The only terrible shame here is you laundering your opinion on corporate taxes by making false claims about them being wildly unpopular.
[1] https://morningconsult.com/2021/04/07/infrastructure-corpora...
[2] https://americansfortaxfairness.org/files/Polling-Questions-...
The flavor of democracy we practice has been good. However, we must be honest enough to admit it can degenerate into mob rule, which generally means decisions are made by the most gullible and ignorant among us on any specific topic.
Simple example: There is no way my vote on a whole range of medical issues should have the same value as that of a medical professional, such as my wife. While I have a reasonable understanding of biology, the difference in knowledge and understanding in this area of knowledge is massive.
In other words, I am as ignorant about medical matters as she is about engineering. It isn’t an insult to classify me as ignorant in this category. It’s the truth. Why do our votes have the same value?
So, yes, 65% of Americans want to raise business taxes. They are ignorant fools being led by the nose by politicians using this ignorance to gain votes at their expense.
The most important reality to understand us that politicians are never negatively affected by some of the nonsense they push. They don’t lose their jobs, careers or level of pay. On the other hand, the fools who buy their nonsense very often end-up with the short end of the stick.
Raise business taxes? No problem. More businesses will go to China if they are able to. If they can’t, they’ll reduce costs through automation. Some will do both.
In a globalized economy we need lower taxes. Zero would be an even better number. Anyone who thinks otherwise suffers from a serious deficiency in perspective.
Strongly disagree. Your wife should educate the voters around her on issues that she cares enough about to invest the time (or treasure) doing so. Those better-informed votes should all count equally.
It's a slippery slope to suggest that being well-versed in an area should grant extra power. Who determines who is well-informed? Hell of a conflict of interest.
Also, consider how wildly primitive (and often wrong) medicine was two centuries ago but how respected the practioners were at the time. Things are better today but the medical profession is not infallible.
Lastly, should business people get extra votes on economic policy and taxation?
This is very real problem. Yes, experienced business people are far better at understanding the range of issues pertaining to economic and taxation policy. That is self evident. Most people have zero experience and very little understanding of this, once again, particularly as it pertains to a connected global economy.
Here's a simple example of this:
Today politicians in the US are pushing for a truly massive-beyond-description infrastructure spending plan. Removing political intent (buying votes with our tax dollars by throwing money at large groups through these programs), one of the most typical targets of this infrastructure spending are roads, bridges and government buildings.
Simple question for anyone:
Name just ten companies who, in the last, say, 50 years, decided NOT to base their operations in the US because our roads and bridges are deficient. Just ten. Fifty years is a long time. If this is a real problem it should be very easy to rattle-off ten, if not twenty or more companies.
Any?
Nope. Not one.
In other words, this "infrastructure" thing is a solution looking for a problem. Or, put a different way, it is a waste of time and money at a massive scale.
OK, that's a tough question. Fine.
Same question. Only this time, within the US. Name ten companies who, in the last fifty years, chose to move to another US state because of the condition of the roads and bridges in their original state.
No?
It's a fantasy, isn't it?
Spending money like that is irresponsible. It will waste a decade or more. You can't recover the opportunity cost.
You see, lay people buy this crap without perspective and analysis. Our roads and bridges are just fine. Sure, maybe some here and there. And yet this should not be the focus of our spending. I just watched our local transit agency tear-up and re-pave a one mile stretch of road near our home. There was absolutely nothing wrong with the road. In fact, you could argue what they have done is actually worse. The prior road was gray-colored. The current topping is black tar-based. In other words, they created a mile-long super-heating surface in an already hot summer area.
Anyhow, the obvious question then, might be:
If not roads and bridges, where should we invest?
Where it matters. Ask companies what it would take to have them come back. Ask business people what they need. You are likely to compile a list that looks something like this (not complete):
- Lower taxes, federal, state and local
- Lower regulatory burden
- Faster (light-speed fast) building permits and process
- Sensible, fair and fast legal immigration policy
- 10 to 25 year manufacturing subsidies aimed at in-shoring the supply chain
- Invest whatever it takes to bring in not-trivial capacity
in semiconductor and other essential manufacturing
- Stop the minimum wage madness that is killing competitiveness
- Cancel the treaty that allows Chinese companies to ship for free within the US
- Tort reform
- Stop funding and guaranteeing student loans (this raises costs)
- Create an intense pro-business entrepreneurial culture
- Stop throwing money at military crap and use it to fund an industrial revival
As someone in manufacturing, one of the things I want the most is a short and relatively local supply chain. If you are manufacturing microwave ovens in China your supply chain is insanely short. Almost everything you need is within a truck drive from your plant. In the US your supply chain stretches all over the world. Long supply chains cost a lot of money, hence the decision by many to migrate their manufacturing to China. If the glass, screws, wires, chips, displays, plastic you buy is made in China...well, it's hard to justify making your microwave oven in the US when all you can source here might be the box and instruction manual.
An investment in a localized, efficient, low cost supply chain spanning a range of products --from low tech to high tech-- is the single most important decision the US could make. Investing in roads and bridges is going to bring NOTHING to the US. An efficient local supply chain would change the game in ways one can hardly imagine.
Can this be done? Well, it's hard to say until we start focusing on it and getting the right people around the table. We have been focusing on the wrong things for years. Others, like China, have not. This comes with consequences. The uninformed don't have a wide enough view and deep enough expertise to understand where we are and what we need to do to avert disaster.
