Keeping tax low for the rich does not boost economy

January 4, 2022 4:04 AM

In a shocking twist, 50 years of tax cuts for the rich failed to trickle down, LSE study says.
posted by signal (69 comments total)

You don't say.
posted by Gelatin at 4:05 AM on January 4, 2022 [12 favorites]

I’m shocked, shocked I tell you.
posted by The River Ivel at 4:09 AM on January 4, 2022 [11 favorites]

This is my surprised face.
posted by whatevernot at 4:11 AM on January 4, 2022 [9 favorites]

50 years ago, Reagan had to sell his tax cuts for the rich with the promise, however false, that they'd also benefit the lower classes. These days Republicans barely claim their tax cuts will pay for themselves (Ron Howard narrator voice: They don't), and have moved the Overton window enough that tax cuts for the rich are simply Good while raising taxes is Bad. This orthodoxy is so complete that George W. Bush launched two wars and never even proposed a tax hike, but rather funded them entirely with deficit spending (and his supporters suggested that social programs that Republican oppose should be cut to make up the difference).

The invaluable Heather Cox Richardson has been pointing out that the leadership of the Confederacy and their successors believed that the wealthy should have more say than others in how those resources are allocated, with a greater proportion going to themselves of course. They labeled any attempt to bring equality "socialism," and we can see today that while Republicans of the past may have cloaked their intent in phony claim that others would benefit from voting for policies to transfer wealth upwards, they now simply use their captive media for scare tactics, and deploy voting restrictions and extreme gerrymandering to ensure their opponents can't wield power no matter how much of a majority they hold.

All of the above indicates two things: That the ultra-rich know they can't honestly sell their "transfer the other half of the nation's wealth to the rich" agenda, and that they believe enough power is within their reach -- by installing a fascist dictator if need be -- that they don't have to.

Their agenda is an existential threat to democracy much more that Bush claimed Islamic terror was.
posted by Gelatin at 4:17 AM on January 4, 2022 [99 favorites]

When they tell you who they are believe them.
posted by Harry Caul at 4:23 AM on January 4, 2022 [10 favorites]

Clearly, we need a 50-year experiment of heavily taxing the rich, for comparison.
posted by GenjiandProust at 4:34 AM on January 4, 2022 [118 favorites]

*monocle falls out, shatters
posted by saturday_morning at 5:10 AM on January 4, 2022 [17 favorites]

This bit from the Weforum article is interesting:

There is evidence to suggest that the general public has a more complicated relationship with income inequality than might be supposed. A recent study has found that the way wealth is obtained is a key factor in how dissatisfied people feel about it.

Its authors say that whether the rich made their money from capital (such as owning assets) or labour (income from work) is significant. They also find that, in many countries, the gulf in salaries between the richest and poorest is now the key driver of inequality.

We're not just talking about the "idle rich" or the "1%" here, we're also talking about people making $150K when the median income is $60K. We're talking about the new "above the API/below the API" class divide where Doordash asks its engineers to deliver food once a month and some of them are furious.

We are morally okay with our new minor nobility because they demonstrated merit by working hard and being smart, and meritocracy is the moral soup we're swimming in. And if you aren't okay with it, well, they are. They have established their rightful place in our class structure via their hard work and smarts just as solidly as an aristocrat in an aristocratic society who has a family tree going back to Charlemagne.

I'm not quite at that level, but I'm close enough that I'm pretty sure that my taxes, and the taxes of everybody like me, should be higher.
posted by clawsoon at 5:34 AM on January 4, 2022 [27 favorites]

Clearly, we need a 50-year experiment of heavily taxing the rich, for comparison.

We more or less had that from the 1930's up to the 1980's....you know, the period where America was The Greatest Country In The World that the Republicans are so enamored of.
posted by briank at 5:34 AM on January 4, 2022 [67 favorites]

Clearly, we need a 50-year experiment of heavily taxing the rich, for comparison.

