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So earlier this week, new Congresswoman Alexandria Ocasio-Cortez was interviewed on 60 Minutes. In the course of the interview, Cortez laboriously and correctly described marginal tax rates:
Once you get to the tippie-tops, on your $10 millionth dollar, sometimes you see tax rates as high as 60% or 70%. That doesn’t mean all $10 million dollars are taxed at an extremely high rate. But it means that as you climb up this ladder, you should be contributing more.
Many Republicans seized on this as “the Democrats want to take away 70% of everything you earn!” This included comments from highly placed Republicans, like Steve Scalise, who tweeted:
Republicans: Let Americans keep more of their own hard-earned money
Democrats: Take away 70% of your income and give it to leftist fantasy programs
Congressman Scalise is the House Republican Whip – the third-ranking Republican in the House of Representatives.
Does Scalise really not know the difference between effective and marginal tax rates? Or is telling the truth just completely alien to his value system?
And why does being either dishonest, or an ignoramus, seem to be a formula for rising high in the modern GOP?
The “kicker” panel at the bottom more and more reflects how I’m feeling, alas.
Ocasio-Cortez’s suggested 70%, by the way, is both moderate and reasonable policy.
Usually I avoid doing cartoons based in the current news cycle; I prefer to do cartoons that will last. But this one is both; it’s got a story in the current news cycle, but the underlying issues will remain relevant for years to come.
I’m pleased with how this comic came out. It’s very basic, visually, but often the very basic comic strips are the ones that look best. Looking at it now, the only thing that makes me wince is that I drew the guy’s left arm in the same pose in panels 1 and 4; I usually try to avoid that, since having them move around from panel to panel makes them look more lively.
Although it’s not important to the strip, the woman in the strip is visually based on Alexandria Ocasio-Cortez, and that was fun; I don’t often do caricatures in my strips.
TRANSCRIPT OF CARTOON
This cartoon has four panels, plus an extra fifth “kicker” panel, with much smaller artwork, below the bottom of the strip.
Panel 1
Two people, a man and a woman, are standing inside some sort of building, talking. He has neatly combed and blow-dried blonde hair, and is wearing a polo shirt. She has dark hair combed back into a bun, and is wearing a simple pale dress with a dark belt. He is grinning in a somewhat mocking way; she is responding seriously, arms spread a bit.
POLO: I hear liberals want to raise income taxes to 70 percent! How stupid can you guys be?
BUN: I know it sounds strange, but top tax rats of 70 percent or higher were normal until the 1980s.
Panel 2
A close-up of Bun, with a bit of the back of Polo’s head in the foreground. Bun is smiling and holding one palm up in an “explaining” gesture.
BUN: The 70 percent rate we’re talking about would only apply to the ultra-rich. And even the ultra-rich would pay much less than that on their first 10 million dollars of income!
Panel 3
Another closeup on Bun, who is still talking with her hands, and now has a serious expression.
BUN: When top tax rates were at 70 percent – or even 90 percent – the rich didn’t stop working or flee the country. Anyhow, shouldn’t billionaires start paying their fair share?
Panel 4
A shot of Polo and Bun. Polo is laughing. A third man, wearing a necktie, has come in and is talking to Polo while pointing at his watch. Bun is startled by what Necktie says.
POLO: Ordinary workers can’t live on 30 percent of their income! You’re stupid!
NECKTIE: Congressman, sorry to interrupt, but you’re due on Fox News in ten minutes.
Kicker panel below the bottom of the strip
Bun speaks to Polo.
BUN: I should go, too. I’m getting “do not engage” tattooed inside my eyelids.
Oh … I get it.
Republicans are uniformly stupid and don’t know the difference between marginal and effective tax rates. All CPAs and economists of any value are democrats, for instance (really bad and stupid ones may be republicans).
Democrats (the good people!) know the difference, and only deep down want the best for people, although they don’t always signal these virtues. Motivations are uniformly good.
Subtle, but I get it.
Zag: No, more like: Republicans habitually elect and/or appoint ignoramuses and conspiracy theorists to high office.
Ignorant people (and knowledgeable people) can be found in both parties. But our ignoramuses aren’t the President of the US, or the House Whip.
Man, that shooting must’ve rattled him more than we thought! Get well soon Steve!
Obama claimed that women earn 77 cents on dollar for the exact same work, which is just as false as the comments about 70% marginal tax rate. So was Obama being dishonest or is he an ignoramus?
