What lies beneath: Evidence from leaked account data on offshore banking use
brookings.edu
brookings.edu
2. There exist tax preparation companies which profit enormously from doing the paperwork for you and they'd miss out on that profit if the government just billed you.
(I agree that #2 is a big problem, but I don't think it's actually the reason we file taxes.)
(85-90% of households in recent years)
You now have to be able to deduct over $24k to not take the standard deduction.
Oh, and my taxes are supposed to increase even more once the Trump tax holiday for the middle class expires in 2025. Luckily for corporations it is permanent for them. That tax plan was the most blatant government handout to the 1% and for some reason 40% of Americans think it's the best tax plan ever.
In any case, the standard deduction does have the effect of significantly reducing the administrative burden of taxation, and it crosses off one of the arguments used in favor of pointlessly complex tax filing.
“If you had any income that is not reported here, report it on irs.gov/…. Failure to do so is punishable by …”
This would make things significantly easier for 90% of the population.
Since “they” also define what you can be prosecuted for, that’s a bit of an odd justification even before considering the fairly strong evidence from both tax prep lobbying and anti-tax candidate behavior (including occasionally saying the quiet part out loud directly about the pain in the process being necessary to keep tax burden front of mind for taxpayers) that the two reasons cited by the grandparent are, in fact, the dominant factors.
Which ones? I don't agree or disagree, but I think it's a good practice to call out politicians when we make claims they do something. That way it gives a more clear line of sight to your claim.
The IRS doesn't know how much tax you owe because Congress has created a massively complex system that includes using deductions to incentivize certain types of behavior, as well as using the tax system as a mechanism to deliver means-tested benefits.
For example, the Earned Income Tax Credit is a means-tested benefit program that's delivered through the tax system. This is not a niche program - 25 million families benefit from it.
It requires filers to identify how many qualifying children they have, which in turns depends on things like the educational status (is this child in school, college, are they a full-time student) and residency (child must generally live with you, but with exceptions for overseas military service, etc).
In cases where multiple filers can claim a qualifying child (e.g. cohabiting single filers), you're required to make an election as to which return will claim the qualifying child.
The EITC also encourages reporting of informal income (because it's only available to people who earned an income) which might not be on a W-2 / 1099, e.g. baby sitting, to qualify.
None of that stuff is known to the IRS from W-2s, 1099s etc. and they are dependent on the filer to provide it every year, especially as circumstances change; and filers are strongly incentivized to provide it as the credit is refundable.
What should happen is you log in to irs.gov and see everything they know (number of kids, income, interest, reported charitable giving, etc...), you fill out the missing pieces (energy credits, when you bought and sold stocks, charitable giving not reported to them, etc...), and they run the calculation. It should take almost no time at all for people with simple returns and only a few minutes of inputting some basic figures for most everyone else, with of course a handful of people who have terminally complex returns and need an accountant.
Instead you have to manually enter all of the information the IRS already knows because otherwise nobody would pay for TurboTax or H&R Block. Only real accountants would be necessary for those special cases where people have complex holdings.
This has been a major topic of discussion in tax circles for decades, the vast majority of Americans do not benefit from deductions and the federal government's direct knowledge of your income is essentially identical to your own (because of mandatory reporting from employers, banks & other financial service entities).
Specific deductions are written by and for high income individuals, and supported by lobbying from the tax industry which wouldn't exist without them, but they're not used by the vast majority of Americans, especially with raised SALT limits and doubled standard deduction.
And this is not just limited to the Earned Income Tax Credit.
There are also Child Credits, Child and Dependent Care Credits, Adoption Credits, Residential Energy Credits (for those who got solar), Low-Income Housing Credits (for low-income home owners), American Opportunity Tax Credits (for those with low/middle incomes paying college expenses) ... and all of these are relevant to non-itemizers.
P.S. there are also above-the-line deductions available which reduce your AGI even if you take the standard deduction - an important one being the one for Student Loan Interest.
The real question, in my mind, is that, knowing John Q. Taxpayer is burdened with understanding the tax code in it's entirety (in the spherical cow, in a vacuum sense), why in heaven's name are things written in such a manner whereby doing everything by the book is so hard?
