>Currently, the richest 1% hold about 38% of all privately held wealth in the United States. while the bottom 90% held 73% of all debt. According to The New York Times, the "richest 1 percent in the United States now own more wealth than the bottom 90 percent".

Your stats don't sound so crazy when you put it in context.

Please feel free to peruse the economic history of states where the rich eventually dodged taxes and left the crushing burden to the middle and poor: ancient Rome, modern Greece, etc.

This is from https://www.bloomberg.com/view/articles/2016-10-06/the-rich-..., based on this study: https://www.psychologytoday.com/sites/default/files/WaiLinco...

However, this is all moot, because taxation is based on income, not wealth. The only way the US government taxes wealth in and of itself is the estate tax, which affects a pretty small percentage of estates.

It would be more relevant to focus on income inequality, but even then, that's missing my point. It's true that wealth and income are very unequal in the US, but it's also true that the people who benefit from that inequality pay more than half of the taxes, and many people pay none at all. How much more should the rich pay before they reach their "fair share?"

The fight isn't happening at the rich's doorsteps, it's happening at the doorsteps of the middle and poor, pushed there by the rich.

Say I have $10m I want to invest in an international company. If I do it in the most obvious way, by capitalising an entity, I might get a 30% return on my money after 3 years after paying all taxes. Alternatively, I can structure it in a different way, and make 50% in 3 years, because I end up paying less tax. The difference is an extra $2m on $10m. If the amount to set up a structure/attorney fees/possibly litigation fees < "normal" tax to pay -> avoid.

The only real solution is to lower rates across the board by getting rid of most deductions. If you remove the incentive to avoid, it'll be less worthwhile to avoid, and most people will stop doing it. How much people would put in an effort to avoid taxes, if the actual tax rate was, say 10%?

You're right. It's way different to charge 40% on $50k, because the person making 50k probably can't make ends meet if you charge them 40% tax. The person making $10MM has no such trouble.

Evasion has always been illegal, avoidance is structuring a transaction in a way so that it ends up being taxed at a lower rate, but in a legal way. Ruthless enforcement is already happening today in most western european countries.

Oh please. It took 6 years for the EU to penalize Ireland for the double irish/dutch sandwich avoidance mechanism.

https://en.wikipedia.org/wiki/Double_Irish_arrangement

https://www.bloomberg.com/news/articles/2016-08-30/apple-ire...

Countries are starving for tax income and have very clear conflicts of interests: they want to 1) tax their normal residents as much as possible, but at the same time 2) hand out low tax “freebies” to non residents (or HNWIs) so they will book some of their taxable profits in their jurisdictions. This needs to stop (globally) before you can effectively combat avoidance. But I doubt it’s ever going to happen.

That's because it's not a clear-cut legal issue. It's pretty much the EU versus everyone else on this one. Even the US government is unhappy about the EU ruling, even though the US government has gone after Apple for its tax practices fairly recently.

If you're making 30k/year, you are just barely making enough to support a family on your income. Yes it's possible to be wealthy and low income, but it's uncommon and generally indicative of retirement or something similar.

Maybe, but not necessarily. What if I spent twenty years putting myself in the position to make $10m in one year?

>If you're making 30k/year, you are just barely making enough to support a family on your income. Yes it's possible to be wealthy and low income, but it's uncommon and generally indicative of retirement or something similar.

Well, yeah, but so what? My point was you're making a lot of assumptions based on income alone.

I don't understand what your point is with this whole argument. Yes, there are always exceptions. They aren't very interesting but the very nature of being exceptions, especially since tax laws are written for the general case.

The number of multi millionaires in your exceptional case is also much smaller than you probably think. It's vanishingly difficult to earn no money when you have millions in assets.

I don't see how you could make a statement like that. It costs money to live, and it costs money to keep a business venture going. After 20 years you may own $20m. It doesn't necessarily mean you're incompetent. It may just mean things didn't go the way you planned.

>I don't understand what your point is with this whole argument. Yes, there are always exceptions. They aren't very interesting but the very nature of being exceptions, especially since tax laws are written for the general case.

My point is you don't know enough about someone's situation to make a blanket "they can afford it" or "they can't afford it" statement, and that statement underpins the entire argument for forcing people with higher incomes to pay more taxes.