Perhaps this is the point: When things are good it is OK to make bad decisions here and there because you have a buffer zone. You can make mistakes, survive them and go on. However, when you find yourself in the emergency room, what you need is deep and wide expertise and the right knowledge for someone to be able to make the right decisions. No more amateur night or well-intended-but-dangerous decisions rooted in ignorance.
The US and Europe are in the same place with regards to China. They have intelligently sucked in every industry of any value from both regions. It is hard to create a list of the massive segments of industry that have migrated operations from the US and Europe to China. You have to be in awe of what they have accomplished in about fifty years. If the US and Europe don't change their approach to business we will both suffer further erosion of whatever job-generation we have left. This is no longer a hypothetical. This is very real. And, yes, people with expertise need to be making decisions, not politicians or ignorant voters.
> And, yes, people with expertise need to be making decisions, not politicians or ignorant voters.
I agree with the sentiment but there's no universal definition of ignorant voter in the political sphere. There's only, subjectively, useful to someone or not useful to someone.
Many decades ago I actually worked with Frank Zappa for a few months on one of his projects. Long story. We had dinner together almost every night, just a few of us, sometimes just he and I.
Frank was very active politically. One night, as we were discussing various ideas, he said something like:
"Martin, the reason people like you and I don't go into politics is that you have to be a member of a very specific human subspecies to be able to survive the brutality you will encounter. Most intelligent people don't want to touch politics because they know it is a meat grinder. The sad part is we end-up with people who know nothing about anything and would likely be ambulance chasers or criminals if they had not figure out how to scam their way into politics. We are hopeless."
The epic climax of this reality was when, out of all the amazing people in the US, we ended-up with Trump and Clinton as the only two choices we could make. I can't see how anyone could argue either of those clowns is an example of the best the US can offer.
I still agree with Zappa. I can't imagine ever getting into politics. Particularly these days. I have zero interest in having my life and my family's life violently ripped to shreds by the unscrupulous actors who permeate that world and protect their turf at all costs. One day we might just come up with a way to govern ourselves without these mutants, until then, it's the best we got.
Looking at monetary policy since 2008, I sometimes wonder if taxes are even necessary.
It's increasingly clear that central banks can print and fund ~20% of their host governments' budget without any risk of lasting inflation. Why not try ratcheting that up?
Also remember that inflation is compound. 4% a year inflation isn't a steady increase.
Isn’t that point precisely addressed by the Biden administrations of setting a global minimum tax rate? If every country, or at least every country without signify the trade barriers (who cares what happens in North Korea) has the same tax rate than there’s no incentive for companies to move their profits - or the entire company - abroad to save on taxes.
Wouldn't it be simpler to just set corporate tax rates to zero, and instead raise taxes on income and -- especially -- capital gains? And the US already has a personal tax system where it doesn't matter where you earn income: if you're a US citizen, you have to consider US income taxes, period. So the problem where people try to push their personal income out of the country to avoid tax just doesn't crop up as much.
Do you mean income as in profit (= revenue minus expenses), or income as in revenue (not subtracting costs)? If you mean profit... that's what corporation tax is already. So I'll assume you mean revenue.
No it wouldn't. It would kill many businesses overnight, and incentivise the worst behaviour in the rest.
Consider a company that buys components for $100 and assembles them into a widget they sell for $105 to shops. (Who sell it for $110.) Let's ignore other costs.
Corporation tax at 20% would charge the company $1 per widget.
Income (as revenue) tax at 20% would charge the company $20 per widget, and the company would immediately have to stop producing widgets altogether, or substantially raise the price of widgets. It wouldn't have a choice. You as the end user would see the prices of everything in shops shoot up, and many things would disappear from the shelves.
If you used a lower tax rate, say 1% so that companies like this can continue, it will be far too low for companies that pay $50 for components and sell their widget for $100. Those would be charged only $1 on their profit of $50, keeping $49.
You want to incentivise (and indeed help) the former type of company. It's selling widgets at close to the cost of making them, and if it is so minded, it may use the highest quality materials it can afford.
But you have designed a tax that strongly incentivises, even requires, the latter type of company: Only pursuing opportunities that use the cheapest possible materials while selling at high prices. Never doing anything that brings in just a small profit.
Society does not benefit from businesses operating on vapor-thin profits. When (not if) anything goes wrong these businesses trigger a job-loss chain reaction that is impossible to avoid.
What you want are businesses who make enough in profits to build a solid safety net, evolve, compete, provide security and upward mobility to employees, suppliers and the entire food chain that surrounds them.
Profits are not bad. They are an absolute necessity for growth and stability.
I didn't say profit was bad. The discussion point was not about razor-thin margins. The 5% was just notional for discussion. The same problems occur with fat margins.
Building on your point that profits are necessary for growth, stability and job security, presumably you have in mind that the company gets to keep the profit, to use for those things as needed.
The GP proposal I replied to is a tax system which sets a legally required minimum profit margin, and then takes 100% of that required minimum as tax, though I expect the poster didn't think of it that way.
As the proposal is to force the company to make some profit percentage and take that directly from the company, the remaining profit the company can reinvest in growth, stability and job security is reduced. Aside from reducing the amount available to plow back, this also acts to amplify variance in profit from period to period, increasing instability in the company's finances. Reducing profit that can be used by the company and amplifying instability both reduce growth, job security, upward mobility etc. So much for understanding business.
