Americans, on the whole have been happier and better off when we have had progressive taxation. See:
https://psycnet.apa.org/record/2018-03098-001
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"Rattner, a former investment banker who reached No. 2 at Lazard, was one of the administration's wealthiest officials. His financial disclosure put his net worth at between $188 million and $620 million."
Why should I listen to what this guy has to say about taxing the rich?
3
Capital gains should be treated as ordinary income and the marginal rate should be raised on higher incomes, but not to 70%. (The first $50,000 or so in interest, dividends and interest could be tax free to encourage savings and reduce the sting) The earnings cap for Social Security should also be raised. But one important issue that has not been mentioned is society's need for stiff estate taxes on very large estates.
At the end of the Constitutional Convention, a woman said to Ben Franklin, “Well, Doctor, what have we got—a Republic or a Monarchy?” Franklin, arguably one of the wisest of our Founding Fathers, responded "A republic, madam, if you can keep it."
To understand Franklin’s response, one has to understand why Franklin favored independence from England. Franklin came to that conclusion after what happened in the French and Indian War which was fought to protect the property of absentee landlords. Colonists were required to pay for the privilege of having to fight and maybe die to protect land they could only lease from entitled aristocrats who were themselves exempt from taxation. Sound familiar? It should.
Having seen the harm of extreme concentration of wealth and power, especially across generations in families who were given special treatment, he favored inclusive and progressive taxes. Even more important to Franklin was imposition of near-confiscatory taxes on very large estates.
Franklin was right. We should listen to him.
5
The middle class knows that the very wealthy will find all kinds of tricks to not pay taxes and that the burden for all of those promises for the poor will end up being paid for by the Middle Class. I hear the IRS knocking.
2
Tax capital, not labor.
Capital assets in all forms should be taxed, and income earned by labor should not be. As A. Lincoln noted, all wealth ultimately flows from labor. When wealth is locked away in assets, it does not enter the economy and build civilization.
6
I am so old i remember 1992 when a presidential candidate named H. Ross Perot suggested that deficit reduction could be achieved by actually collecting more of the tax owed at the regular rate. Why not add this to our roadmap; I haven't seen any rebuttal of the notion. Fund the IRS.
3
Everyone should pay some Federal tax. Even if it's a dollar a year for those making very little. But the only fix to the US tax code is to gut the code, eliminate the special interests, subsidies and loop holes. You can say you will enact a tax rate of 70% on those making 10 million a year, but that is a fraction of people and they'll never pay close to that even on monies made over 10 mm. The reason = the tax code. About 10,000 pages and growing thanks to both parties and their reckless, self-interests once in Congress. So, when those very rich don't really pay much more, or maybe less, we'll have to lower the 70% marginal rate to those making 1 million, then 500,000, then 200,000. Then what?
3
This is where we really suck as a nation. Anyone remember 9/11? Recall the obscene response punishing us all? Homeland Security another waste of money demanded to know where everyone was spending money and how to make sure when we go to a pawn shop we are not financing the terrorists and this applies to everything or almost everything besides just pawn shops. EXCEPT old DICK Cheney left a loophole for his butt buddies: real estate the largest single financial transaction most people ever make is left alone so we keep finding our enemies are investing their illegal money in our real estate where they ONLY have to pay real estate tax if that. Also landlords ONLY have to pay %3 income tax compared to the rest of us, why? Why can't the media do a real story about this?
1
“It’s the deductions, exemptions, and tax credits stupid”. Gross income as reported ro the IRS is then distilled to Adjusted Gross Income after baseline adjustments. Then come preferences, carry forwards, deductions ert., etc. Nothing new so far.
But, at the end of the very expensive tax calculation ordeal, create a simple ratio. Your tax ratio expressed as total state and federal taxes paid divided by gross annual income declared. I suspect Mr Rattners last chart approximates that percentage. All else is stuff and nonsense. No more oblique manipulations with Alternative minimum tax or protected or advantaged sources of income.
Use your actual tax rate, and apply a surtax to those in the 6th through 10th decile equal to their actual gross income divided by the gross income of the 5th decile of tax payors. Then grant a tax credit to those in the 1st through 4th decile based on their actul gross income divided by the gross of those in the median tax brackets. The result is restoration of the highly graduated income tax due based on gross real income which is today an absurd fantasy. The important question is: why should one’s taxes not be proportional to income. America makes individual success possible?
Whatever changes are made to raise revenue and make the tax laws more equitable one thing is absolutely certain, before the ink is dry the lawyers will be finding loopholes.
1
AOC's tax comments are starters. And it's high time we started - top 0.1% = bottom 90% - bad.
But, taxes are complicated. The real change must be in attitude. Are we unified (all for one and one for all) or are we competing dogs? Is plenty enough to go around or does and attitude of scarcity force us to fight to the death?
Loaves and fishes was not a miracle but a concept.
2
Hire more IRS auditors to go after tax cheats or those who are offshoring their money in tax havens. Go after employers paying their their workers under the table. Publish names of those tax cheats and illegal employers. Lock ‘em up!
1
Editors: Please, Please, PLEASE have Mr. Paul Krugman respond to Mr. Rattner's tax proposal. To a layman, Mr. Rattner's Op-Ed seems quite sensible. However, most of us need to read financial recommendations form other financial experts such as your most articulate Mr. Krugman. I would be indebted to you. Thank you!
3
And one more thing...
One particular tax year when I was in my mid-30's, our family earned more income in the stock market than we did working very, very hard at our regular jobs. Back then, any knucklehead could make money in the stock market. I think the simile in common usage for successful stock market investing back then was a "monkey throwing darts."
I remember holding "tech stocks" for days and quadrupling money only to see the company disappear months later. It was a complete sham, but the bigger sham was that I paid less tax on my long term capital gains than I did on my regular income.
