Tax the Billionaires

One challenge to making a minimum tax work is ensuring broad participation. In the multinational minimum tax agreement, participating countries are allowed to overtax companies from nations that haven’t signed on. This incentivizes every country to join the agreement. The same mechanism should be used for billionaires. For example, if Switzerland refuses to tax the superrich who live there, other countries could tax them on its behalf.

We are already seeing some movement on the issue. Countries such as Brazil, which is chairing the Group of 20 summit this year and has shown extraordinary leadership on the issue, and France, Germany, South Africa and Spain have recently expressed support for a minimum tax on billionaires. In the United States, President Biden has proposed a billionaire tax that shares the same objectives.

To be clear, this proposal wouldn’t increase taxes for doctors, lawyers, small-business owners or the rest of the world’s upper middle class. I’m talking about asking a very small number of stratospherically wealthy individuals — about 3,000 people — to give a relatively tiny bit of their profits back to the governments that fund their employees’ educations and health care and allow their businesses to operate and thrive.

The idea that billionaires should pay a minimum amount of income tax is not a radical idea. What is radical is continuing to allow the wealthiest people in the world to pay a smaller percentage in income tax than nearly everybody else. In liberal democracies, a wave of political sentiment is building, focused on rooting out the inequality that corrodes societies. A coordinated minimum tax on the superrich will not fix capitalism. But it is a necessary first step.

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Fifty years ago we had Alternative Minimum Tax. It was not adjusted for inflation and gradually hit middle class tax payers. We don’t hear much about it any more. Could be revised and updated.

Estate tax is another opportunity. We hear some candidates may eliminate it if elected. Others want to increase its bite. Ah politics!! Will we ever decide what we want?

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Everyone knows what is wanted: Someone else to pay ALL the taxes !!

Billionaires pay less tax than the average citizen.

In the 1960s, the 400 richest Americans paid more than half of their income in taxes.Higher tax rates for the wealthy kept inequality in check and helped fund the creation of social safety nets like Medicare, Medicaid and food stamps.

Today, the superrich control a greater share of America’s wealth than during the Gilded Age of Carnegies and Rockefellers.That’s partly because taxes on the wealthy have cratered. In 2018, America’s top billionaires paid just 23 percent of their income in taxes.

This is a big problem that many countries of the world are trying to correct as explained in the following reference:

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Everyone knows the clever way to do things if you live off of investments is pay taxes only on what you spend. No tax due on paper profits (unless we do wealth tax). Best deal is let heirs inherit your investment assets at stepped up basis. They pay no taxes on your gain.

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Please repost my original post. There is nothing in my post that is insulting or hateful. It is only about economics.

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I thought this article was interesting on this subject.

Problems with wealth tax:

  • Finding the wealth.
  • Proving that someone owns it
  • Agreeing the value of that wealth: what are private companies, works of art, racehorses, esoteric properties and exceptionally rare wines, and so much more, really worth?
  • Collecting the money before the billionaire has disappeared to a place that refuses to cooperate with this tax
  • Repeating the process, year in and year out.

Any tax authority that tries to undertake this exercise will need access to vast numbers of valuation experts, an armoury of lawyers, and a bottomless pit of funds to take on the legal disputes with the billionaires who they’re trying to tax .

Alternatively, countries could have:

  • Seriously progressive income tax rates
  • Capital gains tax rates in line with income tax rates
  • Progressive inheritance taxes with strictly capped reliefs for business property that only require assetvaluations once in a lifetime
  • Progressive corporation tax rates, particularly for private companies
  • Close company and trust rules that attribute the income of private companies and trusts to beneficiaries annually so that the personal tax rates owing on these sums is not avoided by hiding them in legal entities.

My solution is not perfect. However, it has a lot more chance of success than the 2% wealth tax, and will probably raise considerably more money at a lower cost. If that is the real goal, rather than political posturing being the aim, then pragmatism is to be preferred.

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Of course we do all of this with property tax everywhere in the US. Property records indicating owner are maintained by most counties. Value is contested in reassessments frequently. We know how to do that. Adapting a federal collection system should not be difficult.

Other assets such as minerals in the ground or businesses are more complex but methods are routinely used by accountants and probably tax collectors.

For business the value of physical assets is probably easiest. Value of a business is whatever someone is willing to pay for it. When a publicly traded stock company value should be clear. Private companies are more difficult but accountants do have their methods.

