you name a place, anywhere in the world, where $400k/yr is not enough to survive for one family?
Ummm, where exactly in the world is $400k per year not enough to survive? Monaco?
If you earn $400k year after year, then you are earning enough to be "rich". But true, it's still possible to live beyond your means regardless of how much you earn and incur financial difficulty.
In San Francisco it's just about striking distance to the lifestyle I described. The commutes and the housing are generally a little worse.
However, as I mentioned above, that same family (or even one that earns millions more) could easily put themselves into financial difficulty if they live beyond their means.
With $400k annual income you couldn't buy a single family home in the Pacific Heights neighborhood and if you had many children perhaps you couldn't afford to send them all to Harvard, but if you lived reasonably within your means you could certainly still be considered "rich".
I understand it’s emotionally satisfying to see them deprived, but the government also ends up with less revenue when they apply their skills to lower impact projects.
Large engineering firms have offices in various Midwestern states that are just as productive as SV, NY, what have you.
My effective tax rate between state and federal is something like 55% before including sales taxes.
These Billionaires find ways to pay basically nothing in tax because their wealth comes from capital gains and not from RSU + salary compensation which are taxed as normal salary.
The bulk of the burden of new tax increases will fall on people like me who make more than 400k but make it in easy to tax ways instead of changing the law and making it easier to heavily tax people in the 100M/yr+ category
These aren't complaints, just facts.
That seems extremely high, what state is this? Do you mean the top marginal rate, or is that literally the effective rate when you file your 1040?
Someone making over $400k might want to invest some of that money. The businesses in which that person would have invested would hire people. And pay wages. And taxes. If you take more of the “rich” money. They won’t invest as much. And thus won’t create value. Giving that money to the government doesn’t create value — or if it does, there is still the issue of deadweight loss. The private sector always spends more efficiently than government.
Every rich person I know doesn’t put their money under the mattress; they invest it in something.
As far as tax changes that affect me: well the very high rates of California taxation led me to moving my residence and business to Texas. When I lived overseas, the Biden-supported, Obama-signed FACTA legislation (which was ultimately a tax law) had a very significant impact. I couldn’t open business bank accounts in the UK which led me to not being able to expand my (then) consulting business because our potential client required a UK company and that company needed a UK bank account in order to get anything done. Since I wasn’t a UK resident, it made it even harder. I am not super rich so Barclays and friends weren’t going to go through all the FATCA hoops just for my £100k per year in turnover.
And in terms of tax changes that helped? The Trump tax cuts resulted in a significant amount of savings that led to buying an airplane and significant production equipment, for example, being able to deduct a significant amount on an aircraft purchase — an aircraft that we wouldn’t have been able to afford without the change in the tax laws. That aircraft enabled my business to expand into smaller markets, which benefited those smaller markets in which we entered (they could get our product cheaper and resell it at a greater profit.) We could also target smaller towns that would have otherwise required flying commercial and then driving all day — then there was the issue of moving cargo quickly. Also the tax savings on equipment purchases allowed us to not have to pay copackers and instead set up our own bottling facility. Which lowered our cost per unit, allowing us to lower our wholesale prices, which led to our customers being able to make a larger profit. (Our business is making specialized fitness cleaning products and our customers are small boutiques and fitness studios.)
It’s very short sighted to see taxes that are paid only by “someone else.” If you run any sort of business at all, the effects of tax policy can be immediately evident. The typical wage worker doesn’t see it because they limit themselves to their immediate viewpoint: they fail to see the chain of transactions that lead to them having a job in the first place. An employed person has more economic impact than an unemployed person. That’s just a fact.
So yes, tax policy is felt by everyone, even those that don’t pay taxes.
That's not true. If your combined income with your spose is more than 400k the tax increase will affect you. so it will affect individuals making as little as 200k if you assume income is divided equally between two spouses.
I do agree though that the spending could be improved. That position varies group by group.
Those tax breaks happened to catalyze massive tax receipts nonetheless, but taxes are politically justified by who they poleaxe, not by the consequences that result.