We tried that, after the second world war. All it produced was the wealthiest nation on earth, with an upwardly mobile middle class, a strong industrial base, and white picket fences in a nascent suburbia. Clearly what we needed was Ronald fucking Reagan to burn it all the ground so that 10 people could afford to build secret lairs inside volcanoes.
posted by Mayor West at 5:35 AM on January 4, 2022 [102 favorites]

Is this a repost/old news, or has someone proved this yet again? And if the latter, how many times will it need to be proven?
posted by acb at 5:36 AM on January 4, 2022 [5 favorites]

how many times will it need to be proven?

13
posted by wemayfreeze at 6:25 AM on January 4, 2022 [2 favorites]

This is my favorite Star Trek Fact: You already live in a post-scarcity society, and that's been stolen from you by the greed and fear of the extremely rich.
posted by mhoye at 6:29 AM on January 4, 2022 [43 favorites]

I don't think the extremely rich could manage to take it away on their own. The REAL problem is the much larger number of people who don't mind being poor as long as the people they hate are even poorer.
posted by rikschell at 6:49 AM on January 4, 2022 [29 favorites]

Well I never
posted by potrzebie at 6:59 AM on January 4, 2022 [1 favorite]

The REAL problem is the much larger number of people who don't mind being poor as long as the people they hate are even poorer.

Don't discount the impact of the moderately well-off gentry class on the politics of taxes.
posted by clawsoon at 7:04 AM on January 4, 2022 [12 favorites]

the leadership of the Confederacy and their successors believed that the wealthy should have more say than others in how those resources are allocated

To be fair, that was true of the founders as well. It took until the mid-1800s before the property ownership requirements were dropped for voting.
posted by CheeseDigestsAll at 7:09 AM on January 4, 2022 [15 favorites]

Also, more important than simply the rich getting richer, the upper are extracting their wealth from the rest of us. To the tune of $50 trillion.
posted by CheeseDigestsAll at 7:14 AM on January 4, 2022 [5 favorites]

Is this a repost/old news, or has someone proved this yet again?

I'd describe it as yet another step in a trend over the past few decades. No serious economist says that tax rates simply don't matter for growth. But in the 1980s, the consensus was that they mattered a lot, and some believed that the optimal rate was below the existing rates; since then, the evidence has moved way in the other direction, with many economists believing that rates matter much less than previously thought, that the optimal rate is much higher than existing rates, and that rates that are too low can actually reduce growth. Here's an overview from a center-left think tank. Now, conservatives are playing defense, saying things like "given the importance of entrepreneurship and innovation to American economic growth, caution is warranted before creating a new high tax-rate regime."

Note that I'm describing the debate among researchers and others who may have biases but do actually care to some extent about honesty and accuracy. Not all politicians - on either side - fall into that category.
posted by Mr.Know-it-some at 7:34 AM on January 4, 2022 [6 favorites]

Your premise is that policy decisions are based on empirical evidence.
posted by mecran01 at 7:55 AM on January 4, 2022 [9 favorites]

Surely this study will be the one that turns the tide.
posted by wierdo at 8:01 AM on January 4, 2022 [3 favorites]

To be fair, that was true of the founders as well.

Most of the founders owned slaves, and thus had similar economic interests as the leaders of the Confederacy, yes. This is not a contradiction or paradox.
posted by eviemath at 8:01 AM on January 4, 2022 [8 favorites]

I'm not quite at that level, but I'm close enough that I'm pretty sure that my taxes, and the taxes of everybody like me, should be higher.

Same.

I firmly believe zero billionaires should exist while even one person lives or dies in poverty. But at my level, I could pay more in taxes. And I would be happy to do so if those increases went to things like universal healthcare, keeping people fed and in homes and educated, and investing in a sustainable future.
posted by Foosnark at 8:03 AM on January 4, 2022 [18 favorites]

Its authors say that whether the rich made their money from capital (such as owning assets) or labour (income from work) is significant. They also find that, in many countries, the gulf in salaries between the richest and poorest is now the key driver of inequality.

