> And naturally, this needs to be funded by taxes on the very wealthy.
This is the part where the math never works out.
If you look at the richest people, they have something like tens to low hundreds of billions of dollars. Which is less than the amount of money the federal government already spends every week. If you taxed the top 100 billionaires at a rate of 100%, it would fund the existing federal government (and no new programs) for about a year, and then there would be nothing left for next year.
The funding for programs like that never comes from the "very wealthy" because there just aren't enough of them for that. It comes from the upper-middle class. Which is fine, but let's not delude ourselves that we can get there by only taxing Bill Gates and not your local cardiologist.
Except that they already pay kind of high taxes. These are the people who make six figures but don't have a personal full-time tax accountant to engage in international tax avoidance shenanigans. They're how the state and federal governments in the US together spend around 50% of US GDP.
So the problem isn't that we don't have enough tax revenue -- holy crap does the government have a large budget -- the problem is what we're spending it on. We should be spending less on the military and means-tested assistance programs and instead use the money for a UBI.
> This is the part where the math never works out.
I think this is a bit naive because you're considering money to be fixed and treating the system as a zero sum game. In terms of revenue, the US government gets ~55% from individual income tax and 12% from corporate, with a total revenue of 403B/yr. But also turning the "dial" on tax doesn't only affect the revenue. Every "dial" turn turns other "dials" but this doesn't result in a constant value across the system, even in a fixed instance of time. There are dial configurations which dominate other dial configurations but the system is insanely coupled. Neither this argument nor the "just increase taxes" argument is great because they do not capture the nuance necessary for an effective strategy. What that is? I'm not an economist, but I can tell you the system is rather complex and there's good reason we're all talking past one another and that's because we're solving different optimization problems and even when we recognize that we generally don't recognize that we're not agreeing on coefficients of terms nor what variables are at play. I think we need to first recognize the complexity of these issues and most of he time should kinda just shut up unless we're being clear that we're discussing to learn rather than teach.
Of the criticisms to Piketty, not having done the math isn't really one of them.
I don't have Capital and Ideology close at hand, so I can't check how he worked it out, but consulting some other sources:
- the top 1% in the US apparently have around $45.7T in wealth [1]
- there are around 22M people in the 20-24 age bracket and 23 in the 25-29 age bracket [2]
So suppose there are 5.5M people turning 21 every year. Giving them each $100k (yes, less than the Piketty proposal for the EU, but in the ballpark, and gives us round numbers) would cost $550B/yr at present. If this were funded as a flat wealth tax only on the top 1%, it would amount to around a 1.2% wealth tax, not accounting for evasion etc. So literally, 99% of the population could pay more in taxes, the 1% would be taking a hit, but honestly so long as long-term average returns are more than 1.2% above inflation, you could still have inter-generational wealth that gets bigger over time.
Of course, many would naturally prefer for a wealth tax to be progressive; the ultra-rich should pay a larger share than the pretty-rich. This would have the impact of shrinking long term dynastic piles of wealth, but not fully eliminating them, and reducing the impact on people at the low end of the 1%.
The top 1% of households in the US starts around $10M. That sounds like a lot, but consider it includes retirement accounts, value of a home etc.
For a couple in that bracket at about retirement age (and who might own their home and be expecting to retire on their savings), those people might be looking at a household income of $300-400K per year.
I don't know, but it seems pretty unreasonable to start hitting them with an extra $120K tax bill annually.
This is again the basic point that the other poster was making.
It's so much that if you make the median US income, you have to make it for ~300 years -tax free- to save up $10M.
It's 50 years, tax free, on a good developer salary.
It's so much that with 5% interest rate you can pay those $120k in tax and still get $380k a year, placing you among the top 5% wage earners in the US, while doing nothing more than own.
Is so much, that when I dream about becoming independently wealthy, the amount I dream of is half of it.
For people in retirement age it's even more obvious that it's a lof of money. Like, how do you even spend that much money before you die?
As you probably understand by now, I definitely don't think it's unreasonable to hit them with an extra $120K bill a year, because $10M is a lot of money for any individual, or couple, to own.
I mean, sure if you completely ignore investment returns; otherwise your numbers are bogus.
The “safe” rate of retirement drawdown is generally accepted as 4% because inflation, bad years in the markets etc.
In case it isn’t obvious, taxing wealth is basically taxing the older people in society, because they had more of a chance to accumulate wealth.
Hitting people at retirement with a 25% marginal tax increase is just wrong and an unworkable policy proposal.
Piketty’s proposal may work in countries with functional pension schemes, but not in the U.S. where personal wealth accumulation is necessary to extent a solid middle class lifestyle into retirement.
Use 4% then. You're left with 280k (400-120) a year. That's 9 times the median US income, and very close to being in the top 5% income. Not to mention that capital tax is usually lower than income tax.
Even ignoring investment returns completely, $10M is enough for anyone to live extremely comfortable the rest of their life, just using this money!
Taxing the very rich (as the top 1% is) is reasonable, also when they are retired.
You speak as if the money itself can't be used, only the returns. As if it's somehow 'not a lot of money' if it's not possible to live indefinitely on the capital gains alone.
But I agree that it's unworkable, but only because this is a powerfull group (wealth is power after all). I think it's completely unrealistic for that reason alone. But it's a good idea, and $10M is a lot of money.
Would the crudest flat rate scheme be unappealing to people just above the threshold to which it applies? Sure. I don't think anyone's seriously advocating for Bezos and the successful small business owner to be paying the same rate.
