Tax Justice Now
October 15, 2019 6:28 AM   Subscribe

Starting from the current tax system, everyone can design their own tax plan: Wealth tax, individual income tax, corporate tax... Pick the rates, adjust enforcement, and taxjusticenow.org shows: 1. How much revenue would be generated; 2. How tax progressivity would change."
How much revenue would a wealth tax generate? And a VAT?

Which groups of the population would gain or lose from replacing private health insurance by an income tax?

taxjusticenow.org provides factual answers to these questions.

You can also simulate the tax plans of the main presidential candidates:

Based on their currently released plans, this is how Warren, Biden, and Sanders would change tax progressivity

Their proposals are still being refined. We'll update the model as new proposals come in.
New Rules, New Politics - "A new economics is being born—one that is being argued everywhere from academic journals to the 2020 campaign trail and is moving with surprising alacrity to mainstream consciousness."[1]
posted by kliuless (44 comments total) 18 users marked this as a favorite
 
Wait why can I only tax rich people up to 10%, I want ALL OF IT
posted by Automocar at 6:59 AM on October 15, 2019 [12 favorites]


I didn't see an option for "Tax Churches".
posted by Thorzdad at 7:21 AM on October 15, 2019 [26 favorites]


This Saez and Zucman analysis is highly controversial - that is, not yet trustworthy. They are using a number of non-standard assumptions. Some background from the WSJ and Washington Post editorial board and the Tax Policy Center and more technical discussion from Wojtek Kopczuk (bigshot editor of the Journal of Public Economics).

Outsiders often see these kinds of debates and automatically assume criticism is just political - that is, on MeFi people think right-wing political hacks are trying to cover up the truth, and conservatives think that Zucman and Saez are cooking the numbers to provide cover for left-wing politicians. There is some political motivation, but really, questions about the Zucman and Saez numbers is coming from really smart, really technically engaged people from across the political spectrum.

#1: The fact is that the mainstream consensus is that there has been substantial growth in income inequality over the past 40-50 years. #2: I also think there's a pretty good consensus among centrists and moderate Democrats and people on the left that the tax system should be substantially more progressive than it currently is, although opinion on the ideal system varies. I worry that the controversy over Saez and Zucman's methods will raise unfair doubt about #1 and therefore harm the argument for #2.
posted by Mr.Know-it-some at 7:22 AM on October 15, 2019 [6 favorites]


Wait why can I only tax rich people up to 10%, I want ALL OF IT

That's 10% per year. Unless their wealth is increasing by over 10% a year (which is really difficult to do in the long run), you'll whittle it down eventually.

I would settle for a wealth tax that capped wealth growth at the same rate as wage growth, plus a rigorously enforced estate tax.

Oh, and an empirically-determined progressive income tax that was based on actual data on the non-linear marginal value of income.
posted by jedicus at 7:38 AM on October 15, 2019 [4 favorites]


Interesting that there's an assumed evasion rate; it's surely endogenous!

it's sort of a shame that the Bush folks poisoned the well of dynamic calculation of the effect of tax cuts by trying to gin up tax cuts that were revenue-positive through growth effects. the tax system matters for the forward looking decisions that people make about investment and saving, and that affects the growth path of the economy and future tax revenue, but that's not in the popular press version of progressive tax discussions.

empirically-determined progressive income tax that was based on actual data on the non-linear marginal value of income.

the challenge is that you have to take a (relatively) strong normative stance on how people value income to do that sort of numerical exercise. i'm not sure economists know enough to legally codify marginal utilities.
posted by dismas at 7:50 AM on October 15, 2019 [1 favorite]


this is very slick though.
posted by dismas at 7:56 AM on October 15, 2019


Hmmmm. Surprised to learn (at least according to this site) that you can actually lower taxes for all brackets except the 600k+ and still make more money if you change the tax on dividends, corporate, and stock options. Has anyone proposed a plan somewhat like that? I’d think it’d be broadly popular, or is there a reason I can’t think of that that would be terrible?
posted by corb at 8:24 AM on October 15, 2019 [4 favorites]


jedicus, can you point to something high-level that explains "non-linear marginal value of income"?
posted by kokaku at 8:25 AM on October 15, 2019


kokaku: not to speak for jedicus, but I think they're probably referring to the intuition that 100 dollars means more to a poor person than a rich person.
posted by dismas at 8:33 AM on October 15, 2019 [7 favorites]


kokaku to me it is kind of like this assume that I make $100k a year (to the nearest order of magnitude)