500 million Americans will lose their jobs every month, according to Pelosi, if her package isn’t passed.
https://www.youtube.com/watch?v=-UR5M5teyQ0
Lots and lots and lots of stupid statements can be found from democrats in Congress (as well as from republicans). Another good one is Hank Johnson wondering whether Guam will tip over.
The claim that only republicans say stupid stuff is just false and cherry-picking.
Ampersand,
Have you considered the possibility that at least part of the reason why you see Democratic politicians as less ignorant and into conspiracies is because you tend to believe the same ignorant things and believe in the same conspiracies, while Republican voters and politicians tend to have different ones?
I think that is a good point, but it’s also that everyone has the tendency to just overlook things on “their” tribal side, especially in this very tense political age. If you want the ultimate goals that Maxine Waters is pushing for, as an example, you are simply going to overlook the stupid stuff she says. You are not even going to remember she said it, even if it’s something you don’t really believe. It’s just human nature, and it happens on both sides.
Zag,
Yes, that was my point.
Zag, that Nancy Pelosi statement from 2009 was pretty clearly just a slip of the tongue. She meant to say 500k (still questionable, but not egregious), and she’s made that mistake and corrected herself before: https://nypost.com/2009/02/04/pelosis-500-million-person-slip
And the Guam thing was pretty ridiculous, no disputing that. Johnson claimed later to have been joking, but it seems more likely that he was just trying to cover his butt with that explanation.
But: I seriously doubt that we will see Steve Scalise correcting *his* math error, or even admitting that it isn’t to be taken seriously by claiming it was a joke or something. The GOP strategy lately seems to be focused on doubling down on even the most ridiculous statement. Hopefully he proves me wrong on this.
As David said, there’s a difference between committing to a completely false analysis – such as conflating effective and marginal tax rates (a “mistake” that GOP speakers have been making for years), such as denying climate control, such as claiming that there’s an enormous problem of non-citizens voting with fake IDs – versus an isolated mistake or slip of the tongue that is admitted to, and does not become the party’s policy.
Everyone in every party who talks in front of microphones over and over is going to make mistakes; no one bats 1000. But that’s not the same as virtually the entire party committing to a deceptive take like “we can’t reasonably say if human-caused global warming is real.” And it’s not the same as a President, or the head of the relevant congressional committee, having that deceptive (or ignoramus) take.
Me: “Ignorant people (and knowledgeable people) can be found in both parties.”
Zag’s response:
Zag, please read my words before you respond to them next time.
I am not saying that “only republicans say stupid stuff.” Literally no one on this thread has said that; no one of any significance has ever said that, as far as I know. It’s a complete straw man on your part, and you should drop it.
The point is that most voters, even most working class Republicans, support what Democrats are actually proposing, taxing only people who make hundreds of millions at very high rates, like 70% only on income over a very high threshold.
Republicans know that if they attack such plans on the merits, they will lose. So, on this particular issue they lie, knowingly, repeatedly and systemically, as a party to scare voters into voting against Democrats.
“both sides do it!!!!!!!!!!!!!” “you’re just as biased at the rest of them!!!!!!!” would not be valid arguments against that point, even if there were actually comparable lies told by Democrats. But, all the opponents can cite are a few isolated misstatements. They can’t come up with a parallel, knowing, repeated, systemic lies told by elected Democrats as a matter of party policy, because there aren’t any.
Meanwhile, Amp immediately can point to climate change, and I can now chime in with the so-called “crisis” at the southern border and the lie that Republicans want to protect health insurance coverage for people with preexisting conditions. These are points that we have argued and linked to repeatedly in the past.
The Democratic party is a coalition of minorities with competing interests who will call each other out on their bullshit.
The Republican party is a coalition of people with various degrees of unearned privilege (often quite scanty) who will cover for each other to maintain the the (sometimes pathetic) privileges they have.
I can buy into creating a marginal tax bracket that will tax incomes over $10 million at 70%. It’s doesn’t break my heart. What I’m waiting to see is how much money Rep. Ocasio-Cortez thinks that will raise in tax revenue and how she intends to fund the “Green New Deal” that she proposes.
And, aside from the money, how she intends to replace 88% of current energy production with renewable sources in 10 years without completely disrupting American society and what financial impact she thinks that will have on Americans. But that’s a different topic.
