Isn’t there a perception issue with how “rich” is defined? Middle to high income citizens pay the most taxes, but the ultra rich have very little in terms of income, they are enormously rich in assets and the dividends that come from them.
A recent Rob Henderson tweet that might help define the classes nowadays:
'Something the rich and poor have in common that the middle class does not: Having more than 1 job.
Usually, the middle class works a 9-to-5. If you have 3 or 4 jobs, you're either working low-wage gigs to make ends meet, or you're an entrepreneur/businessman/mogul/celebrity.'
So I understand where you're going and it's a nicely reasoned argument, but you talk about how we shouldn't let emotion drive us, and you are, in a way. And this is coming from a liberal perspective. I don't like the income inequality in this country, but the reason you're not going to get some people to sign on is that we understand where we live.
So let's start with some numbers. If you took the entire combined wealth of every billionaire this country has (which you state above is $7 trillion) you could run the entire country for precisely one year (maybe a few months into the next). The budget for the US government for fiscal year 2024 was $6.2 trillion (and a good chunk of that is interest on the US debt). Once you see that, you start to understand where the problem is. It's not with taxing people. It's with the spending. If all you're going to do is tax the "ultra-wealthy" without getting a handle on spending, even a liberal knows you're not fixing anything. You're just pouring more money in a black hole.
But then comes the second problem. We've already demonstrated this is not going to help in any meaningful way because the spending is out of control, but both sides see this "extra money" and they go crazy: tax cuts for corporations, "forgiving" student loans, building up the military (there has to be a war somewhere we can send weapons to at taxpayer expense). And so now you have to start looking lower on the food chain for taxes, so tax the ultra-rich becomes tax the rich becomes tax the middle class becomes tax everybody.
But more often than not, the things that are sold as "taxing the rich" are taxing everybody. I'll give you two good examples. The first one I saw in Biden's first tax plan when he said he wasn't going to tax anyone making more than $400,000, and then I saw that he'd included a tax on "stock trades." Everyone with any kind of investments would pay for a tax on stock trades, outright in their investment accounts or as part of their 401Ks or IRAs. Even pensions would get hit as pensions are basically just large, "communally owned" investment accounts. Suddenly even someone working at the local fast food chain with a 401K became "rich." The second example was the wild idea to apply capital gains rates to inheritances. So I pass away and my niece inherits my house. The suggestion was that she would pay capital gains rates (in the form of inheritance taxes) on the difference between what I bought my home for and the value at my time of death. For most people, their homes are their only real assets in this world. Right now, when someone dies, the inheritors of their estate (however large or small) get a step up in basis, which means if they inherit the house and decide to live there, they pay nothing (unless their estates go over something like $5.5 million). If they sell it in a few years, they only pay capital gains on the difference between the sale price and the value at the time of death. But they wanted to change that. I ask you, how many people could afford to pay capital gains taxes on a house (or a businesses, a farm, anything) on what they *inherited*? It would be a tax on *everyone* again, and most people would have to sell the home or business.
And that is why, even as a liberal, you're not going to sell me on taxing the "ultra-rich." You can show me all the pics you like of Bill Gates's homes. I hate the fact that we have such income inequality. And, yes, men like Bill Gates are getting far more out of the system than they're putting in. But to let the government tax Bill Gates, I have to believe they will stop with Bill Gates. And they won't. I have seen absolutely nothing to suggest they would, and much to suggest they wouldn't.
Are we confusing income and wealth? Income is taxed, wealth isn't. How do you value wealth? Imagine the bureaucracy necessary to calculate a price for private property for which there is no available market price. Who values the Gates Estate? How can a price be established? Or the house down the street? Or the value of your stamp collection or small business?
It would also be helpful to let working class people know precisely how they would benefit from increasing taxes on billionaires. Instead, what many working class people see are billionaires opening businesses in their communities and providing jobs.
Working class people need to have this question answered: Where, specifically, will that tax money go? To benefits that most working class people would prefer not to qualify for?
If progressives truly want to help the working class, they could fight for a change in zoning laws for housing, but most progressives are members of the professional class and don't want to take a hit to their property values. Tying local minimum wage laws to local housing costs would be great, too, but it would raise the cost of lattes and paleo lunches in gentrified neighborhoods. We can't have that.
Scrapping the cap on social security tax would protect the solvency of social security, but that would also impact the professional class, who would be most likely to see their SS taxes raised.
The working class aren't stupid.
They know which class of people are actually holding them down.
These progressives are the people who had fits when the SALT deduction was capped. If they believe in taxing those who have more, then they need to be willing to pay more as well. Here in NY state, they made a specific loophole for those of us who own businesses to avoid the cap. This is an essentially single party, progressive state and they passed a specific loophole designed to benefit wealthy business owners. If they want to convince people that their policies are going to benefit anyone other than the wealthiest among us, then they need to stop being hypocrites.
I think your imputed tax rate is misleading since it conflates unrealized capital gains--assets that have appreciated in value but have not been sold. I would be cautious about imposing "cures" that may cause more problems than the current level of income inequality.