How much I'd notice if I lost:
$0.01 - So small I frequently don't bother getting the change and just dump it into the penny jar at the store
$0.10 - I know I certainly wouldn't be able to even know if a dime had gone missing from a pocket, frequently lost in sofa/car and found at a later time
$1 - probably not even going to notice
$10 - might think that I've spent quite a lot lately, but wouldn't especially notice
$100 - would be very annoyed, but the finances can handle without any adjustment
$1000 - Would be very pissed and might have to rethink purchases for a while but easily overcome
$10000 - will significantly affect my quality of life would need to make changes in spend to rebuild my cushion
$100000 - completely unfathomable that I could even lose this amount of money as it simply doesn't exist to be lost to lose this would require major fraud or somehow stealing my house
$1000000+ - impossible for me to lose this as everything I own wouldn't even add to this amount.

Now for Bezos (who makes about half a billion a year losing a million wouldn't even change his spending habits at all)

For someone who makes a million a year they probably shift everything down one category, while for someone who makes $10k a year everything shifts up one (or two categories) The scale isn't linear it is in orders of magnitude thereby demonstrating the non-linearity of loss.
posted by koolkat at 8:51 AM on October 15, 2019 [10 favorites]


What dismas and koolkat said.

In other words: How much better off would someone be if you gave them $100? Someone who's broke and starving would buy some food and be much better off. It would make almost no difference to a rich person.

Corollary: Taking $100 from a rich person and giving it to a poor person would, on net, create a lot of utility.
posted by Mr.Know-it-some at 8:59 AM on October 15, 2019 [12 favorites]


The rich pay less taxes then you (NYT)
posted by The Whelk at 9:17 AM on October 15, 2019 [1 favorite]


I'd also like to see the effects of a Financial Transaction Tax. Something as low as a 1%, a penny for every dollar spent buying and selling securities or stocks—rounded up of course. It would bring in a shitload of money and put the kibosh on all the HFT bullshit that arbitrages stocks for fractions of a cent.
posted by SansPoint at 9:22 AM on October 15, 2019 [6 favorites]


I think someone pointed out a .01 cent transaction tax on Wall Street could fund the entire MTA twice and give us free fares.
posted by The Whelk at 9:36 AM on October 15, 2019 [4 favorites]


Is there an option to remove the payroll tax cap?
posted by typical npr listener at 9:54 AM on October 15, 2019


I'd also like to see the effects of a Financial Transaction Tax. Something as low as a 1%, a penny for every dollar spent buying and selling securities or stocks—rounded up of course. It would bring in a shitload of money and put the kibosh on all the HFT bullshit that arbitrages stocks for fractions of a cent.

Sweden tried this and it appears to have been a dismal failure as much of the trading volume just moved overseas. I'm sure the relatively small size of Sweden versus other markets made this very easy, so we can't assume the same thing will happen in the US, but it's worth noting.

I hear mixed things about HFT. There are some credible claims that the existence of HFT has reduced the spread throughout the stock market, making it cheaper for ordinary citizens like thee and me to buy and sell stocks. That seems plausible, but I also wonder if there is a point of diminishing returns. At some point the bid/ask spread is low enough that reducing it doesn't mean much any more.
posted by It's Never Lurgi at 10:43 AM on October 15, 2019


There are some credible claims that the existence of HFT [high frequency trading] has reduced the spread throughout the stock market, making it cheaper for ordinary citizens like thee and me to buy and sell stocks. That seems plausible, but I also wonder if there is a point of diminishing returns. At some point the bid/ask spread is low enough that reducing it doesn't mean much any more.

