Why do you think that minimizing taxes becomes their #1 priority? What actually happens is that they tell the guy handling your finances to save them some money, and that's their problem. And given their fee structure, they'll go as far as they need to, even though the rich person in question doesn't really think about their taxes all that much.
This is the real multiplicative effect of being really rich: It's not knowing that you'll never be short of money, but how many things you don't even have to think about, because they are handled in your stead.
This is where I'd expect AI will change the world for consumers first: The tasks that now require either a lot of energy, or hiring an assistant or eight, becoming so cheap a good chunk of middle class will be able to afford it.
Nah I’ve met a fair number of mega-high wealth individuals. They would go so far as to pick a materially worse deal that allowed them to pay no taxes, over a higher payout that required some taxes paid. It is nuts.
In this particular case that I had in mind when writing this comment, they were arguing for foregoing a tranch of money entirely because it would be taxed at income rates instead of long term capital gains, which would make their %age tax ratio go up, and massively increase the total tax paid.
They would have rather foregone that income entirely, then be forced to pay full income taxes on it. Of course they didn’t argue it this way, or else the idiocy would have been obvious even to them. They were arguing that plan B “results in less tax paid overall.”
That is what their metric was: which plan results in less taxes paid. Not which plan results in more take-home pay.
It's nuts that we treat LTCG and income differently. We should adjust LTCG for inflation and then charge the amortized taxes whenever folks realize gains.
"but then taxes would be too high!" yes, so we should also reduce income taxes when we do this.
Quit flogging the upper-middle class to pay for the technically unemployed rich.
It’s not nuts, it’s actually quite purposefully thought through. Profit gets taxed once at 15-20% in the form of corporate income tax, the taxed again at LTCG tax rates. The combined total is similar to the individual tax rate for high earners.
If you tax LTCG at income rates, then you will just start incentivizing other schemes to return profits to shareholders, which is going to be economically inefficient, harder to manage, lead to consolidated ownership structures, fewer liquidity events for small shareholders, greater inequality, and less prosperity.
Long term capital gains having lower tax rates isn’t feature, not a bug, for everyone not just wealth managers.
Only taxing wealth "at rest" makes it avoidable for those who have the means to pay accountants to keep it moving in productive ways and thereby non-taxable. You then end up only taxing the people who can't afford that, which is the middle class.
If it's productive, it's contributing to society. If Alice's $100 goes to Bob's wages, which buys Charlie's shoeshine service, which pays for a week of TV dinners, I don't think those 100 dollars should be taxed more than David's 100 dollars that just sat in his bank account. But I do agree, we should prefer taxes that can't be avoided, LVT being the best option.
Given American anti tax sentiment, it isn’t surprising.
Plus there is a concerted effort to maintain the narrative that the government should be starved, because the government is the most wasteful body that can be.
Being rich isn’t just some sort of statistical metric - it’s also a clear cut option to have your principles and desires accommodated.
It’s not hard to believe.
To determine whether its 60-40 (tax avoidance - convenience optimization) would seem to be the question to pursue.
Being wealthy unlocks the option to not be a rational actor with little or no real world consequences, enabling capricious urges and whim to be a significant factor in the decision making process. See: Elon musk.
Or take people who are super competent, with strong ethics and world class bravery, and catapult them into the truly heroic! Think for example, Elon Musk!
I also think Elon has done great and important things for humanity, but to call him super- competent, ultra courageous, and heroic might be a pretty significant stretch.
He seems to me to be an analytical thinker with 1st percentile intelligence, who struggles with emotional intelligence and impulse moderation. Probably a pretty fun guy to hang out with, but also an asshole more often than he should be. Nobody is even nearly perfect, and hero worship tends towards the delusional in most cases, so I tend to steer clear of thinking too good or poorly of anyone.
