back
210 comments
The current issue I feel with taxing is that, at least in USA, it mostly taxes based on Salary on Employees, but never tax on the capital or the actual wealth.

Tax the rich means: Increase W2 tax and property tax which, takes money away from me to feed lower middle class

Tax cut means: Reduce the estate tax and cooperate tax, keep the W2 tax flat, and cut the benefits that most critical to the bottom: Food stamps while keep other unnecessary programs unchanged: Discounted Toll for low income when driving in HOV lanes.

I'm reading Piketty's book now and it's not isolated to the US.

Once you hit a certain wealth in most OECD countries, you just stop paying taxes. All that is required is to not take any income, which is easily done. So the top of the "income" distribution is a lie. When we say "top 1% pay X of all taxes", we're talking about the top 1% income earners, not the 1% who have the most wealth, or even the 1% who have increased their wealth the most over the last year.

Piketty is clearly correct with his minimum wealth tax proposal. It does seem the only way to tax people who never realize income.

A lot of the poor and middle classes don't understand how a billionaire earning millions of pounds per week in passive income is any problem for them - or where it comes from

1, billion, 2 billion, 100 billion individuals makes no difference to the average person

In fact there's a misguided sense that they earnt that money through work and not rent seeking

But the sad truth of the matter is - the rich are on the other end of your mortgage or indirectly your rent - the other end of that business loan to your favourite coffee shop controls the price of your coffee - you pay them interest directly or indirectly through everything you pay for and they use that money to buy more of the assets you use - they are a massively increasing rent seeking class

Their wealth growth is exponential it compounds on itself some particularly rich people are seeing 40% annual returns and the overall economies wealth growth is 1 or 2%

It's analogous to a black hole things like capital gains tax and income tax mean nothing to these people because they don't sell and they don't have a "working" income because that's not how the ultra rich accumulate wealth

The sad thing is for people on benefits the government look automatically into your personal bank account and track anything coming in - they have built a massively invasive infrastructure to track the poor so they can remove their benefits if they try to earn £5 selling music or selling IT services - but if you're rich the government don't even know how wealthy you are - the government doesn't know how many billionaires there are - let alone any talk of having to tax them - so they get to pay very close to - if not nothing - whilst software engineers (as an example relative to this forum) in the UK get to be the high rate tax payers where 50% or more is taken

Everyone else has to fund their free ride and its absurd - they're the group that need the least support financially

> you pay them interest directly or indirectly through everything you pay for

I wonder how feasible that would be to track as an economic index. Even on individual level its popular to workout which day of the year you start earn money you get to keep after income taxes and vat.

There's a parallel between welfare and passive gains from diversified investments; yet as you point out, government welfare is tracked and very visible, while private investments are far more opaque.

Part of the wealth that workers create is paid in taxes to the government; another part is paid to the shareholders of the company they work for, to the bank they get their mortgage from, and so forth. The latter is equivalent to an hidden tax, part of which goes toward a form of private welfare that's proportional to an individual's wealth.

People get quite angry about government welfare, particularly if the recipient seems undeserving of it. Yet they have no problem with the passive income from billionaires, even if it ultimately amounts to the same thing.

The paper talks about economic growth, income distribution and unemployment.

I'm mostly interested in economic growth, so looked at what the paper claimed about that.

It found that major, sudden reductions in taxes on the rich did not have any statistically significant effect on the trajectory of economic growth over the following five years.

But:

- Their sample is small. They only looked at relatively large, discrete declines in their home-grown measure of taxes on the rich. They did not look at all tax-rate changes.

- They did not look at effects beyond the five-year horizon, which means it would probably exclude the impact on people starting startups, as the successful ones usually take more than 5 years to start making serious money. (or did during the period the paper considered, even if timelines have subsequently accelerated.)

- Big sudden tax cuts don't happen in a vacuum, and I don't see a way to control for confounding.

Just look at growth rates before Reagan/Thatcher in the US/UK and after. If you take the 30 years before and the 30 years after, you'll see growth actually decreased.

Obviously this is correlation, but it's somewhat damning to the conservative gospel (dogma?) that lowering taxes somehow automatically produces more growth.

Given that we have no clear indicator that raising taxes on wealthy people would reduce growth (really, we have the opposite signal from the historical record), there seems little reason not to pursue greater equality.

The question I have is that at some point X taxes are collected and the economy is growing at Y, then the policies change and now X-5 taxes are collected and the economy grows at Y. What was the function of the 5 under the first regime?
> The average citizen seems to be fairly poorly informed that taxes on the rich have fallen really dramatically in the past 40 years.

