The Super Rich and Taxes

[Taxman59]

It isn't all that complicated. I should pay less in taxes. Everyone else should pay more.

 

[Car-Guy]

I'd like to see income taxes eliminated, and a new tax system put in place based on consumption. Probably would trim the IRS by 80%.

Isn't sales tax a consumption based tax? The more you buy/use, the more you pay...

I think a consumption based tax along with a flat income tax "sounds" like it could be a bit more fair, but I haven't thought through all the details/ramifications. That too should eliminate most of the IRS and a lot of the tax gaming. As well as tax lawyers, Turbo Tax, tax courts, H&R Block, etc, etc.

 

[Ronstar]

Isn't sales tax a consumption based tax? The more you buy/use, the more you pay...

I think a consumption based tax along with a flat income tax "sounds" like it could be a bit more fair, but I haven't thought through all the details/ramifications. That too should eliminate most of the IRS and a lot of the tax gaming. As well as tax lawyers, Turbo Tax, tax courts, H&R Block, etc, etc.

Yes sales tax is a consumption tax. I was proposing more sales tax, no income tax.

I like the flat tax option also. Anything to simplify and cut bureaucracy.

 

[Dash man]

IMHO, the problem isn't in-life wealth creation, its inter-generational wealth transfers.

Jeff Bezos went from packing books in his apartment to having enough money to look and act like a James Bond villian. Along the way, he changed the world and had the courage to not sell all his shares when it was "only" worth $2B.

Bill Gates started comfortably wealthy and then changed the planet. Along the way he didn't sell off all of his shares. He's now trying to cure disease in Africa.

Elon Musk...you get the idea.

Amen to them.

But that's not to say all is right in the world:

The relative treatment of earned vs. non-earned income is not right and things like stepped-up cost basis at death are downright silly for the super-wealthy and the rest of us alike.

The problem I would personally address is dynastic, multi-generational wealth.

A modest proposal:
Tax the concentration of inheritance received rather than the size of the estate.

For example, we could decide that any inheritance (all sources) to an individual in excess of $5m would be taxed at 99%. Below $5m is 0%.

If Jeff Bezos decided at his death to distribute his $200B by giving 2m families each $100k...zero taxes. Best lottery every. A lifetime of wealth goes back into society. And Bezos can decide how its distributed. Knock yourself out.

If he decides to give it to his one kid? We will take about $199B of that, thank you for playing. His kid will have scrape by on $1B.

I think this single change would do much to disrupt the creation of a new aristocracy, which is as the root and long term risk of these challenges. (Of course, we can now all argue about wether the cut-off is $1m, $5m, $10m...)

My $0.02.

It’s not that easy. That $200B isn’t all cash, or even mostly cash. It is tied up in businesses, stock, bonds, real estate and such. Imagine if all of Jeff Bezos’ shares of Amazon had to be sold off at once to pay a tax bill. Share prices might plummet affecting most 401k, IRA, pension, mutual fund and ETF accounts.

 

[Midpack]

Isn't sales tax a consumption based tax? The more you buy/use, the more you pay...

I think a consumption based tax along with a flat income tax "sounds" like it could be a bit more fair, but I haven't thought through all the details/ramifications. That too should eliminate most of the IRS and a lot of the tax gaming. As well as tax lawyers, Turbo Tax, tax courts, H&R Block, etc, etc.

+1. Agreed. Too bad none of the primary stakeholders have any reason to change - just like campaign finance, the root of the issue along with many others. And the complexity of the current IRS code is outrageous, and unnecessary for fairness.

 

[marko]

IMO, the super rich have waaay too many options to nail them down. It all sounds good for a politician to say "we're gonna getcha" but in reality, even if laws were passed, they'd find a way around it. This is just one of those things that you just can't waste your time on.

Remember the old "yacht tax"? All it did was put blue collar boat builders out of work while the jobs went to other countries.

 

[pb4uski]

Certainly not super-rich, but a couple unusually high income US citizens that pay a lot in income taxes:

Kamala Harris and her husband earned more than twice as much as Joe Biden and his wife did last year, according to copies of their income tax returns released on Friday.