Hidden assets are the problem. Gold bars or cash in a safety deposit box. Valuable art or antiques etc are more difficult. Not so obvious until sold.

You will if TCJA is allowed to expire at the end of 2025 with no other changes.

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Get rid of corporations as taxable entities. Income is “passed through” to the shareholders every year and is taxable as personal income. This means the elimination of all corporate tax rules and regulations because they have no income. It is all on the shareholders. Tax accts and attys will have to find real jobs…

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I’ve long argued for essentially this as well (not as pass through but elimination of the corp tax and offset it with higher income taxes). Getting rid of the corporate tax would have a lot various benefits.

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‘Don’t tax you, don’t tax me. Tax that man behind the tree.’

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Why tax billionaires?

“Because that’s where the money is.”
Willie Sutton

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I have advocated the same thing. Who pays the corporation’s taxes? The customers. Why? Management demands a target ROI. Taxes bite into profits, so revenue needs to be higher, so that after tax revenue meets the target ROI. Then there are the second order effects due to miss-allocation of capital, to game the tax system.

We could go back to the old system, require earnings to be reinvested in the company (the “job creator” thing), or paid out to shareholders. None of this stock manipulation via buybacks. I heard the pump seal company I worked for was in the IRS’ crosshairs several times for “excess retention of capital”, 40 odd years ago.

Steve

I pay a wealth tax on the value of my home every year. When I was in Dallas that would include my car, too. Seems we have no problems with wealth taxes that hit most of the middle class. We just have problems with wealth taxes that hit the truly wealthy.

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Why do the world’s most fortunate people pay among the least in taxes, relative to the amount of money they make?

The simple answer is that while most of us live off our salaries, tycoons like Jeff Bezos live off their wealth. In 2019, when Mr. Bezos was still Amazon’s chief executive, he took home an annual salary of just $81,840. But he owns roughly 10 percent of the company, which made a profit of $30 billion in 2023.

If Amazon gave its profits back to shareholders as dividends, which are subject to income tax, Mr. Bezos would face a hefty tax bill. But Amazon does not pay dividends to its shareholders. Neither does Berkshire Hathaway or Tesla. Instead, the companies keep their profits and reinvest them, making their shareholders even wealthier.

Unless Mr. Bezos, Warren Buffett or Elon Musk sell their stock, their taxable income is relatively minuscule. But they can still make eye-popping purchases by borrowing against their assets. Mr. Musk, for example, used his shares in Tesla as collateral to rustle up around $13 billion in tax-free loans to put toward his acquisition of Twitter.

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Well sort of, but not really. It’s facile to trace it to customers, since the money starts with them. But some customers pay no corporate tax at all. Some pay most or all of it.

As CEO of Goofyhoofy’s Finer Screen Door Manufacturing and Breakfast Oatmeal Conglomerate LLC, last year the company made no profits. Clearly then those customers who patronized my corporation paid no corporate tax. This year, thanks to multiple tornadoes and an article praising the health effects of oatmeal, we sold out of both and made $1,000,000 profit. So “customers” apparently paid the corporate tax, even though we hadn’t changed our prices at all.

Maybe it’s “shareholders” who paid the tax, since in the first case the value of their shares was untouched, but in the second it was reduced by owner’s equity to the extent of the taxation. The company didn’t really wind up with an extra $million, the value to shareholders was $1M - whatever the tax rate was.

It’s irrelevant what the “target” is. The only thing that matters is what the “actual” is.

Stock buybacks are done with after-tax profits. I believe there are still excess retention rules, although they don’t seem to be very well enforced. But this thread is mostly about individuals who have accumulated vast wealth due to ownership of companies, and that is a different thing.

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Explain that to several participants in the auto industry. They are systematically cutting their lower priced models, and moving their brands “up-market”, because management is pushing for a higher GP. I suspect Tesla’s outsized GP was a large part of other automaker’s embrace of EVs, to boost their GP. Now that Tesla is cutting prices, and accepting a lower GP, the other automakers are less enthusiastic about EVs.

Has it occurred to anyone that Tesla’s price cuts are a strategy to preempt other automakers entering the EV market in a big way, by taking away the attraction of a fat GP?

So far, the result of VW’s push for margin expansion has been soaring prices, and falling product quality and reliability.

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Assets like real estate and even toys like airplanes, yachts, and cars are easy to value. Its the business assets that are more difficult. Antiques. Art. Who knows what it is worth this year?

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