You are exactly right. HFT isn't really the source of any significant change in bid/ask pricing.

The bid/ask spread was reduced dramatically in the early 2000s when the exchanges switched from fractional dollars to decimal dollars. So where previously the smallest increment for a price was typically 1/16 of a dollar (6.25 cents) it is now a single decimal cent.

It so happens that around the time that decimal pricing was phased in was also the time the high frequency trading was ramping up. So the high frequency traders claimed the credit for what was really a bookkeeping change.
posted by JackFlash at 10:58 AM on October 15, 2019 [1 favorite]


My copy of the US tax code is 5,626 pages. I want more variables to play with!

Hmm. It does not say what happens to the economy. Getting rid of inequality requires thinking about the downstream effects as well.
posted by sabraonthehill at 11:08 AM on October 15, 2019 [2 favorites]


Oh, this is easy. 100% estate tax over 10M. If your spawn isn't worthless, they'll earn their own fortunes.
posted by mikelieman at 11:25 AM on October 15, 2019 [4 favorites]


> If your spawn isn't worthless, they'll earn their own fortunes

I agree with your larger point but hoo boy, plenty of worthy people don't earn fortunes.
posted by The corpse in the library at 12:16 PM on October 15, 2019 [1 favorite]


I'm... I'm confused, what's this 10% max on the Wealth?
Cap Gains is counted as wealth? Where is that taxed?
posted by symbioid at 12:31 PM on October 15, 2019


The real problem is the tax on investments, not income tax (although that's a problem too) and you can't change that here. There are countries where you literally cannot become rich solely off investments in stock due to the tax structure and that is a lot more healthy in terms of society. Wall Street bets on water, food and health care are what's driving the US to the brink. It should be illegal.
posted by fshgrl at 12:44 PM on October 15, 2019 [3 favorites]


fshgrl: there are taxes on capital gains and dividends under 'individual income tax.'
posted by dismas at 12:58 PM on October 15, 2019 [1 favorite]


Oh, this is easy. 100% estate tax over 10M. If your spawn isn't worthless, they'll earn their own fortunes.

When I was younger, I was stymied by the argument whereby a farm, factory, or other business was worth well over 10M (but the income itself was modest for the owner), and inheritance taxes would force the inheritors to sell off the family business.

Nowadays I realize that the farm or business should be in a shared ownership corporation among all of the workers (not just the "owner" and their children), so it turns out my instincts as a youth were correct.

No one deserves to inherit that much. The business itself will prosper under new ownership. If a business goes under because of inheritance taxes, it's because the children took their ball and went home, tanking the business in protest. Not because the government interfered.
posted by explosion at 1:07 PM on October 15, 2019 [5 favorites]


Wait it's broken. There are still billionaires.
posted by klanawa at 1:10 PM on October 15, 2019 [3 favorites]


This is such a cool educational tool.
posted by latkes at 1:53 PM on October 15, 2019


What tax rates will it take to impoverish Donald Trump's children for life?
posted by saysthis at 2:22 PM on October 15, 2019 [2 favorites]


I'm... I'm confused, what's this 10% max on the Wealth?
That'd be a new wealth tax - % of total wealth taxed per year. I imagine getting one passed above 10% is not considered realistically achieveable (and too easily avoided with stuffing assets in overseas tax havens as corps already do). Conventional income taxes are under the 'individual income tax' tab and go up to 100%, and you can add more brackets.

As a non-american though... US income taxes are just ludicrously low for higher earners. Yet you pay 12% of the first dollar? And the capital gains tax limit really needs to go. Christ, it's no wonder your income inequality is through the roof and rising fast while the social safety net barely exists, and then there's the regressive and massively overpriced medical insurance costs - marking that in as a 'tax' really drives it home. I knew the taxes were significantly lower than European levels, and Trump had made it worse, but I'm genuinely rather surprised you're not already a completely (economically) failed state by now.
posted by Absolutely No You-Know-What at 3:37 PM on October 15, 2019 [3 favorites]


My copy of the US tax code is 5,626 pages. I want more variables to play with!