I used to think like you, until I realized that the people sinking millions of dollars in every electoral campaign to push candidates friendly to 'lower taxes' are the ones who are already taking advantage of every loophole.
Then you can see the truth.
And in many developed nations also (naturally) get the biggest net benefits.
Trying to stay on their good side hoping they will "do the right thing and pay more taxes", won't really make that much of a difference.
> won't really make that much of a difference
is that you hunch or you have data? I remember seeing the bell curve in an undergrad business class.
I'd imagine a 20% vs 45% tax will absolutely have different outcomes.
If someone is already dodging taxes then they will probably continue but the next generation of millionaires should never start.
That's why I think it's related to pirating movies, it's a similar dynamic.
If the politicians actually wanted to tax the rich then they'd be closing loopholes, not raising the marginal rates.
You will be fine. Just like everyone else in pretty much the entirety of the rest of the civilized world.
And predictably, the responses are whether or not you are actually middle class. Because somehow if you're not, you deserve to be f**d hard I guess...?
In the same way corporate taxes trickle down to the consumer (otherwise known as "everybody else"), the same is true of taxes on wealthy incomes.
And even our discussion over who pays taxes and how much they pay is moot since the problem is actually spending. The best thing that could happen is that everyone has a real tax burden and everyone pays it directly (not via payroll deduction). Because then more people might be interested in how their taxes are being spent.
I'm talking about earning 2x-3x national average pay and getting fucked by that here, in a small EU country.
5k(eur) gross monthly here (current gross average is ~1950eur), after taxes and social/medical (they're a "tax" here, divided between worker and employer) gives me 2922eur net, and I cost my employer 5805eur. With VAT (22%) our customers pay 7082eur, for me to get 2922eur, and the government gets 4160eur. That's without any actual cost, my chair, my computer, toilet paper, office rent,...
Until you can get to a point where the rich actually pay taxes then we can talk about rates.
During Clinton we were set to be debt free in 2013... the bush passed his cut. Tax policy matters.
"Those making between $75,000 and $100,000 will pay a scant 1.8 percent average tax rate this year, the nonpartisan Joint Committee on Taxation predicts."
"That will shift the relative burden to the wealthy, at least temporarily, with those earning more than $500,000 expected to pay more than two-thirds of all income taxes this year... Those making between $500,000 and $1 million will pay 20.8 percent of their earnings in income taxes. People earning more than $1 million will pay 25.8 percent."
https://www.politico.com/news/2021/04/25/dems-tax-cuts-biden...
Since the world is lacking in the department of opinion of wealthy men, let me add something to this discussion:
I'm currently in the situation of becoming rich (from a global standpoint, unicorn early employees would laugh at my near future net worth) due to selling my company. I'm having conversations with both tax lawyers and private bankers who are interested in helping me manage my future money. It's very clear for both sides that:
a) I never want not to be rich again
b) Paying less taxes is better than paying more taxes
Even so, all the professionals I talked to were very straightforward with saying that trying to avoid taxes would bring more headaches than it was worth it. Deferring taxes is considered kosher even for tax authorities as long as I declare everything I have correctly and it wouldn't be that bad after the first uh, let's say bite after the liquidation event.
Still, they insisted that an offshore structure would be useful to me for the rest of my life. I'm not American, I'm a citizen of a developing country that isn't a total mess, but it's... developing. And let's leave it at that. A few cases that convinced me:
1) Tax officers have no downside to suing even completely transparent transactions. It's completely possible to get a tax bill with a heavy fine on top years after the fact because suddenly someone thought something was off. One of the tax lawyers I talked to mentioned* how he nullified a ~hundreds of millions fine/reassessment, but only after a long (+expensive) legal battle and a lot of stress for the sellers. Totally unfounded, and he mentioned it happened more than once.
2) I almost* lost my exit because the government bureaucracy was not working due to covid and the buyer had a hard deadline for Q1. Said bureaucratic procedure would be a single docusign in a business-friendly jurisdiction (aka tax heaven)
3) American private bankers find it a hassle to deal with developing country clients directly, handling their money through offshore accounts (as a business client, that is, the shell corp is the private banking client) is a lot easier.