>The number of multi millionaires in your exceptional case is also much smaller than you probably think.

Or it's much larger than you probably think. Nobody knows. Why are you assuming you know?

> It's vanishingly difficult to earn no money when you have millions in assets.

Actually, with current interest rates it's pretty easy. I know people with millions in assets who put their money in safe investments, because there's no reason to take risks when you have millions and you're in your 70s. Right now the interest on safe investments is a rounding error.

If you have $10 million in income and cannot make ends meet, something is wrong with you. I understand that you could also have debt. That doesn't mean you aren't "making ends meet". I have more debt than income. I'm making ends meet just fine.

> My point is you don't know enough about someone's situation to make a blanket "they can afford it" or "they can't afford it" statement, and that statement underpins the entire argument for forcing people with higher incomes to pay more taxes.

Income is extremely correlated with how much of anything one can afford, including taxes.

What is your alternative anyway? We'll just stop taxing people entirely because we can't really know what they can afford? Or are you just being pointlessly argumentative?

> Or it's much larger than you probably think. Nobody knows. Why are you assuming you know?

Because I did the math, as could you.

> Actually, with current interest rates it's pretty easy. I know people with millions in assets who put their money in safe investments, because there's no reason to take risks when you have millions and you're in your 70s. Right now the interest on safe investments is a rounding error.

Drop your millions into T Bills for 5 years and you'll earn 1.3% on the safest investment you'll get. 1.3 is a rounding error? Ok. On a million dollars it's also 13k. So if you park 5 million in this absurdly low interest investment you'll still make 65k/year.

So no, it's not easy to make no money if you have millions in assets. A few million in safe investments yields more income yearly than the average American family makes.

Again, it all depends on the details. Could you make ends meet with $10m when your $20m debt comes due in the same year?

>What is your alternative anyway? We'll just stop taxing people entirely because we can't really know what they can afford?

The alternative is, one, we keep the top rate reasonable. Nobody should have to pay 70% or 90% or whatever on his income, no matter how large. And everybody should pay income taxes, even if it's just a token amount.

And two, we should get more of the national income from consumption taxes. If you can run out and buy a bunch of stuff you can then I know you can afford it. I'd have a national system like California's, where things like food and clothing are exempt.

>Or are you just being pointlessly argumentative?

Don't be an ass. Seriously.

>Because I did the math, as could you.

When I "no money" I don't actually mean zero money, though I'm sure there are people who keep large amounts of money in their checking accounts. I mean no money compared to assets. What is a few tens of thousands for someone who has millions in the bank?

>Drop your millions into T Bills for 5 years and you'll earn 1.3% on the safest investment you'll get. 1.3 is a rounding error? Ok. On a million dollars it's also 13k. So if you park 5 million in this absurdly low interest investment you'll still make 65k/year.

You realize for someone who has five million dollars in the bank, particularly someone who's only going to be using it for a handful of years, $65k is a rounding error? And that the average tax rate for someone in that bracket is around 13%, so that guy with five million in the bank is going to pay somewhere in the neighborhood of $8500 in taxes.

Can you describe a realistic situation in which you receive a personal loan for $20 million that comes due at once that you cannot pay for by liquidating other assets? This isn't a real scenario. No one will give you this kind of personal loan without collateral or proof of significant unencumbered assets. And at minimum, you'd be doing this through a corporation, or again, you are incompetent.

> The alternative is, one, we keep the top rate reasonable. Nobody should have to pay 70% or 90% or whatever on his income, no matter how large. And everybody should pay income taxes, even if it's just a token amount.

No one in this comment thread said anything about raising taxes to 70 or 90 percent for anyone. You're taking against a nonexistent point.

Nor is this "alternative" an alternative. In no way does this address the fact that a specific income does not guarantee an ability to pay a specific tax rate.

> And two, we should get more of the national income from consumption taxes. If you can run out and buy a bunch of stuff you can then I know you can afford it. I'd have a national system like California's, where things like food and clothing are exempt.

Consumption taxes are effectively regressive. Exempting clothing and food is a decent idea but it's still regressive and I'm not sure foie gras and mink coats should be tax free.

> Don't be an ass. Seriously.