Harris and the so-called second gentleman, Doug Emhoff, reported a federal adjusted gross income of about $1.7m in 2021, which was about the same they claimed to have earned the prior year.

Joe Biden and the first lady, Jill Biden, cited an income of nearly $611,000, about $4,000 more than they made in 2020, said their tax documents, which were released by the White House.

The vice-president and her husband also reported paying $523,371 in taxes on their income, a rate of 31.6%. For their part, the Bidens reported being taxed $150,439 on their income, meaning the president’s family’s tax rate was 24.6%. ...

 

[Closet_Gamer]

It’s not that easy. That $200B isn’t all cash, or even mostly cash. It is tied up in businesses, stock, bonds, real estate and such. Imagine if all of Jeff Bezos’ shares of Amazon had to be sold off at once to pay a tax bill. Share prices might plummet affecting most 401k, IRA, pension, mutual fund and ETF accounts.

Of course its not that easy...I didn't think I solved in 10 lines of an ER post.

I'm not really envisioning Bezos attorney logging into Schwab and typing in "AMZN, Sell 55.5M shares @ Market" clicking enter and then doing 2M cash transfers.

But with a few more lines -- it might even take several whole pages to rewrite the US estate tax code -- I suspect we could address those issues.

And if, by chance, Bezos attorney does enter a giant market sell order?

Great day to buy some AMZN.

 

[ERD50]

Oooops,I didn't refresh this page, and cross posted with others...Oh well....


my bold:

.... If Jeff Bezos decided at his death to distribute his $200B by giving 2m families each $100k...zero taxes. Best lottery every. A lifetime of wealth goes back into society. And Bezos can decide how its distributed. Knock yourself out. ...

My $0.02.

Interesting idea (I haven't thought through all the ramifications, but interesting). But I wonder about the bolded part.

Bezos has his money invested. Isn't that wealth "in society"? If he sold it all, those investments would all drop by some amount, and millions of people's 401K's/IRA etc would drop by some amount.

Putting into people of lower income would spur spending, but maybe that's just a trad-off? I really don't know how it compares, but it's not like Bezos has the money buried in his back yard(s).

-ERD50

 

[Music Lover]

I think the issue is not how much the rich folks pay, but do they use their money and influence to tilt the playing field in their favor. They can do things that the rest of us can't, like buy their own election. Let me give you a clear example of that:



https://www.wired.com/1997/06/paul-allen-ventures-into-seattle-election/

In effect, he bought his own election, and the timetable for the election. IIRC, the opposition had a bit over a month to raise money and make their case.

Was this fair? You can judge for yourself. But, I think it's the cunning use of money, much of which goes goes on under the radar, that is what concerns people.

Small potatoes. Just think what you can do if you own a major media company that millions of people read every day. Suddenly you have the ability to make or break any politician, not just the one in your back yard.

 

[OldShooter]

IMHO, the problem isn't in-life wealth creation, its inter-generational wealth transfers. ...

And this a problem why? Because it makes you jealous ?

 

[Music Lover]

IMHO, the problem isn't in-life wealth creation, its inter-generational wealth transfers.

It's always easier to spend someone else's money. If I work hard and make a lot of money then I get to decide how it is spent.

If you don't like that idea, create your own wealth and give it away.

 

[razztazz]

Yes sales tax is a consumption tax. I was proposing more sales tax, no income tax.

I like the flat tax option also. Anything to simplify and cut bureaucracy.

If by "flat tax" your talking about the single rate 20 or 25% the Dick Armey's and Steve Forbes' have floated over the years that's not why the tax cods are complicated. You can have 50 different highly progressive tax brackets and still have a very simple tax code. What make the tax codes so complicated is the definition of income and deciding what is taxable vs non-taxable vs taxable but at favorable rates etc etc etc.

Steve Forbes used to use the statement "ya make it... ya pay it." Meaning whatever money you made no matter the sources, that was all on the table as taxable (I believe after a single deduction for all that he called "generous" but I believe was only $17,500 for a single and probably double for filing jointly etc)

Now that would simplify the tax codes! But it was immediately revealed to be oppressive for at least 50% of the non-already-in-poverty demographic and, at least on paper, a runaway for the super rich by those "mathing out" his proposal at the time. But we all know they aren't giving up preferred treatment on their un-earned income anyway.


