Based on the 2014-2018 Income figures and taxes paid in the article, I calculate the following effective federal income tax rates:
Buffet 19%
Bezos 23%
Bloomberg 3%
Musk 30%
When they have “income” - they pay federal income taxes on it (other than Bloomberg - he must have some top-rated tax advisers!). I don’t see much of a problem here. Changing the definition of “income” to include unrealized capital gains opens up a huge can-o-worms. I think I’d rather see, at the death of the wealth creator, the wealth flow into charitable trusts vs into general revenues of the bloated federal government.
The entire wealth of these 4 individuals (Buffet, Bezos, Bloomberg, Musk) combined (probably around $500B) would make a minor dent in the federal debt of around $27T. Combining the wealth of the entire Forbes 400 might bring the debt down to $24T. (And I’m not suggesting nor advocating for the confiscation of the wealth of any of those individuals) I don’t see a revenue problem, I see a spending problem.
Similarly, the entire income/wealth of all the actuaries in the country is trivial compared to the annual federal budget/debt.
I say we shouldn’t tax actuaries.
If you restrict the unrealized gains tax to people with, for example, at least $1 billion in unrealized gains, I don’t see a can-o-worms that’s significant compared to the dollars involved. In fact, change $1 billion to $100 million and we’re probably still okay.
For these 25 people, almost all their unrealized gains are in publicly traded stocks. We need a smoothing mechanism, other than that, it seems that taxing them is pretty straightforward.
It is going to be difficult to eliminate the deficit anytime soon, but we can certain stop adding to it with some sort of way to tax this group.
In the case of Musk, it’s insane to think how much of his compensation is tied to the value of the company, Could that be at risk to manipulation being so focused on a single metric? He already benefits from a stock price rise relative to his $70 exercise price.
This is a better argument. That said, I don’t see why the money still wouldn’t flow to a charitable trust. Are we discussing ending the charitable deduction?
Also I don’t know if you could really say the federal government is “bloated” when it has so much debt. You could also describe it as starving. It is, in any case, a problem our children will pay for.
Clinton and Gingrich worked together to eliminate the deficit in the 1990’s, but then 9/11 happened, and it came roaring back. The George W Bush stimulus checks didn’t help either (those were before 9/11, IIRC, at least the first round) but I think military spending was the primary driver.
BTW, I don’t think it’s desirable to completely eliminate the debt. But if we limited it to some range of GDP that would be good.
I remember during the Clinton/Gingrich years there was a time when the Treasury just stopped issuing a certain type of debt. Like maybe 10 year notes? That caused issues in the private sector because a number of things were tied to the yield and there was no longer a yield to tie them to.
I’ll toss in my own pet peeve: charitable contributions deductions. These are insanely abused.
Let’s look at exactly how this works. An individual takes money that would otherwise go to the public coffers and redirects a (larger) sum to a cause at their own discretion. Great if if goes towards something that the public would otherwise desire, but that isn’t how it plays out in practice.
Does Loomis school ( private boys school in Connecticut) really need another $10,000,000 grant from Henry Kravitz ( an alum)? This is money that helps make 5 “under privileged children” attend the school each year. Meanwhile the schools in Hartford can’t afford text books. Makes no sense. Terrible allocation of resource. For a society that touts capitalism as an efficient way to allocate resource, it’s a travesty.
Or how about the insane “trusts” set up? Tuition for female Polish pole vaulters to attend Brown University. Yes I made that up, but you get the point. Hospital wings/additions that bear the names of the endowed…cuz that really lowers hospital costs? Seriously? Pure ego pandering, without any clear public benefit.
The idea that these contributions are all sent to the Red Cross or the Salvation Army is total fiction. More likely Mark Zuckerberg is setting up a trust fund for his grandchildren - who don’t even exist yet. Yeah, I made that up, too.Total joke.
Yep. Here are some more …
Contributions to Harvard – maybe you get your name on something. Harvard students disproportionately come from high income households. They have extraordinary talent and will earn lots of money after graduation (if that’s what they want). But, somehow this is a “charitable” cause.
Or, the Metropolitan Opera. Really? Entertainment for the wealthy isn’t a “charity”.
Or, gifts to religious organizations. My suburban church builds a beautiful building so upper income people can worship their God (or just socialize). How does that deserve a “charitable” deduction?
Or, my neighbor donates his old couch to Goodwill and deducts $100 for something that Goodwill will sell for $50.
A lot of the charitable deduction problems can be solved by tightening up the definition of charity, and how that money can be used. Churches specifically, there’s nothing about them directly that suggests they should be a deduction, and quite a bit that suggests they shouldn’t. If they’re doing charitable work, have them seperate that, make that part of subject to normal charity regs, and then people can donate to that portion of the church or not.
To be fair, most arts organizations are also doing various outreach programs. Summer camps for kids that they run at a loss just to expose kids to the arts. Deeply discounted or free performances for school groups. Stuff like that. It’s not putting meals on tables, but it does in some small way contribute to making the beneficiaries more well-rounded individuals, which perhaps has some societal benefit.
But it wouldn’t be crazy to split out the portion of the funds that go to outreach programs vs keeping the lights on. I think the practical implications are pretty tricky though.
I think the bigger issue is with foundations. I can set up a charitable foundation to help an AIDS Hospice in Africa. Then I “need” to go to Africa to visit the Hospice.
$200 limo to/from airport
$10,000 round-trip business class airfare
$160 for 2 nights in fancy hotel near Hospice
$60 meal expense for 2 days
$500 donation to Hospice
$2500 week-long Safari
I can have the foundation pay for all but the last expense and it will count as “program expenses”. The Hospice only got $500, but I just saved my marginal tax rate * $10,920.
Instead of spending $12,920 for the safari vacation, by giving $500 to the Hospice and visiting it in person, if my marginal tax rate is 35% then I spent $10,920 * .65 + $2,500 = $9,598.
I saved $3,322 and a Hospice got $500.
And you could easily doctor the numbers to make it even more egregious.
This is my understanding of what the Clintons are doing with their charitable foundation, by the way. Except allegedly on a much bigger scale. And they’re soliciting donations to their foundation from rich people, which makes it even more sketchy than if it was entirely self-funded.
ETA: And the Clintons are hardly the only ones. Just the best known.