4) This is not a case, but: I don't love paying taxes, but I understand that I live in a poor country and of course taking a tax dollar from me is a lot fairer than taking a tax dollar from my poor neighbor. Still, it is not beyond the realm of possibility that my government, or at least a few unsavory parties that could be in charge one day, decides that it wants to set a high wealth tax or outright confiscate investments and I don't plan on making that easy (see point a above).
So, there's that. No need to feel sympathies for the (future) millionaire here, just want to share that avoiding taxes is not my primary concern, and could not be for others, too.
* Yes, this is a joke * Later I confirmed with said client, he was still angry at it
Throwaway for obvious reasons
Since the world is lacking in the department of opinion of wealthy men[1], let me add something to this discussion:
I'm currently in the situation of becoming rich (from a global standpoint, unicorn early employees would laugh at my near future net worth) due to selling my company. I'm having conversations with both tax lawyers and private bankers who are interested in helping me manage my future money. It's very clear for both sides that:
a) I never want not to be rich again
b) Paying less taxes is better than paying more taxes
Even so, all the professionals I talked to were very straightforward with saying that trying to avoid taxes would bring more headaches than it was worth it. Deferring taxes is considered kosher even for tax authorities as long as I declare everything I have correctly and it wouldn't be that bad after the first uh, let's say bite after the liquidation event.
Still, they insisted that an offshore structure would be useful to me for the rest of my life. I'm not American, I'm a citizen of a developing country that isn't a total mess, but it's... developing. And let's leave it at that. A few cases that convinced me:
1) Tax officers have no downside to suing even completely transparent transactions. It's completely possible to get a tax bill with a heavy fine on top years after the fact because suddenly someone thought something was off. One of the tax lawyers I talked to mentioned[2] how he nullified a ~hundreds of millions fine/reassessment, but only after a long (+expensive) legal battle and a lot of stress for the sellers. Totally unfounded, and he mentioned it happened more than once.
2) I almost lost my exit because the government bureaucracy was not working due to covid and the buyer had a hard deadline for Q1. Said bureaucratic procedure would be a single docusign in a business-friendly jurisdiction (aka tax heaven)
3) American private bankers find it a hassle to deal with developing country clients directly, handling their money through offshore accounts (as a business client, that is, the shell corp is the private banking client) is a lot easier.
4) This is not a case, but: I don't love paying taxes, but I understand that I live in a poor country and of course taking a tax dollar from me is a lot fairer than taking a tax dollar from my poor neighbor. Still, it is not beyond the realm of possibility that my government, or at least a few unsavory parties that could be in charge one day, decides that it wants to set a high wealth tax or outright confiscate investments and I don't plan on making that easy (see point a above).
So, there's that. No need to feel sympathies for the (future) millionaire here, just want to share that avoiding taxes is not my primary concern, and could not be for others, too.
[1] Yes, this is a joke [2] Later I confirmed with said client, he was still angry at it
> all the professionals I talked to were very straightforward with saying that trying to avoid taxes would bring more headaches than it was worth it
Good to know that the difficulty curve of tax avoidance is steep in the millionaire region, and that it's not obvious there's even a point in trying hard.
> Tax officers have no downside to suing even completely transparent transactions.
Minimizing risk of tax officers making mistakes or acting in bad faith.
> Said bureaucratic procedure would be a single docusign in a business-friendly jurisdiction (aka tax heaven)
Streamlining of legal/tax procedures.
> American private bankers find it a hassle to deal with developing country clients directly
Outsourcing the hassle to someone better suited to handling it.
> it is not beyond the realm of possibility that my government, or at least a few unsavory parties that could be in charge one day, decides that it wants to set a high wealth tax or outright confiscate investments and I don't plan on making that easy
Mitigating risk of unfriendly governance, similar to point 1.