From my experience, most people get the income part, those who have good portfolios get capital gains, but most people don't even know where to start looking if they aren't guided to it by an adversarial audit, which are guaranteed to be counterproductive in fostering the any degree of goodwill between taxpayer and tax service. Obviously, an accountant is capable of learning the corpus of material to be able to work with it, but given both the licensure requirement, and the fact most accounting questions I've heard resulted in a lot of open to interpretation answers, I'm not at all confident saying it is reasonable to expect the taxpayer to accurately report things, and furthermore, to expect some group of experts to handle it for everyone else, we've not done a good job at treating tax expertise as a public good in the accessibility department.
In short, at it's core an information propagation problem, suffering from perverse incentives present in private enterprise guarding and perpetuating information asymmetry to create opportunities for profit extraction at the expense of public process being rendered largely ineffectual.
https://www.propublica.org/article/filing-taxes-could-be-fre...
For example take Paris Hilton. When she had her DUI a few years ago her 500k car got repo'd. Wah? She stopped making payments on it. Payments?! Because she probably had it going through some business expense structure and was probably literally writing off the interest and payments. More than likely the original money was borrowed against an existing capital asset. If the sale price of the car did not make up the difference they had to come up with whatever cash was left over. Like most repos. But in this case it was a fairly flashy car that held its value decently well. So they probably took a small loss. But there was never any real risk to owning it.
Think of getting a HELEOC but running everything through that type of borrowing structure. But since you 'know a guy' you get the super awesome low interest rates. Which are business expenses. That flashy show of hers was a way to write a bunch of stuff off. Everything is an expense and a way to write it off your taxes. In some cases it does not even affect your taxes if you bury it in another company that is doing something similar that you control 100% of and just happens to be in a lower tax bracket. But gave you a sweetheart deal of leasing a yacht for a small amount per year for being such a good customer!
Except if you don't actually relocate there, in which case it's fraud.
As best I can tell, Brookings would not be eligible since the rule change in 2001 but was grandfathered in before this (domain goes back to 1996). It's not clear why they weren't purged with the other non-universities squatting on edu in 2003 - I'd guess Brookings's political connections, frankly.
Brookings.edu was first registered 07-Sep-1996, so it would appear they are grandfathered in. Similar case for the S.F. museum, the exploratorium.edu https://domain.glass/Brookings.edu
https://net.educause.edu/eligibility.htm
FWIW the Smithsonian also has a .edu address.
Personally, I think the entire financial system is broken and should be squashed.
https://www.propublica.org/article/irs-sorry-but-its-just-ea...
> For now, the IRS says, while it agrees auditing more wealthy taxpayers would be a good idea, without adequate funding there’s nothing it can do. “Congress must fund and the IRS must hire and train appropriate numbers of [auditors] to have appropriately balanced coverage across all income levels,” the report said.
> Since 2011, Republicans in Congress have driven cuts to the IRS enforcement budget; it’s more than a quarter lower than its 2010 level, adjusting for inflation.
Besides, many of the best tax evasion strategies are legal -- you just need an army of lawyers and a large pile of cash to deploy them.
Your average middle class person can't afford to risk taking the irs to court.
consequentially the German IRS has bought data from Swiss and Liechtenstein tax haven whistleblowers. several times so. and to the amazement and applause of the public, very prominent figures went to jail. like soccer legend Uli Hoeneß.
the corresponding Wikipedia article is surprisingly not available in English yet:
https://de.m.wikipedia.org/wiki/Steuers%C3%BCnder-CD
long story short: if you, the American people, elect representatives who want a fair system, you will get a fair system.
of course IRS will go after tax fraud at scale if you make them do that.
Isn't the premise of the linked paper that the wealthy use these foreign banks to avoid getting caught underreporting their income and assets? That's not legal.
The IRS does a lot of stuff that can be easily handled by a computer--matching up data from various sources to make sure it agrees. Once it needs a human eyeball, though, they do very little.
It's just your Joe-Blue-Collar guy has most of his finances already reported to the IRS, anything wrong and the matching computer will catch it.
The EITC is particularly complex (blame Congress) and therefore error/fraud-prone, but many aspects of typical errors/fraud can be mechanically detected (is this a qualifying child? is this qualifying child being claimed on another return? is there undocumented non-W2/1099 income being used to support this claim?).
It’s a bit frightening that the IRS can deputize a corporation but I guess with crypto you live by the sword, die by the sword. Maybe the dystopia imagined by crypto enthusiasts is a self-fulfilling prophecy. You get the government you prepare for?
The more cynical individual voters are about the system, the easier it is for people with money and power to shift outcomes to the ones that benefit them. It's the political equivalent of a FUD strategy.
