How American billionaires pass wealth to heirs tax-free
bloomberg.com
bloomberg.com
If you have a billion in stock but live a humble life, what's the point in taxing it? You'll live the same way, and sell some stock. But selling stock to pay taxes is not necessarily good, unless whatever the government does with the money is better than whatever the company was going to do. Sure, it could be good, but it's not a slam dunk.
The idea of wealth is just very different in the modern world. If wealthy people were hoarding (keeping a bunch of stuff without using it), then taxing would put that stuff back to use. But wealthy people hold onto money-producing assets, which means someone is still using the stuff. Not always, but often. So it means that taxing it just takes it from one use (say, by a corporation) and puts it to another use (maybe a government use).
I'd much prefer that we tax consumption. It could be a 1000% tax for a Ferrari. Encourages better use of stuff and can be very progressive without triggering as much anger.
Industrial capacity utilization has been falling since the 1970s. So the "money-making assets" have been in use less (also the only thing that "makes" new actual wealth is labor). There is a glut of capital sloshing around profitable sectors, as the vast majority of people agree. Underconsumption (over overproduction, different words for the same thing) is generally seen as the economic problem, which higher consumption taxes would worsen.
https://monthlyreview.org/2008/12/01/financial-implosion-and...
Who makes that decision? In a democracy, the people do, via the government they elect.
> The idea of wealth is just very different in the modern world. If wealthy people were hoarding (keeping a bunch of stuff without using it), then taxing would put that stuff back to use. But wealthy people hold onto money-producing assets, which means someone is still using the stuff....
> I'd much prefer that we tax consumption. It could be a 1000% tax for a Ferrari. Encourages better use of stuff and can be very progressive without triggering as much anger.
One important thing that's missing from your analysis is power. One important function of inheritance taxes is make wealth-power less hereditary.
Also, wealthy people consume less, proportional to their wealth, than poorer people do. It's pretty much impossible for a billionaire to "consume" their fortune, unless they decide to do something useless and absurdly grand, like building a thousand ziggurats or something. Consumption taxes only work to concentrate the tax burden on non-wealthy people.
So, you're proposing people don't form opinions or try to influence opinion? You're just arguing for maintaining the status quo here.
> Also, wealthy people consume less, proportional to their wealth, than poorer people do. It's pretty much impossible for a billionaire to "consume" their fortune, unless they decide to do something useless and absurdly grand, like building a thousand ziggurats or something. Consumption taxes only work to concentrate the tax burden on non-wealthy people.
In real terms the wealthy consume far more than the poor. That's how Ferrari's exist; that's why consumption taxes make sense to a lot of people.
The money the wealthy don't consume (therefore the part that wouldn't be touched by consumption tax) is invested in producing assets and is already being used by society. Consumption taxes produce more money from the rich, and provide incentive for the rich to invest more and consume less.
> One important thing that's missing from your analysis is power.
Real power only comes from the use of wealth, you can trick some people by the promise of eventually paying but that wears thin very quickly. Influence via media campaign is easily taxable (probably already is?); gifts are already taxed once they get meaningful. Paying public officials for preferential treatment should be treated like the blatant corruption it frequently is.
If you want to improve society, that's great. Consumption taxes are a way to help society. Bashing consumption taxes because they don't hurt the rich sounds more like petty bitterness.
So what?
If someone uses some tax loopholes and then buys a few exotic cars, I can work up a little outrage about that. Maybe get mad about the loophole. Same if they are hoarding a bunch of stuff -- empty apartment buildings or something.
But if they had to pay $1M for a Ferrari, and $900K of that was taxes that I might benefit from, it's hard for me to maintain that outrage. And if they had to pay 1000% tax on that empty apartment building (nobody else is using it, it must count as consumption, right?), then that could make a sizeable tax payment.
In fact, this is starting to sound better and better. Anything not being rented out counts as the owner renting it, and paying consumption taxes. That'll get more stock in the housing market, fast. Probably need to sort out some accounting about how to treat depreciation vs renting vs buying.
The main point is to tax people for consuming or wasting stuff.
And no "it's only for the rich" is not a valid argument. Once it's in place it will gradually be expanded downward. (It's exactly how the income tax started.) It will act as yet another wall for the middle class getting into share ownership and preventing retail investors from getting into the market.
Politicians and media are also doing things like renaming the wealth tax a "unrealized capital gains tax" to disguise what it really is to mislead the public.