Now, if it were all on the table, no cap gains, no inheritances, no special kinds of income or carve outs, deductions, or the hundreds of other things that complicate the tax codes and then progressive tax brackets, that might fly. Would still require tweaking though, I'm sure.

 

[Closet_Gamer]

And this a problem why? Because it makes you jealous ?

I'm not in the least bit jealous.

I think it is a problem for the same reason Versailles was a problem.

I will leave it there.

 

[Closet_Gamer]

If you don't like that idea, create your own wealth and give it away.

I do and have.

But as a society we establish rules. Those rules includes how we finance society and gaurd rails we put around any number of social issues. Lots of people, myself included, are concerned that royalty levels of wealth concentration are a significant ill in society.

I will let it go here.

 

[VanWinkle]

I know a lot of lower income people who don’t pay taxes either. Just because you use the tax laws to your advantage when you have money, is that any different than using the laws to your advantage when you have little …or can control your income. Subsidies anyone?

The way subsidies are calculated is a joke, but it is the tax law per the Supreme Court. I took advantage of the law, the same way the ultra rich take advantage of the tax laws. I agree that everyone should have skin in the game, but just don't ask how much skin or the consternation never ends.......

VW

 

[scrabbler1]

If by "flat tax" your talking about the single rate 20 or 25% the Dick Armey's and Steve Forbes' have floated over the years that's not why the tax cods are complicated. You can have 50 different highly progressive tax brackets and still have a very simple tax code. What make the tax codes so complicated is the definition of income and deciding what is taxable vs non-taxable vs taxable but at favorable rates etc etc etc.

Steve Forbes used to use the statement "ya make it... ya pay it." Meaning whatever money you made no matter the sources, that was all on the table as taxable (I believe after a single deduction for all that he called "generous" but I believe was only $17,500 for a single and probably double for filing jointly etc)

Now that would simplify the tax codes! But it was immediately revealed to be oppressive for at least 50% of the non-already-in-poverty demographic and, at least on paper, a runaway for the super rich by those "mathing out" his proposal at the time. But we all know they aren't giving up preferred treatment on their un-earned income anyway.


Now, if it were all on the table, no cap gains, no inheritances, no special kinds of income or carve outs, deductions, or the hundreds of other things that complicate the tax codes and then progressive tax brackets, that might fly. Would still require tweaking though, I'm sure.

The part I bolded reminds me of something I saw in a late 1995 episode of "Firing Line" where Buckley and his panelists discussed the Flat Tax, an issue raised in the GOP primaries leading up to the 1996 presidential election. Steve Forbes was in those primaries, while Armey's proposal was still a top news item.

https://www.nytimes.com/1995/12/21/...-of-the-flat-tax-excluding-the-equations.html

I recall Lester Thurow (an economics professor at MIT), another panelist on that show, made the point you made - the complication in the tax code is not with the rates but with the definition and determination of income.

 

[OldShooter]

... royalty levels of wealth concentration are a significant ill in society. ...

Not sure what "royalty levels" means but I view this idea as speculation rather than a proven fact.

And, even if a fact, does that justify taxing income before death and then confiscating that already-taxed income after death? HL Mencken told us: "“For every complex problem, there is a solution that is simple, neat and wrong.”

 

[Rianne]

50% of my property taxes go to schools. Beautiful new and remodeled schools. Helps my property value but I have no children. Our roads have huge potholes and the city continues to fill them with some fast-patch stinky tar. And the potholes are back next year.

Taxes, I want transparent, detailed, and specific accounting of where my taxes go and why. I'll pay them, whatever rules or laws they come up with, OK. But I want to know how, where, and when they use my money and why. Someone tell me why that is so hard. We have to explain and document to the IRS our income, and how we spend (to a degree) because our tax bill depends on it. If we donate, send kids to college, remodel our homes, affects our taxes. The report would be mind-boggling, but I want to make the city, state and fed give me an accounting rather than me having to give them an accounting every single year.