There's an observation.

The rich don't pay income tax like us little people do, they don't pay capital gains tax like us either.

They can avoid both through schemes such as taking low salaries and borrowing against assets they will never sell for a profit.

The tax system would need a complete overhaul to plug those holes, but it would always be a game of whack-a-mole.

Piketty's 2% tax floor on wealth (for those with over $10M/$100M in wealth) is an excellent way to fix this.

Basically the idea is to just accept the fact that the super wealthy will find the loopholes, so instead remove the loopholes. Just flatly put a minimum tax all wealth over $XX million at 2%.

One nice aspect of the policy is that it's a tax minimum: so people with high incomes who are already paying that much, regardless of how wealthy they are, don't need to pay the tax.

Another nice aspect is it's relatively easy to implement. There aren't that many people with $XX millions in wealth.

The thing I don't like about this is that it treats trickle-down economics as if it's something that needs to be debunked. Trickle-down economics has never been a real economic policy, and never been seriously advocated by federal policy-makers. It is an entirely pejorative term created by detractors of supply-side economics.

The policies of supply-side economics, however, are much more defensible, but it seems people would much rather pick on the strawman.

> Trickle-down economics has never been a real economic policy, and never been seriously advocated by federal policy-makers. It is an entirely pejorative term created by detractors of supply-side economics.

https://thehill.com/homenews/house/3522907-gop-lawmaker-byro...

Well here is one of those federal policy-makers you say doesn't exist, a Republican congressman, advocating four years ago for trickle down economics and advocating for "...letting the free market - and yes, trickle down economics, which does work - actually flourish in the United States"

So do %s/trickle-down/supply-side/g , then, if it's the term that's bothering you. Doesn't "debunking" trickle-down economics then, by extension, debunk supply-side economics? I'm not clear on the meaningful difference
> as if it's something that needs to be debunked.

When half the country has believed something for close to a half a century, across multiple generations, you bet your ass it needs to be debunked. The fallacy of the "precious job creators" is as American as "pulling yourself up by your bootstraps"

The fact that you and I were not dumb enough to fall for it doesn't really help anyone in the grand scheme of things. There's still an insane amount of work left in educating the public, and we may even be regressing at this point.

You'd think so but not even a decade ago Kansas tried it again and it failed and the GOP continues to cut taxes for the wealthy and people keep electing them.

Most of the nation (and world) never took any economics. This stuff is all magic or religion or whatever to them. Ronnie Raygun is as good as a saint to much of the US.

Can you describe the defensible policies of supply-side economics? That's as vague a term as trickle-down economics to me.

Supply-side economics is based on a flawed premise of looking at only the Laffer curve and saying if taxes are too high the economy suffers, therefore we must make the tax rate arbitrarily low. In reality though there are more nuances to making the tax rate arbitrarily low (e.g. high inflation and cost of living for starters).

You're right, it's not one lie, it's a pack of lies, trotted out every time congress needs to justify another capital gains tax cut or rationalize why the next tax hike needs to target work not wealth.
When you are rich, it allows a lot more time and funding to come up with arguments supporting policies that will make you even more rich.
I have literally seen it being defended, in all seriousness, after the economy crash. When the financial institutions were bailed out.

Maybe not the name, but the literal idea that the money given to them will flow down. There were even graphics gping with it. Again, in all seriousness.

So yes, it needs to be debunked.

I always like to approach this conversation with a question:

Should business that actually do create jobs in practice get bigger tax breaks?

For example, if I by some miracle create a 1 man company that makes $100 million / year profit and somebody else creates a company that makes $100 million / year profit but has 2,000 employees...should the two companies be taxed differently?

Walmart employees 1.6 million people in the US. 68% are full time. Average salaries range from $18.25 / hr (field associate) to $27 / hr (supply chain). Median $30,520 across all US employees. 156,000 employees are estimated to be enrolled in Medicaid (9.4%).

Amazon employees 1.1 million. $23 / hour average for field / fulfillment. Median $53,211 across all US employees. 123,000 employees are estimated to be enrolled in Medicaid (11.7%).

Both offer pretty extensive career development, training and tuition assistance programs.

Profit per employee:

- Walmart $10,800 / employee (1.6 million employees)

- Amazon $50,000 / employee (1.1 million employees)

By comparison:

- AppLovin $3.7 million / employee (898 employees)

- NVIDIA $2.86 million / employee (42,000 employees)

So what if we actually had a tax strategy that literally was aimed at "job creators" rather than "capital gains"? What would that look like?