So people want to essentially review each rich person personally to assess their tax rate? And this implies how they "made their money", not their current allocation for a wealth tax. No wonder raising taxes is unworkable.
posted by The_Vegetables at 8:04 AM on January 4, 2022

So people want to essentially review each rich person personally to assess their tax rate?

We already effectively do this with different rates for income taxes versus capital gains taxes versus interest taxes, don't we? Except that capital gains taxes are generally lower than income taxes, and people would like it to be the other way around.
posted by clawsoon at 8:17 AM on January 4, 2022 [22 favorites]

It's fine to say "your money or your life" to a person who needs health care, but if you say the same thing to a billionaire suddenly it's "class warfare."
posted by Faint of Butt at 8:19 AM on January 4, 2022 [44 favorites]

So people want to essentially review each rich person personally to assess their tax rate? And this implies how they "made their money", not their current allocation for a wealth tax. No wonder raising taxes is unworkable.

Yeah, there's no way that the income from capital gains could possibly be taxed differently than income from other sources without an impossible tax reform. And the idea that every person would have a different tax bill, you'd need some sort of revenue service organization to coordinate that. Pie in the sky.
posted by Superilla at 8:21 AM on January 4, 2022 [20 favorites]

So people want to essentially review each rich person personally to assess their tax rate?

Isn't your take a little bit of a lazy straw man? There's just two categories presented ("capital" and "labor") which are quite reasonable and already-established categories of earned income. No one's suggesting a personal review of where that money came from or what they were doing.
posted by RonButNotStupid at 8:23 AM on January 4, 2022 [5 favorites]

One of my profs way back when described trickle-down economics as "piss on the poor". It's always what I think of when I see/hear people claiming that tax cuts for the rich will benefit all of us.
posted by nubs at 8:25 AM on January 4, 2022 [11 favorites]

So people want to essentially review each rich person personally to assess their tax rate? And this implies how they "made their money", not their current allocation for a wealth tax. No wonder raising taxes is unworkable.

This distinction is already made except it used in the reverse. Wage income is taxed at a very high rate and capital income is barely taxed at all. Warren Buffet famously pointed that he was taxed on his income at a substantially lower rate than his secretary was. Buffet's effective tax rate was about half at the time of the quote and the difference has only increased since then.
posted by srboisvert at 8:26 AM on January 4, 2022 [4 favorites]

I could be wrong, but I think the point of that comment was that the cited survey indicates that (many) people evaluate the morality of taxing wealth differently depending on whether they perceive that wealth to have been "earned" as a result of labor or not. That kind of individualized moral judgment doesn't necessarily track with tax-law concepts like income vs. capital gains (e.g. stock options may be seen as compensation for labor, or one person's million-dollar salary may be perceived as being more truly earned than another's). More importantly, it creates a structural weakness in the public debate, so that it's easy for the elites to derail any conversation about tax reform with "but what about so-and-so who EARNED their giant vat of money?" Which is indeed a problem IMO.
posted by Not A Thing at 8:56 AM on January 4, 2022 [9 favorites]

My actual pie in the sky tax reform idea is for there to be a single (progressive) tax rate on all income, with no deductions whatsoever, so the tax filing process is automatic. But this would be preceded in March with a 'prebate' payment which would replace all deductions. The math is the same whether you reduce the amount you send in for taxes or whether you send in the full amount but get money back. But a lot of deductions just straight wouldn't fly if they were checks cut to people.

A tax deduction for disability? I can see, in theory, people getting behind the government writing a cheque to every disabled person. Same for school expenses; sure, write a cheque for each student. Heck, I could even see farmers still getting support (even if it wasn't really justified). But last month Elon Musk sold $16 billion in Tesla shares. At the highest income bracket, that would be 37% taxes, but because it's long term capital gains, it's 20%. So in effect the US federal government wrote Elon Musk a cheque for $2,720,000,000 for having the perspicacity to make his money by owning something rather than working for it.
posted by Superilla at 9:04 AM on January 4, 2022 [1 favorite]

I'm guessing that the easiest inequality-addressing tax laws to pass will be higher taxes on the rich, while the most difficult (but maybe more important?) will be the elimination of things like 401-k plans and mortgage tax deductions.
posted by clawsoon at 9:04 AM on January 4, 2022

>There's just two categories presented ("capital" and "labor")

hey I have an idea . . . nah, it'd never work.

as for fascist takeovers, just last night I googled "why didn't the Romans revert to the Republic" and the top answers on Quora all sounded pretty good to me . . . the gist was the Optimates of the Late Republic were perfectly happy with structuring the economy to work best for them and devil-take-the-hindmost for everyone else.

