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Utopia Talk / Politics / American tax scam
LazyCommunist
Member
Mon Oct 07 12:08:45
The Rich Really Do Pay Lower Taxes Than You
By David Leonhardt
OCT. 6, 2019

Almost a decade ago, Warren Buffett made a claim that would become famous. He said that he paid a lower tax rate than his secretary, thanks to the many loopholes and deductions that benefit the wealthy.

His claim sparked a debate about the fairness of the tax system. In the end, the expert consensus was that, whatever Buffett’s specific situation, most wealthy Americans did not actually pay a lower tax rate than the middle class. “Is it the norm?” the fact-checking outfit Politifact asked. “No.”

Time for an update: It’s the norm now.

For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data.


That’s a sharp change from the 1950s and 1960s, when the wealthy paid vastly higher tax rates than the middle class or poor.

Since then, taxes that hit the wealthiest the hardest — like the estate tax and corporate tax — have plummeted, while tax avoidance has become more common.

President Trump’s 2017 tax cut, which was largely a handout to the rich, plays a role, too. It helped push the tax rate on the 400 wealthiest households below the rates for almost everyone else.

The overall tax rate on the richest 400 households last year was only 23 percent, meaning that their combined tax payments equaled less than one quarter of their total income. This overall rate was 70 percent in 1950 and 47 percent in 1980.

For middle-class and poor families, the picture is different. Federal income taxes have also declined modestly for these families, but they haven’t benefited much if at all from the decline in the corporate tax or estate tax. And they now pay more in payroll taxes (which finance Medicare and Social Security) than in the past. Over all, their taxes have remained fairly flat.

The combined result is that over the last 75 years the United States tax system has become radically less progressive.



The data here come from the most important book on government policy that I’ve read in a long time — called “The Triumph of Injustice,” to be released next week. The authors are Emmanuel Saez and Gabriel Zucman, both professors at the University of California, Berkeley, who have done pathbreaking work on taxes. Saez has won the award that goes to the top academic economist under age 40, and Zucman was recently profiled on the cover of Bloomberg BusinessWeek magazine as “the wealth detective.”

They have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began. The story they tell is maddening — and yet ultimately energizing.

“Many people have the view that nothing can be done,” Zucman told me. “Our case is, ‘No, that’s wrong. Look at history.’” As they write in the book: “Societies can choose whatever level of tax progressivity they want.” When the United States has raised tax rates on the wealthy and made rigorous efforts to collect those taxes, it has succeeded in doing so.

And it can succeed again.

Saez and Zucman portray the history of American taxes as a struggle between people who want to tax the rich and those who want to protect the fortunes of the rich. The story starts in the 17th century, when Northern colonies created more progressive tax systems than Europe had. Massachusetts even enacted a wealth tax, which covered financial holdings, land, ships, jewelry, livestock and more.

The Southern colonies, by contrast, were hostile to taxation. Plantation owners worried that taxes could undermine slavery by eroding the wealth of shareholders, as the historian Robin Einhorn has explained, and made sure to keep tax rates low and tax collection ineffective. (The Confederacy’s hostility to taxes ultimately hampered its ability to raise money and fight the Civil War.)

By the middle of the 20th century, the high-tax advocates had prevailed. The United States had arguably the world’s most progressive tax code, with a top income-tax rate of 91 percent and a corporate tax rate above 50 percent.

But the second half of the 20th century was mostly a victory for the low-tax side. Companies found ways to take more deductions and dodge taxes. Politicians cut every tax that fell heavily on the wealthy: high-end income taxes, investment taxes, the estate tax and the corporate tax. The justification for doing so was usually that the economy as a whole would benefit.

The justification turned out to be wrong. The wealthy, and only the wealthy, have done fantastically well over the last several decades. G.D.P. growth has been disappointing, and middle-class income growth even worse.

The American economy just doesn’t function very well when tax rates on the rich are low and inequality is sky high. It was true in the lead-up to the Great Depression, and it’s been true recently. Which means that raising high-end taxes isn’t about punishing the rich (who, by the way, will still be rich). It’s about creating an economy that works better for the vast majority of Americans.

In their book, Saez and Zucman sketch out a modern progressive tax code. The overall tax rate on the richest 1 percent would roughly double, to about 60 percent. The tax increases would bring in about $750 billion a year, or 4 percent of G.D.P., enough to pay for universal pre-K, an infrastructure program, medical research, clean energy and more. Those are the kinds of policies that do lift economic growth.

