'It is not up to the rich to decide how much they should pay in taxes'

https://english.elpais.com/economy-and-business/2024-01-31/gabriel-zucman-it-is-not-up-to-the-rich-to-decide-how-much-they-should-pay-in-taxes.html

by PaulHoule • 2 years ago

23 23 2 years ago

english.elpais.com

abeppu2• 2 years ago

It’s easy for the super-rich to structure their wealth so that it doesn’t generate much taxable income. That’s why the income tax fails.
Since the notion of income for the very rich is not very well defined, it should not be expressed as a function of income but of wealth.
Our proposal is to have a minimum tax equal to 2% of the wealth of billionaires each year.

I think this is pretty reasonable.

To me the more interesting part is a structure for tax-avoidance where he says each country should be able to look at a company's total global tax bill, compute a "deficit" of how much more tax they would have paid if that country's tax rate applied to its global business, and pro-rate based on how much actually occurs in that country ... which presumably then updates their "deficit" calculation.

There can always be countries that play the role of tax collectors of last resort. If Spain decides that it wants multinationals to pay at least 25%, it can calculate the tax deficit of each multinational that has access to its market, defined as the difference between what they are taxed globally and what they would have to pay if they were subject to a minimum tax of 25% in each country where they operate. Some will pay at least 25% everywhere and will not have an extra tax in Spain, but for those that do not [pay]? Spain could collect a portion of its fiscal deficit. For example, if Apple has a global fiscal deficit of 10 billion and does 10% of its global sales there, Spain could say, “If you want to continue to have access to our market, you must pay 10% of 10 billion, an additional €1 billion in taxes.” The logic is very simple: you have to link market access to minimum taxation.

Am I wrong, or does this mean that if multiple countries took such a policy, calculating taxes then requires a fixed-point process to converge on a value?

houseatrielah2• 2 years ago

Wealth is not that easy to calculate. What is a Basquiat painting worth? The worth of Mar-a-lago is currently the subject of a lawsuit.

https://nptelegraph.com/news/nation-world/government-politic...

hotpotamus• 2 years ago

I'm guessing the people who own those things acquired them with money. I'm sure it's possible to figure out a value.

abeppu2• 2 years ago

I think one way of getting values that are reasonable is that if you claim something is worth X, the government should have the prerogative to call your bluff and purchase it from you for X * (1 + c). If you're making a reasonable attempt to value stuff, you should be mildly pleased with that sale, if perhaps inconvenienced. If you're trying to pretend stuff is worth far less than it is, you're at risk.

seanmcdirmid2• 2 years ago

Apple will optimize it so they don’t enter markets that would cause their tax bill to rise. So say Spain wants 25% and other countries just want 20%, well, iPhones will just be sold in the black market like they did in India, so Spain loses out on the VAT that it is already reliably collecting. Each country also wants Apple to compute their profits differently, and they will probably argue about what profit they have dibs on (if multi taxation is avoided).

haunter• 2 years ago

I am Andrew Ryan, and I'm here to ask you a question: Is a man not entitled to the sweat of his brow?

jauntywundrkind3• 2 years ago

Maybe perhaps.

But the people under discussion here have all made vast fortunes on the sweat of thousands other people's brows. They should be expected to have some tax burden. And income tax is clearly not working as is.

tforcram• 2 years ago

`the sweat of thousands other people's brows`.

This is a great point, and I think lends itself to a better solution than taxes. Why give all the excess to the government, who will do who knows what with it? (actually it's pretty clear where the majority of it goes, and I'm pretty sure most people wouldn't spend it the same way as the government).

If someone attained their wealth with the help of others, why can't we enact regulations saying that the wealth must be divided amongst all of them? Sure you can have some differences for those at the top, but it shouldn't be orders of magnitude difference.

Then each of those individuals would be both better off individually as well as spreading that wealth farther across the economy instead of concentrated to a few individuals.

I'm probably too naive in my thinking here though.

readthenotes1• 2 years ago

Some of the people sweating are tax lawyers doing their best to structure income and hide assets.

They will only increase in value if a wealth tax is passed.

Heck, if you have the PM if Iceland hiding stuff in Panama, what will happen when they get serious??

freefaler• 2 years ago

Aren't those "sweats" being paid for with the salaries they've received? And on these salaries aren't taxes been collected by the government? If the organizer and capital risk taker can't keep the results of his venture for himself and investors he won't do a thing. Without him no venture would exist and no taxes will be generated and no wealth would be created. If you take all the milk from the cow the calf would die of hunger. If you take all the profit from the businessman you won't have anything to tax. Many "experiments" of fair distribution in history prove that.

robocat2• 2 years ago

Another article on 2% tax on assets of the wealthy.