It's also ridiculously harmful to the "food chain" because it would tend to destroy independent supply chain companies, and prevent new ones from being competitve.
The GP proposal takes the legally required minimum profit margin from every individual company in a supply chain, so the total tax taken is the required margin multiplied by the number of companies in the chain. I.e. more companies in a supply chain == proportionally more tax. This creates an extreme pressure to merge small supply chain companies into a giant conglomerates that pay less tax for the same task. I say extreme because it is: Merging brings a benefit of 10-100x tax saving.
If you like giant conglomerates that's fine, but if you want a food chain of independent companies, it's a disastrous policy.
The tax level in that proposal could be set low enough to allow small supply chain companies to survive without succumbing to tax pressure to merge, but if that was done, giant conglomerates would pay a tiny amount of tax, compared with small companies. There would still be a 10-100x tax advantage available to giant conglomerates. Since this entire discussion is a complaint about giant companies paying too little tax, presumably that is not the intended effect.
Some accounting could obviously be done to ensure giant companies pay a similar share to small companies in a chain doing the same thing, to remove the tax pressure to merge. But that's what we have already, that's corporation tax.
They're making a lot of profit.
Its competition that reduces profits
> Its competition that reduces profits
The revenue tax scheme sets a minimum profit level that every company is required to make. Competition can't reduce it below that level.
It's also set things up so where many companies build things in a chain of specialised companies, for example manufacturing components, assembling devices then selling those, and shipping them, the minimum profit percentage is legally required at each step, compounding.
Currently, supply chains consist of hundreds of companies working together. That won't be possible any more, as the new system forces every supply chain to merge into a self-contained conglomerate that does everything in one company.
Companies in that system will be forced to merge into giants or die, and in the end most will be giants. It's probably not the intended consquence of the policy.
Did you know they can export products at cost and still make up to 15% on their international sales? The world is not a level playing field.
Did you know it costs them darn near zero dollars to ship products within the US, while US companies have to pay full fare?
The ONLY way the US and Europe could rebuild a solid industrial base lost to China is to be so pro-business it would make most of the uninformed projectile vomit. If we can do that and maintain it for 25 to 50 years we might have a shot at it. Nothing else will work.
Either we are a nation of pro-business entrepreneurs to the core or we resign ourselves to living in outsourced utopia. That’s how bad it has gotten.
Pick any product and try to source all of its components and manufacturing in the US or Europe. You won’t get far. In most cases it is simply impossible.
If we want a solid future we need to stop vilifying business. The 65% who don’t have a clue will learn this only when it is too late to do anything about it.
Perspective: We couldn’t make PPE, the materials they require and the machines we would need to make them.
China's corporate taxes are much higher than 15%, so it's not like they would be directly affected by this. They might oppose the plan (I have no idea), but it's unlikely to be on an economical aspect of that's the case.
Or you just introduce CO2 tariffs and use them to wreck China in the process of building a CO2 neutral economy.
The idea of a CO2 neutral economy is another utopia fantasy sold to the ignorant voters by politicians. Easy to sell. Easy to form voting groups around it. Who doesn't want to be for "saving the planet".
And yet, we know, without a shadow of a doubt, that we cannot do a thing about atmospheric CO2 accumulation and the climate effects surrounding it. Not a thing. This is what we know --scientifically, not guessing here: If humanity left the planet today and all of our technology simply shut down, it would take somewhere around 50,000 and 100,000 years for atmospheric CO2 to come down 100 ppm. This leads to a very simple conclusion: If such an extreme measure produces a rate of change of 100 ppm / 100K years, a partial measure will not improve on that rate at all.
So, no, a carbon neutral economy will do nothing. Neither will switching to electric cars, full solar and wind power, etc. All fantasies. Sorry. We are being lied to and we are deceiving ourselves.
So let them go, other business would fill up that place.
Businesses don't go to China because they want to. They do so because they have no other choice. When the combination of regulatory, tax and labor regulations makes it so it is impossible to compete you are left with two choices: Embrace China or close the doors.
While "other business would fill up that place" might sound like a nice heart-warming idea, it is a fantasy. The only businesses that will fill that place are Chinese businesses selling directly in the US and Europe (an ever-increasing category, just search Amazon) or US and European businesses who have outsourced enough of their operation to China to be competitive.
So dont allow those business to sell in the US
In June last year, the medical crème de la crème were proclaiming that COVID antibodies last 3 months. I (an engineer with no formal biology training past high school) read some obscure studies that past Sars-Cov-1 infection seems to still provide protection against severe Sars-Cov-2 infection, and it was also what my understanding about the mechanics of the immune system suggested (why would antibodies only last 3 months? how could the human race survive?!)
Lo and behold, I was right, the "medical professionals" were wrong. TL;DR: common sense is worth at least as much as a medical degree. Also, never trust people whose incentives aren't aligned with yours.
I had to read that twice.
The only way someone can have that thought is if they have no clue --at all-- about what a medical degree entails. Sorry my friend, you don't know what you are talking about.
Try this: Next time you need serious medical care...don't go to the ER or any doctor for that matter...just use common sense. Let's see how far that takes you.
