Top 1% of salary earners. The CEOs, highly paid doctors, engineers. The real capitalists - those who hold the assets and pay for their yachts with stock-backed loans - they don't pay 40% of the federal tax revenue. Their salary is $1/year.

How are stock-backed-loans paid back?

If in cash, they have to get the cash from somewhere, right? Supposedly selling the stocks. That can be taxed then and there.

If they transfer the stocks to the lender, that means the stocks in question are valued at $x, since that's the value of the loan. So tax that value.

After you die your estate sells stocks

Does the estate pay capital gains on those stocks, or can it take advantage of stepped-up cost basis rules to avoid those as well?

I'm not an expert, but my reading of the IRS's FAQ [1] is that the cost basis of inherited assets gets reset to the fair market value of the assets on the date of death.

1. https://www.irs.gov/faqs/interest-dividends-other-types-of-i...

You're right, and then you pay the inheritance tax which is more than the capital gains taxes would have been.

> > And then you pay the 40% federal inheritance tax and the 20% state inheritance tax on the total value at the date of death.

After the $12 million (nearly $13 million next year) exemption, the unused portion of which passes to the surviving spouse and increases their tax-free estate exemption.

But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.

If you're a billionaire, a $12m exemption isn't much of anything.

“But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.”

Like what?

GRAT’s are common for volatile assets like tech shares.

The estate gets a stepped up cost basis on the date of death. And then you pay the 40% federal inheritance tax and the 20% state inheritance tax on the total value at the date of death.

Loans are not income.

There is no law of nature that says only income can be taxed. Loans could be taxed.

You totally get it, and I really like the law of nature phrasing.

How about taxing your mortgage, then?

That could be a law. It would be a bad law for most people since they don’t own any houses.

Taxing loans to billionaires is a good law because it closes the “just take out a loan” loophole.

Alternatively, loans are income today coupled with an expense over some future period.

Including loan proceeds in taxed income (and deducting repayment) is certainly a potential policy choice.

OTOH, treating pledging an asset as security for a loan as a realization event at FMV, making it both taxable if a gain and a basis value update, while taxing capital gains as normal income would also be a way to shutdown the “use secured loans to fund your lifestyle to avoid realizing gains and being taxed” hack.

I have already covered this elsewhere, but that's an excuse and actually only points to how concentrated the wealth is. Too bad they pay more money than others. Tax them more.

The wealth that wealthy people have isn't "concentrated", it's created. I.e. they didn't take it from you.

It's not created by those people. It's created by some worker somewhere, and those people collect most of that created wealth as economic rent, solely because they own the capital used in the process.

Without their capital the whole organization where workers are creating would not exist in the first place. So the market is rightly rewarding capital owners for risking it in the first place.

Do you think that is easy and just "collecting rent"? What is your experience investing?

Without the labor, the output wouldn't exist either, so why do the capital owners pocket most of the generated wealth?

For that matter, how did it come to be that capital is so concentrated that most productive people have to rent it to generate wealth?

Both capital owners and workers are paid according to the prices set by the free market for their input. Most of the generated wealth however is captured by the society (ie we each derive more value from the stuff we buy than the cost we pay for it) and by the government - taxes on work, consumption and profit are usually much larger than other costs in a company operation.

Capital tends to concentrate, indeed - but that is also a good thing as it allows bigger enterprises. However the cost to build a new business has been steadily decreasing over the year together with the cost of capital while its availability has been increasing. Today's most productive people can easily open their own practices and set their price on their own contracts. The "rent" they pay is hugely outweighs by their future profits.

If you want to rail agains something, rail against the fact that financial education and investing is not more widespread so people do not understand that they can participate and invest in capital markets from very low amounts of money. Capitalism is powerful and empowering but requires work and education.

Before Kennedy it was 91%.

Imo we are well bellow the Laffer curve.

>Before Kennedy it was 91%.

To which the common retort is "but nobody actually paid that because prior to the tax code simplifications of the 70s you could trivially reduce your burden in all sorts of ways"

Not only that, the tax avoidance schemes required investing in tax shelters, which were usually very poorly performing investments. When Reagan exchanged the lowered tax rates for elimination of those tax shelters, it allowed capital to flow instead to productive investments, which helped the economic growth.

