Taxing The Wealthy

Wow, Nick Hanauer’s proverbial pitchforks seem to be coming out. Taxing the rich has become a popular topic and quite a few Democrats have come out with some “radical” proposals. Elizabeth Warren’s proposal suggests taxing the wealth, not income, of the top 1% or 75,000 American households. She proposes taxing all assets no matter where located around the world, more frequent audits, and a huge (yuge!) tax upon citizenship cessation. Alexandria Ocasia-Cortez has proposed taxing 70% on incomes above $10 million (the first $10 million is “free” and anything above $10 million gets taxed at 70%).

And of course, the Republicans, and more specifically, the billionaires are having a fit over these proposals. Bloomberg warns of Venezuela-type catastrophe and Howard Schultz says taxes increases are the wrong solutions to our problems. The “real” problem is our debt. But, a lot of the tax experts and economists say these ideas are viable and could work. They are saying these ideas are worth debating.

And finally, the majority of the Democrats, the majority of the Independents and a large number of the Republicans are in favor of these radical proposals, especially AOC’s 70% marginal tax on $10 million. The average American wants a tax increase on the rich.

“Oh, it’s unfair!”

Let’s talk about inequities. Since the ‘80’s (and maybe even earlier) corporations have been 1) outsourcing; 2) offshoring; 3) automating; and 4) keeping wages down such that while productivity has appeared to gone up, all wealth accrued from these productivity gains have gone to the wealthiest 1% while the bottom 90% has maintained a flatten wage. So productivity has gone up and the wealthiest has hoovered up all of the gains. The outsourcing and offshoring has created pockets of additional money (that used to flow to the workers) to now flow towards the shareholders and executives, without really creating new products or services. It was just basically pushing people off the boat.

And, to add insult, the tax cuts for corporations and the wealthiest at the end of 2017 came with a promise of increased capital investment and increased hiring with concomitant wage increase. Well, we’re still waiting! A year later, none of the surge in investment or wage increases has appeared. Instead those tax cuts led to stock buybacks which is another way of distributing money to the shareholders.

And…and…and… quite a few corporations do not pay their fair share of taxes. They shelter their income offshore.

And…and…and… quite a few corporations do not pay their fair share of taxes. They shelter their income offshore.

You can’t be surprised that the American people wants to reverse that flow of money.

Note: I’m still trying to figure out how to play around with “backgrounds” and text. I don’t know why my picture got cut off on the left hand side.

Now, I agree that taxing 70% of income above $10 million is a shockingly high number. To play around, let’s assume current taxation at 20% (my impression that the wealthy folks are being taxed at 20%?) and you are a millionaire with taxable income of $15 mil, instead of having net income of $12 million (15 million – 15 million x 20% tax), you now have a net income of $9.5 million (15 million – 10 million x .20 – 5 million x .70). But for the billionaires, who are really squawking, if you have $10 billion in taxable income (like that hedge fund guy back in 2008 who made that money off of the foreclosures, although as a hedge fund guy, his tax rate was probably around 15% and it probably was calculated differently from the simplified version I’m doing here), you move from 8 billion in net income to 3 billion. So, yes, that’s a big…gulp…cut.

So I get it.

But it’s still hard to feel that sorry because a guy making 50,000 a year for 30 years will reach only $1.5 million over his lifetime. So boo hoo.

If you had wanted to avoid these kinds of proposals, you should have done the right thing and spread the wealth to the workers who contributed to the ongoing success of your company instead of avoiding taxes, closing down plants, outsourcing, offshoring, automating without upskilling.