19 votes

The secret IRS files: Trove of never-before-seen records reveal how the wealthiest avoid income tax

6 comments

  1. [6]
    joplin
    Link
    I'm all for increasing taxes on the wealthiest individuals. One thing that bugs me, though, is this article (and many like it) falls into the trap of making nonsensical comparisons. For example:...

    I'm all for increasing taxes on the wealthiest individuals.

    One thing that bugs me, though, is this article (and many like it) falls into the trap of making nonsensical comparisons. For example:

    It’s a completely different picture for middle-class Americans, for example, wage earners in their early 40s who have amassed a typical amount of wealth for people their age. From 2014 to 2018, such households saw their net worth expand by about $65,000 after taxes on average, mostly due to the rise in value of their homes. But because the vast bulk of their earnings were salaries, their tax bills were almost as much, nearly $62,000, over that five-year period.

    So over 5 years, their houses increased in value by ~$65,000, but their salaries also increased by approximately the same amount? No, wait, that's not what they're saying. I'm not really sure what the last sentence means. Is it saying their taxes increased to $62,000 a year over that 5 year period? That doesn't sound right as their average income would have to be pretty high to be paying that much. I think it's saying that over that 5 years period, they paid a total $62,000 in taxes (so ~$12,400 per year). From the wording, the implication seems to be that the increase in their home value was wiped out the taxes they paid. OK. So what? These are completely unrelated quantities that happen to have a similar value.

    My point is that while I like the premise the article is putting forward about getting the ultra wealthy to pay more taxes, much of the article is making nonsensical comparisons that are confusing (or worse, misleading). I wish they'd just stick to comparisons that make sense, as it lessens the impact of their point.

    7 votes
    1. [5]
      vord
      Link Parent
      I believe they are comparing tax burden relative to wealth+income. It's odd, but when the wealthiest make most of their income from their wealth, but the average person only makes their income...

      I think it's saying that over that 5 years period, they paid a total $62,000 in taxes (so ~$12,400 per year). From the wording, the implication seems to be that the increase in their home value was wiped out the taxes they paid. OK. So what?

      I believe they are comparing tax burden relative to wealth+income. It's odd, but when the wealthiest make most of their income from their wealth, but the average person only makes their income from a wage, it's the easiest way to make them mesh together. This other segment highlights it better:

      By the end of 2018, the 25 were worth $1.1 trillion. For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth.
      The personal federal tax bill for the top 25 in 2018: $1.9 billion.
      The bill for the wage earners: $143 billion.

      10 votes
      1. [4]
        joplin
        Link Parent
        I agree the second comparison is much more sensible, and really shows the disparity well. I think the first one is too confusing.

        I agree the second comparison is much more sensible, and really shows the disparity well. I think the first one is too confusing.

        2 votes
        1. [3]
          vord
          Link Parent
          I think what this first article does manage to highlight quite well, is that it's insuffcient to purely tax income (tho that top bracket needs sveral dozzen percentage points added to it). We also...

          I think what this first article does manage to highlight quite well, is that it's insuffcient to purely tax income (tho that top bracket needs sveral dozzen percentage points added to it).

          We also need a progressive wealth tax, something on the order of 1% kicking in after $500k or so, and scaling up to ~5% for <insert reasonable soft cap here>, and perhaps as high as ~15% for <insert reasonable hard cap here>. Make it a challenge to exceed the hard cap for more than a few years.

          My personal thoughtt for a soft cap would be a "if you could retire today and live on an average person's salary indefinitely purely on the dividends/growth", and for a hard cap that salary would be 2x the average. Would help keep the financial system within a better order of magnitude.

          4 votes
          1. [2]
            nacho
            Link Parent
            The issue of a wealth tax is that most assets are illiquid. It's not like the richest people could easily pay x percent of that housing complex, or their ownership stake in a business year after...

            The issue of a wealth tax is that most assets are illiquid.

            It's not like the richest people could easily pay x percent of that housing complex, or their ownership stake in a business year after year, that is unless government were to accept payment in something other than cash.

            Valuations of both property and companies is also extremely difficult. The true value is only known when someone purchases the entire company. The cost on the margin of a single stock doesn't mean you could sell every single stock in the company for that price.


            I'm much more a fan of inheritance tax than a wealth tax. An inheritance tax would give huge revenues without most of the issues of a wealth tax.

            Being born to the right tax doesn't morally entitle you to 100% of the wealth previous generations in your family have accumulated. Wealth accumulation happens because of conditions in society. It's only fair to pay some of that back.

            If someone has to sell part of the business or house they inherit to pay the wealth tax, so be it. If they can defend owning said thing, they can take up a loan to pay taxes with, or sell a stake.


            As an aside, a reasonable corporate tax rate is also essential. As is strict regulation of non-profits and what sort of non-profit causes deserve what type of tax rebates because those causes are a net benefit to all of society to the degree that they deserve these massive public subsidies.

            6 votes
            1. vord
              Link Parent
              Quite easy really: Look at value if property when purchased. Look at income generated from said property Re-assess sale value of property Send bill for appropriate amount Just because the property...

              It's not like the richest people could easily pay x percent of that housing complex, or their ownership stake in a business year after year, that is unless government were to accept payment in something other than cash.

              Quite easy really:

              • Look at value if property when purchased.
              • Look at income generated from said property
              • Re-assess sale value of property
              • Send bill for appropriate amount

              Just because the property is not cash doesn't mean the bill can't be. If the wealthy person can't afford the bill, they can sell off some property to pay it. Less-wealthy person can buy it. Mission accomplished.

              If the IRS can afford auditors for poor people, they can afford auditors where the potential payoff is 100x the amount

              Value of companies is even easier: Ostensibly the stock price of a public company should be reflective of the value of the company. Or, you know, their accounting balances. Which the IRS could demand copies of.

              1 vote