I find points 2 and 3 particularly convincing - I can see "outsourcing hassle" to be a reason enough to create "an offshore structure". After all, quite a lot of things in a business is just finding way to outsource some hassle (and associated liability) onto someone better equipped for handling it. Taking all your points together, I can imagine a millionaire wanting to do this even if it would be a net loss of money for them. Time, peace of mind, lowered personal risk and less bureaucratic inertia in business activities are all worth a lot too (even if it's hard to estimate their dollar value).
You gave me something to think about.
You're serious aren't you?
The format you picked in your edit is one of the typical people arrive at. Myself I do like you[0], but some use daggers instead†, or rarely, superscripts².
--
[0] - Though I start my footnotes at 0, because https://en.wikipedia.org/wiki/Zero-based_numbering.
† - Once you get to ‡ and ⸸ it's getting tricky to pick a new one.
² - More often seen in mathematical formulas.
LOL
What a surprising discovery.
Governments with the most abusive tax policies still cannot realize that they cannot tax their way to prosperity.
Most creative and productive people, entities and businessed did, do and will use any tools at their disposal to escape barbaric tax racket and turn their attention toward jurisdictions where they treated better than in their own home country.
Trillions of dollars of wealth escaped and will continue escaping away from economies where ruling politicians cannot get their heads out of their bottoms.
Of course investments in the country where corrupt polititicans are proposing doubling capital gain tax is not going to work.
If some aspect of that sounded less appealing, then you are back to momentum trading and looking for opportunities that distort the market and reality and bet the farm when you make the trade at all. Try to have fun, usually it comes with dopamine.
If that is really your perspective, why live in the US?
This is the real reason the ultra-wealthy aren't taxed. People think that they are obviously going to become rich any day now, and they won't want to pay high taxes when it inevitability happens. Some strange, shared delusion of the middle class.
The ultra-wealthy pay more tax per capita than any other group. This is the opposite of "aren't taxed"
Loopholes for example aren’t some inherent element of tax codes their built and maintained for the express purpose of being used.
Why wouldn't person move outside of tax jurusdiction if it afford saving few extra $MM's and possibility to discover more beautiful, friendly countries?
Of course US Citizenship essentially became IRS trap and renouncing it became very difficult thing to do for americans
So sure, examples exist they simply don’t add up to a meaningful percentage. As to why they stay, making say 10% more money just isn’t worth much hassle to the rich. They have money what they want is all the things a well functioning society gives them.
I think we’ve seen this before… usually ends in democide…
*Except for white-collar crime.
Because worst case, the rich entity can flee, or renounce citizenship and buy citizenship where the tax climate is more favorable. With the amount of money we are speaking about, you can buy anything. Each and every country has a very fast track to citizenship in exchange for money (and an instant path to pretty much all rights except for voting). So you threaten the wealthy with torture? Unless you do all this by surprise one day all of a sudden, they can and will escape.
$150k buys you a Carribean citizenship + passports for the family of 4. 0% income tax and 0% capital gains tax in Antigua and Barbuda. 365 sandy beaches.
What not to love for freedom seeking individuals?
There is quite a bit of progress among rich nations, which is indeed why the article mentioned many of the individuals come from corrupt nations.
The issue, therefore, may not be so much of 'tax havens' but of 'corrupt systems that allow for tax havens'.
I don't think Bezos has a pile of cash secretly offshore.
That should be easy to understand.
Just as robbing productive people with taxes is not going to work.
Significantly reduce or offset personal and capital gain taxes for people who are investing into public projects.
There are many more better ways that tax abusive policies that never work.
Reinvested money already isn't taxed. Companies pay taxes on profits. If they invest more, they reduce their taxable profit and therefore their taxes.
Taxes are not deferring investments, investments are the prime way to pay less taxes. The government wants you to reinvest rather than pay taxes.
Off-shore tax havens broke that system. These companies have billions of dollars sitting unproductively in the Bahamas because they neither want to invest not pay taxes.
The less progressive the tax and the less it's properly enforced the more inequality will occur. Poor and middleclass more effectively stimulate the economy with an equal amount of consumption simply due to the nature of what they spend it on and their quantity.
>Just as robbing productive people with taxes is not going to work.