The "big lie" back then was that my capital gains was on money that I had already "earned." Yeah, right! Income is income. I cannot imagine what would have happened if I had inherited (not earned) anything. (My wife and I were investing our hard earned savings, not a trust fund that we did nothing but draw the lucky sperm card to have. BTW, with our advances in scientific knowledge an estate tax should be rightly named the "sperm tax," or maybe more inclusively the "sperm and egg tax.")
What a joke it was that I was working 60 hours a week to make less than my "Monkey's paw throwing a dart." What a bigger joke that people (trust fund babies) who never work a day in their life to contribute to American society pay a lower tax rate than workers, earners, and contributors.
2
Raising capital gains taxes, especially when personal deductions have been eliminated, will surely harm many seniors who are not wealthy but who diligently saved for retirement. In the past, the tax rate on gains was tied to overall income. That would have to continue.
1
I have no idea if Alexandria Ocasio-Cortez's income-tax proposal is practical, or even viable, but as wary as I am about trusting a an income-tax proposal from a former Bronx bartender, I'm even more wary of trusting an income-tax proposal from a private equity billionaire. Even if he is a Democrat.
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@camorrista — So whom would you trust?
1
What about my 401k? This proposal makes taxing my retirement as important taxing the ultra-rich. Taxation must always always be progressive and this guy wants to tax my capital gains (saved up over 30 years) at the same rate as Joe and Susie Billionaire.
@Ryan A. Actually it shouldn't matter... 401k withdraws (age qualified so no penalty -- i think that is 59 and 1/2 ... who came up that BTW?) are usually taxed as ordinary income.
That is, if your 401k is the most common version where you are contributing pretax dollars (hopefully with some matching funds from your employer, but not all do that).
That is the kind I have. Both your contributions, your employer matching funds, your investment gains... it doesn't matter -- it is all pretax and gets taxed as ordinary income up to 37% of whatever the top federal rate is.
Some prefer to contribute after-tax dollars to a Roth IRA (or Roth 401k) where investment gains will never get taxed (that sounds great except income has to be below a certain level to qualify - regardless of whether you live in NYC / SF or Boonville, Arkansas... and you have to accept - like 401k - that your money is tied up until retirement age (a good thing).
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Mr. Rattner is absolutely correct.
The rich don't get richer by paying less tax on their earned incomes. They are able to shield much of that from higher tax rates through deferred compensation plans, stock options, and other financial chicanery that has been embedded into the tax code - by their high-priced K-Street lobbyists.
It's their unearned income where the real wealth resides. I guess no one recalls that Mitt Romney's tax returns he released during his 2012 campaign showed an effective tax rate of 12%. Mitt knows how to shield earned income. Convert it into investment income via the "carried interest" rule, and other tax schemes.
Our tax code is primarily designed to benefit the ultra-wealthy. Mitt's "47% don't pay taxes" is laughable. He pays no state, local, unemployment, social security, and other earned income taxes.
Mitt and his fellow Richie Rich's "let them eat cake" attitude almost begs the question as to whether or not we should bring back the guillotine. It really was such a "persuasive" tool for changing the minds of the reigning Aristocracy in its era during the French Revolution.
Just saying...
1
@Lance Haley Your arguments are on point even if I'm not sure I would agree to go as far as you may on capturing more taxes (starts to negatively impact incentives --- but only at a certain point -- and we could debate that for years). However, you may be surprised at how high effective tax rates are for the high-income but not rich residents of New York City who are not anywhere near tycoon levels. They may earn $600,000 per year but will actually pay close to 45% to 50% in taxes when you add it all up since the top rate for state AND city together are something like 12-13% .... so then then they have $300,000 left but spend a third of than on rent (no mortgage interest deduction) and then perhaps $60,000 to $100,000 if sending 2-3 kids to private school .... well there it goes. My point is not to try to get tears for our example person, but just point out someone who might seem rich actually isn't getting these tax benefits. In NYC, believe it or not, $600,000 is upper middle income not rich --- these are workhorses of the tax system --- is it unfair? well compared to Romney absolutely! BTW I also know people on deferred comp. plans who are definitely not rich ---
1
Raising income taxes on the highest income earners will do little to correct the imbalance of wealth distribution. And it could disincentivize high income earners who are not wealthy (of which there are many). A federal property tax on net intangible financial assets AND net real property will help redistribute the wealth.
There is an incentive for not turning over assets and generating tax revenue. Capital gain taxes can be eliminated entirely under our death tax laws, thereby helping to keep wealth concentrated. For those with more than less than $22 million of net worth, there is an incentive to "buy and hold" to death. In Jersey you can give all to the next generation without paying capital gain or estate taxes. Who would have thought that dying in Jersey would be so lucrative?
Taxing wealth would do three things. One, assist in funding our current safety net programs. Two, stimulate the wealthy to waste billions, if not trillions over the next generation, on the crap that generates jobs such as cars, boats, race horses (which is what I would spend it on if I was wealthy), accounting services (which is what I want the other wealthy people to spend it on),etc etc etc. Third, and most importantly, it would send a signal to those Americans who literally have nothing that those with something are sharing and, more importantly, spending on jobs that assist them and not hoarding their wealth.
If I could just convince President Trump to tax real estate holdings..
@Mr. Buck Exactly to your point, see my post above to Mr. Lance Haley.
Progressives never answer Margaret Thatcher's famous question to socialists: where do you go when "the rich" run out of money?
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We will cross this bridge when it comes to it. So far, rich are becoming more richer and not in any danger to run out of money.
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Stop caring about the rich. They don't care about you.
2
How about America stops warmongering and uses the money we waste on the military to pay for things like free college? You all do know there is a problem with human societies when we spend more energy and capital on killing people than anything else.