Firstly, a lot of what is happening is legal or at least a grey-area. Secondly with the complexities of multi-juristiction money and 100s of layers of obscurity that a rich person can afford to put between them and their money (legally), would you bother spending 100s of 1000s of dollars looking into it after which you might not find anything that can be prosecuted?
It costs little to look at a much simpler Joe-Blue-Collar worker. Sad but true.
The only way I can imagine it being resolved is by requiring full traceability for all financial transactions so I can literally tell where all the money in an account originated from. Can't see that happening.
https://www.investopedia.com/articles/tax/10/history-taxes.a...
It's uglier than you can imagine.
Which intentionally does not have despots oligarchs or royals to skew the conversation to a business matter which can get lost in the left/right divide
Diff the Bloomberg and Forbes rich lists... they're not the same list. One oligarch on those lists had their estimated net worth double after the Appleby leaks turned up some trusts. I'm pretty sure Bloomberg just calls people up and asks them how much they have.
Wealthy people will push for income taxes while trying to eliminate capital gains and inheritance taxes.
This conversation came up years ago when Bill Gates Sr tried to push for income taxes in Washington state and critics pointed out that it would not affect wealthy people.
Income tax taxes people who work for a living. Property + capital gains tax both tax assets appreciation and rent seekers (unless the investment is a high risk venture into a startup or something ambitious).
States without income taxes usually rely on sales or excise taxes. In a “high tax” state like New York, poor people don’t pay income tax nor sales tax on food or clothing. (A significant expense) Usually high tax pressure is from property tax.
In a state like South Carolina, you have income tax, but property taxes are very low. They make up for that by taxing food, which results in higher taxation for poor and elderly people.
Yet Washington is "regressive" since it doesn't have income tax. Los Angeles would actually be more "regressive" by this metric.
This is why i think its a psyop. Somebody wants the lower and middle classes to fight.
1: https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx
2: https://kingcounty.gov/independent/forecasting/King%20County...
Because of consolidation and the unique governance structure of the US, these folks are enormously powerful today.
If indeed there are lots of very wealthy people who are calling for higher income taxes on high earners (and I personally didn't think that was something so common as to be a stereotype) then that's hardly the worst thing they're doing.
It comes across as someone who really doesn't like taxes, probably because they've listened to too much propaganda generated by very wealthy people who have a vested interest in taxes being seen as a universally bad thing.
This is called “pulling up the ladder.”
The ‘Millionaires for Humanity’ don’t specify what taxes they’d like to see raised, but they emphasize they want it on themselves.
And from the third article:
> Several members, including Molly Munger, the daughter of Charlie Munger, the longtime vice-chairman of Warren Buffett’s firm, Berkshire Hathaway, have spoken in favor of a wealth tax.
Why does the middle class clamor to raise taxes on the rich, which won't appreciably benefit themselves, when they could instead push to lower taxes on themselves, which will benefit themselves?
Maybe different in Europe, but in the USA tax increases do not find their way back to benefits for the public.
I mean unless by "public" you mean the next country we want to "liberate" and bring "democracy" to...
Or, if you're a jaded cynic, the rich are mostly just greedy sociopaths. They want to minimize their own tax burden and give zero fucks about the betterment of society. They got theirs, screw everybody else.
When I lived in the US, the vast majority of my taxes went to the federal government and didn't come back in local benefits like schools and roads.
(Sure, federal money comes back to universities in the form of research grants which pay for foreign PhD students to work in bullshit paper mills. I've seen that firsthand. The wastage of federal money is near 100%.)
Separately, I've known lots of rich people. Of course, they are just like other people. They are not all greedy sociopaths. Grow up.
The money we pay in federal taxes (whether it be income or other taxes) doesn't just vanish into the ether, it comes back via various government programs.
A significant share of road and school funding comes from the federal government, which doesn’t levy property taxes. Another significant chunk usually comes from the State, which in many states does not rely on property taxes.
Regardless of any specific programs I did or didn't list above, the money we pay in federal taxes doesn't just vanish into the ether, it comes back via various government programs.
"Money at the top levels is not at all like money for the rest of us. For a middle class citizen, money is about consumption and freedom to do what you want (with enough of it).
At the top end of the distribution, money is no longer about consumption or freedom (since you can never realistically consume as much as they have, and you don't have to work after you've saved like $10M). Money at that level is a proxy for power - a group of oligarchs can basically have the power of a shadow government, but unelected. And the real question to ask is "how much power/leverage do we want an individual (or a group of rich oligarchs) to have in a democracy."