As a poor person who doesn't fully own his own house but pays in taxes 60% of their income, and much of the rest in house loan interest and principal, I can see how that would play in my own case. If I were to come up onto a lump sum of money by, say, some creative endeavor of mine, and that money is going to be taxed at a 65% tax (such is the law in Sweden for income taxes), I might consider to do a number of things with that money that prevents that tax from being realized, including donating it to charities or investing it in hopeless enterprises. After all, if I can't enjoy the money myself, but I have a bit of agency over it, well the least I can do is enjoy that agency.
Sounds to me like Sweden is doing it right!
If you want very extensive social programs you have to tax EVERYONE really really hard.
The fantassy that one can pay for wellfare by only taxing the rich more or by reducing their loopholes is a pipedream.
Or you could have a society with very low taxes and very low to none social programs, especially if your government doesn't love fighting expensive wars all the time.
Wars and wellfare programs are all very expensive. Even miserly wellfare programs like what the US got is creating some real debt default risk over there.
I don’t think people have fully put together that the same personality type that was a slave owner prior to the 1900s is the same personality type of a venture founder, investor, venture, capitalist, banker, etc…
That is to say their goal in getting rich is to have a dictatorship, not necessarily simply to have a nice boat and a house and raise a family
The goal of the mega rich is the same as it always in history, which is to dominate enslave and basically shape the world to what they want it to look like without being intermediated by people with less power.
Further the more wealth people have, in my personal experience, the less they want to have any constraints by other organizations, specifically governments they disagree with.
If people haven’t, they should read about the “business plot”
In democracies, the minority who own the bulk of wealth are lobbying to ensure they avoid paying taxes. That’s not cool.
Firstly - many developed countries have higher tax rates than America.
Secondly - the issue isn’t being rich. The issue is that tax avoidance for so many years has resulted in absurd levels of wealth capture.
Thirdly - no polity level discussion can happen effectively, because that wealth ensures productive discussion is mired in controversy by the time it reaches the voting public.
> Firstly - many developed countries have higher tax rates than America.
This is mostly not true. People are often confused into comparing US federal taxes to the totality of taxes in other countries, but US states levy taxes too. The total of state and federal taxes is often in excess of 50%, which is higher than the OECD average.
> The issue is that tax avoidance for so many years has resulted in absurd levels of wealth capture.
The primary cause of this is not tax avoidance, it's market concentration. If your company has 0.1% of the industry and is worth a billion dollars and you pay a 0% effective tax rate, you have a billion dollars. If your company has 50% of the industry and is worth $500 billion dollars and you pay a 70% effective tax rate, you still have $150 billion, i.e. 150 times as much. Also, effective tax rates have never actually been 70%.
> Thirdly - no polity level discussion can happen effectively, because that wealth ensures productive discussion is mired in controversy by the time it reaches the voting public.
The real problem is that the tax system is intentionally convoluted to conceal from the public who is paying what and where the money is going. This benefits the rich in many cases, but it mostly benefits Congress, who can lie to people about what's going on to get their votes even while screwing them in particular. This is not a partisan issue; both parties want more money and want it to go to their cronies, so neither of them wants to simplify the tax system into something sensible and harder to game, because it would interfere with the diversion of everyone's tax money to the politically connected.
> Taxes on personal income and business profits made up 48 percent of total US tax revenue in 2021, a higher share than in most other OECD countries, where such taxes averaged 34 percent of the total (figure 2). Australia, Denmark, and New Zealand were the only OECD countries where over half of total revenue was generated from such taxes.
> In the United States, taxes on just the income and profits of individuals (not businesses) generated 42 percent of total tax revenue, compared with 27 percent for all other OECD countries combined.
So that clarification is warranted.
> Convoluted taxes
This … I mostly agree that simpler tax codes are beneficial, I am not sure its complexity is the core reason discussion is difficult.
Tax payment itself is made as painful as possible, so that it remains a focus of ire for citizens.
Hmm. I suppose in the spirit of simplicity, it would be ideal to have an automated tax generation form, and a simple tax code - making it easier for people to just pay their taxes and get on with their life.
And then have progressive taxes for people higher up the wealth ladder.
> Market concentration
Your point is that this is not the primary reasons for wealth disparity?
