Something that people from middle class are not able to afford.
The other reason is that making difficult for members of middle class to accumulate wealth secures their own business, they are effectively killing the growth of potential competitors.
In the longer perspective this is very dangerous, it creates oligarchy, which, in turn, has all the incentives to restrict free market, free speech and democracy.
Middle class is important for the society since those are people who have time to engage themselves into public affairs, they don't have to spend all their time trying to earn money. In addition middle class is much more numerous than 1% of the wealthiest. As a result they give work to a lot of people who are down the social ladder. Both Mark Zuckerberg and some Mr. Jones, who owns a grocery shop employ a single babysitter, need a single plumber to fix their pipes, are able to eat the same amount of food, etc. So thousands of Jones are given job to much more people than single Mark Zuckerberg (obviously I am talking about Zuckerberg as a person, not his company).
That's why from the social perspective it is important to have as many Mr. Jones as possible. They give work to a lot of people, they drag them up. That's why taxing heavily middle class is a terrible idea and all the "tax the rich" regulations in the end mean "tax those who cannot escape taxation".
But then you say:
> all the "tax the rich" regulations in the end mean "tax those who cannot escape taxation"
Why is avoiding taxes different than any other moral problem? Why cannot you say, "putting conmen in prison" in the end means "smart conmen will avoid prison". It's this moral defeatism that gets me.
Sure, there will be people who do immoral deeds and avoid being caught, but how are we better off by not trying to catch anyone?
It's even in the open, that the large corporations pay little taxes, everybody is a witness to that. You (as a society) can change that system if you want.
"Tax the rich" sounds kind of like a good idea at first but then you take into account the point about how the rich have lawyers, lobbyists, and accountants. Rich people and companies already figure out how to subvert tax laws. Why wouldn't they figure out how to subvert the new laws they are clamoring for too?
Put another way, is Bezos supporting this law because he wants to be worth less?
I'd prefer we solve things more directly. Break up big business via anti-trust. Stop businesses from buying one another. Rather than raising taxes let's just simplify the tax code so it's automatic and there is minimal ambiguity or flexibility for creative tax accounting. Let's bring legal cases on all the questionable tax strategies big companies are engaging in. Raising taxes to hope we catch the big guys doesn't seem like a smart plan to me. It seems more likely they'll dodge the increase and smaller companies will get hit with it.
Well, I don't see how it's feasible or desirable to do things more directly. You're saying BigCos are a problem, and you want to disincentivize their formation, then picking them on one-by-one basis will actually require more expertise and more effort, compared to having laws (e.g. tax laws) that apply broadly, and then enforce these laws.
We have laws precisely so that we wouldn't have to decide every case individually, and that the rules are clear to everyone, so they can avoid possible (and arbitrary) punishment.
I also think that as long as you want to tax all corporations the same, there will always be an inherent advantage in being big. That's why many people suggest progressive taxation in various forms to disincentivize such empire-building.
> Raising taxes to hope we catch the big guys doesn't seem like a smart plan to me.
This is a straw man - nobody is arguing just for raising taxes and then not enforcing those laws, we would love to enforce these laws of course. But having them is the first step to enforcement, I don't think your approach (enforce something without support from laws) is more viable, even legally. It requires more regulatory expertise, which you argue we are lacking compared to corporations.
Also nobody is really arguing against tax code simplification, but it only can get you so far.
Big governments love a couple big businesses because it’s much easier to infiltrate, influence, control and ultimately procur wealth with that small group of businesses rather than attempting to influence 100’s or even 1000’s of smaller and independent companies.
So the next time you see 3 domestic car companies, and 3 airplane makers, and 4 toilet paper makers, 3 oil companies, etc. Understand they want it that way because of control and $$$$.
In theory I am all for it but on the other hand what would be the allowed size? I can hardly imagine mom and pop shop producing Lithium Ion cells, starting foundry etc, etc. This measure could put country to severe disadvantage against any other that does not implement same measures.
To be more practical and keep competitive edge internationally I'd just milk big companies by way of taxes and make sure there are no loopholes and perks like foreign earning exceptions etc. And outlaw political corporate lobbying.