How many of these are super productive, hardworking and/or smart to such an extent that their hard work and/or wonderful decision-making proportionally matches their wealth compared to you know your average middleclass engineers, programmers, medium and small business owners or the like. I'd estimate the percentage to be very small. And if their wealth somehow matches their productivity proportionally and above a certain amount quantifiable as ridiculously wealthy i'd start wondering where in the superhero universe these people fit.
"The lower the tax - the more money will stay and will be reinvested into the local economy."
Start here. Less taxes == more money is staying and reinvested in the local economy for the good of everyone.
Bonus: more money start coming in from other jurisdictions that are abusing their productive citizens and businesses with exorbitant taxes.
You're oversimplifying this but even when just sticking to the core of your point i strongly disagree.
>Start here. Less taxes == more money is staying and reinvested in the local economy for the good of everyone.
Not really. Want to stimulate the economy with reinvestments? Dis-incentivise stock buybacks and the like, tax hard. Companies and people don't like to pay taxes. How do you avoid taxes as a company or owner? By having less profits trough reinvestment in R&D, growthprojects and wages.
Tax less and you reduce the incentive to reinvest into the local economy.
Run on a road or highway? Pay a toll. Run a container through the ocean? Pay a fee for protection. Want to have nicer neighborhoods with better maintenance? Pay higher property taxes to your municipality.
You can't escape direct taxation. And as long as you keep competition between companies, municipalities and jurisdictions; the system will balance itself where individuals will pay what they are comfortable with by their own volition.
The current system is broken because a small bureaucratic minority has too much power over your own property (they can seize your property/money at random). It's also too easy to get popular votes and people onboard with it (free healthcare for everyone!).
What kind of benefits the person is gaining by buying $25MM worth of taxes?
I thought so too.
Give that person a chance to reinvest these money into local economy, growing productive businesses instead of slapping the "filthy rich" label and suddenly there is a lots of capital are used for everyone's benefits instead of escaping.
Avoiding guillotines?
People would be happy to pay 100% in tax to avoid guillotine but how much of a prosperous and productive society can be built with this approach?
The carrot is "you get to live in a prosperous, stable society made possible in part by your contributions via taxes".
The stick is what happens when you don't.
The reality is that wealthy person can choose both (live where he wants and keep money safe from tax robbery) and poor can neither.
Inequality is brought by high taxation and not by filthy rich who refuses to obey government stupid policies.
You can already do this, though. Monaco exists. That folks like Bezos, Musk, and Gates stick around in the US indicates some intangible benefits here that justify paying some tax.
Example: Rich people > Shit newspapers > Misinformed populace > Shit political choices > Shit government > Corruption > Rich people now have more money.
Unfortunately many people don't appear to think like that. Or are willfully blind/ ignorant. Take your pick.
A bit of simple math is needed to supplement decisions in terms of return on investment.
Overbloated government spending and useless wars are not a good arguments either.
If government cannot manage their budgets well, why would people who can manage their budgets better should listen?
Hmm there's so many hypotheticals there.
Perhaps they may fund the roads this persons company uses. Or the foodstamps this persons underpayed workers rely on. Perhaps they sustain the people that pay into his rentseeking scheme.
Perhaps that's not the question you should be asking because not a whole lot of people give a damn about this persons 25 million staying in his pocket. (This person him/herself being part of this 'not a whole lot of people')
and a whole lot of people on the other hand would rather this person be incentivized to avoid these taxes by investing in R&D and/or increasing the wages of the people he depends on so as to benefit society and to stimulate the economy.
People who make $100MM are no smarter than those that don’t, I mean Einstein didn’t make that type of money right? It’s not merit either, it’s simply money...under our system money makes money, concentration of capital doesn’t benefit everyone it benefits the person with the capital.
Consider wealth management itself, you want to diversify your investments, you would never put 90% of your wealth into .1% of the assets you own. The rich know and live by this rule, well that same rule applies to society, you don’t want .1% controlling 90% of the wealth so investment is determined by .1% of the population. You want the wealth diversified and in the hands of many so no single person controls investment.