The immorality begins and ends with the military-industrial complex and continues with brainwashed and ignorant voters.
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Big Government greed is insatiable and immoral. Grandma needs those capital gains and dividends to buy food, and the greedy Big Government left wants to take them away!
1
Google "Ratner New York pension fund investigation"
How does the NYT continue to give this guy a platform.
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The justification for having lower tax rates on capital gains is that this income is often the result of holding an investment or building a business for many years. The investor accepts the risk of the investment or business failing or not growing as expected. In return, the capital gains tax rates acknowledge this risk and the difference between an annual flow of income and "income" that accrues over time, but which may be received in a single tax year.
If long term gains were to be taxed at the same rate as ordinary income, this would significantly eliminate the incentive to invest in new technology and innovative businesses to the detriment of the economy.
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@DAB "If long term gains were to be taxed at the same rate as ordinary income, this would significantly eliminate the incentive to invest in new technology and innovative businesses to the detriment of the economy."
Many writers argue that lower rate on long-term capital gains benefit the economy, but is there an empirical test of this hypothesis, anywhere in the world? Denmark, perhaps? I don't know.
But I think I would bet my house that it is a fiction created by holders of lots of stock who make a lot of money off capital gains.
2
The Economic Report of the President 2018 shows just 9% of all federal revenues come from corporate profits taxes. Why not get rid of corporate profits altogether and tax unearned income as income?
This approach resolves the double taxation problem. It increases taxes on the rich. It forces Congress to be transparent about any subsidies it wants to give companies. It shrinks the size of the IRS and it relieves corporations of the need to employ tax attorneys and tax accountants to minimize taxes.
Hey, that's OK with me - all my investments for retirement are in my IRA, where withdrawals are taxed the same as earned income. That wouldn't hurt the vast majority of ordinary Americans who've saved for retirement through IRA's or 401K's. If interest income and long-term Capital Gains were taxed at the same rate as ordinary income but with the new tax rates so low - how much would that really raise? Besides, what about corporate taxes? They need to be higher to be any help.
Trump's legacy, among other things, will be that he sowed the seeds for class warfare. It's been long overdue, but ironically, it's a billionaire that will make the middle class finally realize how badly they have been getting screwed by the super rich.
AOC is right. The ultra rich in this country have never paid their fair share of taxes. That's why the tax code always have loopholes. A 70% marginal tax rate is less than they paid in the 60s and 70s.
1
Whatever the merits, Rattner's ideas will NEVER supersede Ocasio-Cortez's, for the simple reason that his are dependent on Logic for passage, whereas hers are based on a more primitive, and therefore more powerful motive: Envy.
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@Connecticut Yankee Envy? I don't think so. Anger? Disgust? More likely - except, of course, for the "base." They live in a fantasyland where one day they'll be super rich also, like T and the Kardashians, And famous too.
2
@Lois Ruble -I know a few people who play the lottery, especially when the jackpots get up in the 100's of millions$. Funny, when I ask them what they'd do if they won, nobody ever says "I'd give it away."
1
Umm, yeah. Just another rich guy dodge to foist most of hit on the middle class. On the other hand, raising the marginal tax rates on the wealthy, like Mr Rattner...well, we know who is paying that, don't we. Self serving much, Mr Rattner?
Of course, I also want to see estate taxes put back into effect, and other loopholes closed.
As for stock and other capital gains...I don't agree with raising those rates unless the money is actually received. Just like the real estate example for Trump. If you reinvest the money within a year, why should you pay taxes on the capital gains? You should only have to pay it when you cash out. I own mutual funds and have to pay capital gains taxes now...every year...even when I'm not actually getting a penny because it's all automatically reinvested.
Raising tax rates on investment is a good way to kill investment. Without investment, no jobs will be created. And as for business tax rates going down...put them back up for all I care. They aren't sending the share holders much of that tax savings. And if you've noticed, the stock market hasn't done much of anything since the tax law went into affect over a year ago. Here's a clue, regardless of how you structure taxes, the rich will pay for loopholes to be found and created.
My bottom line...marginal tax rates should be higher on the wealthy. Business taxes should be higher than middle class income tax rates, not lower. Close loopholes for the wealthy, both individuals and business.
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It seems as though most of the energy is around the gap between the low income group and depending upon the article, the median, the high and the ultra high. We could tax the higher groups more, but I am not confident in the path of dollars to the lower group.
How about we begin by focusing and developing solutions for these facts:
- 25M of the 117M lowest income group suffers from mental illness.
- Two catégories of disability have the largest percentage below the poverty line - hearing 52% and Vision 44%
- Eleven states, all east of NE/KA have largest gaps between median and low, 33% to 39%
- Learn from the states with the lowest gap: NV, CO, WA, ND, VA, NJ, RI, HI
- Investigate Minnesota, the only state with the lowest tier of income for the low income and the highest tier for the median income. What are they not doing in Minnesota?
1
Oh! Joy of joys! To be regaled by financiers on how they should best be taxed! What a public service!
I suppose we should convene a committee of arsonists when we put together new laws meant to ensure arson is reined-in...let's all be clear: allowing the rich and entitled to form our tax and economic policies is what has decimated the middle class and left my generation in indentured servitude for their education and a wage that barely pays the bills (I have a master's degree and a good white-collar job). Mr. Rattner and his ilk have spoiled any good will left in my heart in decades of failures to protect the middle class over corporate power's ascendancy.
Enough. Elizabeth Warren & Rep. Cortez are talking about leveling the playing field and returning to historic rates of taxation that were in place for some of the most robust decades of America's history; we need good economists, not the wealthy supplicants of avarice to guide us forward.