Then surely, they would have no problem returning to that exact system right? No they want to avoid that by all means necessary? Sounds like they know how much it truly effects things.

As a purely theoretical concept I don't think it's a big deal. It wouldn't have a large effect on me personally. That said, society might hurt a bit from the tax shelter vs productive allocation of capital problem another commenter above mentioned. As a practical matter I have zero faith that the usual scumbags would not corrupt the process leaving everybody with higher taxes than either system and then gaslight everybody into thinking they're paying less. Look at how healthcare turned out.

> That makes the top income tax rate 50%.

While interesting data points, I'm not seeing an argument that they are paying enough, which seems to be your implication. Maybe it should be 90%. Maybe it should be even more.

Make taxes too high, and who is going to invest in America? It will be a Pyrrhic victory for you.

We already see wealthier people fleeing California for Texas and Florida, the same for New York.

It's not the government that produces the wealth in the economy, it's business. Confiscatory taxes will wind up with everyone poorer, including you.

Most business revenue in America is still from small to medium sized businesses, so this investment you speak of doesn't sound too important. So yes, I agree that business produces wealth, but the business that matters isn't going anywhere because they're largely local. The larger corporations are still going to do business here as well because of the market power.

As for wealth flight, it's overblown. First fleeing to another state is very different than fleeing the country. Second people aren't staying in America only because the taxes are lower, there's plenty more to offer.

Edit: I forgot to add that the actual evidence for wealth flight is pretty thin.

And for those corporations or wealthy people that do leave, fuck 'em. They're not special, irreplaceable snowflakes. They beat out their competitors by luck, and local competitors will immediately spring up to fill the void they leave.

Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.

> local competitors will immediately spring up

What is your experience starting new businesses? It is a highly difficult and risky endeavor and few people find it more attractive than simply getting a job. It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.

> Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.

No, mainly because of the risk of capital flight.

> It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.

I disagree. If a good or service is truly valuable, someone will provide it. The value of an unmet need will increase until it becomes attractive, and if it never meets that bar, then by definition it wasn't valuable enough.

The only exceptions are goods or services that capitalism isn't effective at solving anyway, either because they are common goods that capitalism would exploit to exhaustion, or because they would yield only natural monopolies that are rife with abuse. A state-run corporation is a good option here, and wealth flight isn't an issue.

I lived in a country lacking capital (first because it was robbed by communists and then due to the risk of the transition managed by a deeply corrupt political elite) and I can tell you existing demand was only met through imports.

It sucked for everybody - without local capital the entrepreneurship was very limited, jobs remained scarce, specialists emigrated and the trade deficit became unmanageable. In the end multinational corporations slowly entered and bought various state-granted monopolies (the only real monopoly entrepreneurship can't solve) on the cheap. But that tiny capital started a snowball effect that eventually raised the living standard to unhoped-for levels. Now we have both billionaires and a wealthy middle-class. It took a long time though.

Careful what you wish for - a country without successful entrepreneurs and local capital(ists) is an easy prey on the international markets.

> Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.

Which brings the need for inter governmental regulation.

Good luck with that! The most authoritarianists have ever managed to do was make it illegal for people to leave their inhuman regime: guns on borders, pointing inside. Not surprisingly, those countries were quickly outcompeted by free countries.

It's exactly what has happened / is happening in Europe.

Europe is divided between countries deeply infiltrated by Russia and countries who can’t wait to escape and write their own futures. UK, Poland, Hungary will welcome fleeing capital. Brexit wasn’t the last exit.

With its anti-business attitude, tiny high-tech industry and lacking innovation and creativity, Europe’s importance in the world is vanishing fast.

The future is in Asia and Eastern Europe. And US, of course.

I completely disagree.

Billionaires should not exist. When one gets to a certain amount of wealth, TBD, there they should get a golden plate saying "Congratulations, you won capitalism" and from them on, tax rate is 100%.