Doctors are human beings. They are not gods. They are not perfect. And yet a medical degree --the knowledge and perspective that comes with it-- DWARFS even the most informed common sense.
Don't confuse politics with science.
First, countries would reduce their taxes to the minimum 15% based on the same dynamics we had until today (note that US's tax is higher). Later, countries would find ways to return the tax (not difficult when one could simply 'fail' to collect, or give 'investment aid' etc.).
IMHO, the importance of the treaty is with regards to establishing common standards. Raising corporate rates would require an additional vehicle.
This is the case with the OCDE literally calling countries with favorable taxation "tax paradises".
It's as though so many people saw Brexit and completely refused to learn anything from it. In the UK prior to Brexit the EU was often the scapegoat for things that politicians wanted but knew they couldn't get popular support for, the classic example is how the unpopular (and ultimately abortive) attempt to switch the UK fully to the metric system was very much seen as "petty-minded EU bureaucrats getting one over on the British public" in the tabloids when the reality was that almost all of the effort was Westminster's doing, mostly because business interests had been calling for it as a way to ease international trade.
The problem is that while falsely blaming an external outgroup for your problems isn't immediately dangerous, it can quickly spiral out of control. Around 2013 blaming the EU for bad policy-making on a wide range of things like immigration, the refugee crisis, a percieved decline in law and order, a creeping sense of political control over public discussion, and a whole list of other things reached its peak and the referendum was basically wrenched out of Cameron's hand. Eventually if you subvert a democracy by blaming your own unpopular choices on an outgroup, the inevitable question people start asking is "why don't we just get rid of $outgroup then? As you say, $outgroup cause all our problems so let's get rid of them and solve all our problems at once" which many billions of pounds and geopolitical bridges burned later is exactly what happened.
If nations as you put it "defer to external international conventions to be the bad-cop for wildly unpopular policy decisions" then things like Brexit are the inevitable result. Not only is it inherently wrong to sidestep democracy like that in my opinion, if supranational organisations are blamed for things that are unpopular then their influence will eventually be damaged by this. Organisations like the EU, the UN, and others aren't just limitless negativity sinks for domestic politics - all that political negativity has to go somewhere and eventually it just spills out.
The point of this measure is to avoid a coordination trap that leads to corp tax rates converging on zero even though each country does not want that. Such scenarios are well studied, and a mutually agreed upon enforcement mechanism is the optimal solution. If that resembles a conspiracy theory to someone, well, hopefully they can read the wikipedia page on the Prisoners' Dilemma and learn something new.
Sure, you can call it what you like; what matters is, does it deserve the same negative connotation as "cartel"? The answer to that depends on your position on:
> Ultimately taxes going to zero is a good thing because it is a sign of competitiveness between tax structures favoring more efficient governments.
...which is incorrect, because "efficiency" is not tax rate alone, it's tax rate compared to services offered. We're not talking about countries cutting their tax rate because they're more efficient; Ireland doesn't know how to build roads cheaper than England does. We're talking about countries that decide to cut their tax rate and cut services proportionally in order to entice immigrants. They aren't any more efficient the day after they do that than the day before, they're just selling a shoddier product at a lower price point.
And it's worth pointing out, if you think of government as a product and tax rates as the price, the reason we have this problem in the first place is that the market is broken by allowing corporations to "buy" one product but "use" another. For a company to primarily operate in the USA but pay corporate taxes to Bermuda is roughly equivalent to a man who drives off the lot in a new Benz but is making payments on a used Buick. If the market were functional - if the "price" a corporation chooses to pay in deciding where to be patriated were aligned with the "value" they receive in access to infrastructure and markets - we wouldn't be here discussing this agreement because it wouldn't be needed.
Imagine you and I are neighboring farmers who irrigate our fields from the same river. Our farms grow, as does our water use, until we're each using half the water. I buy a bigger water pump and start sucking up most of the water, leaving you with dying crops. So you go out and buy an even bigger pump; now you're getting most of the water, and some of my crops are dying.
What's the result? There are only two outcomes here: either we agree to split the water, or we spend more and more money on larger and larger pumps until neither of us has any profit left over. The latter outcome is the "trap" - neither of us wants to spend every spare dollar on pumps, but unless we come up with some agreement, that's what will happen.
Also once the US can manage to get 130 countries to agree to its tax regime in one area, guaranteed it won't stop there.
I'd say that this however is not a resource sharing situation. It's a competition for the magical money tree of corporation taxes. And that's a good thing, because "setting up an environment in which businesses cannot thrive" is often a vote winner, but is a terrible idea.
Anyway, you're right that this a competition for corp tax money, and that it could be bad in theory if there was no competition for it, since e.g. we could all collectively agree to set the corp tax rate too high, which I agree would be bad. But there's no ratchet effect. All we have to do to avoid the "taxes too high" problem is be aware of it and decide not to do that, whereas we cannot avoid the "race to the bottom" problem by being aware of it, we need an agreement like the one described in the article.
This method contains no incentives to do it (competition) and no way to establish what is "too high" (also competition).
The argument is, is that poorer countries, especially those with natural resources, would do better nurturing their own corporations, rather than creating policies to attract foreign corporations.
The end result of preferring foreign corporations is a race-to-the-bottom where the end result is that corporations become a law unto themselves, operating as if they miniature states within the host state.