> all the "tax the rich" regulations in the end mean "tax those who cannot escape taxation"
I think they are usually talking about avoidance (legal), not evasion (illegal). while some avoidance schemes do toe the line of outright evasion, I (perhaps naively) don't believe ultra-rich people routinely employ illegal tax strategies.
personally, I'm okay with the fact that some people will inevitably break the law and not get caught, as long as it's not pervasive. if nothing else, they will have to live with the anxiety that the music might stop for them at any moment.
what I'm not okay with are the "tax the rich" initiatives that look good when condensed to a set of talking points, but in reality are just a tax hike for the upper-middle that will be easily (and fully legally) avoided by the wealthiest people. convince me you have a solution for that before you come for even more of the wages I actually work for.
Isn't a complex tax code a moral problem for the same reason? The other way to attack the problem would be to simplify tax codes more.
Notice that there isn't an argument that Zuckerberg should have less money. There is an argument that Mr Jones should have more. As far as anyone on the left is concerned that would decrease equality (the obvious way to achieve it is less transfer payments from the middle class to the poor).
This is an oft-touted talking point, but not actually correct. If you add up all the numbers, most social welfare in the West proportionally goes to pensions and healthcare. Poverty relief is usually a smaller budget than corporate welfare. This article (0) shows the distribution for the US.
Additionally, part of US social welfare specifically enables companies like Walmart to get away with not paying their employees a living wage, so is de facto corporate - not social - welfare. In short: thinking of it in terms of "the poor are the problem" only helps hide the wealth transfer from the middle class to the upper class.
There is no way for the middle class to have more money while keeping the wealth for the upper class constant, because the system already trickles up middle class wealth. At some point, we should be expecting companies to pay their dues and change rules to make them: corporation tax, liveable wages, overtime compensation, emissions, pollution, workplace safety and perhaps even off time caused by burnout.
0: https://www.usgovernmentspending.com/us_welfare_spending_40....
UBI solves all these issues nicely. People get to spend the money in the way that works best for them. Because they aren't 100% tied to the corporations, the worst, lowest paying jobs gain leverage when negotiating.
While not the best solution, it is far better than current welfare. Even Milton Friedman supported UBI in this context.
They're just shackled to a government handout making them totally dependent on the government of the day's generosity or lack thereof.
This seems to relate to marginal income tax rates, not corporate taxes.
>and all the "tax the rich" regulations in the end mean "tax those who cannot escape taxation".
They don’t have to. Simply eliminate deductions and credits and exemptions.
There’s nothing at all simple about switching from one to the other. (Grocery stores in particular would be extremely hard-hit and a lot of us rely on them to survive. The wheels would come off quickly if not carefully thought though.)
If the issue is it affecting poorer people adversely, then that should be addressed by making them less poor, e.g. the government giving them money.
Whole Foods could conceivably become the equivalent of a discount grocery by virtue of such integration, after Amazon bought up farms and distribution channels.
Simply? In a global world economy? There is nothing simple about it.
One could argue that the US is already an Oligarchy or more accurately an 'Oligarchic Plutocracy' which has accomplished all of the above.
Even I would refer to USA as democratic, but there is lot of evidence that the democratic component is pretty weak.
This seems like a false narrative to me.
For example, the policies Biden is putting forward tax household income at those above $400,000 annually and above, which is firmly in the 1%. This isn't your plumber or single babysitter.
In addition, they are discussing a minimum corporate tax rate and closing loopholes so that corporations and individuals can't pay 0% in income taxes, which is what many are paying now.
If the numbers at https://dqydj.com/average-median-top-household-income-percen... are correct, the "top 1%" household income threshold in the US in 2020 is $53lk. $400k is closer to the "top 2%" level.
More importantly, these numbers like "400k" tend to not be inflation adjusted (e.g. the cutoffs for the net investment tax and the additional medicare tax are not, cutoffs for phaseouts of the child tax credit are not, etc). And income percentiles grow faster than inflation. Looking at that same data table, it looks like the percentile boundaries grew 6%+ year over year from 2019 to 2020. If that's not a fluke caused by the pandemic in some way, then in 10 years you expect something like 1.79x growth in the cutoff numbers, which would put $400k at about the "top 8%" level at that point.