I wonder how that would change the payoff calculations for business founders?

If winning means you just get your winnings taken by taxes over the rest of your life, why work to win?

https://80000hours.org/2014/05/how-much-do-y-combinator-foun...

The median return for a founder is essentially $0. Because most startups fail.

The average return for a YC founder is skewed heavily upwards by one or two ultra-successful unicorns.

Plenty of founders are motivated by non-monetary goals (especially status).

But would people still be incentivised to become founders if the amount you get to own after decades of taxes rounds to $0?

Some pundits suggest a cap on wealth "limitarianism".

Incentive structures matter.

It appears to me that a lot of small businesses are run by people investing huge amounts of their time to go from having a few million to a few million more.

A 2% tax above a cliff means that people will stop developing their businesses once they reach the cliff.

Socialism via taxation policy?

kmos17• 2 years ago

What if the 2% only kicks in for people with over $100M in assets?

seanmcdirmid2• 2 years ago

I’m not sure how that is workable. If they have investments, they deprecate at 2%/year no matter what after $100m? Of course, the IRS doesn’t take a share of those assets, only cash, so they have to liquidate 2% of their assets each year, but only if they are worth more than $100m (assets - debts I guess?). Sounds like an auto economic cash given what has to be liquidated each year.

robocat2• 2 years ago

Then no founder continues building their business once they near having $100M equity.

Basically it creates a cap on private business size? Maybe reasonable, maybe not.

It is a negative incentive to never try to work more to earn more. Suddenly you lose your serial entrepreneurs. Disincentives matter as much as incentives.

In New Zealand, the party suggesting a wealth tax, was going to levy it if you had more than $1 million equity.

There is no reason they wouldn't reduce the limit from $100M over time. Politicians want power, why would they want to allow anyone to have significant assets?

One fundamental strength of capitalism is that it finds compromises between competing needs - compromises that our politicians can't or won't make.

jemmyw2• 2 years ago

So they have to sell off a small bit of wealth to pay the tax? That seems reasonable if their wealth is so large that they're over the tax threshold. For most founders this will never be an issue and for those that it is... they've basically got so much wealth they could just cash it all out and live a good life, so it's unlikely they're working more for the money.

jemmyw2• 2 years ago

Socialism via taxation policy

All Western capitalist nations, including the US, implement a degree of socialism via taxation. So whenever I see this "that's socialism" argument my thought is so what? We already have socialism, that's not an argument. A good argument is on the effect in either direction.

polski-g• 2 years ago

Europe should implement wealth taxes. Such a tax in America would be in violation of the takings clause of the 5th amendment. So it would further shift more capital to the USA, great win for us.

snapplebobapple2• 2 years ago

Fundamental disagree. What the services and network effects of being in a country is worth is very much up to the individual to determine amd when taxes are significantly higher tham their value it causes people to leave. Its a big part of the wealth drain in canada and why our capital markets suck so bad vs the usa, where many rich and founders go instead of staying. You cant think you can give someone a bad deal and they will jist put up with it forever.

blacklight• 2 years ago

Your point can be summarized as "We can't tax the rich, or they'll just go somewhere else". A.k.a. the Stockholm syndrome of extreme capitalist markets - we all know that it's not fair that Jeff Bezos pays zero on his wealth while a hardworking bricklayer has to pay nearly half of his salary, but that's the price to pay to avoid scaring off the ultra rich. Needless to say, this vision of the world is abhorrent, immoral, and disgustingly unfair, and we need to fix it.

snapplebobapple2• 2 years ago

No,my argument is the benefit and the cost of taxation should attempt to equal out, otherwise people will look for a better deal and it applies to all pay levels not just rich people. We have a mismatch between the services being provided and the benefit from the services flowing to people not paying the taxes and those services providing limited network effect benefits back to the tax payers right now.

there are also other problems with your statements. You pretty clearly haveno idea how taxes work because you are confusing the dollar earned by the brick layer with a dollar dividend paid to bezos. When the correct equivalent dollaris the profit earned by amazon and the combined tax paid by amazon and bezos on the dividend, since the earned dollar that is equivalent to the dollar the brick layer earned is the one earned by amazon, a dividend is just a distribution of partially taxed earned dollars fr(m the construct we call a corporation.

you also incorrectly think hardness of work has anything to do with earnings, when it is irrelevant. What makes work valuable is scarcity not hardness.

'It is not up to the rich to decide how much they should pay in taxes'

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