Companies compete for shareholders by satisfying as many customers as possible. If states can compete for the best deal for international business, companies can better serve people, and those states can house centres of international trade.
It’s not just abstract talk, but incentives that drive us to live different everyday lives than people in guild-economy medieval times, or past slave economies, or how people lived in the GDR or other eastern bloc countries.
You wanted to write “shareholders”, right?
if your goal is to have a few conglomerates rule the world, then this is a good way to do it. Not sure how that is much different from a powerful "state" though
Companies must create valuable things people want, or be out of business in a very short time.
Tax the wealthy. Don't let them take "charitable" deductions or use tax-exempt IRAs. 100% inheritance tax above $4 million.
Think about it like this: when I want to buy a house, I buy a house. When a billionaire wants to buy a house, they create a property management company (as a subsidiary of their existing business interests) that buys and rents out the house, negotiate for their existing business interests to fund it, and then they rent the house from that PMC.
Excess liquid assets sitting in a large corporation’s treasury, are essentially sitting in the wallets of its directors. They’re left there only because the tax implications are better if they’re moved toward their purpose-build vehicles at the last moment possible.
No it doesn't. It equally affects both large shareholders and small shareholders. E. g. pension funds will get lower gains, and regular dudes 401k (or whatever they are called in your country) will get smaller yields.
I don't have numbers, but I suspect the richest people get only small percent of large corporations income.
They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it while they are alive we'll take it when they die, so we'd take away the incentive to hoard all the wealth with those schemes.
"That’s what taxing corporate income (or more targeted, corporate assets)"
Incorrect. Targeting corporate assets hurts heavy industry. Targeting income hurts low-margin business like grocery. And we already have a tax on corporate profits: capital gains tax on dividends and stock appreciation! It mostly affects people who are doing well and less so people and companies doing poorly. It automatically compensates for market changes (sector doing great paid more, a whole sector slumping pays less).
I don't think you quite understood the scheme here: they never own the PMC. They don't gain the appreciation value of the house or anything like that. It's not an investment to them. They just got someone else to set up the PMC and buy the house, for the positive side-benefits that come from having arranged to assume (at least partial) directorship over that PMC.
Maybe it's easier to picture it at larger scale, with an explicit example: say you're a famous property developer who has built a bunch of hotels with your name on them. In one sense, those are businesses for their own sake. But in another sense, those are your vacation homes. You can stay in them, for free, any time you like, which the hotel will likely book as a business expense (hosting one of its directors for an official evaluation of operations on behalf of shareholders.)
That business expense will also extend to any perks the hotel offers its ultra-premium clients (often a class only set up in the first place as a way to justify giving directors these perks) — e.g. hotel-employed drivers assigned to pick the billionaire up from the airport, and then attached to them to fetch whatever they need as long as they're there.
If you build a bunch of hotels that provide you a free place to stay anywhere you go, then you don't need vacation homes. You never need to buy them, rent them, own them in any sense. They're never realized as income, any more than a "company car" or "company-supplied laptop" that you need to give back when you quit is income.
By itself, this would be ridiculous; it'd be like starting a car rental agency just to have a "company car."
But, because these are also profitable businesses for their own sake, you can get investors (incl. your own investment businesses) to put money into them, such that you never need to put any of your own (post-tax) money into them. You don't actually even need to personally be a shareholder in the hotel chain, "only" a director of it, to reap these benefits! And, if you're also a person with a lot of connections — someone with a rolodex of reliable CEOs and executives to staff these businesses with — then you never need to worry about actually building or running the business, either.
This is how billionaires — or at least, capitalist billionaires — get away with never realizing much income (or even having very many estate-tax-able assets as part of their net worth!) at all. They just cause corporations to invest money in other corporations, never actually touching any of the money or the resulting assets themselves, but rather ending up in arrangements where business expenses of the invested-in corporations are being spent directly on their own happiness, mostly by having temporary use of the business's assets whenever they like, as some non-transactional, pure-expense part of the business's operation. The vast majority of their assets are soft power — social influence — realized/"invested" by putting people into power in roles in businesses, where those people in power in those roles can then give them perks in return.
(And, if they ever need real liquid assets for some reason, then they just make arrangements with other billionaires to 1. start non-profits; 2. get some underemployed accomplices [e.g. relatives] employed at their non-profits in high-paying [but not to the point of being individually highly taxed] roles; and 3. get corporations that owe each billionaire favors, to direct charitable donations to one-another's nonprofits. Then, since this income is entirely the result of cronyism, the accomplices will listen when the billionaire directs them on how to spend their income — and thus the billionaire can spend it as if it were their own income, as they please; usually not on assets, mind you, but rather usually for expenses that personally benefit the billionaire, e.g. things like huge parties or political lobbying. This is the classic "high-society wife" setup, but it can be extended to hundreds of accomplices.)
>make arrangements with other billionaires to 1. start non-profits
Which is why they (and corporations) should not get tax deductions for donating money!
[0] i.e. https://www.microsoft.com/en-us/microsoft-365/business-insig...