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An elderly lady once said to me: "Consider the source."
4
Taxing the rich does nothing. Middle class will pay in the end.
The Tax Foundation suggests the 70% marginal rate on income over $10 million idea will raise $700 billion. Over a decade.
$70 billion a year is nothing.
Reverse Trump's tax cuts. $120 billion a year.
We have close to a $1 trillion dollar deficit. This is at our current spending levels, let alone the addition of new promises.
There is no math where "taxing the rich" covers our bills. None.
Want to be like Scandinavia? You're going to have to tax like them. Income of $60,000 taxed at 60%. VAT taxes of 20%. $6 - $8 gasoline. Denmark taxes new cars at 100%. Great. A $20,000 minivan costs $40,000 after taxes. That's why they ride so many bikes in Denmark. (This skips over the whole "white people are horrible let's be like all white, anti-immigration, no minimum wage, low corporate taxes, weak union laws Scandinavia).
Interest payments on our debt will soon reach $700 billion per year. We're broke people.
"More taxes, less stuff" should be the only slogan for 2020. It won't be, so be prepared for your savings to disappear from inflation.
3
Thank god for AOC. Politicians never talk about taxing their donors if they can possibly help it! Big Money wants to rule the entire world, and the U. S oligarchs have said Okay, go right ahead! But perhaps there's a small chance we will say, at last, enough's enough . . . let us live too, us commoners!
1
I'm into a new tax strategy: reduce things the gvt has to pay for.
>> If your workers are in the US you pay little to no taxes; if foreign, you reimburse the fed/state gets for unemployment benefits
>>Flat tax on income under $400K indexed to 3x avg qtrly inflation for last 20 qtrs. 1.5x flat tax up to $1M. 3x up to $50M
>>Torch tax laws on investment real estate. Rewrite from the ground up.
>>Incentives for companies who relocate to US and bring workers; more incentives if they hire in US.
>>Tax corporations who experience data breaches. Tax DOD-related companies at TWICE the rate for IP losses that affect nat. sec.
>>Allow use of EPA ugly list chemicals BUT tax for clean-up and public health costs to gvts
>>Tax core medical company profits (pharma, etc) at 40% for every product sold above gvt calculated "fair price" or int'l avg price/dose
>>Tax all *corporate* contributions to political campaigns (by any means) and payments/retainers to lobbyists since the gvt will have to fix the damage of influence
>>Increase tax on juul & weed industries and send $$$ directly to state educ depts
Of course you realize I'm joking.
Really should just firebomb the tax code and start over with 21st century approaches.
The top 20% of taxpayers already pay 89% all of all federal income taxes. Moreover, despite Mr. Rattner's reliance on "an expert from the Tax Policy Center," there simply are not enough wealthy taxpayers with enough income and assets to further tax and make any meaningful dent in the federal deficits and accumulated federal debt. The only way to address these tremendous, looming problems is to cut spending on entitlement programs (Social Security, Medicare and Medicaid). Period. Anyone who says otherwise is selling something, usually themselves, and never backs up their fantasies with any numbers.
I challenge Mr. Rattner and the NYT to do an honest piece on this subject. The numbers needed are all available at irs. gov and cob.gov.
4
Tax fairness cannot be addressed without fixing the fact that the bottom 50% of income earners pay nothing in income taxes. These immoral “Americans” pay nothing! The top 50% of income earners pay 95% of income taxes collected. This inequality must be changed!
4
Getting the wealthy and ultra-wealthy to contribute their fair share is not easy and there is no silver bullet. Unlike the poor, these fellows have the money to hire lawyers and schemers to find every possible loophole to get out of paying. Their strategy is similar to that of the slime eel or hagfish (Hyperotreti) that, to escape capture from a predator, excretes tremendous amounts of slippery slime so it can escape, sometimes enough to even choke the attacker to death.
Getting money back from a group that use this strategy so effectively will be a constant struggle to find, identify, and close loopholes just as fast as the wealthy eels make them. I'm honestly not sure our government is institutionally nimble enough to manage it, even _if_ it got out of the pocket of the rich and displayed an actual desire to tax them.
Just tax ALL income the same way (but do allow capital losses to be deducted), with reasonable progressive rates. Avoid double taxation (so restore the SALT deduction). Close loopholes and shelters. Keep it simple and stupid.
PS: to those who complain about Rattner's proposal hitting their retirement nest egg have they considered the fact that 1) it does not concern dividend and interest income, which is already taxed as ordinary income (i.e., like wage or SS income) and 2) unless their ordinary income in retirment is quite high, the effective tax rate they pay on it is likely to be lower than the CURRENT rate on LT capital gains, therefore it would likely be to their advantage if LT capital gains were taxed like ordinary income?
1
Amazing how many people here know how much money I should make, how much I should keep, and how much I need
1
See how everything tax wise got worse under Obama? Yeah, they balanced the deficit they inherited from the Greed Over People party with austerity for the middle class and poor, and tons of corporate welfare, and let the Wall Street criminals walk. This guy is basically looking at a plan to tax the rich and doing the old shell game where what you'll end up with is higher taxes on the middle class, which by the way is becoming extinct due to policies foisted on us by this very same guy. Can no one see that these are not FDR style Democrats but pseudo democrats, Neoliberals, Can we not toss them from the Democratic party? They really have become a drag on progress.
Well Steven, cap gains & dividends USE TO be treated as ordinary income! Then we had the Bush tax cuts & now we are stuck with the "new" % favoring "investment". That favoring, favors people who actuall have $$$ to invest. (Me included). So we have tax statements like Mit Romney's & Trumps where millions are taxed at low rates for the benefit of the rich, richer & richest. Ain't America great! (?)
The second to last sentence in this piece tells us all we need to know about what's behind the curtain with this guy.
