My understanding of the proposal is that households worth more than $100 million would pay an annual minimum tax worth 25% of their combined income and unrealized capital gains. This doesn’t seem insane? In particular, that’s a hell of a residential property
My city passed a "mansion tax" for people who own multimillion dollar homes. However the threshold for where the extra tax kicks in isn't adjusted for inflation or the top X percentile of most expensive homes. So we're on track for the average single family homeowner to be paying the "mansion tax" in another decade or so. It's already hitting some multifamily buildings.
Also reminds me of AMT. When it was originally created, one of the selling points was that it would only impact 155 wealthy families, households who made the then-insane income of over $200k but paid very little in income taxes. By 2017, over 5 million households were paying AMT, particularly those in states with high SALT taxes where $200k/year doesn't afford as lavish of a lifestyle as it used to.
Fully agree. Every piece of legislation that mentions a dollar amount should be adjusted for inflation. That should be true for income thresholds all the way down to parking tickets.
With all these sorts of things where they promise it'll only affect subset X of people, and then in the future once its been passed it's then changed/extended to affect subset Y in addition, I wish someone would suggest some way to just add a clause in, something like "This law is only to target X subset and if anyone tries to change it to affect a different subset of people, or pass a new law that extends its scope to a different subset, all such laws are instantly made invalid and dropped from the books". Or something along those lines.
If they promise it'll only ever affect the "super rich", then encode that in the law and ensure us, by law, that's what it'll be. If they truly don't want to expand its scope further, then have a mechanism that enforces that.
(Of course, this is a separate issue from whether it's even moral to target subset X in the first place, which I won't get into).
Yes here's the actual proposal. I'm sure it's not coincidence that it's left out of the Forbes article
> The proposal would impose a minimum tax of 25 percent on total income, generally inclusive of
unrealized capital gains, for all taxpayers with wealth (that is, the difference obtained by
subtracting liabilities from assets) greater than $100 million.
> Minimum tax liability would be reduced to the extent that the sum of minimum tax liability and
uncredited prepayments exceeds two times the minimum tax rate times the amount by which the
taxpayer’s wealth exceeds $100 million. As a result, the minimum tax would be fully phased in
for all taxpayers with wealth greater than $200 million.
Imagine step 2 to realize the insanity. That household likely doesn't have disposable income that is greater than 25% of their unrealized cap gains, so what do they do?
1. Hope they can get a low interest loan to pay their taxes?
Or
2. Sell some assets. Think about what will happen to your 401k balance as wealthy people all over the US are forced to sell stocks. It will not be pretty.
I'm not talking about the economy failing. I'm talking prices. What do you think happens to asset prices when there are only sellers (everyone with wealth has to sell). You think poor people will have enough cash to keep prices up?
When Elon sold in his latest Tesla round the stock tanked 30% over a couple months. Repeat for Bezos, Gates, etc.
If there are only sellers and no buyers the market collapses entirely. Luckily though people buy and sell stock all the time and even if the entire OMB estimated revenue from the tax (about $500b) was funded by selling stocks, that would represent less than 1% of total market volume.
Also, a household worth $100M is not going to suddenly be starving come tax time. And, they'll know in advance how much they need to pay because they have a CPA or a private wealth manager at the bank who can just tell them and set aside the money for April.
Hahaha. You think the people in that arena don't re-invest every possible dollar for more growth as soon as it hits their pockets? Cash flow is king to be able to pay for continuing leverage.
A sudden tax bill and the end of acquiring new debt are when massive wealth unravels.
I think AMZN and TSLA dropping 10% or whatever because Bezos and Elon have to sell more shares could be feelsbadman but it is not very close to the end of the free market economy.
“In 1894, Democrats in Congress passed the Wilson-Gorman tariff, which imposed the first peacetime income tax. The rate was 2% on income over $4,000, which meant fewer than 10% of households would pay any. ($4,000 was 19.3 times the 1894 nominal GDP per capita of $207.23; the corresponding income in 2021 is $1.3M.)“
How else are you going to find evidence of a slow-moving phenomenon? Besides, has human nature changed in the last 150 years?
If the assertion is (for example) "taxation on the rich tends to end up including middle-class and maybe lower", why would an example from Rome or medieval Europe not be applicable?
Weirdly enough I actually had to write a college paper on the tax policy of the late Byzantine Empire. During the tenth and eleventh centuries, Roman land became increasingly consolidated under a few influential families, who used their influence to pay less taxes. This weakened the state and left it vulnerable to the fourth crusade and eventually the fall to the Turks.
Back to here, I don't think tax policy from the 1800s is especially relevant because the United States has gone through extensive reform with respect to monetary and economic policy since that time. The fed didn't exist and we were still on the gold standard. It's weird to use an obscure law nobody has every heard of to argue against taxing a class of wealthy Americans that are paying historically low tax rates.