Oh, I don’t know about that. They all seem to be agreed that universal background checks will actually have an effect on mass shootings and the gang warfare in places like Chicago, that building a wall in certain locations of the U.S./Mexico border won’t have an effect on illegal border crossings, that President Trump and Russian government interests colluded to help him win the 2016 Presidential election, that they know that illegal aliens commit crimes at a lower rate than American citizens and other such things.
Ron, I don’t think any of those things fall into the same category as “AOC is proposing that ordinary workers should pay 70% of their income” or “there’s significant doubt about if human-caused climate change is occurring.” There is no legitimate disagreement about if effective and marginal tax rates are different things; they are different things, full stop. There is no legitimate disagreement about if human-caused climate change exists, any more than there’s legitimate disagreement about if the atmosphere exists.
I don’t think the same applies to most of the things you list. For instance, what exact effect a wall would have on undocumented immigration rates is something reasonable people can disagree about. (The only opinions about the wall I find unreasonable are those who think it would have no effect at all, and those who think it would stop all undocumented immigration. But I people can reasonably disagree about if the wall’s effect would be significant vs too small to matter).
How sure are you that background checks would have ZERO effect on mass shootings and gang warfare? Obviously it wouldn’t eliminate those things, but are you positive that background checks couldn’t even have a small effect? Like, you don’t think there’s a single mass shooter, ever, who could have been deterred or made to buy less effective weapons? Honestly, if that’s your opinion, it seems as dubious to me as someone saying that there wouldn’t be a single immigrant, ever, deterred by a wall.
Speaking of the border wall – I haven’t figured out how to post links to tweets. But have you all seen the tweet where Jim Acosta went to McAllen, TX, stood in front of a steel barrier there, and made commentary about how he didn’t see illegal migrants causing problems there? Apparently he thinks this supports the concept that a barrier isn’t needed, as opposed to the concept that a barrier prevents problems. I couldn’t even name the guy until he got his White House press pass pulled and it made the news. But if this is the quality of commentary and journalism he’s known for I’d say pull it permanently and give it to someone else.
I’m not contesting that people who don’t understand what a marginal tax rate is aren’t spouting BS.
Yeah, but there’s been a whole lot of the former, hasn’t there? How many times have you heard a commentator, public official, political cartoonists, etc. who seem to have the idea that all a 20 foot wall will do is ramp up sales of 21 foot ladders. And I haven’t see too many Democrats call them out on it, which is the point here.
Actually I’ve made it a practice ever since the first mass shooting that got highly publicized years ago to the point that they publish everything they can about where and how the shooter got his guns to check that particular issue out. I’ve only ever seen one that would have failed a background check. Yes, he shot 4 people. So that one MIGHT have been stopped – or not; as you well know there’s plenty of illegal means to acquire firearms. Heck, plenty of these shootings use firearms that were owned by the parents of the shooters, who bought and owned them entirely legally. The bottom line to me is that the law being proposed will cost lots of money and have basically no effect on the problem it’s supposed to solve – which makes me suspect the motives of the people who want it passed.
As far as gang shootings go, here in Chicago they comprise the vast majority of firearm-related homicides and I really don’t see how people who break all the other laws that get you to the point of shooting someone are going to be stopped by a universal background check that’s imposed only on legal gun buyers. Note that here in Illinois the State of Illinois already subjects all legal gun and ammunition buyers to background checks and it doesn’t seem to slow down shootings in Chicago much. Sure, some guns come from Indiana, where the State does not require that. But by definition those purchases are either a) from a commercial dealer that has to have a Federal Firearms License and they DO have to run a background check, or b) a private seller. Pass a law that criminalizes the private seller for not running a background check on a buyer and what’s going to happen is that a buyer with a criminal record will just go elsewhere, either through a straw buyer (which is illegal now) or to an illegal source.
Seriously – I doubt it will make any difference, except to stifle entirely legal private gun sales (which I suspect is the real motive for the law) and criminalize people for no reason.
It’s not so much that we think nobody’s going to be stopped by a wall, but that it’s a really terrible idea to spend billions of dollars on a giant monument to xenophobia in the desert when 1) our infrastructure needs massive repairs, we have people going hungry and homeless, and the small matter of catastrophic climate change to spend that money on, 2) a wall would do severe ecological damage, and 3) undocumented immigration is not the giant bogeyman that the right likes to present it as.