The article focuses specifically on the economic effects of tax cuts, concluding that they have little overall positive effect on economic or job growth. This is consistent with meta-studies looking at the relevant research. To the extent that "supply-side economics" predicts that tax cuts will stimulate the economy, it's fair to say that it has indeed been debunked.
Trickle down economics is just another name for supply-side economics. They're one and the same. The difference is that the name "supply side economics" focuses on the the beneficiaries while the name "trickle down economics" focuses on the results.

Supply side economics owners claimed that benefits would "flow" down from the capital owners. The pejorative name "trickle-down economics" accurately reflects that the quantity of benefits that "flows" down to everyone else from those benefiting from massive tax cuts is a mere trickle of the money that the supply side saved from the tax cuts.

So no candidate ran on tax cuts? Explicitly for high income earners?
> The policies of supply-side economics, however, are much more defensible, but it seems people would much rather pick on the strawman.

Lowering taxes is one of the policies of supply-side economics:

> Supply-side economics is a macroeconomic theory postulating that economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade.[1][2]

* https://en.wikipedia.org/wiki/Supply-side_economics

Along with decreasing regulation and allowing free trade, so you've just knocked down one of the reasons to think about supply-side stuff seriously.

The actual paper never uses the phrase trickle-down economics and just covers how tax cuts for the rich don't improve the economy but does increase income inequality
I mean, when I googled supply-side economics it said it was another name for trickle-down economics. I'm interested in how you'd say they differ, honestly, not trying to be argumentative.

I found at least found one analysis (by a left leaning think tank, so take it for what you will) https://www.americanprogress.org/article/the-failure-of-supp... that seems to show that supply-side economics hasn't panned out.

It seems obvious that there is an optimal tax rate, too much or too little is bad. But I'd definitely say right now we are far far on the too little side of things.

This is ridiculous. "Trickle-down economics" is just another name for "supply-side economics". You can also call it "voodoo economics", as George H.W. Bush did. They're all referring to the exact same failed policies that have been criticized for failing to achieve what they claim to achieve for 130 years.
this is correct. i suspect many simply do not know this because the straw-man is so pervasive.
Quelle surprise!
This is basically what happened in Orbán's 16 years in Hungary. He gave indirect tax cuts for the rich, or just generally everyone who is not living pay check to pay check (by hungarian standards it means you are rich). So for example installing solar panels came with a tax writeoff but the whole thing was setup that it only benefit who already have had enough money to install a full brand new solar panel system. So it didn't help at all those who are really in need. Same happened with EV cars. If you already have money for a brand new EV car you got it cheaper. For the rest? Good luck. Mind you this is eastern Europe where everyone is driving +15 year old diesels from Germany. The rich got richer.
Same in Finland. The ruling party (represents the rich and the business owners) gave tax cuts for rich (high income earners and and those who have capital gains). Next they're planning to cut the business tax 4.5 percentage point. Eroding tbe states tax income while the state is already in the hole with a ton of debt. Of course the story is that these will kick off investments and make business boom. Best part is that to compensate for the tax cuts they're gutting the benefits including social security, unemployment benefits (highest unemployment in Europe btw) and calling those people lazy who just need "encouragement" to start working. A real hero pasty.

Similarly incentives to buy EVs naturally only apply to the folks who are better off. Most working class buy cars that are +10 years old. (The average car age is among the oldest in Europe btw)

Ehh, I don't know if those examples really apply, even if they effectively have a similar outcome. Incentives for environmentally friendly tech are more about helping those industries get off the ground against entrenched incumbents that are harmful to everyone. The benefit of less exhaust in the air is immediately good for everyone.

Although I'm sure government and corporate greed was able to exploit those policies as much as it could.

If we started the society/economy from scratch today, the current situation would seem absurd, inhumane and unacceptable. Imagine an inequality in scale of 10000s while you are only 1.5 more capable than the average.

(Very) rich people with their legal (eg tax loopholes) and illegal (eg sold politicians) tactics cost middle class people almost 100% their optimal income. Not to mention qualities of life like social state and safety. Calculations need a blog post.

Well, yes — much like trickle down economics.
The most effective economic policy to help the impoverished is to tax the rich and give the money directly to the poor.

The only reason this isn't common sense is because the rich have fought it for millennia.

Its been trickle up economics for a long time now.
No shit. If you want a tax cut to have an economic impact, cut taxes for the poorest, the ones with the least disposable income.