Is it possible that your idea of what level is "firmly in the 1%" is just a few years out of date?
Take the raw numbers. Yearly household income of $400,000 is not gong to affect the baby sitter or local contract plumber. I stand by my assertion that the OPs comment was attempting to distort the narrative.
Yes this may need to be adjusted for inflation down the road, like anything else.
I suspect that both of those claims are dubious, by the way. Someone with more wealth is in fact likely to employ more plumbers (due to having more toilets) and babysitters-per-child (full-time nannies, tutors, etc). And given how low-margin grocery stores are, I don't know that I'd expect a grocery shop owner to end up with $400k+ taxable income....
> Yes this may need to be adjusted for inflation down the road, like anything else.
My main point about the inflation bit is that it's disingenuous to introduce a new tax with a claim that it "does not affect the middle class" when you know with near-certainty that in 10 years or less it absolutely will. In fact you are banking on that to make the numbers you depend on actually work out.
Almost all proposals to "tax the rich" that do not come with automatic inflation adjustments built in are just proposals to tax the middle class in disguise.
Many EU states seem to get this very wrong.
I agree in principle, but reducing immigration and restricting free trade aren't policies that make the poor rich; they're policies that benefit those in possession of scarce resources at a cost to the rest of society.
Take steel tariffs for instance. They benefit the steelworkers, at the cost of every domestic industry that consumes steel. The entire economy pays to support an otherwise unprofitable industry.
Reducing immigration won't magically increase the supply of skilled workers. There aren't masses of unskilled poor who aren't going to college due to immigration putting downwards pressure on skilled wages. They aren't going to college because they lack the resources and opportunity.
Here's some ideas:
1. Tax stock buybacks similar to dividends. Or eliminate them entirely. This leads to...
2. Let unearned income tax brackets go up to the same % levels as earned income, only for different income levels. For example, if $400k in earned income is 38%, then maybe $2m in unearned income should also be 38%. Right now long term cap gains tops out at 15%, which is bullshit.
3. Since wealthy people borrow against their assets to spend, instead of selling assets and incurring taxes, place limits on interest deductions when doing this. There are already similar limits in place for mortgage interest deductions.
By using a tax ladder [1] (tax rate increases in steps).
He probably views it as an investment. Amazon has a keener interest than most in ensuring road maintenance is done properly and if that means a small increase to his tax bill he's probably ok with it.
He also desperately needs to score some progressive points. His reputation is getting trashed rn. I'm sure that factored in to his decision.
I'm skeptical of the notion that he wants this to keep competitors down.
Why wouldn’t he just advocate for road maintenance?
Edit: whoops, I didn’t read his actual statement. Tricked by CNN! Still, I’m a little skeptical of ascribing motivations to people like Bezos that aren’t in line with his past actions, but instead are in line with my personal politics, which is why I’m skeptical.
If taxing the big companies is the aim, how does one gauge the policy suggestion?
(I am not Americans just watching this curiously from outside)
Edit: spelling
Besides, paying tax should be a much easier process for the small fish.
The solution would be to have absolute minimalist tax rules which are so simple that there wont be loopholes. Then also make judges apply common sense and smash every attempted loophole until everyone stops wasting money to find one.
Never going to happen obviously but we can dream.
I think we'd be better off fixing the deduction of such problems, but just pointing out that part of the reason taxes are so complicated are to enable this. Another reason is to create corporate tax loopholes...
Yes the loopholes are intentional but it only helps very few individuals and a whole industry of layer, while corporations aren't actually in the business of finding tax loopholes they are indirectly forced to participate anyway because their competitor does. People blame the companies for evading taxes but they are not the problem they have to play along because everything else would be hard to explain to the shareholders.
Imagine if you are a business owner and your company slowly grows to amazon size. At what point would a sane person like to pay people to evade taxes? You would never want to do that instead of building a team of tax specialist or outsource that you could expand in real business. Your local small business owner and Jeff Bezos both have no interest in that.