One crucial part of the agenda is a minimum global corporate tax of at least 25 percent. A company would have to pay the tax on its profits in the United States even if it set up headquarters in Ireland or Bermuda. Saez and Zucman also favor a wealth tax; Elizabeth Warren’s version is based on their work. And they call for the creation of a Public Protection Bureau, to help the I.R.S. crack down on tax dodging.

I already know what some critics will say about these arguments — that the rich will always figure out a way to avoid taxes. That’s simply not the case. True, they will always manage to avoid some taxes. But history shows that serious attempts to collect more taxes usually succeed.

Ask yourself this: If efforts to tax the super-rich were really doomed to fail, why would so many of the super-rich be fighting so hard to defeat those efforts?
kargen
Member
Mon Oct 07 14:29:51
The answer is a two tier flat tax with no deductions.
CrownRoyal
Member
Mon Oct 07 14:52:55
The answer to what? The problem of the wealthy getting wealthier vs eveyone else?
kargen
Member
Mon Oct 07 15:07:39
No the problem with the way taxes are handled in the United States. I have no problem at all with wealthy people continuing to get wealthier. Don't even care about the wealth gap. We just need a fair tax system and a two tier flat tax would be fair. It would cost the wealthy more than they pay now and some accountants that specialize in taxes would have to change jobs but overall it would be better.
Crownroyal
Member
Mon Oct 07 15:19:56
"We just need a fair tax system... "

Why do you need it? Wealthy are getting bigger and bigger piece of the pie, but you said you are ok with that.
jergul
large member
Mon Oct 07 15:34:10
I too favour a two-tier flat transaction tax system on all movement of capital.

What could be more fair than a currency transaction tax?

hood
Member
Mon Oct 07 15:35:23
The answer is to open the top 0.1% of the wealthiest individuals to a year-long purge rules; anyone who kills someone in the top 1/1000 is not subject to any legal penalty.

Maybe even .01%, a cool ~40k targets (rounded). Don't want to be a target? Get poorer.
jergul
large member
Mon Oct 07 15:37:31
Hood
That is often how redistribution takes place if wealth accumulation becomes too absurd.
hood
Member
Mon Oct 07 15:45:46
It's kinda like I was making a commentary on society. :)
kargen
Member
Mon Oct 07 16:02:54
I am okay with the wealthy getting wealthier. I am also okay with people eating cheeseburgers. The thing is it isn't an either/or option. The wealthy can keep right on getting wealthy and we can have a simple and fair tax system. We can also continue to eat cheeseburgers.
CrownRoyal
Member
Mon Oct 07 16:26:24
“I am okay with the wealthy getting wealthier.”

I know, you already said it. You identified “the problem” of some kind, with current US taxation, and indicated a desire for taxation to be “fair”. Why do you feel current system needs to be changed?
kargen
Member
Mon Oct 07 17:49:10
Because people are taxed at different rates. The tax plan is too complicated. The tax system is easily abused and manipulated. Fair share shouldn't mean larger percentage.
CrownRoyal
Member
Mon Oct 07 17:52:51
How do you know that tax system is abused and manipulated? What outcomes make you state this?
jergul
large member
Tue Oct 08 04:10:30
Kargen
Would a tithe system line up as your ideal way of tax collection?

kargen
Member
Tue Oct 08 11:41:07
Yeah kind of a tithe but only on recognized income. One difference is I think it should be two tiered. People living below the poverty line would have a lower percentage than those above for instance. Tithe as it was originally used could take 10% of a farmers crop. That isn't what I am talking about. Until that farmer sells the crops there would be no recognized income. This would be a fixed tax on income only. By income I mean actual recognized income. Ya know, you made money. As example the guy that caught the home run ball that set the record for most home runs. The government assigned a worth to that ball and applied a tax. That shouldn't be. Once he sells the ball he would be taxed on the amount he made from the sell not on some arbitrary number invented by the government.
This income tax would not replace property taxes and I wouldn't object to there also being a federal sales tax. If a federal sales tax were used I would expect a lower federal income tax.
CrownRoyal
Member
Tue Oct 08 12:02:01
" As example the guy that caught the home run ball that set the record for most home runs. The government assigned a worth to that ball and applied a tax. That shouldn't be."

applied a tax on what? The guy who caught McGuire's baseball was taxed without selling it?
kargen
Member
Tue Oct 08 15:27:41
wrong ball. Turned out all right though because he wanted to sell the ball anyway. Had he wanted to keep it he would have been screwed though.

Same thing with paintings. You get a desirable painting and the government wants to assign a worth to it and tax you for that worth before you realize that worth (besides obvious aesthetic worth.)

The point being the current tax system has obvious problems that a flat tax would fix.