2
See Krugman's column of today on AOC's proposed "wealth tax." He is a fan. And I while I agree that taxes on capital gains, carried interest, should be raised, I find Mr. Rattner's plea at the beginning of this article - relating to the "burden" on folks with incomes over $10 million/year = risible.
1
I heartily agree.
Anyone for the existing capital-gains tax advantage needs to explain "why?" Why is income from investing wealth taxed at a lower rate than income from work?
There are two classical answers: the better one is that the lower tax rate allows lower interest rates to borrowers, thereby stimulating business. If you believe this one then:
* why should Americans get a tax cut for investing overseas? Should this not be limited to domestic investments?
* these days most investment capital does not come from individuals, and indeed much of it comes into the US from overseas. The proceeds on that investment aren't taxed in the US at all, so the argument that the domestic capital gains break reduces borrowing costs is weak.
* why is this break independent of the use? Why is the loan to build a brothel in Nevada subsidized equally to that for all other purposes?
The other one is really stupid: "you need to deal with inflation, people won't loan money if the tax doesn't deal with inflation."
The answer to that is simple: adjust the cost basis of the investment for inflation. The idea that investors cannot look into a table and multiply is ridiculous.
1
Why not enact both schemes?
I would agree that this should be indexed to someone's taxable income, it would be ridiculous to hurt middle income retirees with this, when it is aimed squarely at the well off, the corporate CEO's whose income is 90% stock grants, the well off investors in hedge funds, hedge fund managers and the like, that have their income taxed at only 15% (and sorry, my Fox News friends, the long term capital gains rate has been shown since it was put in place that it does not spur capital formation, that most of the capital gains we are talking about are from speculative investments that do little to nothing to spur job growth...and the 15% capital gains tax has made investing in financial instrumens, especially stocks, so popular that now stock price is all that matters, and stocholder management is what leads to jobs being sent overseas or otherwise eliminated...).
There is an easy enough way to do this, simply apply the 15% long term rate if your yearly income is less than let's say 250k, that the full rate applies above that level.
2
Three thoughts. First, that 70%, or anything like it, frightens people and is too easy to criticize since people don't realize that it is the marginal rate. Second, there definitely should be a change in the capital gains tax so that making money from money is not privileged over making money from work. Third, the ridiculous treatment of the estate tax should be completely reversed. It should be serious and large. Of course, it won't raise a lot of revenue, but to allow wealthy people to transfer their wealth to their children is stupid in principal. Even farmers, who yell and scream when this is discussed, even though very few of them are affected at all, should wake up to realize that "keeping the farm in the family," means, quite simply, keeping potential entrants out of farming.
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@Donald E. Voth
Wouldn't the family farm be bought buy the giant farm corporations? I am all for a vigorous and healthy estate tax, but I think family farms need protections.
Not sure that having the majority of our food grown by a small number of giant firms is in the national interest. Not sure that increasing estate tax would allow new people into farming...
7
@JK-Good points. Yep. The federal government--with Trump's infusion of $12 billion, spends billions each year on subsidies for farm businesses with the lion's share of the handouts going to the LARGEST PRODUCERS of corn, soybeans, wheat, cotton, and rice. If the Cato Institute is to be believed, the largest 15 percent of farm businesses receive 85 percent of the subsidies. Between 1995 to 2016, the Environmental Working Group (EWG) tracked $349 billion paid in farm subsidies and found that 50 people on the Forbes 400 list of wealthiest Americans received farm subsidies.
Sources:
https://en.wikipedia.org/wiki/Agricultural_subsidy
https://www.downsizinggovernment.org/agriculture/subsidies
https://www.thoughtco.com/us-farm-subsidies-3325162
7
1. We pay property taxes on our houses and cars. No taxes on other forms of wealth: stocks and bonds, cash. Why?
2. The payroll tax applies to the first $120,000 of income and does not to any additional income above that number. Why?
You can continue the list and publish if in your next issue of the NYT.
Thank you for engaging Steve Rattner but I know you will understand that your tax proposals are insufficiently progressive in that, for example, the increased capital gains tax applies equally to middle income taxpayers.
1
Mr. Rattner's proposals here do make some sense, but perhaps it would also be wise to levy a small tax on securities transactions. Many others have proposed that as a both a revenue raiser, and to possibly discourage so much rampant short term day trading/ arbitrage that also creates a large amount of market fluctuation.
Hopefully, Mr. Rattner and others will remain engaged in the debate over taxes. There may be no silver bullet but we can do far better than what we have now. Ironically, Mr. Rattner's thinking appears to support Sen. Warrens notion of a wealth tax as opposed to strictly thinking income. Tackling loopholes without impacting lower income earners will be the primary challenge.
Mr. Rattner is correct to focus on preventing capital gains from escaping taxation, rather than raising the already high rates on ordinary income.
Ordinary income earners have tax withheld from each paycheck. We should ask the same of capital asset owners.
Capital assets should be marked-to-market with gains taxed annually, without a free option to defer payments for years,
decades, or possibly forever.
@MT While I agree that capital gains should be taxed as normal income, a year to year method is not suitable or equitable. There is no true gain to the investment holder until cashing out the investment.
First, normal wage income is taxed on the year it is received, not the year the work was performed. For an equitable solution, capital gains income should receive the same treatment.
Second, investments go up and down. If you tax the rise of value before distribution, how do you account for the possible fall in value the next year?
Sooner or later, an investment will be realized, even if in the process of settling an estate. At that point, the gains or losses can be accurately calculated and taxes levied on that result.
Unfortunately, one big obstacle to Mr. Rattner's proposal is likely to be the "Senator from Wall Street", Chuck Schumer.
And of course, most of the Republicans in the Senate.