So taxing the rich is not even about spreading the wealth, necessarily - if you redistributed it directly you might get inflation by redirecting investment money into consumption. It's more about limiting the amount of power that a person can accumulate over others."
The regulatory state, even if democratic, is fundamentally self-disregulating (as opposed to self-regulating).
Leaving that aside, the 1% pay 38.5% of taxes, which seems quite fair as is. We already tax the rich quite heavily.
I'd rather the focus be on compliance. Close the loopholes and catch the tax evaders.
Wealth taxes, if you look at examples elsewhere both present and historically, are hard to do well. I worry the government is not sufficiently competent ( now or in the future) to implement it correctly and it does more harm than good. It's very easy to drive capital offshore and take the potential investment and job creation with it.
Given the fact the top 1% hold 43% of the global wealth I think they aren't paying their fair share...
There is no need for someone to have 100 billion dollars they an struggle by with 10 billion easy enough .. or even 1 billion
https://www.trtworld.com/magazine/top-1-percent-of-household...
And obviously funnelling all that money and economic capital to some central state isn't gonna go well so levels below and above the state need to be reinforced.
First off you can't buy a home in some parts with that kind of money. But that aside, you'd stifle most incentive to innovate, provide jobs, and live in your country. Anyone who thought they might pass your 1M limit will just leave to a country that doesn't do that. No offense, but I've never been interested in living in the US and you'd have to pay me quite a lot to accept a green card. I certainly wouldn't take it if offered freely, because it comes with a major tax liability. There are nicer places in the world by a variety of metrics.
So if you chase away everyone with wealth you'll be left paying 100% of the taxes instead of 60% and with no jobs to pay them with. Good luck with that!
Look to Soviet Russia, Cuba, Venezuela for examples of how that plays out.
Thanks for the compliment. I guess you must know better than Picketty (he doesn't exactly say what i said, but does promote very aggressive taxation of capital, which is the same goal more gently said). Go study for yourselve before insulting right and left. I know i did, i'm reading monthly issues of "le monde diplomatique".
> First off you can't buy a home in some parts with that kind of money.
Perhaps instead of 1M$ you'd prefer if i say "the equivalent of 100K ton of wheat at retail price"? Obviously i'm talking from the perspective of my local living standard which is west-european 500M people city.
> No offense, but I've never been interested in living in the US
None taken, me neither.
> So if you chase away everyone with wealth you'll be left paying 100% of the taxes instead of 60% and with no jobs to pay them with. Good luck with that!
Ok so that's the only argument of your comment. It has been debunked time and time again that for individuals, fleeing a country because of taxes is minimal. Corporations do that. And it can be fought by taxing international transactions (which every sane economy but the EU does anyway). Yes, in the end, it becomes a frontal fight between the financial and industrial establishment and your local economy, which obviously will need some negotiation because they can hurt you, but let it be clear that without them, it would work quite well (and in reverse, in my economy, it would be quite hard to practically be capitalistic). I don't even want to eradicate capitalism, i'd just want to not mainly depend on it for living and tip the balance to a much more reasonable state.
> Look to Soviet Russia, Cuba, Venezuela for examples of how that plays out.
You realize that my arguments were communist-ish? You're not gonna scare me off pointing at these countries! Obviously things went bad because the liberals virtually control the world, so these countries had to fight for everything, which breaks at some point. And obviously i'm not defending dictatorship (and please note i'm not using this strawman of the numereous capitalistic dictatorship against you).
Jobs don't need to be "created". Either there's stuff to do for people to live correctly or there isn't. If there is, try to find people who'd like to do it. If nobody wants, either people don't really need it, or it's a chore and organize it fairly and locally (division of labour makes no sense for non-qualified chores, it's just a byproduct of inquality: i'm not taking out my neighboors trash, what we could do tho is mutualize our chores). Then distribute the result of this work fairly. Everything else than life-support can be done without too much constraints, but i strongly believe that even that won't "naturally" be too much capitalistic.
>(he doesn't exactly say what i said, but does promote very aggressive taxation of capital, which is the same goal more gently said).
Well true, he doesn't say exactly what you said, because he doesn't anything like what you're saying. Taxing wealth above the relatively low ceiling of 1M USD at 100% would be ridiculous. He is, though, in favour of a progressive tax system that, crucially, reduces inequality below “tolerable” levels, where an “intolerable level” is a level which results in imbalances of power which undermine or destroy democratic rule and oppress those without wealth.