The reason it is 5,626 pages is because of all the ways to not pay tax. All of the exceptions for capital gains, qualified dividends, qualified business income, mortgage interest, employer health insurance, depreciation, carried interest and on and on.

Taxes could be quite simple. Add up your income from every source, look up your tax in a table. Done.

Instead you have this enormous tax code full of exceptions which is really about how rich people don't have to pay taxes.
posted by JackFlash at 3:48 PM on October 15, 2019 [4 favorites]


I think you need to adjust the sliders under "Individual Income Tax" first, then adjust the sliders under "Wealth Tax". The highest individual tax bracket is 50M+. So just jack that up to 90%, then slide the scales all the way up on the wealth taxes to 10%. I think it's possible to actually tax MORE than 100% like that if you're not careful. Which while amusing, isn't terribly realistic.
posted by sharp pointy objects at 4:01 PM on October 15, 2019


(For the land use nerds in the crowd: WHERE IS THE LAND VALUE TAX)
posted by latkes at 4:27 PM on October 15, 2019 [1 favorite]


I think you are vastly underestimating the impact of a 1% financial transaction tax. It wouldn't just widen spreads. It would kill off most of the trading industry that supports liquidity in markets, and on a fair-value basis, you can expect spreads to probably widen by at least that much, or for trading to just move to a more favorable jurisdiction. Either way, markets will thin and all trading, no matter the holding period, will suffer to a degree. That will have effects throughout retirement accounts, municipal bond trading to support your local city, and so on. Profits on very high return liquidity-providing trading strategies in US equities ("beneficial" HFT market making is in this category) are on the order of 5bps (0.05%) per traded dollar, so the tax is 20x pnl.

Now, I'm not going to argue that our modern society and economy aren't excessively financialized, and that there aren't vast issues with wealth inequality. I do think it is necessary to begin thinking through the very non-linear and hard-to-model effects of such a tax that kills off trading and doesn't address anything else.
posted by ExpertWitness at 4:51 PM on October 15, 2019


Nowadays I realize that the farm or business should be in a shared ownership corporation among all of the workers (not just the "owner" and their children), so it turns out my instincts as a youth were correct.

Uh no. That is a disaster for farms and small businesses. They don't do well in collective ownership as the entire history of the world shows (corporations or collectivism or co-ops) and also the value of the land in a farm is often higher for housing. So if you force the sale of family farms upon inheritance then you lose all the arable land to McMansions or agri-business. A $10M farm might barely support one family because the land would be worth more as a sub-division or a $10M union small manufacturing plant is often only affordable for someone to buy outright to convert to condos or lofts or to a sub division of a large corporation. Nope, nope nope.

Yes, I think there should be different rules for people who own assets directly, like a farm or business, and for people who own stock or other intangible assets.
posted by fshgrl at 5:26 PM on October 15, 2019


Here's a pro-tip. Whenever you hear someone use the term "liquidity" in a argument for some financial policy, you know they are blowing smoke.

"Liquidity" has been used as the excuse for every pernicious financial innovation in the last 40 years - CDOs, subprime mortgage backed securities, derivatives, hedging, currency swaps and the rest.

The idea that markets are liquidity constrained is ludicrous. Around 7 billion shares are traded daily, 17 million a minute, almost 300,000 every second of the trading day. Nearly $700 billion in bonds are traded every day. It hardly matters if a trade takes 10 seconds instead of 1 second to clear. Markets were plenty liquid 20 years ago before high frequency trading.

Economists proposing a financial transaction tax are suggesting something between 0.1% and 0.5% for stock trades. Won't this hurt investors? Not at all. Most studies indicate that response to trading costs is highly elastic. A 10% increase in trading costs results in 10% less trading, so the net cost to investors is zero.