As far as universal background checks, it’s really weird how Republicans are big on law and order until that inconveniences them. If someone’s got to call 5 state and county offices and spend hundreds of dollars to vote, that’s okay, but if it makes it slightly less convenient for them to buy a gun, then that’s a problem. We’ve already agreed that people who’ve committed certain crimes should not have access to guns, but we don’t actually enforce that.
Personally, I don’t think universal background checks are sufficient, but I think they’re a start. Ideally, people convicted of domestic violence would be banned from buying or owning firearms (temporarily would be reasonable for a first or more minor offense), and people who provide access to a gun to someone who uses it in a mass shooting should be charged as accessories in some cases.
Somehow, I’m pretty sure that’s not the motivation of the Parkland kids. Maybe, just maybe, people supporting stricter background checks are really tired of classrooms full of dead children.
I mean, you’re older than I am, and I was a high school senior when Columbine happened. You remember when this didn’t happen. This is not some freak natural disaster that we just have to shrug and accept. We’re the only country in which it happens with anything remotely resembling the frequency it does here, it hasn’t always been this way, and it doesn’t always have to be this way.
No, actually, that isn’t “the point here”. Amp posted about a top member of Republican leadership actively promoting what he knows to be lies for political gain, not failing to call out a bunch of random supporters on their stupid opinions. Top Republicans also claim that they are for protecting coverage for preexisting conditions, even as they are working on lawsuits to end that coverage. Oil companies and the politicians who support them know that global warming is real, just as sure as tobacco companies and the politicians who supported them knew that smoking causes lung cancer in the mid 20th century. Top Republicans are knowingly promoting lies for political gain, to make themselves and their supporters more wealthy. I don’t see Democrats supporting clear lies in a similar fashion, except on the right of the Democratic party, where some are beholden to the same industries as Republicans are. I also don’t see a motive for lying on the left as compelling as the motive of financial gain on the right.
Both Democrats and Republicans know that the vast majority of people who are in the U.S. illegally have been here for years and/or entered legally and overstayed their visas. No wall is going to fix that. The parts of the border where walls and fences would be most effective already have walls and fences. Putting a wall across a desert where hundreds, if not thousands already die annually trying to cross will almost certainly lead to more deaths. I think it is unlikely to reduce attemts enough to be worth the expense. In any case, I think the burden of proof should be on the ones who want to spend billions on the fucking wall.
I think it will slow the flow of guns from legal to illegal markets, and make that transition more risky for middlemen. Both would result in higher prices in the illegal market. Some people would would no longer be able to afford an illegal gun. Also, whether you see why or not, most states with stricter gun laws have lower rates of gun violence. Because of Chicago, Illinois is an outlier. But, in that case, as you note, guns are still easily obtainable in nearby Indiana. In New York City, my understanding is most illegal guns come all the way from North Carolina. That’s got to add something to the price.
Why? To what end? Just to be kill-joys?
Kate,
https://www.commondreams.org/views/2016/10/14/clinton-speech-deutsche-bank-was-designed-give-cover-wall-street-coziness
LoL
Me @19
The banking industry is one of those industries, and Clinton is one of those Democrats.
Of course, it depends on part on how strict the background check is. For instance, should someone who has, less than a year ago, turned in his gun to police because he was worried he’d commit an act of terrorism, be permitted to possess firearms? Current law says “no problem,” but maybe that’s not someone who should be able to hold onto guns. (I’m talking about Esteban Santiago, who shot 11 people, five fatally, in Florida a year ago).
Or how about someone out on bail for a murder charge? Maybe not having guns should have been a condition of bail for Briddell Barber, who shot four people.
And there’s Kevin Neal, although there the problem was that the police were insufficient at supporting the laws, by not following up vigorously on his neighbor’s reports that he was using guns. (If they had gotten a search warrant, they might have taken his guns away, since he couldn’t legally have guns).
Devin Patrick Kelley is another person who shouldn’t have legally been able to buy guns. But the Air Force failed to enter his name into the NICS system after his court martial.
David Wayne Campbell.
David Conley.
Dylann Roof, who probably wouldn’t have been able to buy the Glock he used if the FBI had more than three days to investigate his past arrests.
Robert Lee Adams.
Joseph Jesse Aldridge.
Cedric Prather.
Jody Lee Hunt.
James Sparks-Henderson.