So his practicable suggestion is a global coordinated effort to tax wealth and reduce inequality, which his utopian suggestion is a trans-national socialist economy with true democratic control over the economy.
Also i'm not really sure what's so "ridiculous" about it. I'm not saying the next president of random country should do that. But after sufficient transitioning, in a state of the economy where we have "tolerable" inquality, we should lock it with a hard cap.
To make it even clearer, i believe most "things" should have a cap on how much you're able to posess (perhaps with exceptional derogations, or additional taxation): the number of houses, cars, land, gas, plane travels, eletronics, clothes. For most people it wouldn't be a constraint as the cap would be on the level at which you can realisticaly use it personally, but i think achieving that would prove a deep shift in mentality.
Yes, he didn't say anything remotely like you said. It's disingenuous to cite Picketty as if he would support your position.
> has been debunked time and time again that for individuals, fleeing a country because of taxes is minimal.
Because the difference in taxation is minimal. I used to live in Panama, I've personally meet people who fled tax rates in their home country. The low taxes was also my favorite thing about living in Panama. Personal anecdotes aside, what you're proposing is drastic enough that the emigration won't be minimal, it will be a mass exodus of the wealthy - you know the people paying for 40% of the services you benefit from.
> You realize that my arguments were communist-ish? You're not gonna scare me off pointing at these countries! Obviously things went bad because the liberals virtually control the world, so these countries had to fight for everything, which breaks at some point.
I don't know where to start with that without violating site guidelines and being uncivil to your intellect. Actually are you trolling me? I have trouble believing you could be serious right now.
There's a lot of bigger reasons communism failed. Your proposal would fail for much the same reasons. This comment of yours is so ignorant of history it is mind boggling.
People love to trot out the USSR as a failure, ignoring that a major part of that failure was due to Perestroika and Gorbachev.
As for Cuba, the US has waged terrorist campaign against them for 70ish years. Venezuela has had to deal with US interference and attempted coups as well.
You can't talk about communist/socialist societies and completely ignore the external forces acting against them.
P.S. Cuba and Vietnam are still around and still socialist.
Edit: Actually, looking at all your arguments here, you just scream about how socialism doesn't work and if you disagree then you're dumb. Get better, please.
Note I said communist, not socialist, which might include Scandinavian counties, and works just fine.
If you disagree, you don't know your history. Get educated.
I visited Cuba recently. It's improving now that they're embracing capitalism, partially.
But I still saw people plowing fields with oxen. I've seen very poor people in developing countries, but I haven't seen that first hand. The level of poverty in Cuba is pretty bad still.
>But I still saw people plowing fields with oxen. I've seen very poor people in developing countries, but I haven't seen that first hand. The level of poverty in Cuba is pretty bad still.
Do you think that has anything to do with the US embargo on Cuba? (Y'know, one of those external forces I was talking about originally).
Us? The people? That's how you do decisions in a democracy.
Money at the top levels is not at all like money for the rest of us. For a middle class citizen, money is about consumption and freedom to do what you want (with enough of it).
At the top end of the distribution, money is no longer about consumption or freedom (since you can never realistically consume as much as they have, and you don't have to work after you've saved like $10M). Money at that level is a proxy for power - a group of oligarchs can basically have the power of a shadow government, but unelected. And the real question to ask is "how much power/leverage do we want an individual (or a group of rich oligarchs) to have in a democracy."
So taxing the rich is not even about spreading the wealth, necessarily - if you redistributed it directly you might get inflation by redirecting investment money into consumption. It's more about limiting the amount of power that a person can accumulate over others.
Does this not beg the question why not just limit power itself rather than limiting wealth with the target side effect that the wealthy will not easily purchase power as a result?
Why is almost the entire species seemingly addicted to the idea that the power itself is not the problem? You can erect regulations on the corrosive influence of money in politics until the cows come home but as long as the ROI on lobbying is positive, it's a given that's going to be the result.
On the other hand when there's no power to buy nobody buys it by definition. Adjust above extreme observation appropriately in order to justify the minimal possible tolerable conglomeration of power availability in any given system to find whatever tolerable level the reader ends up comfortable with. Or viewed uncharitably, arrive at the conclusion that's exactly what's already happened and the human affliction of slavish devotion to power is near universal and continuously growing and there's no way to escape it short of completely opting out of modern global civilization given the observed distribution of the population constantly seeking to increase it.
An extreme example of this would be a dictatorial regime where control of the government becomes a life-or-death concern for warring groups.