I dont know - we are well aware of the kind of steps firms take to avoid paying taxes, and instead move them to tax havens. The numbers indicate that firms tend to pay much lower taxes in America compared to their OECD peers.
Again - the point here is on “primary reasons” for wealth capture.
> I went to double check, and the best answer is that America collects less tax/GDP than its peers. Even accounting for state and federal taxation.
Again, this depends on the state, because all the states have different tax systems. You're also comparing by percent of GDP rather than something like tax dollars per capita, but that has two major problems. One, US GDP per capita is higher than the OECD average and so is the cost of living, so in the US the tax collected in real dollars per capita is higher and the percent of GDP that you could collect as tax without bankrupting ordinary people is lower.
And two (this is the big one), the US healthcare system represents 17% of US GDP and is mostly private insurance. In countries where the entire healthcare system is paid for out of taxes, tax rates are correspondingly higher, but in turn US citizens are paying in the form of insurance premiums. So to be comparing like with like you'd have to count those insurance premiums when comparing to countries that pay the premiums entirely out of taxes. Or to put it another way, you couldn't raise taxes in the US and spend the money on anything other than healthcare and regard that as equivalent.
> This … I mostly agree that simpler tax codes are beneficial, I am not sure its complexity is the core reason discussion is difficult.
It's the thing that enables tax avoidance.
There is a very simple way to do taxes: If a business sells a product or service in the US, they collect whatever the tax rate is and remit it, showing the customer what proportion of the purchase was tax so they can see how much they're paying. Let them advertise the pre-tax price; that should satisfy the people who want citizens to notice when they're paying taxes. The business can in turn deduct any tax paid on cost of goods sold from what they remit, like VAT.
Since this uses a single tax rate, there are no games to be played arbitraging the rate or fudging with transfer pricing, and you can get a progressive tax system by combining it with a UBI, which produces a progressive effective rate curve.
Then there's no practical way to avoid the tax. If you buy or sell something, the tax is remitted. When Apple sells an iPhone in the US they have to remit the tax regardless of where they made it or where their headquarters is or what country they stash the profit in. No more loopholes. No more pretending that the employer is paying half of FICA instead of it being a >15% regressive tax on the working class.
> Tax payment itself is made as painful as possible, so that it remains a focus of ire for citizens.
I feel like this is a talking point. Some tax reform guy says something like this and it's highly unsympathetic (Do you see? They want you to feel pain! On purpose!), so then the other side likes to point to it to deflect blame for the status quo onto their opponents. But that doesn't explain why FICA has an income cap, doesn't apply to investment income and hides half the amount being paid from the taxpayer. This is over $10,000/year in tax from the median household with half of it being hidden and all of it being collected transparently. If these "want you to feel it" people had the real power then that wouldn't be happening.
> And then have progressive taxes for people higher up the wealth ladder.
The naive legacy way we try to do progressive taxes is one of the avoidance mechanisms. People hire their kids or cousins who are in a lower tax bracket to move family business income to someone in a lower tax bracket etc. You can get the result you want from a system which is actually simpler.
We have a bunch of social programs like food stamps and housing assistance which have phase outs. The combined rates of the phase outs and ordinary taxes are higher than the effective rates imposed on the wealthy, whether now or historically. So convert the benefits to cash (UBI), eliminate the phase outs and use a flat tax system which effectively makes the phase outs implicit. The effective rates on lower income people are now low or negative. You at slightly below median income get a $12,000 UBI and "pay $10,000 in taxes" so really it's -$2000. A billionaire gets the same UBI but it doesn't make a dent in their tax burden so they're paying the full flat rate.
> I dont know - we are well aware of the kind of steps firms take to avoid paying taxes, and instead move them to tax havens. The numbers indicate that firms tend to pay much lower taxes in America compared to their OECD peers.
Companies avoid paying taxes because they can. The question is, is this the primary reason the companies are worth so much?
