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Originally Posted by CaptainMidnight
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You probably saw the ProPublica piece that came out a couple of months ago, noting that a few uber-billionaires have paid little in the way of income and capital gains tax in recent years.
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What ProPublica and the media fail to note is that the businesses founded and largely owned by these uber billionaires pay huge amounts of taxes. I gave some examples in another post. One was Mark Zuckerberg, whose share of taxes paid by Facebook over the last 12 months was $1.5 billion.
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Originally Posted by CaptainMidnight
Of course, a lot has been written about the Sanders/Warren "wealth tax" idea, although there's wide disagreement on whether the plan would even be likely to pass constitutional muster.
As if on cue, along come left-wing professors Saez and Zucman, pushing a plan they suggest would be easier to implement while not risking any serious constitutional challenges.
https://www.washingtonpost.com/outlo...-billionaires/ |
As you probably know, this is not an original idea. Ron Wyden and other Democratic politicians have been promoting it for years. The fact that Wyden is Chairman of the Senate Finance Committee means you have to take it seriously.
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Originally Posted by CaptainMidnight
I love this excerpt:
"Economically, a tax on the stock of unrealized capital gains is an ideal tax, because it doesn’t distort behavior. The gains, after all, have already been made: Billionaires cannot go back in time and try to become less wealthy. Therefore, the traditional argument that taxation discourages effort and innovation becomes moot."
[End of excerpt]
Wouldn't distort behavior? Seriously?
Sure, they have a point about past behavior. But what about entrepreneurs' and investors' future plans?
When thinking about policy proposals, I sometimes wonder how the great classical liberal thinkers of days gone by might view stuff.
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No shit Sherlock. Your comments later in your post about the ability of taxpayers to reduce taxable income by moving investments to private equity and the like is a double edged sword. Yes, maybe you can misrepresent the actual value of businesses, real estate, and PE and VC investments. But the Democratic Politicians also have a master plan to audit people who will pay the mark-to-market tax every three years. Since the IRS can go back and audit three years of returns (more if there's alleged fraud), that means that some taxpayers will have every return audited. An even bigger consideration is the time and cost and hair pulling to comply with the tax. Taxpayers will have to come up with valuations of everything they own every year. As described in this thread, I had to do that for a relative, once, and it was a nightmare.
And what happens after you've paid tax on large mark-to-market gains on a business or investment that subsequently goes bust? Is the government going to pay you back for the taxes you paid? Probably not. Right now they won't even let you deduct any more than $3,000 per year from a carried forward capital loss against ordinary income. Think about the example of Elon Musk that Saez and Zucman provided in your link. Musk has borrowed a lot of money against his business assets. If those get marked down by the banks someday to anywhere close to book value he'll go bankrupt, but under a mark-to-market regime the federal government will make out like a bandit. Which is what it is anyway. A bandit.
If I were subject to a mark-to-market tax on capital gains, I would choose one of three options,
Option 1. Sell or liquidate several very small businesses I own, and don't start up any more. Sell my real estate investments. I do that and I don't have to go through a valuation nightmare every year, to estimate my mark-to-market taxable income. Then I'd sell my publicly listed stocks too. Would I invest in a hedge fund where the manager got to take 43.4% of the fund's increase in value (56% if I were a resident of New York City) every year? Hell no, that's a good way to go broke. Well, substitute "government" for "hedge fund manager", and that's what you've got under the Wyden/Saez/Zucman plan.
Then what I'd do would be to invest every dime in tax free municipal bonds, so the bastards in Washington couldn't take a penny of my earnings. And maybe I'd become a member of Patriotic Millionaires, or a U.S. Senator like John Kerry who did exactly what I described above, and bitch about people who don't like to pay taxes.
2. Expatriate
3. Commit suicide
In the long term, the government loses, in terms of revenues it will realize from me, for every one of the options above -- confirmation of what Bastiat had to say:
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Originally Posted by CaptainMidnight
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The anti-free trade crowd here should read your link about Bastiat btw.
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Originally Posted by CaptainMidnight
The U.S. economy depends a great deal on liquid equity markets which benefit not only entrepreneurs in search of capital, but individual investors who have the opportunity to earn excellent returns in their 401(k) and other accounts -- greatly improving their prospects for a comfortable retirement.
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This is why countries like New Zealand and Belgium don't levy a capital gains tax. Capital is allocated more efficiently when there's not a penalty for moving it from one business or investment to another.
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Originally Posted by CaptainMidnight
In 1990, when pressed to accede to tax increases, George H. W. Bush famously said that when the big spenders started talking about taxing "the rich," it might a good idea for middle-class Americans to hang onto their wallets. (One of those taxes was the so-called "luxury tax," which backfired in embarrassing fashion and was deep-sixed by the Clinton administration in 1993.)
The senior Bush had a pretty good point.
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The minimum and alternative minimum tax is a good illustration of Bush's point. The impetus for the tax was that 155 Americans in 1966 realized over $200,000 in annual income and paid no tax. The first year the minimum tax was levied, 20,000 people paid it. In 2017, 5.1 million people paid the alternative minimum tax.