[1] https://www.cbo.gov/system/files/2020-10/56575-Household-Inc...
Especially if this is a majority of non-productive, lazy individuals unwilling to get educated, work and prefer to live by selling their votes for printed money of government grants.
In a democracy, yes it does.
Oh, and in my country, it is punished, it's just that the team which must find about the culprit are totally under staffed, what-a-surprise.
Tax avoidance and tax evasion are distinct things. Tax avoidance is (deliberately) legal. Why do you think it should be punished?
For better or worse the only way that type of inequality happens is as a direct result of the policies of the country they live in, thus they should be grateful and thankful for living in a country that not only allows but promotes that type of concentration of wealth.
In exchange for the benefit of living in such a country that promotes such wealth inequality, they should pay a 90% tax rate to reflect the wealth inequality itself. They will bitch and moan of course, but they will still be far richer and better off than everyone else, and everyone else will be better off not living in a country with such high inequality and a country with tremendous national resources, as opposed to a country that is $28T in debt further decreasing the quality of life of those without the personal wealth to not need public services.
If we can ensure that no single individual has to live below the poverty line then I'm less worried about individuals who attain huge stores of wealth.
Who needs more than one pair of shoes?
Who determines what other people need?
Maybe we should forget we are adults and have a governing body tell us why we need so we don’t have to think about it?
Otherwise many are under the impression that looting and robbing is a way to go.
"...educate others how to earn good money and live a good, productive lifestyle".
You may add to that many other educational resources and lots of them are free. People who are willing to learn will learn.
People who are unwilling to learn and prefer to rob and loot - will continue doing so.
Also, if the billionaires give a tiny amount of their money to fund schools, people will get educated, earn more money and be able to spend more.
And governments of course has a ways to convince them that doing that is not wise.
High taxes is the easiest way to deplete economy from productive individuals and their resources.
Taxes literally are used as a tool to incentivize investing in the economy.
I'm sure taxes has all the good intentions but how well does it work so far if trillions of dollars are escaping in direct opposite directions?
If the tool doesn't work at all - in fact instead of building it just breaks stuff - wouldn't it be a good idea to try a different tool?
It might be, or at least a step in the right direction, if those billionaires were teaching free wealth acquisition classes as a full time job after they attain three commas.
Many of the wealthy are born into wealth and have family and institutions that help them maintain it. The poor won't have a start like that, so we might have to setup pools of money donated from these billionaires for the poor to start out with. It could even have a catchy slogan too. Something like, "No exploitation without education."
False consensus fallacy
>> You know this and everyone knows this.
> False consensus fallacy
Absurd comment. The wealth inequality and regressive taxation has been inherent to capitalism since at least roman times - http://www.bbc.co.uk/history/ancient/romans/social_structure... https://foreignpolicy.com/2020/08/14/wealth-tax-zakat-islami...
Once your wealth is international, you don't have to pay on what you don't declare across tax regions. These havens arent really havens, as much as optimizations on where you declare assets based on asset class. etc
And yet their share of wealth keeps on growing and growing for decades. Curious.
Take JK Rowling as an example. Her work added significant value to the lives of hundreds of millions, and she got a slice of all that value creation (say, 30 percent of it). Nobody is worse off. Everyone is better off. Her value proposition was magnified by the scale afforded to her by modern day distribution and movie deals, which is why she got so fabulously wealthy compared to what an author could've achieved (relative to their surrounding population) 100 years ago.
The poorest people inside developed countries on the other hand have had a decreasing value add to society. This is partly because of automation and partly because of globalization and the fact they now have to compete with 1 billion Chinese who work harder than them and for less.
You pay Netflix $15/month because you think it adds more than that much value to your life. Netflix earning that income is a consequence of your judgement of the value add of that service to your life. If Netflix makes billions in profits, it's because people like you thought that it added that much value (and more) to their lives. The same reasoning applies to most things (groceries, personal trainer, hairdresser, etc).
There are ways that people can get rich that definitely aren't proportionate to their value add. Cronyism, externalities, hijacking people's dopamine systems, and so on. That's why we need a government that can implement the right policies that maximize the correlation between money earned and value add.