But it clearly isn't. Apple currently pays an effective tax rate of just under 16%, i.e. they keep 84%. If they paid three times that much (48%), they'd keep 52%. If we oversimplify and assume their valuation is proportional to how much profit they keep, this would reduce it from $3.5T to $2.2T. Which is still preposterous. A founder who owned a significant chunk of Apple would still have a million times more wealth than an ordinary person who owned the same proportion of a small business. Tripling their tax rate wouldn't even change the number of significant figures in their valuation -- because it's a percentage, so it's proportional to the base, which is the real thing out of all proportion.
Moreover, the company size is how they can pay executives such high salaries -- and those salaries are tax deductions to the corporation. A small business can't pay an individual employee tens of millions of dollars a year, they don't even have that much revenue. Concentration of wealth is caused by market concentration.
It's not, it's literally what it is. Per default, accumulating wealth contains risks for the individual attempting to do so, and increasingly more and more of the wealth is stripped away while reducing none of the risk. Thats absolutely theft.
Fulfilling your obligation to a society that brought you riches, however much risk you took and however much hard work vs luck that was, is not theft.
Fueling that society, so that it can persist for your well-being is your obligation as a citizen.
If you fully play out your argument, the least wealthy and least successful deserve it the most to have their remaining wealth taken because they are not assuming any risk in this society.
> If you fully play out your argument, the least wealthy and least successful deserve it the most to have their remaining wealth taken because they are not assuming any risk in this society.
No, if you fully play out his argument then the least wealthy deserve not to have their wealth stolen. His argument is that theft is bad, it isn't a complex argument with unexpected implications.
Although it does seem a bit faulty regardless, the amount of risk someone is taking has no bearing on whether taking their stuff is theft.
The line of thinking we’re trying to get across to you here is best put like this I find; even if 99% of the village thinks it’s a good idea to march into the most productive individual’s house and rob it clean, it doesn’t become morally right to do so.
> 99% of the village thinks it’s a good idea to march into the most productive individual’s house and rob it clean
If this is what you believe raising taxes is like, I'm not surprised you're against it. But no wonder that you're struggling to get this point across, because it's outlandish in how far removed it is from what I perceive the instrument of taxation to be from concept to application to its morality... Forgive me for my own overblown comparison, but yours is a position I'd expect to hear in a comic from Scrooge McDuck.
Even if that individual moved into the village knowing perfectly well that this is the rule in this village?
It is not unreasonable to me that you have to pitch in for common goods if you live in a village, and should you refuse to take part in this you might find yourself in a situation where you have to either move out of the village or forfeit your share.
I like Ayn Rand as much as the next HN consumer, but let’s be a bit more judicious in how we apply her ideals.
If you earned your wealth through driving on public roads, after receiving a public education, without it actually being blatantly stolen due to a public police force, etc etc etc.
Then it is also your responsibility to pay for these items so that they dan continue to be used for future generation.
If you're in eternal debt to the society you were fortunate or unfortunate enough to be born into since before you were lucid, when exactly is the cycle going to be broken?
Public roads can be taxed by use. Public education should be paid by people who participate.
You apply an "if" conditional here in a manner that's morally correct in my opinion. It's just that even if you didn't partake in those activities, you're forced to pay for them all the same. That's the issue.
You can move out of the country of course and find one that's more politically suitable, but the bottom line in my mind is that people in most societies are so different from each other that democracy just doesn't work at the scale it's trying to be applied. Sure, deciding what your society should collectively strive for at a neighborhood level might be possible. City level is reaching, and state or country level is ludicrous.
I think the only responsibility at the federal level should be watching the borders, and I can't convince myself otherwise no matter what material I read.
> If you're in eternal debt to the society you were fortunate or unfortunate enough to be born into since before you were lucid, when exactly is the cycle going to be broken?
Never. No human being has ever thrived in total isolation, and no one’s accomplishments are solely their own. You may not like it, but you are unavoidably part of a society (even if you move into the wilderness and never interact with another person again, you were still raised in one). You wouldn’t have been able to gather whatever resources you’ve managed to amass without that society, and in return it requires you to share the burden of helping everyone else thrive as well.
Theft is illegally taking something. Taxes are part of the legal system. Literally not theft.