How about that?

 

[jldavid47]

We paid no federal income tax last year and will pay no federal income tax this year by taking advantage of the "loophole" in how Social Security income is taxed. We can withdraw or convert up to $19K or so in IRA assets and still pay no FIT. Because of that we can more than live on our Social Security income alone and use what income we get from our taxable assets for extras if we want. We actually have more disposable income now than when my wife was working.


Should we be paying some tax? Probably, but we are allowed by law to plan our financial affairs so that we don't. Tax avoidance (what we do) is legal. Tax evasion is not. The super rich hire accountants and lawyers to avoid taxes. If society doesn't like that, change the tax laws. Otherwise quit whining. (not aimed at anyone in particular)

 

[youbet]

50% of my property taxes go to schools. Beautiful new and remodeled schools. Helps my property value but I have no children.

But even folks free from the responsibility of supporting and raising kids of their own benefit from other people's kids whenever they go to the doc, hire a lawyer, go to a restaurant, have a house built, enjoy the security provided by a standing army, etc., etc. OPK's are pretty important to everyone, whether you have some of your own or not.

Taxes, I want transparent, detailed, and specific accounting of where my taxes go and why. I'll pay them, whatever rules or laws they come up with, OK. But I want to know how, where, and when they use my money and why. Someone tell me why that is so hard. We have to explain and document to the IRS our income, and how we spend (to a degree) because our tax bill depends on it. If we donate, send kids to college, remodel our homes, affects our taxes. The report would be mind-boggling, but I want to make the city, state and fed give me an accounting rather than me having to give them an accounting every single year.

How about that?

There is probably more spending data out there than you think. For example, your school board passes a detailed budget and reports on expenditures vs. that budget in detail. Have you asked to roll up your sleeves, dig in and analyze it? Ditto at all levels: fed, state, local. It's analyzing the data and then reaching consensus on what were "good" expenditures and what were not that is the tough part.

I think our governments' spending is pretty transparent and the data is available for the bulk of it, even here in Illinois with its unsavory reputation for corrupt, "smokey back room" politics. It's deciding what most needs fixing, how to fix it and getting it fixed that seems to be the problem.

 

[Rianne]

But even folks with no kids to raise and support benefit from other people's kids whenever they go to the doc, hire a lawyer, go to a restaurant, have a house built, enjoy security provided by a standing army, etc., etc. OPK's are pretty important to everyone, whether you have some of your own or not.

There is probably more spending data out there than you think. For example, your school board passes a detailed budget and reports on expenditures vs. that budget in detail. Have you asked to roll up your sleeves, dig in and analyze it? Ditto at all levels: fed, state, local. It's analyzing the data and then reaching consensus on what were "good" expenditures and what were not that is the tough part.

I don't suppose it's as easy as a google search? You're right, rather than complain, I need to research and find this data. Chicago should be an interesting read.

 

[Mulligan]

As you're working on this, please try to avoid painful, unintended consequences.

Ha.. Im like pacergal. The more I think about it the less I know…. Im sure the fact that labor is taxed more than capital irks harding working 100k workers who havent attainted any capital yet. Inherited wealth paying considerable less in taxes on that same 100k earned passively in divis doing nothing may irk the worker.
But in general it takes capital to supply those 100k jobs or whatever to begin with. So the answer is not within my grasp.

 

[Sunset]

If we magically changed the tax laws to strip away generational wealth, then all the other countries in the world would become more attractive to all the "rich" folks.
After they leave, it will just be the poor left fighting over crumbs.

It might even kill productivity and motivation to work harder. Already tax brackets kill motivation to work overtime. Plenty of time I heard people tell me they weren't going to do overtime as they'll just pay more in taxes

Everyone knows the more you earn, the more you pay in taxes

 

[Music Lover]

50% of my property taxes go to schools. Beautiful new and remodeled schools. Helps my property value but I have no children.

It benefits everyone to have an educated population, whether or not they have kids.

The allocation of education funding is an entirely different matter.