Growing wealth/income inequality is bad. Transfers can be effective for reducing wealth inequality. We'd need more revenue for that, however.
Progressive taxation is good. Progressive taxation that only targets the top 0.1% isn't effective unless income inequality were much worse than it is.
To make a meaningful amount of more revenue via income tax without hurting the bottom 90% too much, we'd need to target the top 10%. That probably means the top tax bracket should kick in around $130K. Much lower than where it is now, but high by the standards of many other rich countries (in the Netherlands 52% kicks in at $63k/yr, in Denmark it's 60% at $55/yr).
We should add a VAT too. Possibly with a simple UBI-style system to offset its impact on the poor (since they consume more of their earnings than the rich)
Though I support the idea that wealthy people should pay high taxes, perhaps even higher taxes than they do now, I think it's also worth noting that the US already gets 70% of all its taxes from the top 10%[1].
As long as we're keeping capitalism, I don't buy the argument that simply being rich is wrong. I'm also fairly skeptical of set limits on income, as setting those limits is very hard. What goes into it? How much money per year is the limit of a "Just" income? I don't think those questions have a definitive answer.
I think repealing the bush tax cuts is a good idea. I think we should keep the estate tax. I think the "buffet rule" isn't bad, but it's no solution. I just wonder when people will say it's enough. Rich people pay less tax today than they did a decade ago - but they're making massively more money as well. If we add all those taxes, and there's still a massive income imbalance, what then?
I think it's in everyone's interest to live in an equal society, for reasons that I don't want to get into right here. However, I'm dubious that can be achieved through targeting one social class or another. It seems like the American right is targeting the poor, while the left is targeting the wealthy. Everyone feels like a victim and just wants to keep what they have now. What a crappy situation.
Income tax isn't going to solve this, and I think it's unfortunate Europe tends to very myopically focus on income differences. Progressive income tax does little other than to widen the gap between wage slaves and the rich.
The wealthiest don't have an absurdly high income, they own enough assets to live off dividends and wealth appreciation, which typically gets taxed 20-30%. If they even have an income to be taxed, it's basically symbolic.
This is where the real inequality exists, and it's unfortunately not part of the discussion at all. Instead wagies with slightly higher than average income get portrayed as 18th century mustache twisting top-hat capitalist factory owners.
Next steps if nothing measurable develops within a reasonable number of years, increase the rate of change until the overwhelming majority of citizens are no longer taxed whatsoever.
This is the real promise of increased worker productivity benefiting the workers themselves rather than only making them pay more tax.
If that big a majority could not be reached, then I guess as undesirable as it would be, it becomes necessary to start taxing wealth itself. This really shouldn't be allowed to happen though and there's no fair way to accomplish it, but at least the untaxable citizens would not have to worry, while only people who can actually afford to be squeezed step up to the plate as fairly as can be done. There should be no way that taxing of wealth could ever become permanent at all.
Permanent taxes on wage income would have never been allowed if it weren't for their proposed (then later implied) temporary nature in the years it took to finally approve such a massive transfer of wealth away from those who could afford it least.
Remember in the USA, free enterprise flourished like never before or after, but that was only during the period when no wage income was yet taxed.
The only faintly realistic excuse for taxing wages was to use the funds only to pay down debt and reduce ongoing costs forever so that the levy could be lifted as soon as humanly possible.
I do think real honest billionaires are among those who may not want anybody to be able to ascertain what their actual wealth is at any one time. That's fair too.
That confidentiality could be maintained perhaps by an alternative minimum wealth tax, which only the very wealthy could easily pay, for those who do not want to disclose detailed wealth standings at their own option.
After all the dust from such a seismic shift would settle, then the fixed value of the alternative minimum could be focused on to balance the books without any non-rich people having to suffer due to wastefulness and inequality, no matter how long those undesirable financial factors continue to linger. For the very rich, a fixed minimum (rather than a regulated percentage) might still be far less onerous compared to the barely-rich. That's OK, as long as the books are balanced they can still compete among themselves for dominance and stuff, as long as none of the non-rich citizens can get caught in the crossfire any more. There is no other non-revolting choice once tax rates have risen far enough beyond insignificant. The longer that unbearable taxes have been allowed to stand, the more it can be like a dam breaking when sympathies change.
But taxation of wealth itself should really be avoided "at all costs", as the increasing number of non-rich are almost permanently relieved of levies in a systematic way.
Rich people should be able to keep their money as long as none of the non-rich citizens are suffering because of it.
This is in line with people who are already getting so worried about a possible tax on wealth, that UBI looks more urgent to them as years of increasing inequality go by.
I don't have a big problem with income inequality, compared to wealth inequality (averaged over a long time). Consumption taxes and "death tax" (or at least a strong social convention toward donating assets in excess of a certain level, rather than heirs inheriting them) would go a long way. Income inequality is largely due to differences in economic contribution, and encouraging people at the far right of the power curve to do more (and be more numerous) produces positive externalities.
The main quick fixes to the tax code which I'd like to see are immediately taxing carry as income, getting rid of deductions for employer health insurance and mortgage interest, and a national sales tax or VAT (ie consumption tax), ideally highly progressive or exempting the first 50k/yr or something. Then, look at lowering income tax rates to something like 25% flat and setting lt capital gains and dividends at slightly less (20%) or the same as income but indexed for inflation. Get rid of the AMT, and maybe lower corporate rates to try to get firms to repatriate more and avoid abusive tax structuring like the double Irish sandwich and such.