Sure, if you’re one of the fifty people in the world who personally have hundreds of billions in liquid assets, you’ve “escaped” needing to do this sort of thing. But much of the reason that there are so few people who’ve “escaped” this, is that most millionaires don’t aim to just keep getting more liquid assets until they enter this category, because they feel like all the taxation they’d be hit with in the process is “leaving power on the table.” They rather aim to “control” or “leverage” as much money/power as possible at a remove, by minimizing the amount of that that ever personally becomes part of their portfolio. This usually mostly caps their personal net worth (as they’re directing deals to pay into companies they control, rather than ever profiting personally from said deals) but their “social multiplier” on their net worth continues to grow over time.
If you’ve ever seen the net-worth curve for some very-obviously-capitalist entrepreneur/VC/investor, and noticed that it plateaus over time — this is what they’re doing. They haven’t quit making money (unless they’ve declared an intent to “switch modes” and spend all their time on spending their money on improving things they care about, like John D. Rockefeller, or Bill Gates.) People who’ve managed to make huge sums of money, tend to love making money; making money is in their blood. They just find, eventually, that making that money personally is no longer a very efficient way of gaining control over ever-larger sums of wealth.
> Using company property for personal use is a taxable fringe benefit.
Again, the point is to make all “personal use” into business use, by setting up your life so that everything you do is claimable as a business expense by the business, rather than an asset transfer. Sleeping? Managing your hotel. Eating? Managing your restaurant. Getting driven around in a limo? It’s a mobile meeting room where you’re having business meetings!
But, to be clear, on the levels that UHNWI people spend money on, these sort of personal expenses aren’t really what I mean by “arranging to control company resources to personal ends.” They’re cute tricks, but they’re not the “big stuff.”
The “big stuff” is more like: directing where a corporation will spend its lobbying dollars (business expense), to get petty municipal-planning bills you want passed, so you can have the house you want in the place you want, with the NIMBY rules you want in place (personal end). Or directing a property development company to work with a city to get a certain nascent greenfield area zoned and infrastructure put in (business expense), so that you can then build a house in that area (personal end).
Note that in those cases, you don’t gain any asset from the business expense in any legible way. You’re just leveraging your corporate soft power to enable you to do the things you want to do with your own money — to make purchases that would have been impossible, possible.
If you’re Jeff Bezos, you can do this out of your own pocket. But most people would find it a lot more efficient to just have those lobbying / property development dollars never go through their bank account.
Please don't tax the wealthy. I have a couple friends who are in top 0.1%. They have enough money for the rest of their lives. If you start taking money from them, they will simply stop working and start spending more time with friends and family.
The correct goal is not to take money from the rich (which can be achieved by taxing them; this is what Bolsheviks did and it resulted in millions of deaths from starvation), but to get rid of poverty.
Taxing the rich won't help with poverty. Because if even if top 1% will be paying 100% taxes and still continue to work, total government tax income will be increased by 20% or so (that's from richest 1% get 30% of income). That's not a lot, and these money will be spent inefficiently by the government (as government always does).
The government already has more than enough money, but it spends it inefficiently, and this issue need to be addressed (by fixing the system), for example:
* fix gerrymandering
* replace FPTP voting with some variant of ranked choice voting
* increase the limits of the candidate money collection (currently they are very limited for the candidates, but unlimited for parties)
So when more independent or less dependent on parties candidates are elected, more issues can be fixed, for example:
* fix many regulations which drives hospital prices up
* fix regulations which makes lives of ISP monopolies too easy
and so on.
This model of the world assumes that "rich person" means someone with high income and "raise taxes on the rich" means raising the top marginal income tax rate. I don't think either is true and I struggle to imagine how you could be familiar with the financial details of the .1% and think otherwise. This model cannot survive much contact with actual rich people.
People rich enough to be included in "tax the rich" mostly get their money from capital gains, and I don't believe that any rich person anywhere would ever decide not to invest their capital because the capital gains rate is too high. Even if capital gains were taxed at 90%, what else would you do with capital? Dollars sitting in a checking account cannot "spend more time with friends and family".
OK, so we are talking now not about income tax, but about capital gains tax? That's quite a different topic.
But, also, no, capital gains tax should not be increased.
Because you cannot become rich by investing into index.
You become rich by founding a company while working 16 hours a day and getting a large share of it. And after many years of that work with lots of failures and a lot of personal losses, you become rich.
Some people try this path, many fail. If you tell them you can continue doing that, but in the end you will get slightly more than a regular dude working 8/5, they will think, why bother.
Alternatively, you can become more rich by investing your personal money into something risky (like buy a share of your friend garage startup). Again, if cap gains tax will eat your gains, you won't do it next time. Why bother, better buy a condo and wait for it to grow.
Increase cap gains tax, and you won't have new trillion cap companies in the US.
Blanket dismissals aren't helpful. As the guidelines state: "Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something."
>I will simply point out that we could raise the capital gains rate 5% tomorrow, and it would still be lower than it was when Amazon and Google were founded.
Well Google was founded in 1998. In 1998 the long term capital gains rates were 20% for those in the highest bracket and if held for over 5 years went down to 18%. Today's long term rates are 23.8% for those in the highest bracket. Where are you getting your numbers?
https://taxfoundation.org/federal-capital-gains-tax-rates-19...
I was under the impression that the Google founders started in January of '96, when the rate was 28%, and '98 was when they legally incorporated. Perhaps they originally intended Google to be a non-profit, and only changed their minds in reaction to the rate cut in 1997?
> A good critical comment teaches us something.