Jaylen Fryberg. He used his father’s gun; safe storage laws might have saved four lives (five, including Jaylen’s).
Don Charles Spirit.
Ronald Lee Haskell.
I could go on and on and on – I’m less than halfway through this list I’m drawing these names from, and the list itself only goes back to 2009 – but I think that’s enough to make my point.
As you say, not all of these (and many more) shooters would have been deterred by better laws and/or better enforcement of the laws. But I don’t see how you can claim as fact that NONE of them could have been deterred.
Regarding gang murders, and murders by repeat offenders (gang or not) in general – it seems counter-intuitive to suggest either that it’s not possible for laws to make illegal guns more expensive (through supply and demand), or that more expensive illegal guns wouldn’t mean lower sales of illegal guns. And, as Kate said, there’s research supporting a connection between tougher gun laws and lower murder rates (and even stronger evidence for lower gun death rates). Maybe you don’t agree with that research, but a reasonable person could disagree with you on that, which puts it into a different category from conflating effective and marginal tax rates, or from denying global warming.
@Ampersand#22-“Of course, it depends on part on how strict the background check is. For instance, should someone who has, less than a year ago, turned in his gun to police because he was worried he’d commit an act of terrorism, be permitted to possess firearms? Current law says “no problem,” but maybe that’s not someone who should be able to hold onto guns. (I’m talking about Esteban Santiago, who shot 11 people, five fatally, in Florida a year ago).”
I agree that there should be stricter gun control laws but there’s a reason why
many psychiatrists are opposed to laws taking away guns from anyone who thinks that they might commit an act of violence. Someone like Esteban Santiago, who hears voices telling him to shoot people, should be kept away from guns. But if an OCD patient is having fears that he might shoot someone, and you take away his gun, then the next week he’ll have fears that he might kill someone with his car, and if you take away his car, the next week he’ll have fears that he might stab someone. Psychiatrists can tell the difference between people that are actually psychotic or violent and people that are merely afraid of hurting others but it’s difficult to write that difference into law.
The current federal law is that only people who have been INVOLUNTARILY committed to a mental institution lose their guns. Some states have stricter laws:
https://www.cnn.com/2017/01/09/us/fort-lauderdale-shooting-suspect-gun/index.html
There’s a good case to be made for the “involuntary commitment” standard. Involuntary commitment means that a psychiatrist judged the patient was a danger, not a layman. The real question is why wasn’t Santiago committed.
Oh, I don’t know about that. They all seem to be agreed that…President Trump and Russian government interests colluded to help him win the 2016 Presidential election
LOL.
https://www.nytimes.com/2019/01/11/us/politics/fbi-trump-russia-inquiry.html
Scott Walker joins the chorus:
https://twitter.com/gregpak/status/1085234905603325953
Hey, Ron, if you’re still reading, did you read my comment #22?
i do not understand the wealth tax thing. do not almost all rich people have families? i think alot of them will just start moving wealth to alot of different people. if you have a billion dollars and are taxed above 50 million dollars then you probably have ten or twenty people you can work with to say they own your stuff and then you will not pay much or any wealth tax. i wish i were a billionare, i would like to try that!!
i understand the gun thing Ampersand but i am not sure i think it is a good idea because i do not think that police are very good at not-shooting people especially when they think those people have guns. if you start having alot of police going to try to take away alot of guns then i think you will have alot of people getting shot by police. maybe that will be less shooting of people, than the gun owners would of if they kept their guns, or maybe it will be more!
Ampersand how do you think that will work?
Even worse, Lurker, a wealth tax forces wealthy people to gradually sell off the companies they own and/or founded. This seems like a terrible idea.
I fear that too many of the non-wealthy imagine that the wealth of the .1% is in the form of giant vaults of gold coins, Scrooge-McDuck-style, when really, being incredibly wealthy is mostly about allocating labor and resources, not consuming stuff. Bezo’s stack of assets doesn’t place a claim on resources that may benefit others. Assuming that we want there to be more innovative businesses like Amazon, it’s best to keep control of labor and resources in the hands of a guy like Bezos, rather than force him to sell off his own company.
There’s always the “guys like Bezos will just do business elsewhere,” argument too.
If we have to shrink the deficit, a tiny tax increase across the board, utilizing a broad base, is probably best, soak the middle class a little more and maybe increase the deduction for children… basically, I’d like to propose that my wife and I pay more in taxes.