As covered in Mike Duncan's excellent "The Storm Before The Storm", Marius and Sulla "weaponized" the legions and once that precedent was set the system was primed for the populist autocratic takeover that Caesar executed.

The long string of emperors provided bread and circuses, and political stability, so nobody missed the late Republic of annual co-consulships after it was lost.

What I've seen in my actively cognizant lifetime (since ca. 1990 let's say) is that corporate America has steadily ratcheted tightly the quality-of-life-experience of retail workers, pushing for more productivity out of workers at the expense of what used to be 'slack', while the nation's landlords of course ratchet their rents steadily.

Profits are high, happiness is low.
posted by Heywood Mogroot III at 9:14 AM on January 4, 2022 [12 favorites]

Some of us are old enough to remember when "capital gains" was called unearned income.
posted by fullerine at 9:41 AM on January 4, 2022 [29 favorites]

But at my level, I could pay more in taxes. And I would be happy to do so if those increases went to things like universal healthcare, keeping people fed and in homes and educated, and investing in a sustainable future.

Absolutely, me too. An important thing to figure in is that the things these taxes could pay for could be a net gain in many cases. Take universal healthcare, if the money my employer puts into my premiums, and my contributions went into my pay instead, my taxes could go up quite a bit and I'd still have more money. People could quit lousy jobs easier, therefore pushing pressure on companies to pay more and give better working conditions. Yes, a portion of this is paid for by raising taxes on the rich, so it could in a sense be looked at as a wealth redistribution, but we're already redistributing wealth, just in the other direction.

A housing guarantee would probably help stabilize rent and home prices, and force new development of affordable housing. Education would need work, but I bet higher taxes would net out advantageous to the 100k+ college debt crowd, especially if something were done to put downward pressure on tuition costs.

These are all things that, from a "does this put money in my pocket" perspective net positive for a lot of us. Raise my taxes - it gives me more money. And that's all without even making the moral argument.
posted by mrgoat at 9:42 AM on January 4, 2022 [4 favorites]

no deductions, tax all income same as wages, tax net worth.

abandon using tax incentives for behavior modification. tax only for revenue.
posted by j_curiouser at 10:13 AM on January 4, 2022 [2 favorites]

One of my profs way back when described trickle-down economics as "piss on the poor".

The older term was “horse and sparrow economics”, referring to the distribution of oats.
posted by acb at 10:16 AM on January 4, 2022 [2 favorites]

I liked George HW Bush's term: Voodoo Economics.
posted by wierdo at 10:20 AM on January 4, 2022 [5 favorites]

There's a widely held belief that lower taxes are better for the economy, that smaller government is always better. Stephen Gordon notes that this is incorrect:

Some people might at this point be tempted to confidently assert that high levels of government spending are incompatible with growth and prosperity. These people would be wrong. In his paper "15 Years of New Growth Economics: What have we Learnt?", Xavier Sala-i-Martin notes: "The size of the government does not appear to matter much. What is important is the 'quality of government' (governments that produce hyperinflations, distortions in foreign exchange markets, extreme deficits, inefficient bureaucracies, etc., are governments that are detrimental to an economy)."

Joseph Heath explains further in Filthy Lucre:

What sets the issue of taxation apart is the notion ... that taxes are not just a personal inconvenience to the taxpayer but are also objectively bad for the economy. As a general claim this is simply false (despite the fact that there are specific instances in which it is true). It is, however, a typical consequence of a surprisingly pervasive error that I refer to as the "government as consumer" fallacy.