Some big companies retain multiple law firms and ask the same advice a couple of times. If an overworked attorney who barely gets any sleep ever misses a point or drafts his/her advice vaguely in a way that would enable their evil plans, they rely on that single opinion. If there are any problems they don't assume any liability, because hey they got a legal opinion from a respectable law firm. Nobody needs to know/can prove they obtained multiple opinions on the same matter because of legal privilege.
In return, big law gets paid a lot of $$$, because of the risk of providing such opinions under considerable pressure and trickstery.
In a big corp, I think most employees are concerned with saving the day. If the management pressures them to cut corners most will. What better way is there to pass the blame?
Both declarations are available to the IRS; if you force corporations to declare how they "bridge the gap", while it would let them practice tax evasion, it would make it easier to assess what form that evasion takes; and it would make fraud much harder.
I don't remember if it went through.
[1] https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/...
Large corporations have an effective tax rate below the nominal one due to antics with exceptions — while smaller businesses get hit harder. What’s called “progressive” often ends up regressive due to the imbalance in ability to do finance trickery. Rich people will always find or create exploits in the law, so those “high taxes on mega corps and billionaires!” hit the middle class and medium sized businesses: they’re who bear the brunt of taxes, in the US.
You get out of doing that unnecessary damage by removing the game: no whatever exceptions, just a flat rate everyone pays.
What’s called “regressive” is actually progressive in that it lightens the tax burden on the middle class and medium businesses, while making the richest pay a fair share. (Also, simpler codes are harder to cheat.)
Discussing the tax burden of the poorest is a misdirection used by politicians: the poorest in the US receive more benefits than they pay, so it’s a question of how that burden is split between the middle class and the upper class.
The big issue is with "just a flat rate that everyone pays". What do you pay that rate over? Big corporations manage to pay that rate over nothing. Generally those corporate taxes are paid over profits, so corporations avoid taking profits in countries that tax them. They sit on their money, pay it out as bonuses to executives, and take their profits in tax havens.
The issue isn't the tax rate, it's the loop holes. It's that the amount that's taxed is easily manipulated. Instead of easily manipulatable profits, the tax should be levied on something less easily manipulatable. Like revenue. Of course that already happens: VAT taxes, only because you pay them on all products, they are effectively paid by consumers, not corporations.
But how about allowing corporations to deduct their local external costs from their revenue? Not easily manipulatable foreign external costs, but simply the costs made in the same market as where the revenues come from? Then you're effectively still taxing profit, but tied to the local market, cutting tax havens and internal trickery out of the picture. A company on the other side of the world selling in your country but not making any costs there; no labour, manufacturing, rent, etc; would pay tax over their entire revenue, whereas a local shop that has does have all those costs, and therefore cannot help but invest in the local economy, gets to deduct those costs and pay less taxes.
I think that could do a lot to even out the imbalance and make the playing field a lot fairer.
If a country doesn’t make automobiles or refrigerators, are those taxed as if they were pure profit for the retailer? It’s not like a local retailer is going to manufacture even refrigerators, let alone cars or phones.
I think we need to address this somehow. Perhaps by counting size by which actual people control and/or own the companies rather than the current arbitrary legal structure.
Did you even read my post?
It’s entirely about this fact: you wrote a long rant concurring, but phrased as violent agreement.
You just pulled a single phrase out of a multiparagraph post, then strawmanned my argument.
That’s not up to the standards expected of HN posts.
You had one more paragraph with some random technical considerations agreeing with me.
Then you concluded.
You literally just repeated my point, but started with “it’s more complicated than that” — which is phrased as a disagreement with my point.
That’s a straw man (misrepresenting my suggestion as being a flat rate, even though my entire comment was about loopholes — like yours) and violent agreement (phrased as disagreement when repeating the same thing).
Your reply here is just wrong. (:
You could make that argument against absolutely any policy. So what is your solution then? Don't do anything?
Could you explain why this is the case?