“Assuming that we want there to be more innovative businesses like Amazon”
I wouldn’t assume that.
Yeah, that’s why I put that disclaimer in. I’m very pro-growth, pro-productivity but I realize other people aren’t, and may prefer to trade these things for economic security, or perhaps something else. Me? I love amazon and use it frequently.
Amazon, like Walmart, leads to monopoly and the destruction of small, local businesses. Uber and Lyft replace cab drivers with lower paying jobs. Why anybody is in favor of that is beyond me.
link
To do it in one year, by my calculations, you’d need to find well over 3,000 people, who weren’t also in the position of needing to redistribute their own wealth.
luker23:
Then obviously you wouldn’t be a billionaire anymore. The simplest way to ensure people make false claims about ownership to the tax system is to make failure to declare any property legally equivalent to the irrevocable repudiation of any rights or interests. This anyone who was aware of undeclared assets (including accountants, etc) would be entitled to make a legal claim for, or simply take, the assets.
Jeffery:
Non-fungible or non-liquid assets could be dealt with through assigning the percentage of ownership to the government (with the option to pay the current market value in cash), to be held in trust until the original title to the assets is sold and that portion payed to the government.
Should businessmen that supply popular products and services enjoy an increased control over economic resources? Sure, but it doesn’t have to be untaxed or undiluted. It’s one thing to suggest Bezos should remain at the helm and continue to lead the company, it’s quite another thing to suggest that for society to get the benefits of his leadership he needs a $100 billion personal fiefdom. We need to develop new models of ownership, where at the small every-man scale (such as a car or house) it can be absolute, while at the top-end-of-top scale (such as billionaires in control of multinational companies ) it’s something closer to being held in trust for the community.
It’s also extremely unhealthy for democracy to have such high concentration of economic power. Without proactive wealth distribution, the inevitable result will be higher and higher wealth concentration, resulting in a neo-feudal society where the wealthy will own the rest of us as serfs in all but name.
This seems pretty extreme. I can imagine a tiny wealth tax to try and make r=g, but even still, there would be problems due to the way r varies across sectors of the economy (the winners of risky sectors, like small pharma companies, would be hit disproportionately hard). Don’t you worry about moral hazard? I know we already have that to some degree, but what you propose makes the problem much worse- now we have “too big to fail,” and “too publicly owned to fail.” But we need businesses to fail. We need newer and smaller companies to enter the market and win, and that means larger older firms must be allowed to die their timely deaths. If I ran a large company, I would want the government to hold as large a stake in my company as possible, and then I could take stupid risks and receive favorable treatment over my competitors.
I also think you’re on a slippery slope to socialism, or at least the nationalization of all large corporations. When the government owns significant percentages of a company, people will feel justified in democratizing the decision making. “We the people own 51% of Amazon, so who the hell does this CEO think he is to be laying off workers without our consent?” If you somehow avoid slipping into full socialism, you’ll still have explicit state-capitalism “We the people demand that this company be bailed out over this other company, for no other reason than the fact our government owns a significant percentage of it.”
Imagine pricing all this wealth you want to tax. The majority of the wealth in the top 1% is private businesses, right? ( I may be wrong, but I think this is true) How do you value a thing that isn’t for sale or traded publicly? Once you figure out a way to value such a thing, now you’ve incentivized businesses to find ways to be “worth less” according to your metric. You’ll need to be careful here. Even worse, you’ve created a system where the state is in charge of valuing, partially owning, and then selling small, hard-to-value, private businesses. The opportunities for corruption here are immense, because decisions would not be democratized in any real way. You’d be taking the control of assets out of the hands of those most responsible for those assets, and placing this control in the hands of bureaucrats… leaving you with a similar set of problems to the ones you are attempting to solve, while adding a whole bunch of new problems.
One more thing- I’m not sure to what degree consumers benefit when producers are taxed. I’d rather tax excessive consumption of the wealthy, but there’s just not much there to go around. I do think taxing some producers more than others is a fine tool for nudging people to consume less of something, but how does a blanket tax on every place I shop give me a claim on more resources? Maybe I’m missing something obvious.
That’s exactly it. The superrich can’t possibly consume all their wealth. So they just wind up hoarding that wealth, taking it out of the reach and use of their society. There needs to be an upper limit to how much wealth one person can have. I don’t know exactly what that is, but it’s a hell of a lot less than $50 million.