You're arguing against points I never made and you never even stated. You're making appeals to consider imaginary millionaires who can't pay basic taxes. It honestly feels like you're being intentionally argumentative.

> When I "no money" I don't actually mean zero money, though I'm sure there are people who keep large amounts of money in their checking accounts. I mean no money compared to assets. What is a few tens of thousands for someone who has millions in the bank?

The money you have in the bank isn't relevant to your taxes except to the extent that it produces income for you. If you are insanely wealthy and have almost no income, you'll have no trouble paying your taxes.

Are you imagining that I at some point proposed a tax on wealth?

The most obvious situation is probably where you've invested a certain amount of money in a highly illiquid asset, that can someday (i.e. 10-20 years from now) be liquidated for a significant capital gain. This could, for example, be a business or a plot of valuable land.

I can't deny that it's technically possible. I just think it's extremely far-fetched.

For example, let’s say I buy a Monet painting for X million and a bank is willing to give me a collateralised loan of up to 75% of the asset value. If a bank decides to sell that asset tomorrow (i.e. at a suboptimal time) they might not even get 75% of the value back.

Debt is a lever in business and some people make it big by leveraging big.

It's doubly far-fetched to talk about loans to individuals for $20MM. If you're applying for a $20MM loan, you should have an accountant and your accountant should have told you to put this kind of thing in a corporation. You'll still lose a lot but it shouldn't bankrupt you personally.

But yes, obviously not that common. Random Joe won't be getting these. Random Joe doesn't have $20m in assets either, though.

I never use a single 'M' by itself when talking about money because it's ambiguous. Mega or mille? If you see MM, it's not ambiguous.

Taxes are needed to pay for hospitals, teachers, firefighters... what happens if the amount that the 1% think is fine doesn't cover for that expenses? They have so much money that they can afford private version of that services. But what is in that model for the rest of citizens?

This is a problem between short term benefit for a few against long term losses for everyone. It is not possible to have a modern society with low rates of death by sickness and low levels of violence and crime if we can't afford to have in place none less improve all the current safeguards.

Wealthy people can move relatively easily if they want to. If someone is worth $50m, he's really getting very little value from the system. Heavy shoulders should bear a heavier burden, I agree, but how far should that go? Maybe the maximum amount of tax should somehow be capped. Past a certain point, some people just get fed up with paying insane amounts of taxes. Proportionally (income wise) middle and lower income people are paying more in taxes then, but they are also getting more back in comparison to the guy who is worth $25-50m.

The truth is more likely that their wealth has made them selfish and insensitive. As Leona Helmsley famously said "Only the little people pay taxes".

It might be interesting to know what percentage of thier offspring the wealthy are sending to fight and die in wars compared to everyone else.

The only way to create wealth is to give most of it (>50%, at least) away. You have to provide more value than the price of what you're providing.

It is a very good thing, for society, for you and me, that that wealth is created. If the rich ever "stop accruing an insane amount of wealth", that would be very bad. We don't want that. We want that wealth to be created.

And then there's the obvious fix: just have the government do it all. The problem with that is that it takes away the wealth creation motive and replaces it with raw power. The point of business, at that point, becomes advancing it's management position in the government, not to serve anyone. I very much prefer a lot of highly capable people working to provide more goods for me cheaper & better to a lot of highly capable people working to provide a tighter and more controlling government. So should you.

He's getting everything from the system. Law, the courts, the ability to live in relative freedom without walled compounds and guards, etc.

When revolution comes, those $20-50M guys will be the ones on the wall.

Basic services like fire protection are membership based, folks who live in unincorporated territory have to BYO water, sewer, security, and poor folk are really poor.

That's not true at all.[1]

For those making $50K-$100K, 87% have less than a 15% effective tax rate. For those making $200K or more, Only 14% pay less than a 15% tax rate with 84% paying more than 15%.

Here is another set of data.[2] Effective tax rates are strongly associated with higher incomes.

[1]http://www.taxpolicycenter.org/statistics/effective-tax-rate...

[2]http://taxfoundation.org/blog/chart-day-effective-tax-rates-...

[1] http://www.pgpf.org/chart-archive/0008_tax-system

I never said they were being bled dry. I said they already pay most of the taxes, and it seems unjustifiable to ask them for even more, while at the same time demonizing them for not paying their "fair share" -- as if paying more than half of the taxes isn't already a major contribution. Their ability to pay is not relevant to my argument.