Interesting complaint. What was yours intended to teach me? Other than your nitpick, you forgot to include the part where you actually disagree with my point (that asteroidbelt's dire prediction that entrepreneurs would have no desire to launch ambitious commercial ventures if we raise the capital gains rate is not supported by recent history).
All the same, if they're still working when they don't have to, they're doing it for something other than money, so I'd bet that they would stay on anyways
Things are getting bad enough to where "cutting ones nose to spite the face" starts to make sense, redistributing the misery the rich have insulated themselves from.
Just my feeling on the situation.
They know it already, most of my friends are classical liberals/conservatives.
> they will be the scapegoat for the mob
You are probably in the top 10% (as most people here on HN), so a lot of people here might become the same scapegoat.
> Things are getting bad enough to where "cutting ones nose to spite the face"
I'm not sure things are getting bad. Poorest people now are more rich than poorest people 30 years ago.
Like in the US now average electrician makes 70K a year. That's a lot of money. And anyone can be electrician.
They say income inequality raises, which is bad, but it might be not that bad, because common inequality measures do not includes the costs of free stuff given to poorest people from the government, like better free hospitals which they can use in case of emergency.
> starts to make sense redistributing the misery the rich have insulated themselves from.
As I said, taxing the wealthiest (especially with extremely high taxes like proposed by certain "liberal" activists) will not make poor people more rich. It will make poor people even more poor because of economic recession.
Different measures are needed.
Because from your position it seems absurd.
From mine it seems like the only move left to make.
What is the evidence that now is worse than say 30 years ago for the bottom 50%?
It is perceived that it is worse now. But is it objectively worse?
went up.
Income
went down.
So I guess you're right, objectively things are much better, it's just my perception of paying 80% of my income to rent that's the problem.
I'm having a hard time finding where in the chart that happened across the last 30 years. https://en.wikipedia.org/wiki/Real_wages#/media/File:United_...
.png){kind=link}
That graph makes no statement whatsoever about whether real income in the bottom 50% has gone down, stayed flat, or risen over the 30-year period under discussion. For that, you’d look at a real income chart over the 30 year period, which would show that real income has increased over that span.
If incomes at the bottom rise by 20% vs 10% inflation and incomes at the top rise by by 100%, the income at the bottom went up in real terms, though the share of income at the bottom will have gone down.
this is why I think it will be hilarious when the kids start revolting, and burning shit down folks like you will be looking at graphs and going "how can they be upset, look at this graph! these gig economy renters should be jumping up and down with joy according to my statistics...ungrateful bunch!"
Yours as an individual may not have. No one is saying you're ungrateful as an individual when your experience is different to the group's average.
If you need high education, you just take credit, and pay for it with your salary which is much higher than it was 30 years ago.
And if you think that you won't be able to pay for credit because it's not possible to find a decent job with liberal arts degree, then probably you don't need that education.
> Cost of housing went up
I suspect that's because construction workers are paid well now. So instead of studying classical literature in high school, maybe study bricklaying.
> Cost of healthcare went up
This is the issue, but "taxing the rich" won't solve it. It need to be properly regulated. The fact that insulin costs $100 has nothing to do with taxes for the rich people.
> Income went down
Seems like it is not true. There's a chart: inflation adjusted median household income.
https://fred.stlouisfed.org/series/MEHOINUSA672N
It goes up.
> perception of paying 80% of my income to rent that's the problem
Man, I don't know your situation.
Sometimes people pay for something they shouldn't.
Like buying a shiny new car while old car only need occasional repairs, or buying top new iphones while cheapest android is 1/10 of that.
When I was young I rented a flat which costed me about 70% of income, while I could rent a room for 30% of my income, or a flat for 30% of income and two hours commute. But it didn't matter because I was young, and I would not do that now. If that's your case, you may need to reconsider your worldview. If it's not, than I don't really know your situation to comment on that.
Looks like the issue is not that "I want to get rid of poverty" but rather "I want to get rid of rich people".
Why is that a problem?
well it's a problem because I am in that group.
it's clearly not a problem for you or your friends, hence why I believe that cutting the nose to spite the face is the only way to make you and your friends care. Otherwise you'll spend the rest of time saying everything is perfectly fine, when me and a bunch of people keep telling you THAT WE ARE NOT OKAY.
Do you get it now?
> Like in the US now average electrician makes 70K a year. That's a lot of money. And anyone can be electrician.
I would not consider electricians as an example of poor people. And no, not anyone can be an electrician. It takes training and licensing, and many people can't jump those hurdles. (Not to mention the fact that if everyone became an electrician, very few of them would get any work.)
Exactly.
> not anyone can be an electrician
Who can't?
> It takes training and licensing
So?
By the way, just googled, entry level electrician apprentice with zero experience (you are required to do that for some time to get your license) gets about $30K. That's not a lot, but that you can do with almost zero training, and it in several years it is significantly more.
> and many people can't jump those hurdles.
Maybe they can be paintworkers then. 38K of income is not as lavish as the life of electrician, but that's should be good enough who cannot get an electrician license.
> Not to mention the fact that if everyone became an electrician, very few of them would get any work
Truck driver, nurse, carpenter, crane operator, plumber, car mechanic, firefighter and so on. There's a lot of thing you can do with little or no investment.