But this wealth is not hoarded, since it’s often in the form of assets like ownership of a business or shares of a corporation. Unless you’re advocated that those be liquidated, “ownership” of that wealth consists of control, decision making and perhaps (but definitely not always) reaping profit.
My brother and a friend started a small engineering firm a while back, and it’s become very valuable, so he’s wealthy now, but not in obvious ways because the money the firm makes was continuously reinvested into the firm, mostly to hire talent, but also to buy expensive tools like surveying drones and software. What would it mean to you to redistribute his wealth, especially when you consider he’s not turning much of a profit?
I think you’d be surprised to know just how much of America’s wealth looks like my brothers, and the percentage of wealth that is human capital.
Yes. Those shares don’t actually contribute at 100% their worth. For most of the past 30 years companies stock values have far exceeded the value of the companies themselves. But it is a slick way to pull wealth out of the economy and trade it among yourselves.
We can certainly quibble over the details of how to tax that wealth, but it’s already being done. I’m nearly certain that your brother’s firm pays annual property (non-real estate edition) taxes. This is a form of wealth tax.
Jeffery@35,
Your comment seems to be based on the dogmatic assumptions that “private decisions = good” and “democratic decisions = bad”. I don’t agree that this sort of thinking is an accurate reflection of reality. Market forces and the politics of democracy are both systems that act as quality control on leadership decisions. The best results will come from combining the two systems in creative ways, not choosing one or the other.
Consider a mid point between private for-profit companies and government departments: privately run charities. Arguably they can be more effective and efficient at delivering services that government departments, however there isn’t a pool of wealthy shareholders profiting from the organisation. Also, the management of the charities don’t have free reign to spend the money however they like. They are bound by the duty to fulfil the purpose of the charity. These legal limitations on their power don’t seem to result in any sort of moral hazard or constant political meddling from politicians. That’s the sort of direction I would see limitations on wealth heading.
Consider also, the limitations on power granted via democratic success. Most democracies split different power into different branches of government: executive, legislative and judicial. Most have constitutions that limits the powers of each branch. Why should we the powers society grants through financial success be unrestricted. Why model the power of economic success on absolute monarchies (which is where modern property laws devolved from) instead of the democratic systems that have been far more successful and beneficial to society at large?
desipis made a lot of good points @34 & 39, but I think the weakest point in your argument is this:
There is no “slippery slope to socialism”, much less “the nationalization of all large corporations”. Instituting socialist policies, like national healthcare, is an uphill battle, which those with wealth and privilege fight every step of the way. The path from Medicare in the 1960’s through SCHIP in the 1990’s to Obamacare was not in the least bit “slippery”.
Most of northern Europe has been at various midpoints between socialism and capitalism since World War II, and the slippage tends to go away from socialism, not towards it.
Higher marginal tax rates were amazingly successful in the U.S. in the mid-20th century, and I see no reason to see why they wouldn’t work just as well today.
If, after a few years of 1-3% wealth taxes on assets of over 50 million prove to be having a negative impact on jobs and/or innovation, it will not be difficult to roll them back, either.
Unless that firm is valued at over 1 billion (50 million each), free and clear (are those drones fully paid for?) they won’t need to worry about paying the tax Warren is proposing at all.
But if they would, one way that they could redistribute that wealth would be to give some of that talent they’ve been hiring an actual stakes in the company, so they actually get to share in the profits they are creating.
Do you actually know for certain that your brother’s small engineering firm has a valuation of well over $100 million? Looking up valuation of engineering firms (90% of which have fewer than 25 employees, and valuations of less than $10 million), that seems really high. The engineering behemoth CH2M Hill has 20,000 employees and a valuation of $2.5 billion, so a $100 million company should have hundreds of employees, which isn’t exactly a small company.
Looking up engineering firm valuation, the standard estimate is that an engineering firm is worth around half its annual gross revenue, so it would need to have annual revenues of around $200 million ($100 million value split between the partners) before it would be touched at all by Warren’s tax. And the tax is a marginal tax, so at $400 million in revenue they’d be paying $2 million in additional taxes (since valuation is half revenue, it is effectively a 1% tax on gross revenue above $200 million for this 2 person partnership). If they’ve grown from a start-up to $400 million in revenue in less than 20 years (“a while back”), then shouldn’t they be able to manage to decrease their reinvestment by 0.5% of gross revenue and still continue to survive? Alternatively, if they’ve been taking even 10% of the net revenue as personal profit and reinvesting 90% back in the business, they could keep doing that and just pay the wealth tax out of pocket. They’d have personal earnings of $2 million each per year, so just paying the wealth tax on the business out of pocket would reduce their incomes from $2 million/year to $1 million/year, which would be a shock, but is an income I think most of us could manage to survive on somehow.