AnthonyMouse created a strawman to fight; getting from "very wealthy" to "only the top 100 billionaires" is kinda crazy. To use that to assert that the math just doesn't work on using a wealth tax to fund universal inheritance is kinda untenable.
I think "wealthier than 99% of people in a rich country" is fair to call "very wealthy" but I can see how others would differ. I also hope you can see how the person with >10M in net worth would not be happy to pay 1.2% but can likely swing it (and under this crude hypothetical, stops paying it if they fall to merely being richer than 98.9% of their peers), but that the 100k would be life-changing and transformative for young people.
Piketty's proposals for a wealth tax have varied over the years, but have at points in the past included 1% above 1M euros, 2% above 5M euros, 5-10% above 1B euros. He's trying to re-imagine a more equal society; the redistribution can't be small.
> the top 1% in the US apparently have around $45.7T in wealth
"The top 1%" mostly isn't billionaires, it's cardiologists and lawyers and programmers. It's people who labor for money, not people who inherited it. Most of that wealth is their homes and retirement accounts.
This is the problem I have with these proposals: They get sold as applying to dynastic wealth but in actual fact end up applying to many people who sacrificed years of their lives to go to school or start a business.
> So literally, 99% of the population could pay more in taxes, the 1% would be taking a hit, but honestly so long as long-term average returns are more than 1.2% above inflation, you could still have inter-generational wealth that gets bigger over time.
That's the point. There is no reason to use a wealth tax instead of the existing taxes that we already have unless you're going to use a confiscatory rate.
Existing taxes could -- and already do -- generate enough revenue to fund that kind of program, if we would stop wasting the money on less efficient existing expenditures.
But a confiscatory wealth tax would be self-defeating. It would generate less money, because it would give the wealthy a perverse incentive to spend rather than invest, depriving the government of all the future tax revenue on their investment activity -- which long-term exceeds the amount of the principal.
You have to get at the problem from the other end. What you want isn't to make it harder for wealthy people to make money, it's to make it easier for ordinary people to make money. Reduce barriers to entry so anyone can start a business -- and that business can compete with dynastic incumbents, and dethrone them. Increase competitiveness of markets so capital gets lower margins and more of the surplus goes to customers and workers.
Just taking the money doesn't fix it. You have to address the structural economic conditions that led to that result to begin with.
Taxing the very wealthy heavily isn’t intended to fund the state. That argument is a red herring. It should be done to reduce the concentration of power that comes with dynastic wealth, which corrupts society. Arguments to maintain our status quo are typically ideological.
Note also that Bill Gates is giving away a vast majority of his wealth for philanthropic purposes. So if you tax Bill Gates, it turns out you're actually taking mostly every cent of that money from starving kids in Africa and elsewhere. That's something to think about for sure.
The math doesn't work out by design due to favorably shaped policies. A sizable amount of wealth is hidden away extra-jurisdictionally or consists of intentionally undervalued assets or isn't captured in statistics.
Lots of very wealthy people keep wealth in tax shelters, but that reduces their tax burden, not their net worth. Bill Gates doesn't secretly have a trillion dollars.
> If you taxed the top 100 billionaires at a rate of 100%, it would fund the existing federal government (and no new programs) for about a year, and then there would be nothing left for next year.
The point to taxing billionaires is not that "the government needs their money to spend". The government will spend the money anyway regardless of whether it has it. The point to taxing billionaires is to even things out and nudge society to be more equal counter to market forces continuously concentrating wealth. I'd fully support a tax on billionaires where the money just gets burned in a furnace.
> The point to taxing billionaires is to even things out and nudge society to be more equal counter to market forces continuously concentrating wealth. I'd fully support a tax on billionaires where the money just gets burned in a furnace.
Then you're going about it the wrong way.
The main thing having billions of dollars gets you is the ability to choose who runs a large corporation. If you take away the money but not the corporation, all you're doing is transferring the power to run that corporation to some Wall St assholes instead of the founders. The corporation is still just as big and whoever is put in charge of it still has just as much power.
The thing that actually concentrates wealth is large corporations. The solution, then, isn't taxes, it's antitrust and fighting against regulatory capture. It's to make corporations smaller and more numerous, so they each have less power.
Which would not only solve the actual problem, it would also solve the nominal problem of billionaires having too much money, because the way you get billionaires is by having corporations that are too big. It causes the people who got in when they were small to have "too much money". Don't let them get that big and that doesn't happen anymore.
This is the part where the math never works out.
If you look at the richest people, they have something like tens to low hundreds of billions of dollars. Which is less than the amount of money the federal government already spends every week. If you taxed the top 100 billionaires at a rate of 100%, it would fund the existing federal government (and no new programs) for about a year, and then there would be nothing left for next year.
The funding for programs like that never comes from the "very wealthy" because there just aren't enough of them for that. It comes from the upper-middle class. Which is fine, but let's not delude ourselves that we can get there by only taxing Bill Gates and not your local cardiologist.
Except that they already pay kind of high taxes. These are the people who make six figures but don't have a personal full-time tax accountant to engage in international tax avoidance shenanigans. They're how the state and federal governments in the US together spend around 50% of US GDP.
So the problem isn't that we don't have enough tax revenue -- holy crap does the government have a large budget -- the problem is what we're spending it on. We should be spending less on the military and means-tested assistance programs and instead use the money for a UBI.