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Tax the rich? Yes!

January 3, 2022 Leave a comment Go to comments

from Lars Syll

For the first time in history, U.S. billionaires paid a lower tax rate than the working class - The Washington Post

  1. Per Kurowski
    January 3, 2022 at 7:46 pm
    Reply

    The following question should be part of any discussion of a wealth tax:
    In order to raise the money needed to pay that tax, what assets should the wealthy sell and to whom?
    What could the buyers of those assets otherwise have done with their money?
    https://perkurowski.blogspot.com/2018/10/redistributing-wealth-is-not-as.html

    • Garrett Connelly
      January 3, 2022 at 9:17 pm
      Reply

      One needs to notice that the way of life that generates rich people with high rates of return on their assets is leading directly to human extinction. Either that or plain ordinary silent spring.

      Less consumptive people do not harm Earth quite so much as the average rich person and normal wealth people can learn to cause even less harm, while at the same time being healthier and happier.

  2. John Vertegaal
    January 4, 2022 at 6:03 am
    Reply

    Interesting and thought-provoking article, Per. The problem with it, as I see it, is that it’s loaded with unstated assumptions. I’m sure you know that as a rule, in our double-entry accounting system, all venture money gets created as debt; i.e. a booked negative to a borrower, that in order to maintain a pertaining systemic equilibrium will need to be resolved. But what I’d like to know is how, in an integrated system of accounts, or the aggregate economy’s ontology if you will, this loan, from solely being a bank asset becomes the encumbrance-free, “flowing”, material and positively-valued, universal asset you seem to be making it out to be? Aren’t you begging the question of having a serious theory of what money actually is? Am I wrong in my assessment in some other way?

    How about doing a hypothetical tracing from its creation through an economy’s debit and credit entries, until it becomes such a free-and-clear economic surplus asset? I bet you won’t get there without plugs needing to be pulled. And digging just a bit deeper – surprise, surprise, you’ll find that it’s the issuers of money, and those who are ‘making money with money’ while holding an economic claim, who are the sole agents with enough discretionary income, after everyone else has fulfilled their financial obligations, to prevent, through a direct spending on final output, the plug pulling from needing to happen in the first place.
    So what is the justification not only for judicially apportioning the equivalence of which is freely creatable out of thin air, but also condoning a situation whereby a significant portion of commercial borrowers are condemned to default, regardless their own prudence?

    Don’t get me wrong, like you I believe it’s misguided to tax the possession of existing assets, like paintings or yachts. And the point you make about the builders of the latter is right on the mark. The economy is most unlikely to improve with blue-collar luxury-goods creators becoming unemployed. The graph’s depiction however doesn’t imply that a ‘wealth tax’ is needed, but a much increased rate of taxation on the wealthy; which, as far as I’m concerned should be on their income flow, including substantially on any financial-asset transfers by them.

  3. Meta Capitalism
    January 4, 2022 at 2:43 pm
    Reply

    Tax Reform, Including Closing Tax Havens

    A first priority is improving tax equity. Revenue lost from corporate tax cuts have been replaced by regressive payroll taxes. Lifting the earnings cap on payroll taxes will improve equity; the poorest Americans pay a combined 14.6 percent FICA rate while the effective rate on the top one percent is just 1.8 percent. Another source of inequity is the disparity in taxes on various forms of income. The oligarch Andrew W. Mellon is scarcely an historical figure one might associate with family prosperity. Yet Mellon believed that taxes on income from capital should not be favored and rates should be set at least as high as taxes on wages. (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (pp. 454-455). BenBella Books, Inc.. Kindle Edition.)

    Will higher rates on capital gains harm investment, hiring, and economic growth? President Reagan didn’t think so when raising the rate by nearly half to 28 percent in 1986. Nor do former Treasury Secretaries Robert Rubin or Lawrence Summers. Low taxes on capital benefits owners of legacy capital, but entrepreneurs have other priorities; they are interested in creating new wealth not shielding old wealth. Tax rates have no detectable impact on GDP or productivity, and the historical record bears this out: US growth and hiring have been the weakest when capital gains rates have been the lowest, a pattern that has persisted throughout the entire Reagan decline. GDP has grown more than twice as fast in periods of high tax rates on capital gains (1982–2002) as in periods of low rates (2003–2011).54 Such causality is not proof, but rigorous scholarly analyses examining the evidence provide that proof. One recent example is a 2012 Congressional Research Service study by economist Thomas L. Hungerford. He concluded: “Analysis of such data suggests the reduction in top tax rates have had little association with savings, investment, or productivity growth.”55 Other factors influence these macroeconomic variables, but tax rates on capital do not. (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (p. 455). BenBella Books, Inc.. Kindle Edition.)