> So just tax wealth of individuals
Individuals can play the same games. Jeff Bezos could move most of his wealth into funds, foundations or companies and be poor on paper while still keeping the de-facto control of all assets. Or they could shift their wealth overseas, into tax havens or into less transparent areas like crypto.
> Could you explain why this is the case?
Just to comment on this real quick, this has multiple reasons. Basically, the larger your company is, the more funds you have to spend on lawyers and experts, as well as offshoring. Also, depending on the country you're in and the specific tax laws, it might be easier to fulfill incentives for nullifying the corporate tax (IIRC reinvesting and creating jobs is how Amazon nullifies a good chunk of their taxes, right?). That is not to say, we should completely axe corporate tax imo, because some of those incentives are really good. You want corporations in your country to reinvest and create jobs, because that's overall a really good thing for the job market.
The thing about Bezos' wealth is that a huge chunk (maybe even the majority) of it is already in the form of assets. That's not as easily moved overseas (though to my limited understanding it isn't impossible) without hurting his own company, and at that point it might be profitable to just pay a wealth or asset tax or something like that. Obviously that would need to be designed REALLY well, but there's a good chance that that's how we can tax exactly what we want to tax, without hurting small businesses and without hurting the lower class.
I’m talking all loopholes, even giving money to a 501c3. Billy’s nonprofit gives back less than 1% to the country that coddled him. Plus—I feel a lot of nonprofits are just tax dodges.
Want to manufacture overseas? Fine, but move to that country, and don’t come back.
I got carried away again. I would like to basically see tax loopholes closed, or only allowed the first few years of a business life.
The problem is real-estate as this is what people need. If people could buy property they would not be interested in stocks or crypto and they would not care for rich people getting richer. They would be busy in their pools or backyards.
And fixing real-estate is not done by having more taxes, penalizing vacant homes, or grabbing your inheritance. It's simple: Build more housing.
I am almost in my 40s now and one thing I've recently learned is that sometimes it is better not to do anything at all.
You can set a fee of 3% for restaurants let's say, and 10% for some other business (example)
This makes sense for small business
Even if it does mean less restaurants and less eating out, there is nothing inherently more unfair about it.
You can also see for example the digital services tax introduced by France because VAT was not proving effective.
Unless your thought is that businesses would charge more if there was no sales tax. I don't really buy that, though; businesses list pre-tax prices specifically to avoid sticker shock.
How about a policy of mandatory 10% profit for companies over 1B in revenue? That would produce some nice antimonopoly effects too.
Generally the answer is: they "spent" the money on "intellectual property" licensed to them by a subsidiary in Ireland (patents, brand name, software license) where that subsidiary pays zero takes through some accounting trickery[0] and moves that money offshore to Bermuda or Caymans. So the main company makes zero profit in markets outside Ireland because coincidentally licensing expenses exactly equal the gross profits of the company - and thus pays zero taxes anywhere ever.
[0] formerly the "double Irish" international tax loophole, nowadays there's a different "Irish patent box"
Funny. China had a profitability requirement for any IPO until the beginning of 2020.
This is the desired outcome and we should not touch this.
Say I run a company out of the US called 'Paraná' (Seeing as the other big river is already taken), turning $1B/year profit.
I promptly spend the profit buying consulting services from 'Paraná Consulting and Tax Shenanigans LLC' based out of a Panama mailbox for $1.05B, for instance - then I even run my US business at a loss.
(I don't know anything about US or international tax codes, but the above basically sums up the methods described in X stories I've read about tax planning over the years.)
UK, Netherlands and others countries have their own tax havens like Cayman Island, Curacao Island. Are you really going to ban trade with such big financial powerhouses?
Pay the damn wages and dividends, I'd say. The former will go into consumption, the latter will go probably into other companies, especially if we discourage less productive uses of capital (like real estate). And also getting taxes from these is more straightforward. Maybe they don't even have to be that high percentage-wise, if there is less possibility of avoidance.
If the goal is to increase wages, then government should lower the supply of labor and increase the demand for labor. Provide minimum x weeks of vacation, parental leave, maximum 8 hours per day until overtime rates kick in, free higher education, etc.