But more than that, studies have shown that for retail investors, the more they trade, the more they lose to professionals who have better information. So by discouraging trading, you are actually increasing returns for retail investors.

Best of all, a financial transaction tax, by reducing trading, cuts into the heart of the financial industry. The financial industry is a parasite, sucking the life out of the economy. A big part of the increase in income inequality is the rise a the financial industry that soaks up more than double the percent of GDP it did 30 years ago, and puts it into the pockets of financial executives.

So a financial transaction tax, at the same time as providing a significant new source of revenue, has beneficial side effects as well.
posted by JackFlash at 5:56 PM on October 15, 2019 [7 favorites]


Interesting that there's no tool for manipulating payroll taxes as far as I can tell. I guess because those are more legislatively encumbered? Just an exercise, I was trying to see how far you could push their calculator towards taxing the rich and leaving the poor untaxed, but the regressiveness of the payroll tax creates a hard floor on what you can achieve there.
posted by biogeo at 11:54 PM on October 15, 2019


Here's a pro-tip. Whenever you hear someone use the term "liquidity" in a argument for some financial policy, you know they are blowing smoke.

Liquidity is a real thing and does effectively the same thing oil does for an engine - reduces friction. When applied at a micro scale a lot of small businesses go bust not because they don't have assets but because their money is tied up in capital assets and they lack the liquidity to pay their bills. (Most of those couldn't actually be saved by liquidity to tide them over but some could).

The issue is that there are diminishing returns. A small layer of oil over all your ball bearings helps - but certainly since Thatcher and Reagan we've drowned all those ball-bearings and most of the engine in oil. Leveraged buyouts and greenmail are both symptoms of too much liquidity with the oil getting into the air cooling.

It's like the abuse of the Lafferble Curve. There is a point at which lowering taxes does increase income. The only thing is that that tax rate appears to be somewhere above 70% and the Laffer curve is therefore an argument to increase the top rate of tax.

When someone talks about liquidity it means that they think that one aspect in a highly complex system is the only important one - or they are trying to convince you of that.
posted by Francis at 4:35 AM on October 16, 2019 [2 favorites]


They are using a number of non-standard assumptions.

just some more stuff on this :P
  • A few caveats: "1. The graph zooms in on the top brackets; 2. It doesn't include transfers; 3. The tax rate of top earners is hard to measure. Despite these limitations, it's clear that rates for the richest Americans have gone down..."
  • @paulkrugman: "Second, they avoided any analysis of incidence, adhering to what we used to call the flypaper theory of taxes — they stay where they're put (maybe these days call it the Post-It Note theory) In particular, all corporate taxes are considered to fall on stockholders..." (via)
  • @gabriel_zucman: "Ok, quick thread on tax incidence (wait, 'tax incidence?' on Twitter? Bear with me for second). There is a debate about our choice to allocate all corporate taxes to shareholders in our book, 'The Triumph of Injustice'. We've thought A LOT about that, and here's the argument..."
  • @wwwojtekk: "There are other incidence assumptions changes that have changed, the two biggest ones are for sales tax and income but their impact is about constant. If we just remove mean changes in incidence of sales and income tax over the whole period, we are almost there..."
  • @Noahpinion: "Even the economists who created the NYT infographic that went mega-viral have difficulty measuring top incomes!"
  • @Noahpinion: "Another post showing why the tax rate of very rich people is very hard to measure."
  • Higher Incomes, Higher Tax Rates - "One error is that they distribute the very large amount of income that is unreported on tax returns in a way that greatly inflates top-end income, which in turn substantially reduces estimated tax rates at the top."
  • How can we reach political agreement when economists can't decide on the facts? - "Republicans and Democrats there don’t just disagree about the wisdom of certain policy ideas or whether observed trends in certain metrics are worrisome. Each side has their very own data and account of the world, creating irreconcilable narratives about the state of the nation."
posted by kliuless at 6:39 AM on October 16, 2019 [2 favorites]


a $10M union small manufacturing plant is often only affordable for someone to buy outright to convert to condos or lofts or to a sub division of a large corporation. Nope, nope nope.