CrownRoyal
Member
Tue Oct 08 16:09:42
“wrong ball. Turned out all right though because he wanted to sell the ball anyway. Had he wanted to keep it he would have been screwed though. ”


Yep. Setting aside the idiocy of basing your tax policy on the example of someone catching a baseball, because you know how many people are affected by that, you basically invented a story of someone being taxed.

“Same thing with paintings. You get a desirable painting and the government wants to assign a worth to it and tax you for that worth before you realize that worth (besides obvious aesthetic worth.) ”

Specifics? Or is this another invented trash?
hood
Member
Tue Oct 08 17:15:57
The painting one doesn't even make sense. If you "get" a desirable painting, you're likely purchasing it. So, yeah, you'd have to pay tax.
CrownRoyal
Member
Tue Oct 08 18:14:18
Leave to kargen’s special brand of idiocy to identify problems with US taxation and “the answer” to these problems, all based on the large segment of taxpayers who catch record setting home fun baseballs and purchase paintings. And, he had to invent shit about it, to top it off.
Rugian
Member
Tue Oct 08 18:21:23
Some people in this thread, naming no names, are being intentionally obtuse here.

kargen is clearly talking about realized vs. unrealized gains. Let's all acknowledge it and advance the debate accordingly.
kargen
Member
Tue Oct 08 18:21:24
way to hone in on one small point that presented as just one example.

Did you not read the opening post?

"The painting one doesn't even make sense. If you "get" a desirable painting, you're likely purchasing it. So, yeah, you'd have to pay tax."

In that example you might pay sales tax. Paying income tax on it even with the fucked up system we have now would be real stupid. Nah sometimes people inherit art and sometimes they find previously lost examples of great art. Again just an example.
hood
Member
Tue Oct 08 18:27:19
"Nah sometimes people inherit art"

If you're inheriting expensive art, you're inheriting the ability to pay for said expensive art.
CrownRoyal
Member
Tue Oct 08 18:38:02
“way to hone in on one small point that presented as just one example. “

You realize that it was you who brought up the baseballs and painting?
CrownRoyal
Member
Tue Oct 08 18:41:07
“kargen is clearly talking about realized vs. unrealized gains. Let's all acknowledge it and advance the debate accordingly.”

How about you help kargen? Who is paying taxes for the unrealized gains?
CrownRoyal
Member
Tue Oct 08 18:47:09
“For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data. ”


Dolt - “I know the answer! Capital gains are taxed too much!”
kargen
Member
Wed Oct 09 16:00:20
"If you're inheriting expensive art, you're inheriting the ability to pay for said expensive art."
Not always.

CrownRoyal I am done with you. You have either enjoyed so many adult beverages that you lack the synapses to make a coherent thought or you are trolling. My bet is the synapse thing.
hood
Member
Wed Oct 09 16:25:48
Anecdotes are bad policy. Attempting to derive policy to fit the fringe anecdotes is pure stupidity.
kargen
Member
Wed Oct 09 16:51:18
And I'm not calling for policy to change based on anecdotes. I provided an example so people would have a better idea what I was saying.

The tax code needs changed because it is broken.
hood
Member
Wed Oct 09 17:06:03
You most certainly are, considering your proposed change doesn't fix what is broken.
Rugian
Member
Wed Oct 09 17:13:24
Hood,

Tax complexity is actually a common complaint.
hood
Member
Wed Oct 09 17:15:10
Rugian,

Might you point out where I argued otherwise?
Crownroyal
Member
Wed Oct 09 18:48:53
"CrownRoyal I am done with you. "

Good. Next time be done with me before you invent bulshit home run ball story, dumbass. Save me some time.
kargen
Member
Wed Oct 09 23:36:05
You don't think a simplified tax code would fix any problems? And what is not fair about a flat tax?
CrownRoyal
Member
Thu Oct 10 00:30:31
specifics, dumbass. I won’t waste my time arguing what constitutes fair or simplified in kargen’s mind. But at least tell me again a folksy anecdote about a regular everyday folk who do regular things like catch record baseballs or buy paintings. And then let’s base any future tax system on the need of these regular folks. Or give me your ideas on how you’d fix the problem stated in OP. If you consider it to be a problem at all. If not, then just keep on telling your stupid invented tales.

“For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data. ”
kargen
Member
Thu Oct 10 14:27:26
I was responding to hood. You are no longer a part of this conversation Crown.
CrownRoyal
Member
Thu Oct 10 14:34:18
" You are no longer a part of this conversation Crown."


You are currently addressing me, idiot. And, as I reply, this is called conversing, we are having conversation. This is similar to the ancdotes you tell here, that you prefer to call 'examples' instead.
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