Maybe it's just a bug in humanity; control the world with this one weird trick.
Are there any credible studies on what would happen?
What about if you capped everyone’s net worth at 10m? Would that impact on the economy directly (e.g destroying money)?
But if you implement higher taxes at the to end, past what point do those people just leave, or leave on paper. There is an inflection point where the tax would actually do more harm than good. And nobody knows where it is. I'd like to see us get closer to it though, there is room to raise taxes on the very wealthy.
A bigger problem at that level is loopholes and compliance though.
If I make $400K and I only need $75K to live, the burden of my taxes is negligible.
If however I make $80K and I need $75K to live, taxes are an unimaginable burden.
We fix the problem by evening out the burden, forget about loopholes, eliminate all but 2 deductions, dependents and primary residence, that's it.
Because the deductions have been eliminated lower the tax rate for each bracket to the effective tax paid for each bracket, the IRS has this data.
Then end capital gains tax, all income is taxed as earned income.
These changes will give 99+% of the population a tax break, and it will simplify taxes drastically for everyone.
The final step is to add 2 new brackets,
>$5M with a tax of 45% >$10M with a tax of 69%
The rich won't need to be making decision about if and when to eat, but the burden of taxes will get leveled out.
We'll also have enough money to pay for Universal Healthcare, and probably college tuition for everyone.
Go lookup the charts for income inequality for the U.S. When the GOP tax cuts from Reagan's first term took effect the income inequality gap started in earnest.
https://en.wikipedia.org/wiki/Income_inequality_in_the_Unite...
I agree with the general sentiment of your post (though I disagree that capital and labour should be taxed the same way). I'll also add the following: implement an LVT. It is the most economically “efficient” tax there is, and morally perfect at the same time. Then with the money you collect through LVT you can lower income tax.
Wealthy people can keep their money growing inside a corporation essentially forever. It never becomes “income”; instead they just borrow against the assets at exceedingly low rates of interest as well as classifying personal consumption items (like a private jet) as a corporate expense.
It’s possible to keep doing this until death, or even longer.
If you include transfer like EITC, the US tax code is highly progressive and the tax burden on low income earners has only gotten less (e.g. Trump’s doubling of the standard deduction).
I would argue your plan to “fix” the tax code is already flawed if the basis of your changes is wrong.
maybe they are because conservatives design it that way? irs dont go after big corps because of luck of funds
I live in a country with a thoroughly dysfunctional banking system which, by most accounts, fall right in the middle of the global income bracket.
Yet I know a ton of people in the upper-middle and lower-upper class and they all have the following characteristics of their wealth, which _do not_ appear in most wealth statistics:
* One or multiple bank accounts in offshore tax havens, with the US being the most important
* Multiple properties, whose real ownership is hidden by being assigned to family members, friends, and relatives
* A lot of overseas trips to buy things that are normally horribly expensive due to to import restrictions.
* A deep, thorough understanding not only of tax law, but also personal connections with people who work in tax agencies to understand when to avoid (legally), when to evade (knowing the tax agency won't pursue evasions under a certain currency amount) and when to get into convenient tax amnesty regimes.
Again, these aren't phenomenally rich people and they're easily hiding away 50-85% of their net wealth. By most metrics these people's income would, in theory, put them in median American lifestyle. Yet it's obvious that their standard of living _easily_ puts them in the top 2-5% of a developed country, with the addition that labor costs are so cheap that they can afford services even pretty wealthy people in other places cannot.
This is a classic in Latin America, and I have no reasons to believe it's any different elsewhere; the instruments are just different.
I think it's only exacerbated by government intervention (corruption) and regulatory capture.
I do agree that human nature tends to winners and losers, but right now the losers are being bashed over the head by a tool they think is helping them.
I think there's some kind of analogy to the Dunning-Kruger effect where people are deluded that they are in fact in the group of people that will be advantaged by lowering corporate tax rates, for example.
There must be some old noble families with vaults of gold that are "off the books".
If you're providing labour then it's likely that you're providing a small percentage of the return that those providing capital receive as dividend.
Value of labor provider being transformed into profit for capital provider.
This is almost certainly true — apart from oligarchs, dictators, and crypto billionaires, it's broadly understood that "500 richest" lists also miss a fair number of anonymous Omaha residents, for example.