Most of the wealth == most of the taxes. This is justified in a basic arithmetical sense.

No, most of the income == most of the taxes, and that is the situation we are already in. My point is that it's hard to justify asking for even more money from the group of people who already pay more than half of the taxes.

I suppose I mean to say that this is the thing really - income tax on its own is not working, evidently, given that it is so easily avoided. Surely the idea is that everyone should want to commit as much as they can to the furtherment of their community, nation and species. The very fact that things like this, game-theoretic winner-take-all, tax "avoidance" (because it's legal, therefore morally fine), exist is enough to make me wonder if there is any point at all to my existence, let alone the existence of the poor sods who aren't fortunate to make even as much as I.

But then I strongly suspect I'm a lefty pinko communist and shouldn't be trusted in a proper discussion about actual fiscal policy.

Do it, then. Don't just post worthless snark.

If you depend on a small number of people for the majority of tax revenue, you will end up with unstable revenue. Look what happened to California's tax revenue during the 2008 recession. It dropped because the small number of rich people who pay more than half of the taxes got hit pretty hard by the recession.

Besides, do we really want to live in a society where only a small group of people has a financial stake in the funding of the government? Voters would probably be a bit more informed if they had some skin in the game. We really don't want to live in a society where the majority of voters will always approve spending increases because they know their taxes won't increase, and the cost of the increase will be borne by the top few percent. That will get us a runaway train of government spending.

Keep in mind that just because Bob is paying a million dollars in taxes and Julia is paying ten dollars in taxes does not mean the system is unfair towards Bob. Especially if Bob should actually be paying three million dollars in taxes, but has used creative accounting practices and tax avoidance schemes to reduce his tax burden.

If the accounting schemes and tax avoidance schemes are legal according to the tax code, then they are what determine what he should pay.

The amount someone should pay is the amount he or she is legally required to pay. The tax laws are the only standard by which the amount of taxes someone should pay can be determined.

Morals musn't enter this argument, it would muddy the waters too much.

And then, the law being the law, those taxes will be paid.

Yes it does. The reason Bob pays more has nothing to do with fairness. Bob has money the government can take without his permission and Julia doesn't. That's the long and the short of it.

Take their age and approximate hours worked, multiply hours worked by 2x median hourly wage (cause we're nice), take away and redistribute the rest of their money.

You hold $100. I hold $1. We live the same life, live the same services, make the same income, and you pay 100x the taxes, if you base it on wealth. Does this really feel fair?

Even better, if you subtract out debt (as you suggest), this gives me an incentive to spend my money, rake up debt, and pay nothing -- wealth is now a liability, didn't you hear?

> You hold $100. I hold $1. We live the same life, live the same services, make the same income, and you pay 100x the taxes, if you base it on wealth. Does this really feel fair?

Yes, that is fair! How about this scenario instead: I hold $100,000, but suddenly make $300,000 this year because I sold my startup. Trump holds $1,000,000,000, spends $1,000,000, and loses money on a stupid investment so his net income is negative. I pay $120,000 tax, over a quarter of my net worth, while he pays nothing. Is that fair?

If you and I earn the same but I spend all of my money on alcohol and pot, while you set aside to pay for your kids' college, how is it fair that you pay more tax?

You should not penalize people for being frugal and saving by taxing accumulated wealth. There's already a strong incentive to pump money back into the economy via investment - interest/yield, to counteract the constant erosion caused by inflation.

:)

> If your capital losses exceed your capital gains, the amount of the excess loss that you can claim on line 13 of Form 1040 to lower your income is the lesser of $3,000, ($1,500 if you are married filing separately) or your total net loss shown on line 16 of the Form 1040, Schedule D (PDF), Capital Gains and Losses. If your net capital loss is more than this limit, you can carry the loss forward to later years.

https://www.irs.gov/taxtopics/tc409.html

The losses that people like Donald Trump can carry forward are not capital losses, which is what we are talking about in this thread, and which apply to the situation pcardh0 described in his comment. The losses Trump took are net operating losses, which he was able to take advantage of because he is in the real estate business.