2
This is a hit to people that worked for years, bought company stock for retirement income, are not multimillionaires. We are fortunate to get better than 3% on our investments. If you have $1million invested that is only $30,000 income plus maybe $20,000 in SS, hardly being rich.
So what is fair, my wife and I both saved from hourly incomes, she does not have a pension, I took a short term payout and invested it, still driving a 2003 Buick, we are comfortable but not rich, this would put us below the median income.
So the taxes should take into account the actual income, not focus on dividends and capital gains. Some of my investments are in IRAs, I have to take out a distribution each year at the regular income rate. There are more retirees like me than wealthy CEOs and people on boards of directors. We 'actually pay a higher tax rate now than those below the median. Just like the GOP tax scam, this will not hurt the wealthy, but it will hurt small investors like me.
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@David Underwood
Agreed. You made an excellent point, and expressed it very well. Thank you.
14
@David Underwood: " but it will hurt small investors like me."
A tax change will hurt you - oh stop the presses and call out the national guard!
Obamacare hurt tax payers and all you and the NY Times did was either call them liars or belittle them.
You've built up wealth (congrats) now quit trying to slip out of paying your fair share of taxes.
7
@David Underwood
I read your comment and looked at some 2018 numbers: It always helps to have some actual numbers to compare.
For most small investors, treating cap gains as ordinary income would not be a catastrophe.
Filing jointly as a married couple, marginal rates would be 12% [$1,905 plus 12% of the amount over $19,050] from $19,051 to 77,400, and 22% from $ 77,401 to $165,000 [ $8,907 plus 22% of the amount over $77,400].
Fed Income tax on taxable income of $77,400 for a married couple filing jointly would be (from IRS tables) $8904, or an 11.5% rate.
The tax on $165,000 taxable income same conditions, would be $28,179 ( IRS worksheet) which is a 17% overall rate.
In the end, treating income from investments and dividends the same as earned income is a fairer approach.
25
And herein lies the value of radicals like AOC; they scare the wealthy back into the sensible center. Never forget; the powerful in America only make concessions as a way to fend off even great sacrifices being forced upon them.
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The problem with Mr. Rattner's proposal is that it would hit middle class retirees who depend on investment income either directly or indirectly through pension funds. Any increase in the capital gains and dividend tax rate must be indexed to income, as it already does. The whole point of Ocasia-Cortez's and similar proposals is to tax specifically and only the rich, because they are the ones who are perceived to have inequitably and unjustly profited from the existing capitalist system -- not middle class retirees or middle class people who hope to be able to retire some day.
366
@Veronica
You are absolutely correct. Taxing middle class retirees investment income when they finally get to use their 401k proceeds is ludicrous.
Any tax increase should be specifically directed to the very rich who will not miss it- not the retired middle class who is already having a difficult time making ends meet.
105
@marian, 401k proceeds are currently taxed as ordinary income when distributed to the account owner. So are IRA distributions. Roth IRA distributions are not taxed at all because the contributions were aftertax funds.
36
@Veronica
What is a unjust profit.
If a law was not broken then all profits are just.
9
Capital gains taxes are paid by other then rich as well. Raising that tax puts another burden on those who can least afford it.
Not well thought out as far as middle class incomes are concerned. The majority of estate inheritance in the middle class is the personal residence and also small real estate income investments. If you eliminate the capital gains forgiveness upon death, the middle class will suffer much more than the wealthy. Most middle class inheritors would be forced to sell the inherited home or small real estate investment just to pay the taxes, crushing any upwardly mobile status. The wealthy can survive this penalty, but not the middle class.
The big problem with this idea is it penalizes people who are not rich but have saved and invested their whole life for retirement. Please lets not give the super rich the responsibilty for making tax policy. We have been doing that for too long.
Warren Buffet has been railing for YEARS that he shouldn't be paying less tax on capital gains then his secretary does on her income. By giving investors huge breaks on the product of their money, it encourages reckless speculation, inflates interest rates and sticks a finger in the eye of hard working Americans who produce a living from the sweat of their brow. You want to talk about DISincentives to work? It's not the pittances that are begrudgingly doled out to the impoverished and the unemployed, it's the 2nd class treatment given to workers, some of them toiling at 2, 3 or more jobs, who are punished by not being the landed gentry who can generate more money with their money than any other humans can by wits, ambition and effort. Capital gains are a method of protecting oligarchy and shielding dynastic wealth. A nation who rejected monarchy should also reject the trappings of courtiers and sycophants who denegrate the humanist ideal of noblesse oblige.
1
Yes to this proposal. The greatest income inequity comes from equity income not wages. Tax it more please. The 1% can still have and eat their cake, just not the whole cake.
And raise the FICA limit to all wages. Why should working folk pay FICA on their whole paycheck while the biggest psychecks pay only on part?
@JohnV
Because the working folk get more back compared to what they put in. I am surprised that so many people do not know how SS works. The' rich' pay far more into SS than they receive back. That is why it is capped. Do you want to pay the 'rich' more when they retire?
Regular income (w-2 type) only requires a person to show up and do a job. Capitalism is based on the premise that some people willing to take a risk will invest said income (or borrow) into business enterprises that may or may not succeed. The reason for preferential treatment of Capital Gains is that they are the result of that risk. Should Capital Losses be also treated differently? Like, oh well I lost my job so go get unemployment to give short term relief to that loss? The Boy Scout Merit Badge book on Capitalism is really short and simple to understand if intelligence in this area is desired. It is all about risk.
2
Currently, most compensation is a 100% deductible expense to the corporation paying it. Why not put that on a sliding scale of deductibility above a certain level (say, $250k, indexed to inflaiton)? Below that level, 100% deductible; the next $50k, 90% deductible; the next $50k, 80% deductible. At some point, there would be no incentive for the corporation to pay the individual any more.