> most of us are just working to prop them up and keep them rich
I think this part is probably a mischaracterization (though I could also just be misinterpreting what it means). To take the limit case, consider a wealthy dictator who stole absolutely everything he owns, and who flees his ruined country. In this scenario, the aggrieved parties are the people he stole his wealth from, as opposed to, e.g., the waitress who ends up serving him drinks on a Caribbean island.
That means to the extent you believe the "prop them up" part of the theory, you must also believe that most wealth concentrations arise more from things like theft, and less from things like value creation. My experience has been that this seems untrue today and almost certainly becomes more untrue every year (but I do understand that reasonable observers may disagree).
Maybe, maybe not. [1]
[1] https://www.nbcdfw.com/news/tech/cybercrime-to-top-6-trillio...
As a side note I appreciate the urgency in the tone of the quoted here.
It is pretty well demonstrated and accepted that both IQ and talent (in anything, business, sports, art, whatever) have a Gaussian (normal) distribution, but wealth does not. It has a Pareto (power) distribution.
So there is something more than just offering value (ie. the results of talent or IQ or even work) that contributes to the accumulation of wealth.
Some of this has to do with the "Snowball Effect" where it is easier to make more money at a faster rate, the more money you have.
But even that doesn't really get to the heart of the issue.
There is another surprising effect at play!
In a non-sophisticated version (ie. the version everyone is taught in the beginning economics classes) of economics, there is an assumption that someone pays money that they believe is equal to value of some thing that they want. And if this is true, no wealth actually changes hands. You paid $X for something that is worth $X to you ... and maybe others and the person that sold it to you got $X of value which is what they thought it was worth selling it at. The seller is richer by $X but you are richer by something worth $X, so it is really a wash.
But we have to pretend in this case that both sides know the worth of the item in question. And this is almost never the case!
If we allow for whoever "misjudges" the value to be the "loser" and the other to be the "winner" in the exchange as measured by one or the other getting a little more value out of the deal than the other, then something magical happens.
If you play out this scenario (and you can model it yourself in your favorite software) with many "agents" doing these deals, and if you give every single transaction a completely blind and fair chance of 50/50 of being the winner and loser in the transaction, and you do this many, many times ... one agent will always end up with ALL the money in the end!
And this is without theft (as the gp comment insinuated) and is also without there necessarily being any "real value" created (as you suggested).
There is very interesting and recent research in this area[1].
BTW, I used to think more like you than the GP comment (and I still don't really agree with the GP comment) but if you take the time to look into the research and understand the math behind what is going on, it is a real eye-opener and a different perspective on why wealth inequality seems to show up in basically every type of economy and society given enough time.
https://www.scientificamerican.com/article/is-inequality-ine...
It’s NOT a wash though - 2X is a bigger absolute number than the sum of the two pre-trade inputs. Or put another way, if I trade some of my giant stack of hotdogs for some of your giant stack of hot dog buns, we are BOTH better off and value has increased.
In you scenario, I am poorer of hotdog buns and you are poorer of hotdogs, but I am richer of hotdogs and you are richer of hotdog buns.
You insinuate, but don't state, that maybe the completed hotdogs are worth more than either of the parts individually (ie. if I had one bun and one dog they would be worth less (together but separated) than if I put the dog into the bun), and maybe that could be true, but it isn't necessary.
Yes, this was obviously the entire point. You can assume that this is true in any case where people voluntarily agree to trade anything: For each party to the trade, what they receive is worth more to them than what they gave in exchange. If it were merely a wash no one would bother trading. Either party could be wrong about the expected gain in any particular instance—economic calculation is not an exact science—but on the whole across many trades each individual can reasonably expect a net positive value from the trade; i.e. market exchange is not zero-sum. And since both parties benefit, there is a net economic benefit from the trade as a whole.
The point of economics and trade is to create value by allocating goods to their most-valued use. The goods themselves remain the same but the value increases with each trade. It is not correct to look at an exchange of good A for good B and conclude that goods A and B must be of exactly equal value from all perspectives, and that therefore no value has been created in the process. Good-A-with-new-owner has more economic value than Good-A-with-previous-owner, and the same is true for good B.
Going back to the original example, if I'm selling hot dogs for cash then what I want is cash (or something else I can buy with it). I have no use for hot dogs, as such. If for whatever reason I were unable to sell them they would just go to waste. By selling a hot dog I gain some cash and lose one hot dog, which (unsold) is worth much less than the asking price. I might even have to pay to dispose of any extras when they expire. The buyer likewise valued the hot dog more than the cash at the time of purchase or they wouldn't have made the trade. After all, one can't eat money.