Isn’t there a perception issue with how “rich” is defined? Middle to high income citizens pay the most taxes, but the ultra rich have very little in terms of income, they are enormously rich in assets and the dividends that come from them.
A recent Rob Henderson tweet that might help define the classes nowadays:
'Something the rich and poor have in common that the middle class does not: Having more than 1 job.
Usually, the middle class works a 9-to-5. If you have 3 or 4 jobs, you're either working low-wage gigs to make ends meet, or you're an entrepreneur/businessman/mogul/celebrity.'
So I understand where you're going and it's a nicely reasoned argument, but you talk about how we shouldn't let emotion drive us, and you are, in a way. And this is coming from a liberal perspective. I don't like the income inequality in this country, but the reason you're not going to get some people to sign on is that we understand where we live.
So let's start with some numbers. If you took the entire combined wealth of every billionaire this country has (which you state above is $7 trillion) you could run the entire country for precisely one year (maybe a few months into the next). The budget for the US government for fiscal year 2024 was $6.2 trillion (and a good chunk of that is interest on the US debt). Once you see that, you start to understand where the problem is. It's not with taxing people. It's with the spending. If all you're going to do is tax the "ultra-wealthy" without getting a handle on spending, even a liberal knows you're not fixing anything. You're just pouring more money in a black hole.
But then comes the second problem. We've already demonstrated this is not going to help in any meaningful way because the spending is out of control, but both sides see this "extra money" and they go crazy: tax cuts for corporations, "forgiving" student loans, building up the military (there has to be a war somewhere we can send weapons to at taxpayer expense). And so now you have to start looking lower on the food chain for taxes, so tax the ultra-rich becomes tax the rich becomes tax the middle class becomes tax everybody.
But more often than not, the things that are sold as "taxing the rich" are taxing everybody. I'll give you two good examples. The first one I saw in Biden's first tax plan when he said he wasn't going to tax anyone making more than $400,000, and then I saw that he'd included a tax on "stock trades." Everyone with any kind of investments would pay for a tax on stock trades, outright in their investment accounts or as part of their 401Ks or IRAs. Even pensions would get hit as pensions are basically just large, "communally owned" investment accounts. Suddenly even someone working at the local fast food chain with a 401K became "rich." The second example was the wild idea to apply capital gains rates to inheritances. So I pass away and my niece inherits my house. The suggestion was that she would pay capital gains rates (in the form of inheritance taxes) on the difference between what I bought my home for and the value at my time of death. For most people, their homes are their only real assets in this world. Right now, when someone dies, the inheritors of their estate (however large or small) get a step up in basis, which means if they inherit the house and decide to live there, they pay nothing (unless their estates go over something like $5.5 million). If they sell it in a few years, they only pay capital gains on the difference between the sale price and the value at the time of death. But they wanted to change that. I ask you, how many people could afford to pay capital gains taxes on a house (or a businesses, a farm, anything) on what they *inherited*? It would be a tax on *everyone* again, and most people would have to sell the home or business.
And that is why, even as a liberal, you're not going to sell me on taxing the "ultra-rich." You can show me all the pics you like of Bill Gates's homes. I hate the fact that we have such income inequality. And, yes, men like Bill Gates are getting far more out of the system than they're putting in. But to let the government tax Bill Gates, I have to believe they will stop with Bill Gates. And they won't. I have seen absolutely nothing to suggest they would, and much to suggest they wouldn't.
How on earth are people able to stay calm when shown images of gross inequality? (asking for a friend)
Are we confusing income and wealth? Income is taxed, wealth isn't. How do you value wealth? Imagine the bureaucracy necessary to calculate a price for private property for which there is no available market price. Who values the Gates Estate? How can a price be established? Or the house down the street? Or the value of your stamp collection or small business?
It would also be helpful to let working class people know precisely how they would benefit from increasing taxes on billionaires. Instead, what many working class people see are billionaires opening businesses in their communities and providing jobs.
Working class people need to have this question answered: Where, specifically, will that tax money go? To benefits that most working class people would prefer not to qualify for?
If progressives truly want to help the working class, they could fight for a change in zoning laws for housing, but most progressives are members of the professional class and don't want to take a hit to their property values. Tying local minimum wage laws to local housing costs would be great, too, but it would raise the cost of lattes and paleo lunches in gentrified neighborhoods. We can't have that.
Scrapping the cap on social security tax would protect the solvency of social security, but that would also impact the professional class, who would be most likely to see their SS taxes raised.
The working class aren't stupid.
They know which class of people are actually holding them down.
These progressives are the people who had fits when the SALT deduction was capped. If they believe in taxing those who have more, then they need to be willing to pay more as well. Here in NY state, they made a specific loophole for those of us who own businesses to avoid the cap. This is an essentially single party, progressive state and they passed a specific loophole designed to benefit wealthy business owners. If they want to convince people that their policies are going to benefit anyone other than the wealthiest among us, then they need to stop being hypocrites.
I think your imputed tax rate is misleading since it conflates unrealized capital gains--assets that have appreciated in value but have not been sold. I would be cautious about imposing "cures" that may cause more problems than the current level of income inequality.