I mostly agree with you on this point. However, we can't do that without reforming the tax system. For example, Seattle is one of the most regressive places to live in the country, people in the lowest brackets pay 30%+ in local taxes but people over six figures pay 2.8%. People in single-family zones (wealthy) are slowing the supply increase in apartments which is allowing prices to rise. You can't get rid of poverty without going through the wealthy.
Getting rid of poverty requires taxing money (and taxing nothing else). This doesn't have anything to do with redistribution schemes. Rather, the act of hoarding money in a 0% interest environment is regressive and makes it harder for all other participants to do the same. When everyone saves their money, it gets harder to save money because deflation will reduce your income and thus ability to save money. New money must be created to catch up with savings demand but all the demand for loans and mortgages has been saturated at this point.
The only entity that can take on further debt is the US government but it refuses all the time, forcing unconventional monetary policy at the last remaining institution that actually cares about the economy. Remember why the Fed was founded? To prevent irresponsible government spending and fight the resulting inflation. It was not created to create inflation, that's the governments job.
Just think about a simplified real economy that produces housing and food but nothing else. At some point you have more housing and food than you know what to do with and people stop building and making food leading people to quit their job but also losing their ability to buy food and housing. The village chief (the government) then decides to just build a luxurious house for himself with the help of the surplus workers because he doesn't want to see them starve.
This is an allocation problem. We expect everyone to pay for their own living expenses but we do not guarantee that they can do so. We cannot send them welfare and be done with it because the busy people building the few housing that is actually needed feel like they should also get rewarded for simply existing (more likely they get angry at the welfare recipients). Because we want everyone to work to earn money, we must create bullshit government jobs that ensure full employment.
Only when we run into scarcity of materials and full employment do we need to cut back on spending and an institution forcing the government to cut spending already exists, it's called the Federal Reserve. Wouldn't it be better if we didn't have to rely on our politicians to do the right thing and instead we have a mechanism that kicks the private sector in the balls when it is asleep? Absolutely but it would require the above mentioned "wealth tax" on bank accounts with large amounts of money. I don't care what they do with the money, heck, I don't even want them to pay the wealth tax because then the government has to come up with a way to spend the money, defeating the purpose of the wealth tax. They can buy stocks and pass the hot potato to someone else until they find somebody who actually wants to spend the money.
Sure.
> 100% inheritance tax above $4 million.
If you don't think this would cause "massive distortions everywhere", I have some bad news...
Agree. especially about inheritance[1]. However, as I've said before corporate taxes are double taxation, corporation are paying their dues as every person involved with the corporation is freed from the liability of the business's actions by way of the state allowing liability limiting corporate entities to exist. When the business assumes liability from the owners, it also assumes tax responsibility.
>has caused massive distortions everywhere:
yeah, like in the global level of CO2, or the amount of plastic in the ocean, or the amount of mercury in fish, or....
It is not tax competition. It's tax fleecing. The issue is that companies are paying the rates of low-tax countries while operating by and large in "high"-tax countries and reaping all the benefits from their expensive infrastructure, law enforcement, healthcare, education, welfare (to top up absurdly low employee wages)... all of which gets paid for by "someone else" (you and me).
It might be tax competition if a company that decided to pay Bermudan tax rates also had to draw all its talent from Bermudan universities, had to build their massive shipping hubs in Bermuda using Bermudan transport, had to perform their complex legal cases through Bermudan courts, had to have their entire workforce cared for by the Bermudan healthcare system (or pay them enough to go private)...
(Nothing against Bermuda, picked totally at random)
And please: capital flight being the results of abusive policy? Corporations and wealthy individuals will always try to avoid giving the fair share to the society that enabled their wealth in the first place: the case where wealth moves because of abusive policies is so marginal in the ocean of pure greed. Some countries are fiscal parasites and benefit from the theft of other societies, and this is how we deal with parasites. Should we just watch wealth evaporate away to offshore stashes, wealth that actually belongs to the people?
Given that the median US household pays about $10k in taxes per year, and has a net worth of about $120k, perhaps we also need a global minimum wealth tax of say 8% per year, with a tax free allowance on the first $100m of net worth.
The only useful number is not % tax difference between rich & poor, but % leftover for discretionary spending.
How much of your time should you be forced to devote to others - the majority of government spending is on social programs. 1 day a week, 2 days a week?
What's the fair share? I'd say it's actually far lower than current tax rates.
When conspiracy theorists start being right, you need to question whether they're crazier for believing their theories no matter what, or if it's crazier to believe that they're wrong no matter what. Things like this are why I've never fallen for the promise that globalization and open borders are good for anybody but the ultra-rich, maybe.
Nations don't have a lot of control over what goes on outside their borders. They can try, but it's hard.
So you end up with weird 'race to the bottom' scenarios where everyone is trying to out-do one another with lower rates i.e. a giant prisoner's dilemma.
Something needs to be done collectively to sort out the problem and this kind of activity is how it's done.
This effort is not about 'fleecing' it's more or less trying to but a lower bound on corporations ability to avoid paying taxes.
It's the opposite of 'not serving their citizens' - it's making sure that taxation is applied to international corps in some consistent way.
I don't think 'conspiracy theorists' have been talking about this one.
How is that so?
More tax for the government, at least that benefits government workers and public servants positions.
This proposal seems like a global group of government affiliated people colluding to fleece each others' citizens instead of serving them. This is literally what conspiracy theorists have been predicting for decades, it's a terrible shame to make them right.