Or, as Kate suggests, they could vest their employees in the company until the primary partners’ ownership share dropped closer to $50 million each. Of course, doing that would cost them about as much of their profit income, so probably better off either surviving on $1 million a year or decreasing the rate of expansion of the business by a little bit.
gak…of course 100 million,, not 1 billion
I think you guys misunderstand me, my brother’s engineering firm is in no way close to being impacted by any proposed wealth tax. I only brought it up because J Squid described wealth as something that is “hoarded,” I was trying to paint a picture of what wealth often looks like, so we can better talk about what it means to have it redistributed.
Charles, I appreciate your breakdown, but this isn’t quite right:
I’m guessing that’s just a typo, and you meant that the 90% was operating costs rather than a “reinvestment.” I don’t like to talk business with my brother, but I wouldn’t be surprised if his annual earnings are around 10% of his revenues. I’m only typing this so that everyone understands that the tax burden under Warren’s plan would impact profit in a measurable way, and that remaining 10% is the money that can either be kept as profit or reinvested.
For fun I looked up the market cap and earnings at a company I’ve done a little work for that is based in my hometown, Worthington Industries. (I was going to go for Mars, because I worked at a Mars plant for years, but they are too enormous and 100% private, so a proper valuation is difficult). They are also public, so there’s less guesswork involved when it comes to valuation.
Imagine this same company with a single owner. An oversimplified back-of-the napkin calculation yeilds a 42.6 million dollar tax burden for Worthingon Industrie’s owner on on a 2.18B valuation (assuming the owner owns nothing else). That’s roughly 22% of their annual earnings. That’s big, imagine what that would do to a growing company like Amazon over a few years.
What’s immediately obvious is that this tax looks very distortionary because it’s impacts vary so widely. Why structure it this way? Why tax “wealth” when so much of it is structured in businesses that often benefit all of us. Why not tax high incomes, or even better, find a way to go after idle wealth (I know there’s not as much there to tax, but that wealth truly is hoarded). Inheritance taxes are unpopular, but they shouldn’t be. If we are looking for revenue, the best thing to do is implement a carbon tax yesterday, because currently, the lack of such a tax is distortionary in that there is in effect, a large subsidy for those who emit carbon.
Kate, we are operating under different definitions of socialism, I’m using the dictionary definition. Also, I agree we are not currently on a slippery slope toward public ownership of the means of production- I was responding to one part of a comment made by desipis about looking for new ways to structure economies. I don’t think Warren is a socialist at all, and in fact she’s the democrat I’d like to see winning the primary.
As an aside, I wish “social democracy,” and “wellfare state,” were more popular when describing a certain kind of left-of-center politics, as classical liberals like me are a little uncomfortable voting for a politician who describes his/her politics using the same word that Vladimir Lenin used to describe his. Socialist is scary in a way that social democrat is not, because I can be sure one of those isn’t a radical who wants to tear down the system that’s keeping us all afloat.
I don’t see anyway to argue that his is not a case beyond a certain value of wealth. Where, exactly, that value is can be debated. But I hope we can all agree that $1 trillion is beyond that point for any single person.
Jeffrey:
The tax burden is on the owners (e.g. Bezos) not on the company directly. Amazon could continue growing rapidly as long as Bezos sells off a small portion of the company to cover the tax.
The current tax scheme is already distortionary. Companies are already structured in unnatural ways in order to make it look like they make no profit on paper as to avoid tax. Taxing wealth, if anything, would re-balance things. Why should wealthy owners of companies focused on growth pay no tax while wealthy owners of stable income producing companies pay tax on their dividends?
The idea that these businesses exist to “benefit all of us” is a pile of crap. The fact they have out competed their rivals by providing marginally better or cheaper products or services is not something that justifies being tax free.
Where would we be with a slightly smaller Amazon? Probably living in a world where Amazon has more competitors, where customers and employees get a better deal because of that competition.
https://www.visualcapitalist.com/chart-assets-make-wealth/
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