EDIT: Seems like the article is suggesting that giving more disposable income to the rich, results in them using that extra income to buy capital rent seeking assets. So it is a double fuck you to the poor. Because not only do the rich end up paying proportionally less in taxes, but they also use the extra money to compete with you for your home, buy the home and rent it back to you, putting you in an even worse financial situation.

I think the real issue in the UK is the definition of "wealthy". The government seems to think it's people making more than 50k...
But hey it’s for the greater good eh, like Effective Altruism that people like Dario or Peter Thiel have been really obsessed with.
In other news, the pope is catholic
No se podía saber
Take the inverse stance: take a country that taxes its citizens to death, like France or Belgium. How are they doing? Very badly.

France is concerned that the IMF main jump in and take things under control because the government's public deficit is out of control. With a GDP of about $3.6 trillion (american trillion, not french) and public spending representing, officially, 57.2% of those $3.6 trillion, that's a cool $2 trillion spent, yearly, by the state. This is where wealth goes to die.

If you were to seize, just fully seize (and consider it's liquid, which it is not), the wealth of all the billionaires in France (there aren't even 50 of them) you'd end up with $500 billion.

So if you were to just take all the wealth from all the french billionaires, you'd only pay a quarter (!) of the budget of the french state. For one year.

And that's it. 25% for a year.

Another way to see it: the french public deficit is more than $100 billion, yearly. If you were to seize the wealth of all french billionaires, you'd only have enough money to prevent the public debt from growing (which has to be at around 140% by now) for five years.

I'm not listening to talks about "taxing the rich" anymore until that caste called politicians stops spending money it doesn't have, enslaving future generations that shall be taxed to death to pay the insane public debt their governments are creating.

Wanna talk about what's happening to the city of Brussels (Belgium), my native city? 40% right at the poverty line. Immense deficit. Conditions of living going down the drain. First political party in the poll is now the PTB, a full on communist party (and communist in the EU have noticed that, at the moment, they could get the votes of islamists, so strangely enough in a "the enemy of my enemy of my friend" way, communists in countries like France and Belgium happen to be very welcoming to religious extremism [in France the communist party literally has been forced, when it created a coalition with others party at the left, to sign a paper saying it condemned islamism terrorism for they've been so cosy with the idea that it really wasn't clear at all that they actually were against islamist terrorism]).

And you want to get me started on that wonderful discovery the left made recently: that by importing millions of poor migrants and then giving them the right to vote, by a very surprising coincidence these poor imported migrants happened to not vote for the right?

How... Convenient?

Several countries are discovering that: "you eventually end up of the money of others" and "when the rich becomes poor, the poor dies".

The one thing that really irks me in this is the full-on hypocrites I know who believe that anyone richer than them should be taxed to death: to them "trickle down economics" do not work but that they live a middle-class lifestyle more preposterous than 99% of the planet doesn't bother them. They want lower taxes but not for those richer than they are.

I cannot understand that mindset.

I hate the Zuck: really, screw that guy and his faked 3D legless avatar demo for his dystopian VR world (how did that one turn out btw? As well as the Meta AI race?) and screw his PHP+JavaScript "punch the monkey" abusive ad world. Just fuck it. But I don't give a single crap in the world that he's got two $250 million Yacht or whatever they cost and however many he's got.

Good. For. Him.

I'd rather be poor and free than live under communism. And doubly so if we're talking about living in a society dictated both by religious intolerance and communism (which is where several countries are headed).

And if you want to "help the poor", go give all your money, open your house/appartment to pooor migrants and give me a fucking break.

All the brain dead marxists here - please remember, any artificially promoted slogans whether it’s “tax the rich” or “cut the taxes” are there only to get your votes. The real problem is never as simple as turning few knobs.
Can we please tax the negative effect that big money has on the rest of us?

I mean I'm perfectly fine with people who work hard making a lot of money. But that changes once that money is used against me. From that moment on I want to be compensated for damages, and the best way to do it is through taxes.

Giving tax cuts to public companies allows anyone to invest in them and benefit from that.

Also just because someone benefits, that doesn't mean that other people have to suffer.

The scientists who worked for the cigarette companies couldn't find a link to cancer. Economists who work in academia can't find working economic policies for the same reason. Private sector economists on the other hand...actually place bets and get rewarded or punished for being wrong. Not shockingly, they have very different opinions from the academic economists.

PS And you wonder why Mississippi is richer than the UK.

PPS The Laffer curve is real, has a mountain of evidence and disproves this paper.