The 3000 is the deductible limit per year based on a loss, this isn't the limit to carry over.

https://www.irs.gov/publications/p536/ar02.html https://www.irs.gov/publications/p550/ch01.html#en_US_2015_p...

It's taxed at any time when the gain is actually realized e.g when you sell something that has increased in value.

There is no point of taxing wealth at an arbitrary time and this is actually destructive to the middle class and not the wealthiest ones.

Look at the old money problem in Europe.

As for taxing assets directly, it is impossible to hide most of them (land and buildings are very hard to hide). Even things like shares and bonds are near impossible to hide. About the only thing that could be hidden are things like diamonds, but these are such a tiny amount of all assets that it would not be important.

Lets get away from taxing productive activities (i.e. income) and start taxing consumption and hoarding.

Taxing "wealth" would means that the wealthy would keep being wealthy but the poor can never gain any wealth, this is what is effectively has been going in Europe since WW2 with the exception that there is a subclass of the "wealthy poor" in Europe, those who have inherited property and titles but effectively have no cash to uphold them.

Under this system you would penalize people who have savings, people who invest, and more importantly people who need to consume "more" such as people who are having kids because they need to buy a bigger house or a bigger car.

Under your system you also encourage grey and black market trading, and secondary economies that bypass the taxation system.

Taxing income is fair because it taxes what you get, taxing wealth is abysmal because it taxes what you have. Wealth taxation would mean that any financial crisis where people lose their job would be 1000 times worse, it means that getting sick or wanting to leave work to raise children or to help parents would be impossible, it pushes people to effectively be slaves because you don't tax what they actively receive but have a regressive exponential tax on what they've accumulated in their entire lifetime effectively you tell people do not save, do not buy something which is too big, do not retire and work all your life otherwise you won't be able to afford what you already own.

You can't strip people off property they have already own, I can't even understand how would people come to think this system of taxation is reasonable, to the point of which I am beginning to question where people who post on HN live and how do they make their money.

We already live in a society where you effectively taxed for well over 50% of your income, where to buy a house you have to be endured to a bank for decades and you want to make this worse?

1. I suggested taxing consumption and assets instead of income. Income taxes would fall to zero to be replaced with taxes on consumption and assets. You might have to pay more tax on your consumption and assets, but you would have more income to pay for it.

2. Consumption taxes like VAT are hard to avoid given the way they compound through the production chain. They really are very efficient taxes and any regressive nature can be mitigated with other transfer payments.

3. A wealth tax applied directly to the asset (the asset owes the tax, not the owner of the asset) would also be very efficient and hard to avoid. It would encourage the productive use of the asset rather than hoarding.

4. All taxation is stripping people of property they already own - income tax is stripping you of your labor after all. That is what taxation is.

5. Taxing wealth would not stop the poor from becoming wealthy. If would actually help the poor to become wealthier as the only thing they have of value (their labor) would stop being taxed.

I do agree with you that a change from an income based taxation system to a consumption/asset based system would be unfair to those that have paid income taxes all their lives and saved and are now taxed on their savings. The solution would be to have a long transition period (25 to 30 years) where each year the income tax rate fell and the consumption/asset tax rose.

All of this is rather academic anyway since the rich and powerful will never allow an asset tax to be implemented - the last thing they want is to start paying tax. As Leona Helmsley famously said "We don't pay taxes. Only the little people pay taxes."

No, you are missing the point you can't live in a society where you are taxed regardless of your income. If I choose to take a sabbatical from work there is no reason for me to pay tax unless I actually earn during period.

>Consumption taxes like VAT are hard to avoid given the way they compound through the production chain. They really are very efficient taxes and any regressive nature can be mitigated with other transfer payments.

VAT is a horrible taxation system which is one of the main reasons why Europe has a major issue with taxation distribution where the lower income brackets pay considerably more than they should.

>A wealth tax applied directly to the asset (the asset owes the tax, not the owner of the asset) would also be very efficient and hard to avoid. It would encourage the productive use of the asset rather than hoarding.

We already have taxes applied directly to assets they are called capital gains taxes, the different is that capital gains are taxed when they are realized, you are suggesting a system where you will be continuously taxed regardless what you do with the item which is unethical, immoral, and an abysmal idea.