A more transparent tax code, even if revenue neutral, would boost economic activity. A more transparent tax code, taxing things with negative externalities and not discouraging positive externalities, raising more income while cutting expenditures greatly, would be even better.
Not that there is much chance of any of this happening.
This article is not really worthy of Hacker News. We already have a tax system that is designed to do a fair amount of wealth redistribution. That moral argument was fought and largely won a long time ago.
Now, that system certainly needs tweaking, and the technical details of that are worth discussing. What is the optimal amount of money that can be taxed from the wealthy before we suffer consequences like capital flight or low private investment into the economy?
Throwing around “wealth tax” as a slogan to argue over is not going to bring about that constructive discussion, though.
A good solution would be a flat tax plus a prebate. Tax all income at 15% regardless of the source, with no tax breaks or exceptions. The first $50k or so is tax free, and that could be handled as a prebate where everyone gets paid (taxRate * floor) by the govt[0]. This would be much more progressive than the current system and vastly simpler to implement and enforce.
Looking at the current capital gains rate is actually too rosy, since there are so many loopholes and exceptions that wealthy people can use to bring the rate down. The actual effective tax rate billionaires in the US pay is below 10%.
I doubt something like this will ever happen given how many selfish interests would fight against it. It sure would be great though if middle class workers didn't pay a higher tax rate than millionaires.
[0] I'm throwing out round numbers but have seen research that backs up figures in this ballpark.
This has been downvoted, can someone add a counter-argument for this? I.e. why should someone with higher wealth be able to pay less tax (in absolute and relative figures) than someone with lower wealth?
Wealth is not income though. Higher wealth taxes would go a long way but then you again have the problem of the wealthy simply moving their wealth out or not bringing it to the high-tax country in the first place.
The problem isn't the tax rate, it's the growing wealth inequality. Since you seem to have thought much about this already - do you agree it's a problem, and how would you fix it, if not for progressive taxation?
Really? You think that's more realistic than just taking it from the top 0.1%? There was a time in this country for nearly 40 years where the top tax bracket was above 75%, and for quite a while it was 91%, and for a short while it was 94%. Basically it was a policy of not letting a small number of people take all of the marbles. There is, in fact, a way to avoid that tax, it's called start a new business or expand one - those costs are tax deductible. The problem is tax policy at the top end is basically saying some tiny number of people can be hoarders, not innovate, and then aristocratically hand it off to their kids in the form of trusts that don't pay inheritance tax.
Very possibly some kind of basic income would help people be more mobile, move from expensive cities to less expensive cities. But I also think as likely is higher taxes would incentivize the very rich to invest. Rich investors = good. Rich savers = bad.
In the Netherlands we already have wealth tax (capital gains tax, but doesn't care whether you gained or not). It's nothing particularly disruptive. We still have the most wealth inequality in all the world. It might be a bit pointless to tax wealth in addition to capital gains though. You could just raise the former instead.
The biggest problem I have with that is that taxes for the rich have a history of becoming taxes for all. I want to see less wealth being consumed by government and more of it staying in the hands of the people that created it.
I would like to see a flat tax rate with a negative income tax for people below a certain threshold to replace welfare. Flat tax to treat everyone equally and negative income tax to shorten the tail on the left of the curve.
But, that is me. I don't have a problem with some people having vastly more wealth than me. They are still citizens that should be treated as equals under the law.
I would really like to see the 16th Amendment repealed and government return to being funded by import/export tariffs. A flat tax with a negative tax on the low end is a compromise in my mind. I don't see the 16th Amendment ever being repealed but I do want to see tax code simplified, people keeping their income and less redistribution through welfare. That is not something that government should be doing. Sending more money to government is a bad investment.
Are people not aware how large wealth inequality is at this point? A small marginal wealth tax would generate just absolutely massive amounts of revenue because that is where most money is locked up, not in people's salaried income.
This is ignoring the fact that wealth taxes don't effect you until you are extremely rich - even the most aggressive proposals don't start until you are at $32M-$50M in net worth - there are definitely some startups that are struggling while the founders have this much in equity, but the vast majority of struggling startups never hit the $100M+ valuation that would be required.
Not to be a dick, but I don't see why anyone thinks this is valid justification to block a wealth tax - maybe you could argue that the cap should be higher. Income inequality has gotten ridiculous and is only going to get worse as AI technologies mature. There needs to be a way to reallocate wealth from the super-rich to the 40% of Americans who would be unable to pay for a $400 emergency and I haven't heard a better proposal.
Progressive taxation is good. Progressive taxation that only targets the top 0.1% isn't effective unless income inequality were much worse than it is.
To make a meaningful amount of more revenue via income tax without hurting the bottom 90% too much, we'd need to target the top 10%. That probably means the top tax bracket should kick in around $130K. Much lower than where it is now, but high by the standards of many other rich countries (in the Netherlands 52% kicks in at $63k/yr, in Denmark it's 60% at $55/yr).
We should add a VAT too. Possibly with a simple UBI-style system to offset its impact on the poor (since they consume more of their earnings than the rich)
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