The picture underlying this fallacy is relatively straightforward. Government services, such as health care, education, national defense, and so on, "cost us" as a society. We are able to pay for them only because of all the wealth that we generate in the private sector, which we transfer to the government in the form of taxes. A government that taxes the economy too heavily stands accused of "killing the goose that lays the golden eggs" by disrupting the mechanism that generates the wealth that it itself relies on in order to provide its services.

Thus the government gets treated as a consumer of wealth, while the private sector is regarded as a producer. This is totally confused. The state in fact produces exactly the same amount of wealth as the market, which is to say, it produces none at all. People produce wealth, and people consume wealth. Institutions, such as the state or the market, neither produce nor consume anything. They simply constitute mechanisms through which people coordinate their production and consumption of wealth.

For example, you can pay for security through taxation and policing, or by paying security guards. You can pay for education through taxes and public schools, or you can pay for education through private schools.

When we pay for services through taxation and public provision, rather than privately, it's basically a form of collective shopping. In some cases the service can be organized much more efficiently in the public sector than in the private sector (e.g. health insurance and public pensions, because you get massive efficiency gains from risk-pooling). In other cases where individual preferences are much more important (e.g. food and clothing), it makes more sense to organize them through the private sector.

At a small scale, we're familiar with collective shopping through condo associations:

If Canadians want to consume more health care or a new subway or better roads, what are their options? The situation is the same as with the condo residents who want a new sauna: If people want to buy more of this stuff (and are willing to buy less of something else), then they should vote to raise taxes and buy more of it. It doesn't necessarily impose a drag on the economy to raise taxes in this way, any more than it imposes a drag on the economy when the residents of a condo association vote to increase their condo fees.

One can see, then, the absurdity of the view that taxes are intrinsically bad, or that lower taxes are necessarily preferable to higher taxes. The absolute level of taxation is unimportant; what matters is how much individuals want to purchase through the public sector (the "club of everyone"), and how much value the government is able to deliver. This is why low-tax jurisdictions are not necessarily more "competitive" than high-tax jurisdictions (any more than low-fee condominiums are necessarily more attractive places to live than high-fee condominiums). Furthermore, the government does not "consume" the money collected in taxes - this is a fundamental fallacy; it is merely the vehicle through which we organize our spending. In this respect, taxation is basically a form of collective shopping. Needless to say, how much shopping we do collectively, and in what size of groups, is a matter of fundamental indifference from the standpoint of economic prosperity.

A more polemical argument: Why a Conservative government would be bad for Ontario.
posted by russilwvong at 10:30 AM on January 4, 2022 [22 favorites]

So people want to essentially review each rich person personally to assess their tax rate?

Sure, why not. According to Google, there are currently 614 billionaires in the US. I find it hard to believe that the IRS, an institution which has exerted person-hours to ensure that they receive the four-figure sum I owe them, could find some way to do the work on that group. And if we want to run the gov't like a business, it would be smart too. Imagine how much money they could pull in from working those 614 cases, as opposed to what is probably making so much less working the thousands and thousands of cases that net them, what, $5,000-10,000 per person?
posted by nushustu at 10:44 AM on January 4, 2022 [10 favorites]

I find it hard to believe that the IRS ... could find some way to do the work on that group

You mean the same IRS that is hugely underfunded and understaffed and pays its most senior lawyers and accountants a fraction of what they can earn in private practice, doing things like representing billionaires?
posted by Mr.Know-it-some at 11:23 AM on January 4, 2022 [5 favorites]

A tax deduction for disability? I can see, in theory, people getting behind the government writing a cheque to every disabled person.