As for forcing companies to pay dividends, I’d rather the government not be able to tell me what to do with my company’s funds. If the government wants control of the funds, they should raise the tax rates.
> As for forcing companies to pay dividends, I’d rather the government not be able to tell me what to do with my company’s funds
I don't want to digress too much, but limited liability corporation and more complex structures with shareholders are creations of the government. You used to have to obtain a specific charter from the sovereign for each one of them. So unless you're an individual doing business with unlimited liability, it's debatable whether government (or the lawgiver, to be more specific) shouldn't get to make the rules for you.
Of course, the idea that states are created for the benefit of humans is bullshit, but it's nice to dream of something better...
I agree with this. Which is why I wrote the state can choose to increase taxes. I have yet to be shown how requiring a company to pay dividends accomplishes the goal of improving the lives of humans.
Of course, that's too tame. We'd be better off eliminating the most common forms of incorporation, or severely curtailing them e.g. maximum revenue limits. All the things that corporations can do, individuals, partnerships, mutual-benefit firms, etc. can also do, except often more carefully.
> doesn't let you entirely evade taxes
"Entirely"?
It's not about evading taxes to 100%, but maybe 90% (not sure about the numbers).
Also, the taxes get paid in a different country, doesn't benefit the people in, say, the US.
https://www.kwm.com/en/au/knowledge/insights/australian-soft...
In that example they found that the 'licensing fee' was a royalty meaning there is a 30% withholding depending on double tax treaties and rates between the two locations. Which for a zero tax foreign licensor would mean a 30% local tax on however much you send overseas.
I wonder how much the company saved on avoiding taxes in that way, until it didn't work any more. (Didn't see any numbers, having had a look at the linked page)
I wonder if there's any table of all different methods companies use, to avoid taxes, and how much they typically save, and what could be ways to stop it
Maybe could be helpful for lawmakers
> required to pay 30% withholding tax
That's quite a lot is it? Compared to company taxes. Seems like a strong incentive to stop cheating
Agreed. To add perspective, I don't believe corporations will give a crap about the people (extreme example, Amazon) like we believe our respective governments should. I'd rather have bad spending on keeping people alive than no spending at all.
Instead of actually promoting innovation, they tend to become a subsidy for the tech industry.
Meanwhile Joe Schmoe bought yet another iPad (which wouldn't exist without the government inventing much of computer tech) to go in a landfill in two years. But at least he funded Apple's ability to make a brand new, basically identical model, next year.
How do we measure who has a "good" track record on spending money?
To avoid pure anecdotes, the Government Accountability Office actually studies this every year: https://www.gao.gov/products/gao-20-440sp ...
That's not to say I don't believe in government spending. I don't know that there is a much better solution, and any conglomeration of humans is going to have roughly equal capacity for doing the right thing and doing the wrong thing, hopefully weighted more towards the "right" thing with solid leadership...
R&D would get us fastest nice things like space colonization, longevity, megastructures, the next step on the Kardashev scale.
NASA doled out public money to prime contractors for various pieces of the program (North American, Grumman, Rocketdyne, Douglas, IBM...) and the primes subcontracted various pieces as they always do.
This is not to understate the tremendous engineering effort of organizing such a huge program, but it’s not like this achievement was done by a bunch of government workers alone.
Thank you, loopholes!
What you mention is less true if corporate tax is progressive on profits.
On the other hand, Amazon wouldn't care about corporate taxes on profits because it reinvests all its revenue.
This is arguably a more efficient transfer capital rather than raising taxes and then dealing with bipartisan political entities in the most efficient use.
Id also point out that the new tax policy also raises wealth tax by a significant amount. Also, its probably better to deal with wealth tax on a state by state basis, since this in turn forces the development of generally low tax areas since its favorable for people to move there (like all the companies setting up shop in Austin right now, which in turn raised the wealth of anyone there who owns a house by close to 100k at this point)
In the same way that the new "Stimulus package" now requires that payment processors report any transaction over $600 on a 1099-K Tax Form, it's always the little guy that is mostly affected by the changes in tax law because little guys have no lobbyists and don't have an easy access to lawyers to fight the IRS.