1
Some more great ideas from one of the wealth holders.
Capitalism is a great system IF it's seriously regulated. As we have learned in the last 40+ years, GREED MUST BE REGULATED.
WE THE PEOPLE must demand that WEALTH be taxed at 99.99% for the top 0.01% and 70% for the top 10% until OUR infrastructure and social safety nets are restored. Most of them got their wealth through inheritance and/or OUR government contracts - which they bloated with supposed costs and used inferior materials for to line their own pockets. They would not have anything but for the hard work and hard-earned taxpayer dollars of WE THE PEOPLE and giveaway politicians.
It is time to get serious about taxing every "wealth" avenue - including trusts, foundations, supposed "non profits", off-shore tax havens, real estate and every other place they try to hide OUR money.
2
@njglea
You must know this will never happen?
Since at least when Reagan became president, the Republicans have successfully based their political fortunes on lowering taxes for all, even though it usually worked out best for the rich. I don't believe that any party will enter the White House by increasing taxes in the manner proposed by Rattner, AOC, or any other Democratic contenders. And even if that occurs, they will have to convince 60% of the Senate. Not going to happen.
Rattner's proposal is a serious and should be taken seriously. Taxing capital gains as ordinary income would eliminate the 'carried interest' loophole and make the whole tax system fairer - everything income source should be counted as income.
It was also suggested that other loopholes designed to benefit specific special interest be eliminated.
What more do you want?
Perhaps you could suggest that we address the entitlement issues by having a serious debate on 'means testing' of Social Security benefits for retirees with income (including capital gains) greater than $500K and increasing Medicare part A and B premiums for retirees with incomes greater than $400K. We have to debate these issues keeping in mind that we cannot solve the current forecasted deficit by cutting entitlement benefits to the poorest and most vulnerable among us.
Who knows what Trump/McConnell/Pelosi will do but if the consider seriously what Mr. Rattner is proposing then it will be a real step forward.
Investments should be taxed at a progressive rate negatively correlated to investment length. We need to differentiate between meaningful investments and short-term investments. In particular, micro-investments that buy and sell stocks in fractions of seconds are parasites that syphons money from pooled investment funds, such as retirement accounts, into the pockets of a few, with no benefit to anyone else.
2
While the far left wants to tax the middle class into oblivion, the bottom 50% of income earners pay nothing in income taxes. Nothing! The top 50% of income earners pay 95% of income taxes collected. When are the bottom 50% going to pay their fair share?
4
@Larry, you are aware that the federal income tax to which you refer is only one of a myriad of federal, state and local taxes that everyone pays, regardless where they fall on the income scale.
People in the bottom 50% pay Fica, state and local sales taxes, excise taxes, gas taxes, etc. etc..
Contrary to your simplistic comment, they are already paying their fair share.
@Larry
I know--it is incredible that most of these people commenting do not realize that they contribute really nothing to the running of this country. The rich pay for just about everything already. Ungrateful.
There are some better ways:
1. Capital gains should be taxed as ordinary income but the gain adjusted for inflation.
2. Dividends and share buy backs (distributions) should also be taxed as ordinary income but grossed up by the corporation tax rate paid in that year and that gross up treated as a pre payment of income tax.
3. All gross distributions should be taxed when paid at the top income tax rate.
Thus assuming that CT was 25% and marginal income tax 40% and actual marginal tax rate 35%
Dividend. 100
Gross up. 33
Total 133
PrePay. 53
Payment. 47
Net to tax
payer
Gross Dividend 133
Tax rate 35%. 46
Net To Tax payer. 87
Then the tax payer would receive a repayment of 40.
Capital gains assuming no inflation adjustment would be taxed also at 35%
Much better to eliminate corporation tax and replace with VAT.
Raising taxes on capital gains is raising taxes on the middle class. Many people rely on stocks to help fund their retirement. They’re not all multimillionaires. This is just another way of using middle class money to reduce tax increases for the wealthy. Perhaps it would make sense to tax the first $500,000 at the lower rate and any amount above that at a much higher rate. It would also help to eliminate the various tax dodges that allow the wealthy to pay less than their share of taxes while receiving the full benefits of living in the United States.
1
I wholeheartedly agree with the idea of taxing capital gains at the rate of ordinary income. This would also eliminate the ridiculous injustice of taxing IRA's, 401K's and other tax deferred instruments of the middle class at regular income instead of the capital gains rates the wealthy enjoy for similar investments.
What about bringing back the first tax ever created by the Founding Fathers of American capitalism: the estate tax. Leave some flat amount to each heir, with an additional amount for heirs that require care. If Trump had only inherited a paltry 2 or 5 million we would not be dealing with a trust fund baby as President. The last thing America should be doing is betraying our revolutionary roots and creating a new entrenched aristocracy. If there is no estate tax, we might as well distribute the titles of Lord and Lady...
And finally, the ONLY tariff that makes sound policy both economic and political, is a %1000 tax on all American real estate purchased by foreign nationals. Why are we allowing the world's elites to force out Americans from reasonably priced urban real estate? Why in the world would we even allow foreign nationals to purchase American farm land? This makes no sense. A tariff on foreign purchase of real estate (retroactive mind you) would have an enormous positive impact for America.
There are plenty of tax alternatives that our Congressional millionaire's club will never even consider to create due to their self interest.
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Part of capital gains is just inflation. There should be a deduction for inflation in any capital gains tax.
Any attempt to close loopholes only engenders more loopholes.
The idea of taxing capital gains just like all other income is one I've been waiting for decades for someone to propose.