In theory this happens now, with ongoing financial support for those who are disabled. In practice, disability payments (at least where I live) put one at about half the level of the poverty line.
posted by ricochet biscuit at 11:25 AM on January 4, 2022 [1 favorite]

tax only for revenue

I disagree. Tax for revenue, and to internalize externalities. Pure markets are incapable of capturing externalities, positive or negative, in prices. Taxation is the best way to internalize most negative externalities, and refunds or direct payments to internalize positive ones.
posted by biogeo at 11:44 AM on January 4, 2022 [12 favorites]

And given that massive wealth inequality is destabilizing to a democracy, the existence of billionaires is a negative externality that should be taxed.
posted by biogeo at 11:47 AM on January 4, 2022 [8 favorites]

Taxing the shit out of specific crypto blockchains -- for their respective carbon production and any ransomware payouts -- would be an excellent start, yes.
posted by Heywood Mogroot III at 12:17 PM on January 4, 2022 [5 favorites]

I firmly believe zero billionaires should exist while even one person lives or dies in poverty. But at my level, I could pay more in taxes. And I would be happy to do so if those increases went to things like universal healthcare, keeping people fed and in homes and educated, and investing in a sustainable future.

I also believe billionaires are obscene (in fact I'd set the threshold at least an order of magnitude lower, maybe two). At this point barring bombing brown people, corruption and some anti-environmental initiatives I could careless what the government spends the money it's taking from billionaires. The key thing is to compress the inequality and as long as the government is taking from the obscenely rich and giving it to practically anyone else that money is churning and promoting equality. Once we've reduced maximum wealth per person below say 50 million we can start with worrying about nuances of where to spend all this wealth.

Its authors say that whether the rich made their money from capital (such as owning assets) or labour (income from work) is significant. They also find that, in many countries, the gulf in salaries between the richest and poorest is now the key driver of inequality.

No one gets "rich" by labouring. At best they get rich by controlling capital even if they don't own it outright. Mostly though they get rich by owning things.

You mean the same IRS that is hugely underfunded and understaffed and pays its most senior lawyers and accountants a fraction of what they can earn in private practice, doing things like representing billionaires?

Even underfunded if the IRS reduced enforcement on everyone but the 614 by say 1% they'd probably have more than enough resources to go after the 614.
posted by Mitheral at 1:14 PM on January 4, 2022 [4 favorites]

You mean the same IRS that is hugely underfunded and understaffed and pays its most senior lawyers and accountants a fraction of what they can earn in private practice, doing things like representing billionaires?

Yes. That is exactly the same IRS. Because again, they're not too underfunded to ping me about money that I owe which, again, will net them a four-figure sum. I find it hard to believe that they couldn't just stop worrying about people who make under, say, $150k a year and focus on people who make over $100M a year. Do that for like five years. See if it results in more taxes getting paid.
posted by nushustu at 1:19 PM on January 4, 2022 [8 favorites]

I find it hard to believe that they couldn't just stop worrying about people who make under, say, $150k a year and focus on people who make over $100M a year

Mostly because those people hold wealth in ways that are difficult to understand and track, from a tax law perspective. The IRS has to have people specialized in that kind of thing, and those people can make way more money working for the billionaires, keeping it out of the IRS' hands. At that level of wealth, paying people so that you don't have to pay taxes is a cost of doing business. It's probably even tax deductible. On top of that, the mega-rich have direct access to the people who control the IRS budget and write the tax code. Most of what we think of as tax evasion in that range is completely legal.

They can, however, go after you. You're probably easy to audit.
posted by mrgoat at 1:32 PM on January 4, 2022 [5 favorites]

For anyone who wants to get into the weeds: CBO: The Effects of Increased Funding for the IRS and IRS reform will generate a lot more revenue than the CBO thinks and JOINT HEARING ON MINDING THE TAX GAP: IMPROVING TAX ADMINISTRATION FOR THE 21ST CENTURY
posted by Mr.Know-it-some at 1:41 PM on January 4, 2022 [4 favorites]

The IRS has to have people specialized in that kind of thing, and those people can make way more money working for the billionaires, keeping it out of the IRS' hands.