    Equally important to the question of tax fairness is elimination of tax havens used by wealthy citizens and multinational enterprises to shift their taxes onto others. Tax havens launder money. They are pirates, surfing the global economy, indulged by politicians in Berlin, London, Paris, Tokyo, and Washington. The OECD has identified forty-two tax havens, such as the Cayman Islands and Switzerland, where hiding foreign money is an economic mainstay. Local economies there prosper from banking laws promising low taxes and secrecy to wealthy foreigners, drug dealers, smugglers, multinationals, arms merchants, and tyrants with bloody hands. (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (p. 455). BenBella Books, Inc.. Kindle Edition.)

    The United States is a big loser from the piratical tax haven business model.56 In combination with weakly drawn American laws and under-resourced tax officials, havens have converted the payment of taxes by wealthy Americans and US multinationals such as Apple, Caterpillar, and GE to a voluntary exercise. “Taxes are only paid by the naïve,” is how the OECD described this tax environment in February 2013.57 Tax fairness and large American budget deficits argue for closing havens, which could generate as much as $100 billion annually in tax revenue alone just for the United States, according to government estimates reported by Gretchen Morgenson of the New York Times.58 (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (pp. 455-456). BenBella Books, Inc.. Kindle Edition.)

    Turning first to personal taxes, Swiss banks accommodate American and other foreign tax cheats utilizing a contrived distinction between tax fraud and tax evasion, the latter defined as legal in Swiss law. A prominent Swiss strategy involves selling tax indulgences to wealthy foreign tax dodgers, the purchaser becoming a Swiss citizen of convenience for a year at a time—for the price of a hotel stay. It works this way: At the end of 2010, 5,445 foreigners, including the wealthiest German, Baron von Finck, and French singer Johnny Hallyday, purchased Swiss citizenship for a forfait fee tied to a small multiple of the cost of renting accommodations for a year. Thus, for an average cost reportedly of about $130,000 annually, foreigners can significantly reduce or avoid income taxes elsewhere in the world. The Swiss like the scheme because these tax fugitives spend an average of $250,000 each, supporting an estimated 23,000 jobs.59 (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (p. 456). BenBella Books, Inc.. Kindle Edition.)

    The rich democracies have grown impatient with such chicanery, and several years ago called for havens to terminate their business models or be blacklisted and face economic sanctions; officials at the April 2009 G-20 meeting in London authorized such sanctions. The Obama Administration has been supportive and began aggressively pursuing Americans with hidden wealth abroad, using scofflaw laws enacted early in its first term over the strenuous objection of Congressional Republicans. Since then, the Justice Department has prosecuted eleven Swiss banks for aiding tax dodgers.60 And international agreements have been reached requiring Swiss and other foreign banks to identify US accounts exceeding $50,000, opening the door to audits from which the IRS expects to reap $8 billion in tax receipts. Uncooperative foreign banks face sizable penalties on their US-based income, causing many now to shy away from US customers.61 (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (p. 456). BenBella Books, Inc.. Kindle Edition.)

    In Europe, some tax dodgers, such as former tennis great Boris Becker, are snared for misclaiming residence in tax havens like Monaco; Becker actually lived in Munich. The crackdown there has also inspired entrepreneurial instincts among some European bankers in these tax havens; they have begun whistle-blowing, selling electronic files listing the names of wealthy tax dodgers to officials in the United States, Germany, and elsewhere. It can be quite profitable. The IRS paid a record $104 million in 2012 to a former UBS banker who shared records on 5,000 American tax cheats, for example. Those records resulted in UBS paying a fine of $780 million and audits that produced $5 billion in taxes and penalties.62 (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (p. 456). BenBella Books, Inc.. Kindle Edition.)

    Whistle-blower bounties have proven to be good investments for Germany and Australia as well. In recent years, finance ministers in the German states of North Rhine-Westphalia and Lower Saxony, along with national tax officials, have paid millions of Euros to purchase purloined account information fingering thousands of tax dodgers.63 For bounty payments of €4.6 million, for example, the Merkel government has recouped nearly €200 million from German tax cheats laundering income through the Liechtenstein bank LGT. One tax cheat was the then-CEO of Deutsche Post, Klaus Zumwinkel, who was fined €1 million in January 2009.64 And another €200 million was recouped from German tax evaders hiding funds in Swiss banks, according to a 2010 report in Handelsblatt.65 Germany also shared a compact disc listing account holders at the LGT bank with Australia, whose tax investigators and courts have gone after more than twenty of those listed. At least one tax dodger there (and now fugitive) was hiding sufficient wealth to trigger a $36 million tax bill.66 (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (pp. 456-457). BenBella Books, Inc.. Kindle Edition.)