Ethically is it right to increase the risk to accumulate wealth? That depends on what you buy with that risk. It’s well-established that people will take risks for fun, and they’ll take significantly more risk when security for themselves and their family is on the line.
Folks with hundreds of millions or billions in assets or millions in income have vastly higher levels of security compared to folks with $100 in the bank and a $15/hr job with no benefits.
So, how much is it ethical to take from the rich to ensure that the poor have decent odds to improve their situation and have a basic level of security? In America, it’s been as much as 60% in income taxes for the highly-paid. A wealth tax of 40% upon death still exists, even if the rich have found a way around that. It sounds like America has already established that 40% taxed to the benefit of all is ethically okay.
So we should probably be killing the buy, borrow, die strategy of tax avoidance, especially on transfer taxes should be collected. But could we take more from the wealthiest and have that be ethically okay?
Let’s say we have someone with $300M in assets and those appreciate 8% annually on average. Those assets will be worth $600M in 10 years. Assuming a spend of $10M per year, they’d still be worth $400M by the end of 10 years. So we’ve had at least $100M generated compared to where we started just for existing and living a lavish life. But we could have taxed that $100M at 40% and put 40M into public services, infrastructure, or entrepreneurial grants to provide tens of thousands of people with more security without materially affecting our asset-owning individual. Even just distributing $40M to supplement incomes for low-security folks would translate to 2500+ people getting a chance to improve their situations.
So, is it ethical to tax the excess asset appreciation that the individual didn’t use for anything? It’s not that it didn’t grow, it’s that it grew a little less fast. And we were able to impact thousands based on that. I’d argue yes, and I struggle to understand how “make life no different for the individual vs make life better for thousands of people” comes down on the side of the individual. It’s not until taxes grow higher than appreciation that I start to think it might be unethical.
But as you approach taxes equaling appreciation, I can see how it could be counterproductive. I think that’s not the argument though. It wouldn’t be terribly difficult to tax assets based on appreciation above their highest appraisal, with appraisal triggering taxes being owed. Certainly no more complicated than our current taxes assets and the loopholes that lead to buy, borrow, die.
Theft/stealing is a concept that predates the idea of law and legal systems. The very first legal system talk about “stealing” and punishment for thieves without having to define the word.
I disagree with the guy upthread, but it’s a bit dense to say that taxes being theft is oxymoronic when you clearly understand what he meant.
They’re also voting for the policies that enable safe wealth accumulation and preservation, so “steal” seems like the wrong word—though there may well be some wealthy people who feel stolen from inasmuchas they’d rather live in a less secure society where they could try to be the winning warlord. Most capitalists see the value of a stable consumer class, though, backed up by a legal system and economic policy that injects money to prevent the collapse of their income-drivers.
They're literally plotting policies of "wealth redistribution" in the EU at least. The idiot bureaucrats can call it what they want, but forcibly redistributing your assets more and more to other people makes it thievery.
The longer people will call it communist plot and insist on not paying taxes, the higher is the probability of having the actual communist plot and being exiled to the Moon by a popular vote.
Maybe if we don't strip poor people of any chance of getting out of poverty they won't turn to communism.
If you chase an animal in the corner, it will fight back. You can shoot it and win but don't be surprised if the situation repeats.
The problem is that communism (as it is practiced) forces everyone into poverty, except for the tiny fraction of the population who comprise the elite of the politburo.
Yes, communism is horrible, I totally agree. What I am alluding to is that some form of social democracy can bring long term stability, thus minimizing the risk of people radicalizing.
Revealed preference at play again, and everyone knows that whats the whole communist thing really is about anyway - crippling jealousy and wishing to kill off the people who've put more effort in their life than you.
This is the real multiplicative effect of being really rich: It's not knowing that you'll never be short of money, but how many things you don't even have to think about, because they are handled in your stead.
This is where I'd expect AI will change the world for consumers first: The tasks that now require either a lot of energy, or hiring an assistant or eight, becoming so cheap a good chunk of middle class will be able to afford it.