This is so silly. You don't think the budget that covers the salaries of, say, 1,000 auditors who are currently auditing small-potatoes taxpayers could cover the budget of a team to audit a billionaire?
posted by agentofselection at 1:50 PM on January 4, 2022 [3 favorites]

Peak "Better Things Aren't Possible" centrist energy.
posted by agentofselection at 1:51 PM on January 4, 2022 [8 favorites]

I'm not saying it's not possible in theory. I'm not even arguing it's a bad idea. I was explaining why it isn't currently done. Those salaries, by the way, are capped in civil service law, the IRS can't just offer more money for those jobs. Billionaires can. And it's a skill that's in demand, the IRS can't just pick up some rando and teach them tax law at that level. It takes a lot of time, training and experience to have the skills to audit a billionaire.

What you're looking for is a political solution, not an administrative one.
posted by mrgoat at 2:01 PM on January 4, 2022 [3 favorites]

It takes a lot of time, training and experience to have the skills to audit a billionaire.

Yup. Just look at the Panama Papers. There were only 143 individuals exposed, but it involved 11.5 million documents, thousands of shell companies, and hundreds of reporters to uncover and analyze.
posted by CheeseDigestsAll at 2:22 PM on January 4, 2022 [4 favorites]

I mean, that team used to exist.

The wealthy’s lobbyists immediately pushed to defang the new team. And soon after the group was formed, Republicans in Congress began slashing the agency’s budget. As a result, the team didn’t receive the resources it was promised. Thousands of IRS employees left from every corner of the agency, especially ones with expertise in complex audits, the kinds of specialists the agency hoped would staff the new elite unit. The agency had planned to assign 242 examiners to the group by 2012, according to a report by the IRS’ inspector general. But by 2014, it had only 96 auditors. By last year, the number had fallen to 58.

The wealth squad never came close to having the impact its proponents envisaged. As Robert Gardner, a 39-year veteran of the IRS who often interacted with the team as a top official at the agency’s tax whistleblower office, put it, “From the minute it went live, it was dead on arrival.”

This isn't even "current structural issues around salary caps make it impossible", that's not nothing but there was organization around this as a concept. The problem is somewhere around 30 years of relentless pressure from the GOP with a rallying cry of "if we make paying taxes as painful as possible (for the general public, not for us), they'll support bleeding the government to death".

We used to have it. It was there. It could be there again. There's all the same barriers there are to making anything else structurally better right now, but that's nothing new.
posted by CrystalDave at 2:34 PM on January 4, 2022 [19 favorites]

Yah every time I suggest this and it gets this kind of resistance, I just think "if only there was some kind of organization, some body of people with power and money, whose leadership was overseen by people who could remove them at will, and whose responsibility was to improve the lot of those people."

Hey! Good news! That's a description of our government!

Hey! Bad news! That's also a description of corporations.
posted by nushustu at 2:38 PM on January 4, 2022

If someone’s finances are too complex for a college graduate in finance with a B average , they are too complex to exist. We need to strictly limit not just the amount of wealth people have, but also the ways in which they are allowed to structure it. That means also limiting the kinds of financial instruments there are and the size and complexity of corporations. Never happen, but the amount of waste from companies eating other companies and creating elaborate holding companies and regional subsidiaries and so on, and then having people have to deal with that in tax law and antitrust and liability and so on, is just ludicrous. The complexity is the enemy in lots of ways.
posted by freecellwizard at 3:18 PM on January 4, 2022 [5 favorites]

I also believe billionaires are obscene (in fact I'd set the threshold at least an order of magnitude lower, maybe two).

I hope we relaunch Who Wants to Be a Millionaire but now all the contestants are billionaires so it is more of a threat.
posted by ricochet biscuit at 3:19 PM on January 4, 2022 [24 favorites]

I hope we relaunch Who Wants to Be a Millionaire but now all the contestants are billionaires so it is more of a threat.

I am definitely going to steal that.
posted by clawsoon at 4:01 PM on January 4, 2022 [1 favorite]

I stole it from elsewhere, so spread the ill-gotten gains around.
posted by ricochet biscuit at 5:49 PM on January 4, 2022 [4 favorites]

Obviously, there is some justification for taxing capital gains at a lower rate: to account for the effects of inflation (leaving aside if you think capital gains should actually be taxed higher than earned income, which is a reasonable position). If you buy something and it appreciates at roughly the rate of inflation for a long time, it is reasonable that you shouldn't be paying taxes on the gains, which in real terms are nil.