    Swiss officials are certainly aware that they are conspiring with drug smugglers, African warlords, and arms merchants. Swiss president Eveline Widmer-Schlumpf acknowledged in a Der Spiegel interview in December 2012 that her nation’s refusal to expose names enables foreign bank account holders to evade prosecution until statutes of limitation abroad expire.67 Yet bankers and politicians there appear unembarrassed by the piratical business model. The powerful banking industry has even prevailed upon Widmer-Schlumpf to accuse German tax authorities purchasing compact discs of “organized crime.” I doubt the irony was lost on Ms. Widmer-Schlumpf.68 Swiss officials have also reacted by criminalizing whistle blowing. And, provincial German tax officials paying bounties for compact discs have been indicted, with arrest warrants issued by Swiss prosecutors across the border.69 The controversy has sparked a bit of reform in Bern, although the Swiss idea of tax reform was for the legislature in mid-2012 to raise the forfait to a slightly higher multiple of the cost of an annual stay.70 (Tyler, George R.. What Went Wrong: How the 1% Hijacked the American Middle Class . . . and What Other Countries Got Right (p. 457). BenBella Books, Inc.. Kindle Edition.)

    — Tyler, George R. What Went Wrong [How the 1% Hijacked the American Middle Class and What Other Countries Got Right]. Dallas, Texas: Benbella Books; 2013; pp. 454-457.

  4. Ken Zimmerman
    January 7, 2022 at 9:22 am
    Reply

    Individualism, wealth pursuit, being left alone by government, and combative violence have been central to parts of America since colonial times. But so has piousness, love of and support for community, respect for differences, and belief in democracy. The battle continues. Right now, the first group is winning. As Carl Sagan said, we need an alien (not from anywhere on Earth) invasion to unite us.

  5. John Vertegaal
    January 17, 2022 at 6:34 am
    Reply

    Ken, I’m sorry to say that I find your response incoherent. It appears to be conflating the ‘non-interference’ command of deus ex machina anthropological reasoning – as a matter of course inducing a certain resignation with a particular cultural status quo – with yet a reliance on an uncertain (higher) deus ex machina’s ability to effect desirable changes in that same status quo.

    Relying on aliens to get us united, so as to negate our economy’s illth*1, to me seems to be about as defeatist a sentiment as can be imagined. Especially when applied logic from irrefutable premises were to provide the ‘all it takes’ to achieve what most of us here are after. This set of first principles, finding its own source in the economy’s meta-domain of justice*2 and as such being insusceptible*3 to an otherwise valid charge of circular reasoning*4 (the bane not only of NC but Marxist econ too), would be forming the cultural impetus to economic fairness instead. While the in this context getting rid of “successful” tax-avoidance schemes, and, in a more general sense, the clearing up of money (and capital) ambiguities*5, can’t help but roll out of a logical deduction – and thus would be finding their countermeasures in to be implemented law.

    *1) Coined by John Ruskin (Wikipedia)
    *2) http://www.vcn.bc.ca/~vertegaa/ontology.pdf (rev.’d ’21, and as such accepted for a Zoom presentation on the recently held WAPE Forum) …chickened out : (
    *3) When axioms are drawn from a meta-domain outside the field of inquiry, the onus is on doubters to show a contradiction in the meta-field underlying the field-of-inquiry hypothesis. More in *2.
    *4) A belatedly admitted to be true argument, put up by Cambridge U.K. against Cambridge MA, in the notable CCC debates of the ’60s.
    *5) Something a slightly affiliated MMT, self-admittedly* not an actual theory, is unable to do.
    * http://www.vcn.bc.ca/~vertegaa/Kelton Quote.pdf

    • Ken Zimmerman
      January 27, 2022 at 3:56 am
      Reply

      Amazingly, you got it, almost. The US has never been culturally coherent. Perhaps never will be. But for 3 civil wars and many smaller conflicts the US has sort of held together. Most coherently during WWII, the Cold War, and the Revolutionary War (the low point). Check out ‘American nations : a history of the eleven rival regional cultures of North America.’ by Colin Woodard. Right now my estimate is 13 rival regional cultures. Maybe Trump Republicans will set up a 14th. Best.

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