Edit: If anything I want to solve wealth inequality (or at least the perception of wealth inequality) so that draconian politicians don't propose draconian laws that would ruin the economy.
Can I get the 2% tax rate too, or is it just for Bezos?
Except fot the fact that he didn't make $50 billion.
I'm not opposed to the idea of front loading taxes by taxing loans after a certain threshold.
Even if you are fully indoctrinated though and are ideologically opposed to a wealth tax, perhaps you can recognize the insanity of capital gains tax, whereby Bezos (upon selling his shares) pays just 15%.
Calculation of capital gains does not account for inflation. Taxing a nominal increase in value over multiple years at the same level as income makes no sense.
I resent the implication that I am indoctrinated in some parochial ideology. Especially considering I'm not even American.
You wouldn't say you "made $100k" if the value of your house increased by that much, and you weren't selling it.
Sure.
Make $200k/yr and in 2014 buy 556 Bitcoin for $220/btc and in 2018 you will find your effective tax rate 2014-2018 is about 2% ... until the price of Bitcoin dropped or until you sold the Bitcoin, at which point you'll be taxed (which is also the situation for bezos).
[I could otherwise pick any stock that has gone up a _lot_ since then and make the same example.]
To actually answer your question, I don't have a solution, but I also don't think the problem is as bad as people make it out to be.
For this article's specific case I'd just patch the simple hole that you can't skip taxes by passing your shares on after you die. As long as the tax basis date isn't reset on inheritance, everything still works. Someone will pay the taxes eventually. It's an easy change and doesn't really change anything for the lives of most people and it makes more rational sense that way. It's basically fixing a bug in the current law.
Why not? Redistributive wealth tax seems like a reasonable way to accomplish this, along with raising marginal tax rates, closing tax loopholes, and a 100% inheritance tax. Use the excess money for direct investment in material infrastructure, social benefits, and (most importantly) education, and I would imagine the wealth distribution would look quite different in 20 years.
We design the economic system we live in. We can change it any time. Capitalism is a human invention: we create the rules to the game. This isn't some law of physics or some truth of the universe.
I don't see how it can take more than 15 minutes, but it's been in processing for 14 months now, and I paid $200 for that service. So in a frictionless world, it produces $800/hr. But I'm sure that the end worker receives something like mentioned $15/hr, which looks like extreme inefficiency. They lose at like 98% of it somewhere just because of that inefficiency. So it's not about taxes, but about the effective use of money. They can easily 2x the wage, and maybe even 10x, if someone would spend some time to figure out where the leak is.
Typically not effective at solving any problem, while also causing new problems.
> combined with Medicare for all, funded via cuts to the military budget.
Largest and most insane military ever built and if you cut it completely and doubled income taxes(in addition to forcing everyone to pay, no low income exception) you wouldn't put a dent in your proposed plan. You would have so much debt the subsequent inflation would be beyond control.
The U.S. was at its most "equal" with strong unions and high inflation (1970s). Perhaps that's what we need again. Strong labor bargaining and run inflation hot for a while. Also raise the non-primary home property tax so that the rich can't shelter their wealth in real estate.
If you bought say $5000 of TSLA 3 years ago, that would now be worth nearly $100,000. The media will try to tell the uninformed that you've made a ton of money, and "have paid no taxes". But you haven't made a ton of money, you still just have TSLA shares. As soon as you convert them to USD you have to pay tax on the gains like everyone else.
https://financialpost.com/personal-finance/high-net-worth/el... (“Elon Musk, short on cash, keeps borrowing more and more money even as Tesla stock surges; Musk has US$548 million in personal loans from Morgan Stanley, Goldman Sachs and Bank of America, an increase of 8 per cent since May”
The wealthy are not the only people who borrow to fund to consumption -- the middle class does as well, and much more so than the wealthy.
Let them eat cake?
And so what if he does? The biggest issue I see is that so many confuse money/wealth with actual stuff.
It's the stuff - the goods and services that add value to our lives - that matter. Consuming stuff takes from society: the time, effort and material to produce it. Simply having wealth, in whatever form, is totally neutral. If Rich Guy has a trillion Dollars in the bank, it doesn't affect anybody. But if they spend it all on potatoes, then that is what would impact society by subtracting all of the potatoes and limiting their use by others.
Consumption is what takes from society. Wealth doesn't subtract (or add) anything.
"regular" people do similar financial engineering all the time with home equity lines of credit (i.e. taking out loans against the equity in your house). instead of passing down fat portfolios, they pass down real estate (which is becoming increasingly expensive)