There are very likely legal structures that allow the ownership of the corporation to transfer over to the employees over a period of time, and delay payment of inheritance taxes.

The point is that the owner shouldn't be accumulating $10M of assets (whether in stocks, land, manufacturing equipment) in their own name in the first place, it should be under the ownership of the company which itself is employee-owned, rather than solely owned.
posted by explosion at 9:50 AM on October 16, 2019 [1 favorite]


@gabriel_zucman: "Ok, quick thread on tax incidence (wait, 'tax incidence?' on Twitter? Bear with me for second). There is a debate about our choice to allocate all corporate taxes to shareholders in our book, 'The Triumph of Injustice'. We've thought A LOT about that, and here's the argument..."

the linked paper (zucman and saez) is interesting - I'm really, really not an expert on the public finance and tax incidence literature - but it seems like even given their justification (that static descriptions of tax incidence should attribute taxes to, roughly, the income that's taxed so as to be consistent with national accounts), they still can't really avoid thinking about behavioral responses and incidence, which is precisely what they seem to be doing in the graphs.

e.g., in their draft (which I realize is only a draft): Hence,
in this case, the natural description of the pre-tax and post-tax incomes, and tax paid is the following: pre-tax labor income is wL, post-tax labor income is ¯w = w(1 − τ_L)L, workers pay τ_L wL in taxes.


attn: mods, this is why i want latex or markdown on MeFi

Once you change labor taxes, w and L will likely respond and to say something like "this is the amount of revenue that will be collected" or "this is the post-tax distribution of income" is not quite so straightforward to calculate as picking a new τ_L and keeping everything else constant. Maybe I'm missing something in how they calculate things on the widget.
posted by dismas at 4:12 PM on October 16, 2019


@gabriel_zucman: "Ok, mooooar on tax incidence"*

@ojblanchard1: "The heated discussion between Larry Summers and Emmanuel Saez at the PIIE conference (https://bit.ly/2BtKqWK) is exciting. But the discussion by Gabriel Zucman (currently only audio at https://bit.ly/2Iv4sno session 11, at 23:58, video available monday) is more informative."
posted by kliuless at 5:43 AM on October 22, 2019


The French Economist Who Helped Invent Elizabeth Warren's Wealth Tax

@edroso: "Who's the 'you' in this paragraph?"*
Ms. Warren wants an annual asset tax of 2% on households worth more than $50 million, and 3% if you’re worth more than $1 billion. Mr. Sanders would tax “extreme wealth” starting at 1% on households worth $32 million and topping out at 8% on those worth $10 billion or more. Whereas the Soviets confiscated wealth virtually overnight, at least Bernie will take a dozen or so years to pilfer most of your savings.
@alexhern: "the Wall Street Journal's assumed audience is 51 people"
posted by kliuless at 6:00 AM on October 22, 2019 [2 favorites]




@gabriel_zucman: "Ok, mooooar on tax incidence"*


this is frustrating because it is, in fact, the same thing on tax incidence as the previous thing he said. It's not more of anything.

I haven't read the book, but I have read Zucman and Saez's working paper about why you should ignore incidence under certain circumstances (but not all) and their documentation of the widget you linked to in the original post. They specifically and explicitly don't include behavioral responses in their analysis of tax plans in the widget. The approach in the widget (presumably, not in the book) amounts to assuming that taxes change but nothing else about the structure of wages, labor supply, or savings and investment behavior changes. I think this is a pretty bad assumption, but I don't know how consequential it is - my guess is that it's non-trivial.

This is, to emphasize, not a comment that says I disagree with the idea of wealth taxes. But if you want to use the tax system to soak the rich, you gotta think about the fact that their behavior is not invariant to the tax regime.
posted by dismas at 12:58 PM on October 22, 2019 [1 favorite]




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