This thread is about how taxes with small rates applied only to the rich have a historically documented tendency to grow in scope and rate, and that therefore it is legitimate for all potential taxpayers to worry about a new kind of tax, no matter how tightly scoped and low in rate in initial proposals
Because it is one of the key examples of how taxes trickle down.
Also, do you see those old tax rates? People love to make comparisons about how housing was affordable half a century ago, then check out the tax rates, that’s partly why.
We are at absurd tax rates and all because the government doesn’t make any effort to control their spending.
Rich individuals who are born into money will always find ways to escape these taxes, but your average person who built their wealth will not and in a decade when they hit the middle class, they will just contribute to extending the wealth gap.
Call me crazy but I don't exactly have a ton of sympathy for temporarily embarrassed millionaires. The statement that we somehow have absurd tax rates now is completely inconsistent with the reality that taxes have been trending down for decades, punctuated by tax cuts that were made in the last decade. If you're worried about government spending and government debt, and you probably should take a macroeconomics class and realize you shouldn't be, then you ought to be in favor of reforming our codes to ensure the rich are paying a fair rate given that they benefit hugely from being in a country with developed infrastructure, a highly educated workforce, and a military that ensures global stability and unmolested shipping.
Bringing up tax codes from before 1900 is just an absurd way to start a discussion about this because we've had over a century of development in monetary policy and taxation since then.
So it took 130 years to go from 10% to 70% - given this is starting around .1% we will have like 400 years before it is ubiquitous? I am willing to take that risk.
If you could rate policies by how good they are, you'd could get a couple categories: clearly bad policies, these don't get implemented. clearly good policies, these get implemented broadly. things in the middle, these get debated a lot and some get implemented in very limited scope and then we learn if they should be expanded or not. The ones that do get expanded are going to have a lot more visibility and presence in the general consciousness than those that don't. There's also a lot of factors that tend to discourage implementation and it's very common that the perceived value of policies increases significantly after they've been adopted.
There's basically just a lot of things going on such that the natural result is that the scope of policies increases over time. And that's a good thing.
Sure, it's possible the law will be written in such a short-sighted way that it won't take inflation into account in any way.
It's also possible that in the future, another law will be passed that expands this law to affect people who could not reasonably be considered "very wealthy".
But if the former happens, that's fixable, and also unlikely to affect ordinary people due to simple inflation for a good long time, so there's plenty of opportunity to fix it. And if the latter happens, that's when you need to fight it.
There is a very real, very serious problem with income and wealth inequality in this country. Study after study shows that the inequality is real, and that it is causing a raft of issues, from psychological to economic to political. It's really hard, at this point, to take seriously anyone who says we shouldn't try to fix that by reducing the inequality, especially if their only argument is, "Watch out! If the government comes for their billions, soon they'll come for your billions! Er, I mean millions! Er, I mean thousands!"
> Sure, it's possible the law will be written in such a short-sighted way that it won't take inflation into account in any way.
And when it's you that's likely affected where such short-sightedness to happen, and when there are multiple examples of such short-sightedness just in these comments already, I think that is a worry. Also, since the party proposing the law tends to have socialist and postmodern-Marxist leanings, there's even a potential motive for some less honest short-sightedness. Because, after all, inequality is a serious issue.
It's a story. But it is also an empirical question many people will be able to answer for themselves from abundant historical evidence no? Maybe people don't care about the data if they've never had difficulty paying their tax bill. I'm in the other camp, as are many working class people.
Sorry, could you restate your claim? It seemed as though you claimed that "many working people" have historically been taxed on their unrealized capital gains. After I fell off my stool laughing I wasn't sure you meant it.
My claim is that it's an empirical question whether tax policy drifts over time in such a way that more people pay more. Seems foolosh to argue over what can be easily quantified.
In terms of my statement about many working people having trouble paying taxes, that too is quantifiable. As someone with many working poor friends I could offer anecdotes where people have to sell a car or do something drastic to pay their tax bill. The reason is that many working poor don't have normal middle class jobs where a portion of their salary is set aside for taxes. Everyone should pay taxes, even poor folks who don't have bank accounts or steady employment. My point is that these people hate taxes as much, likely more, than jeff bezos does. The people who seem to like taxes and tax increases (you may be one), tend to be upper middle class professionals who have never had to scramble to pay them for fear of prison or wage garnishment.
https://fred.stlouisfed.org/series/FYFRGDA188S - it seems like taxes don’t really “drift” so much as find an equilibrium and stay roughly there. I think the burden is on you to explain how this law would break us out of the current ~17% status quo.
From the article: "A tax on unrealized gains will need to be carefully calibrated and accounted for, targeted first towards high net worth individuals and liquid assets"
What does the word "first" in that sentence imply?