We already have issues of people who cannot afford to pay an inheritance/property tax having to effectively sell their property, what you effectively suggest will kick people off their home as their houses would become too expensive to pay tax on over the year. You are suggesting a world in which the 250,000$ house you bought where you were 30 years old is worth 4-5 times or more by the time you are in your 60's or 70's making it unsustainable.

And you don't need to live that long as most property would increase in value faster than your income would increase which means your tax liability would grow considerably faster than your ability to pay it.

>All taxation is stripping people of property they already own - income tax is stripping you of your labor after all. That is what taxation is.

No taxation is reappropriation of a portion of the gains you receive by the collective as you receive them, no one is coming to you after 10 years and say hmppfff your TV is too nice pay more tax.

The system you are suggesting would be even worse for social mobility than what we already have, Europe is touted as some social mobility heaven which is a joke, the only social mobility is for immigrants and eastern europeans, the wealthy in Europe are the ones who have been wealthy for 500 years with almost now new wealth being created; the amount of "new money" is low to nonexistent in most countries.

And as for the Leona Helmsley quote well; kek; In the US the top 20% pay ~85% of the federal tax income tax, and have pay ~70% of all federal taxes, in Europe the top 20% pay on average 40% of the total tax revenue and that is mostly because of high consumption taxes VAT, Fuel Tax, Sugar Tax etc.

And most importantly in your absurd system when there is a financial crisis and people lose jobs they go into exponential debt for no reason, in a progressive income based taxation system at worse the government goes into debt while the people at least have a chance to remain afloat by their savings and by the fact that the have already paid forward for social programs using their income.

Also why should rich people pay more taxes than poor people? What is the moral reasoning behind that? As I see it you pay for government services and to me it is immoral that one has to overpay 100x for a service while someone else pays a fraction of that. It's as if you walk into a coffee shop and one guy pays $1 for a cup of coffee while another rich person is forced to pay $100 for the same cup of coffee.

No wonder that rich people move their money somewhere else. If a majority survives by leeching off a productive minority then eventually the system will fail and people will live in abject misery and poverty.

If that was true, it would have happened a long time ago.

https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...

That doesn't prove much. Many people would argue that all this means is that taxes were unfairly high then, and more fair now. Others would argue the opposite.

If we are interested in defining a fair rate of tax, I don't see how historical data will help. What's fair needs to be based on something more objective.

Governments funding themselves by income tax is a 100 year old phenomenon. That particular form of passive revenue generation isn't an absolute. Governments subsidized roads and schools before then, whether it was from property taxes, nationalized industries, bond programs, outright expropriation or any other form of revenue generation.

Compliance with passive taxation literally requires indoctrination, and there are people that reach a place in society where they can opt out of it.

This isn't a "stance" I subscribe to, it is a reality I can perceive. It would be disingenuous for me to say I don't understand what is going on, or hand waive it away as saying these people neglect their "civic duty".

This doesn't really hold water.

Consider a situation where 99% of income goes to 1% of the population. Would it be fair for them to provide just 1% of the total tax revenue? Or should they provide 99%? Or is 'fair' somewhere in-between?

In other words, if they get more than half of all income, is it not fair that they pay more than half of all income tax?

Personally, I think taxing income is the wrong approach anyway. In my opinion we should be taxing wealth (LVT, that sort of thing). This is becoming more important due to capitalism's tendency to devalue 'earned income' (e.g. labour) in favour of 'unearned income' (e.g. rent). We are going to face a situation sometime in the not-too-distant future where the vast majority of people will have no means of contributing anything meaningful in the way of income tax. We are probably already there.

Instead of seeing wealthy folks and thinking we should charge them more and more in taxes, because "they can afford it" - rather, we need to go after our government for run-away spending!

The US federal government collects more money in tax revenue alone, than ever before in the history of any country that has ever been.

It's ridiculous that so many citizens have this mindset that it's still "not enough", and worse, that people more successful than oneself should foot the bill so that you can enjoy more nice things.

Even if expenses did not increase, that statement would always be true because of inflation.

You can arrive at different conclusion when you start from different data. Starying from raw income and ignboring everything else serves a simple political purpose: to paint low-income people as priviledged and high-income as harassed.

Any discourse which yield outlook that any common-sense person would see doesn't match who is downtrodden and who is priviledged should be taken with a grain a salt and huge scrutiny.