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Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

21 pointsposted 11 hours ago

12 Comments

hungryhobbit

11 hours ago

If you live in California and see the endless stream of TV ads against the wealth tax, reading this will make you want to murder everyone involved in those commercials.

(To be clear, I'm not advocating murdering anyone ... not even the ultra rich ... but man, their aversion to paying taxes is shameless.)

paimapi

11 hours ago

you can thank Sergey 'Do No Evil' Brin for that: https://theconversation.com/why-a-vote-on-taxing-californias...

I remember doing the math when the last company I worked for was sold, and how much of a percentage of the wealth our founders received alone would be subtracted if they had made all the hundreds of us millionaires. I think the math equated to roughly 0.006% or so of their total wealth to basically instill a new millionaire class in my city which likely would have led to a little boom in spending + business creation

of the few people who did get an actual decent share and not piddly RSUs, I believe more than half stayed on in very senior roles and still do some of the best work at the company today. it's always astonishing how proportionally little of an impact wealth redistribution would have on the ultra-wealthy, and how disproportionately large of an impact that would have on the quality of life for the rest of us

gjsman-1000

8 hours ago

Yes and no.

Consider if the US government liquidated every US billionaire at 100% of their stock market paper value (impossible, the liquidity influx would smash the stock price to the ground and ruin middle class retirements).

In this non-existent perfect world, it would raise about… $6-7 trillion. Enough to cover the US government deficit for under 3 years, or run the government for under one year. Then it’s gone.

Completely liquidating every billionaire would be satisfyingly cathartic, but still wouldn’t be enough to cause a real trajectory change. The idea is useful political fodder, to hide the fact even a hypothetically heavily taxed billionaire class can’t even cover today’s spending problem.

paimapi

8 hours ago

In your hypothetical, none of the money is re-invested which would be an utterly ludicrous thing to do. It also doesn't account for the GDP growth typically associated from people having lower healthcare\transportation costs and how quality of life increases translates to much higher productivity (see Brazil's experiment giving money to mothers in favelas, for eg, and the uplift of the entire economy). It's not a difficult extrapolation - if you're not bogged down with medical or student loans or rent or etc, you have disposable capital to purchase things and hire services

But the money in your hypothetical would literally just disappear into the void, never to touch the US economy again. It imagines a world where SNAP beneficiaries purchase nothing with their cards, the money simply vanishing, as if eaten by a deep god, not even existing as shit on the ground for two enterprising economists to consume and stimulate GDP growth with

This is a transparently bad thought experiment jury-rigged for failure

toomuchtodo

8 hours ago

Ahh, but they wouldn’t have undemocratic power from their wealth if it was liquidated. China does this right, the US could learn how to handle these people better.

gjsman-1000

8 hours ago

That's a slippery slope that never ends as long as there are distinctions on this earth.

A homeless person may very well say that someone with your salary and ability to donate $500 to a political cause is undemocratic.

user

7 hours ago

[deleted]

mring33621

9 hours ago

We need to figure this out. These people don't have "income", but do somehow have plenty of money to spend. So we should use their sources of spending money as a proxy for income, for taxation purposes.

Can we:

- create a progressive tax on dividends and capital gains, based on total wealth?

- create a tax on asset backed loans?

robocat

4 hours ago

How greedy you sound.

It is so easy to rationalise the idea of taking everything off someone who has more than oneself. We've got political phrases to justify it.

But beware because you are the wealthy: that person living on the street wants everything you have; and maybe 95% of the world deserves to take everything you own (that's only fair right?).

In New Zealand we have MMP voting, and minority parties want to bring in wealth taxes: taxes to take between 25% and 100% of retirement savings (assuming someone has managed to save enough to own a nice house). Double taxation since those savings were after already getting taxed at 30%+.

Incentives matter. Overtax the creators, and they either won't create new businesses or won't grow their businesses.

Consider moving to a poor country if you want things to be fairer.

People need to be incentivised to create wealth for their country. So that the country can afford to pay for nice things like healthcare and social services.

Balance is required to disincentivise the parasites (loan-sharks and many finance verticals seem parasitic to me)... We don't need scumbags that take wealth from everybody without creating any surpluses.

"Regressive taxation" is regressive for business building. It's a risky, shit job. Put the taxes too high and why would anyone do it? Haven't you noticed that little don't create businesses in lots of countries (because why the fuck would you!!). Go on: kill your golden geese in the USA (flatten the world market).

I've helped create a business that brings in important overseas income to NZ. I'm taxed so highly regressively that I lack the incentive to risk my precious hours to earn more money.

I hate the greedy fuckers that pontificate about taxing me. Armchair wankers can go create a business then gift their ill-gotten gains to their own governments. Just beware that the median return for a founder is approximately $0.

mindslight

9 hours ago

I really wish articles like this wouldn't anchor around this refrain of "... while their wealth increased by $XXX". It's a staple of tax law that you're only taxed when income is actually realized, and there are a few glaring loopholes that allow people to avoid realizing capital gains. At the very least, things should be changed such that taking a loan against an asset beyond its basis is considered a realization of income - similar to how if you take a loan against your IRA it is considered a distribution.

But we already knew all that! We don't need numbers calculating out infinitesimally small fictitious "tax rates" (for a tax regime that doesn't actually exist) to illustrate it. Unless someone is actively selling the stock they own, they are not paying any income tax on its value, period end of story.

And so rather it feels like a wasted analysis to keep focusing on the value of zero divided by $big_number, when there are going to be far more interesting things like exactly what income did they realize, and what type of expenses did they use to offset it, what amounts did they actually pay tax on, and so on. Because capital gains deferral is not the only way the tax code skews towards the rich by far, yet it's currently using up all the air in the room.

java-man

10 hours ago

   A few countries, including Switzerland and Spain, have wealth taxes on a small scale. Several, most recently France, have abandoned them as unworkable.

There exists a simple self-correcting protocol for establishing the value of property: the owner declares the value, and the state reserves the right to buy at that price. Or auction it off. If the owner declines to sell that auction price becomes the new value for computing the wealth tax.

The reason they say "it's unworkable" is because the rich don't want to pay taxes.

carefree-bob

4 hours ago

That works for real estate, and indeed property taxes are a long running staple of government taxes precisely because land is fixed. Economically, land value taxes are considered the most efficient form of taxation as they have no dead-weight losses, and were championed by Ricardo. But if I have a contract that assigns 10% of the earnings of some mutual fund to a holding company in the Bahamas, then it is not so easy to convince the government of the Bahamas to join you in seizing the asset. The money is overseas, and the wealthy only need to transfer to your jurisdiction whatever they need to spend, which is generally much, much less than what they earn in a given year.

So what happens when you try to tax unrealized capital instead of land is that the former is highly mobile and can arrange to be not subject to your jurisdiction if the rate of taxation is higher than whatever inconvenience is obtained by moving the claims around, so the net result is a loss of overall tax revenue. This is why France abandoned the ISF and replaced it with a tax on land, which is not mobile, and why most jurisdictions have low taxes on capital compared to less mobile things. It's not because it is "fair", but because there are limits to what you can collect that don't apply to things like land or labor.