There's also things that add large value through positive externalities that don't result in getting rich, such as scientific research, where it's very hard to privatize the benefits.
A big problem we have in this discourse is the conflation of the two ways of making money (value add vs extraction) into a single bucket (on the far-left it's all extraction and on the economic-right it's all value-add), which is having a terrible impact on our ability to think clearly about policy and is making regular people resentful and jealous instead of thankful towards the most productive people in our society.
When I think of the richest that gained a disproportionate amount of that wealth that left the bottom i generally think of rentseekers, people using anticompetitive practices,(near) monopolies, duopolies or monopsonies, etc Reaching that position has been made easier for many of them due to technological advances indeed but that they're in those and that they're incredibly unhealthy for capitalism is the case none the less. Also definitely cronyism and so on as you mentioned.
When we look closely most companies and the people pulling profit from them fit into this category of utilising a form of capitalism that can't be considered healthy for society at large. For example everything from intel and amd artificially extending their IP into perpetuity by strategically extending the standards with new IP every x years to microsoft simply waiting out a competitors bankruptcy in court and abusing their clout for competitive advantage in new markets, apple and google using their duopoly/monopsony positions to charge high rates in their app stores to google dictating webstandards in their favour due to their clout and fucking over competitors, solarcity pulling shady contracts, supermarkt chains pulling a larger share of profit from farmers and other producers despite reducing their value to the distribution chain as their marketshare grows,etc
When i think of these i think of people who have gathered value worth countless lifetimes of hard work to a point where it should be impossible becaused it is impossible to be proportionate. People who are generally wayyyyy further away from anyone in this thread wealth wise than we are from a bum on the street.
> and is making regular people resentful and jealous
Might have something to do with things like social mobility and such declining for so long. Capitalism should not be allowed to devolve into an oligarchy.
Yes it is. Also of government, more generally (well, power, of which wealth is a subset.) Before the modern era, this was pretty consistently upward redistribution, aka concentration.
Do the words 'top' and 'bottom' perhaps mean something? Have you ever bothered to look at the distribution on wealth and income?
The top 1% has more more wealth than the bottomn 50%, it is impossible for the bottom to contribute more than the top
"it is impossible for the bottom to contribute more than the top"
What I'm hoping for is a significantly more equitable contribution of the bottom 50 percent to broader society than what they're currently contributing. Something like a flat tax rate and a reduction in entitlements, perhaps, but I don't have conviction on the exact specifics.
Countries like Norway or Sweden, which have more billionaires per capita than the USA have much less progressive tax codes.
Would they prefer to do business in a society without benefits bought by taxes, where education is scant, crime is common, infrastructure and roads a crumbling and police is glorified mafia.
Guess what, Amazon doesn't work in Russia because they cant make money there
Sorry, I expect this PDF to be full of BS.
<< In the 1981 Mel Brooks comedyHistory of the World, Part I, King Louis XVI, reflectingon his outrageous privilege, exclaims, “It’s good to be the King!” Mr. Brooks was ontosomething >>
great!
I see a similar authoritarian nerd attitude in security all the time, where someone finds an unexpectedly invasive surveillance method and then tries to ingratiate themselves to the institutions who can mandate it. They think they have made something people want, when in fact they have only invented a new way to betray their fellow citizens to the insatiable will to power of bureaucracies. (Contrary to the talking points of their apologists, bureaucracies are in fact not made of people, they are made of bureaucrats)
Let's look at a problem these organizations don't care about, like the real social issue that is domestic money laundering, which not only converts the proceeds of really harmful crimes into legit bank deposits, it harms communities directly with real estate and rental bubbles, diseconomic businesses, dumping, political and police corruption, all of which their anti-capital policies directly create. The revenue-gap nerds are fine with laundering because some of it comes into the tax net, social consequences be damned.
While I have never earned enough to hide it in my life, I wish the class of people who think governments have a revenue problem but not a spending or scope problem would try solving a problem they didn't first cause for a change instead of thinking the world needs more of their concern and facilitation.