I do not necessarily agree with your comment, but it is irrelevant to my main point.
Even if it were always 100% true that both parties somehow gained value (that could be equated to money), if the differences between those two gained amounts unequal, then the agent-model works just the same ... at some point one (or a few) agents will still end up with all the money!
Value cannot be equated to money. This is the point you keep missing. Money is a specific good while value is subjective and variable. While you can say that at any given point in time a certain "agent" valued one good more or less than another, based on observed behavior, it makes no sense to try to compare the magnitude of the values placed on a good by two different "agents". Moreover the same agent can value a good more than its price (in money) at one time, and yet value the same amount of money more than an equivalent good at another time; the fact that someone is willing to pay $5 for one hot dog does not imply that they would be willing to pay $10 for two. In general, barring the limited cases where items are more useful as a set than they are individually, the more one has of something (even money) the less one is willing to give to obtain more of the same.
If there were an "agent" that always valued money over every other good, never needed to buy anything to sustain itself, and had an unlimited supply of goods to sell (such as labor over an unlimited time period), perhaps they could end up with all the money. That's a totally unrealistic scenario, of course, but there is a bigger problem: If the total supply of money is held by a single entity then it is no longer a customary means of indirect exchange, and thus no longer money. People would settle on some other means of exchange and the (former) money would become worthless as currency.
Some notes:
>Value cannot be equated to money. This is the point you keep missing.
Out of curiosity, how do you think trade of any sort works in a capitalist society? In almost any case you can imagine there has been some conversion of money for a trade to be able to take place.
> That's a totally unrealistic scenario, of course, but there is a bigger problem: If the total supply of money is held by a single entity then it is no longer a customary means of indirect exchange, and thus no longer money. People would settle on some other means of exchange and the (former) money would become worthless as currency.
Would the new means of exchange be the "money" then?
On computer simulations, yes, one person ends up with all the money. And of course in the real world that is not the case. It ends up an oligarchy ... up until the "poors" revolt! You will notice that this has happened many, many times throughout history.
> the aggrieved parties are the people he stole his wealth from, as opposed to, e.g., the waitress who ends up serving him drinks on a Caribbean island.
I understand your logic here, but I think in these scenarios we are all losing - if the dictator's money is the only game in town you have to play his game and by his rules.
When the efforts of the waitress, and all the other effort and resources directed to fulfilling the dictators whims, it creates a network of economic activities around a single person's will.
If that money was being spent by the population he stole it from, the choices of the spenders will be more diverse, reflecting the desires of a that whole population, this creates a more complex network of economic activity and it also means that people supplying that demand have greater choice in how they participate.
it reminds me of the ant article from the other day.
https://www.theatlantic.com/science/archive/2021/05/ant-tape...
Think about the alternate title for these benign actions:
Annual Report on Isle of Man financial sector
Hackers breach Cayman National Bank and Trust’s Isle of Man subsidiary, the second of major breaches for this institution
Post-Mortem, Cayman National Bank and Trust breach and client behavior
Aggregating Customer trends sourced from hacked bank, using pytorch
"man dies after impact with car"
is rightly reported as
"man booked for manslaughter after hit-and-run"
the technical details are perhaps not as important than the criminality that transpired
The internet is a mirror, it tells you what you want to see. You should be most skeptical when things match your worst nightmare.
From my view the absurdity is that people are concerned about why they arent being hosed equally by their own government’s revenue efforts instead of why they are being hosed at all
This leads to a greater absurdity of demanding that another country - that has a balanced budget - take money that it doesnt need by taxing its customers and being mad when they say no.
This requires a very special kind of hubris that I think people need to 1) recognize they have bought into 2) recognize that their neighbors don't subscribe to that train of thought and have been operating by a much more effective set of rules. So whatever you’ve been told is probably just a lie if it bothers you that this is usually legal.
I'm not saying it is practical for their own country to balance their budget, or that their own country and citizens/representatives have a consensus mechanism for having a more fair revenue system whether by taxation or otherwise. I am saying that has nothing to do with countries that have figured out how to fund themselves by offering financial services, or the people that use them.
The author is saying "doing business with these banks is not illegal, but they lack certain reporting requirements that have been very helpful in revealing illegality, and we should be concerned about that."
The author has given multiple reasons and cited other studies showing why we should be concerned. At this point, I think the burden of proof is on you to explain why the author's concerns are unfounded. Why do you think beneficial ownership registries and similar reporting requirements are not needed?