But we have computers now and it seems pretty trivial to simply calculate the inflation on an asset from the purchase date to sale date and then subtract that from the capital gains, leaving the net real gain to be taxed at the same rate as earned income (or a higher rate). We already index tax brackets to inflation (or we do in Canada, I assume in other countries too), so we already have an official inflation rate for tax purposes.

At the same time, we could eliminate the tax exemption for capital gains on homes, since those will generally be a lot lower in real terms.
posted by ssg at 6:17 PM on January 4, 2022 [1 favorite]

Bostock! My shocked face, please!
posted by nfalkner at 8:06 PM on January 4, 2022 [1 favorite]

Obviously, there is some justification for taxing capital gains at a lower rate: to account for the effects of inflation

I don't get that - my income taxes don't go down if I don't get a raise in a particular year and have a net reduction in compensation. My property taxes also don't go down (all things being equal) if my property does not appreciate with inflation. Why would capital gains be any different?
posted by saeculorum at 8:53 PM on January 4, 2022 [9 favorites]

Your income taxes do go down if your income stays constant, because tax brackets are adjusted for inflation, so you'll pay a lower tax rate. Your property taxes will also go down if your property does not appreciate with inflation, because presumably other properties in the jurisdiction have appreciated, so they will pay a higher proportion of the total taxes.

Say you bought a stock for $100 thirty years ago and sell it today for $200. Because of inflation, you have actually gained exactly nothing. Now say someone else bought a stock for $100 a few months ago and sells it for $200 today. They've doubled their money. Should you both pay the same tax on that capital gain (which is what happens now)? Seems unfair.

What if you bought a bond that paid out $100 in interest after 30 years, as well as your principal of $100? You'd pay even more taxes than the other guy, because your $100 would be taxed as interest instead of capital gains. That's bizarre.

Why not take the inflation out of the equation and tax the real returns on wealth heavily — or tax the wealth directly?
posted by ssg at 10:40 PM on January 4, 2022 [3 favorites]

we need to focus less on who to tax, and more on what to tax
posted by Heywood Mogroot III at 4:08 AM on January 5, 2022

Why not take the inflation out of the equation and tax the real returns on wealth heavily — or tax the wealth directly?

100% estate tax after the first $10 million. You're done using the money, and if your crotch-gobblins aren't worthless, they'll earn their own fortunes.
posted by mikelieman at 5:19 AM on January 5, 2022 [4 favorites]

Your property taxes will also go down if your property does not appreciate with inflation, because presumably other properties in the jurisdiction have appreciated, so they will pay a higher proportion of the total taxes.

Property taxes are also generally assessed at the local level (occasionally state in the US) and states don't have the ability to print money and most have max debt limits, so local taxes are really just adding up all the things that a jurisdiction wants to pay for in a particular year, and then attempting to divide it among the pool of tax payers. Federal taxes are not like that. The current US debt is $23 trillion. Federal tax collection amounts don't really matter that much.

Also property taxes (and local taxes) are generally not particularly progressive, so IMO entirely too much discussion is aimed at federal taxes and federal tax rates, and not nearly enough at local tax rates.
posted by The_Vegetables at 7:32 AM on January 5, 2022 [1 favorite]

ssg: thanks for the description of federal income tax - I had forgotten that the brackets were indexed. I appreciate the correction. I can nit-pick a bit on property tax, but I do agree that in the vast majority of cases, property tax is effectively inflation-adjusted via millage rates. I do see some value in adjusting capital gains tax for inflation - although fundamentally any significant amount of capital gains tax is paid by a very small portion of the population (stated as one person who does pay significant capital gains taxes).
posted by saeculorum at 10:31 AM on January 5, 2022

"tax only for revenue"

i think i may have been misunderstood. my meaning is, only use the tax code to raise money for the government. which could be spent on externalities.
posted by j_curiouser at 3:12 PM on January 5, 2022