1
Worthy ideas in the direction of returning tax policy to be about raising revenue instead of handing out political goodies. Giving Corporations a lower rate, in line with world standards was not a bad idea, not cleaning up all the corporate giveaway, indeed adding some, was criminal. To refine your ideas.
First, Capital Gains as income is fine but you need to allow for stepped up (inflation adjusted) basis. Otherwise you discourage long term investment where a significant part of the return just reflects normal growth. At the same time, lets tax dividend as income at the personal level but deduct it at the corporate level to end double taxation. I would combine this with an end to corporate and personal interest deduction, the government should not be in the business of preferring debt to equity.
A top marginal rate of 70% is more about curbing huge salary and bonus payments. The managerial class has been ripping off workers and shareholders for years. Let's also ban corporate stock buybacks which are just short term stock manipulation to benefit management. If there is excess cash, they can distribute to all shareholders. Also, how about ending the tax deductions for salaries and bonuses in excess of 5 million, why should the U.S. tax payer subsidies these ridiculous sums? Anyone earning at this level who claims a high tax rate discourages work is lying, they would work just as hard.
2
Taxing wealth instead of income might change the calculus, as Elizabeth Warren proposes. Let's examine that.
2
Disagree with those who think all income should be taxed the same, because investments are money that is placed AT RISK. When we work for our weekly paychecks it's income we can count on. Money invested with the hope of profiting can be lost in its entirety if things don't go as we hope. The reward for taking that risk, and making our money available for businesses to use, is that we get to keep a higher percentage of it. This should not be changed.
3
There is no moral reason on God’s green earth that the one who earns by investing money from the comfort of home and computer, has less responsibility to pay for the benefits of this society than the one who leaves their children, arises before dawn, gives their time, energy and the sweat of their brow to hope they can pay for housing and food for their families.
Risk? What? That worker can be fired at any moment with almost no protections and soon be living on the street.
I’m not too worried about the capitalists’ risks. Earning money by clicking a moment now and then? Sorry. Doesn’t cut it.
3
While AOC's hare-brained idea is to dramatically raise taxes on the ultra-rich and Warren proposes a seriously thoughtful surtax on wealth, an actual policy wonk comes out with the worst idea of them all. His capital gains and dividend ideas would amount to an enormous tax increase on a wide swath of the middle class and upper middle class that aren't in the ultra category. Millions of Americans own stocks and bonds and mutual funds, all of whom would get a rude awakening from Uncle Sam exactly at the time when we're seeking greater income equality. Rather than "soak the rich!" Mr. Rattner seeks to soak as many as possible.
Good to see, by his graph, that the tax effect on the 1% hasn't really changed since about 1950, despite declining tax rates. What would AOC's new marginal rates do, given this data?
I agree with Glenn Ribotsky. A 0.1% transaction tax on stock trades would have great benefits.
France President Hollande pushed a similar 'super tax' of 70% to top earners in France, and it failed quickly. His Finance Minister Macron (now President) called it "Cuba without the sun". Taxpayers and talent can move, and companies don't have to hire in your country, so it failed. I think the better approach is a consumption-based tax like a VAT, then rich folks buying things will pay more. Ocasio-Cortez is clueless about income tax strategies and France's failure evidently, and many rich folks make most of their money from capital gains, Buffet has a salary if $1. She'll learn....hopefully.
2
I agree that the tax on capital gains is too low and needs to be raised. However, the present scheme doesn't take into account that "long term' capital gains applies equally to assets held for just one year or for many years. Thus, if you sell an asset that you've owned for 20 or 30 years or even longer, you must pay the same capital gains tax you would if you sold it 13 months after you bought it. But the "gain" you realize when you sell something you've owned for a long time doesn't take inflation into account, which means that the dollars you sell it for are worth much less than those you paid for it decades ago. In some cases, what looks like a capital "gain" to the IRS may actually be a loss in real dollars. For that reason, I think the capital gains tax rate should be raised only if the gain is indexed for inflation.
1
If you really want to shift wealth towards the middle class revise the pay scales i.e. minimum wages, for different tiers of a companies size. Should the workers for Walmart be paid a meager wage of $14.00 per hour while the family sits on billions. Taxing the wealthy does nothing for the middle class. It does not effect their pay check. It only gives more money to the government to waste.
1
@Richard Johnston Taxing the wealthy provides funds for roads, bridges, other infrastructure, education, public housing and public transportaion -- things that everyone needs EG ....Funding for colleges has dropped dramatically, for example, at almost all state levels....one reason why college has become so expensive. Public housing - see NYC - really did help a lot of middle class people -- teachers, police, fire -- now it's falling apart due to lack of funding... So -- taxing the wealthy has lots of benefits for the middle class.
"Taxing the rich" puts the cart before the horse
Private wealth is more or less the result of Law--(1) Property (2) Labor (3) Tax.
So ask how they got their wealth to begin with. If they more or less stole it--or gamed the system--taxing it is more or less just returning it to rightful "owners".
Capital gains are not due to improvements. They are unearned--due to other people driving up demand and raising the price. Capital gains for real estate for example is often mainly due to community well being--infrastructure, services, opportunities including beauty--landscape, architecture, design and city and town planning rules.
So the communities really create the capital/price gain. It should be theirs from the start. Capital gains "tax" is just as easy way to calculate the actual gain--enabling the community to get it's fair share--no more no less.
So too--more or less--with corporations and their stock-- limited liability should imply limited entitlement.
2
Have pity on retirees who depend on investment income to live decently and no where near the one per cent life style. If capital gains were to be subject to higher tax rates, there should be a threshold below which there is no tax on them. When you reach your 80s and 90s, most of your investments were made long ago and if you are lucky your gains are fairly high. Why penalize those of us who saved and were able to pick some winners along with the losers! Especially since losses in an IRA are not deductible!
2
@Julie Carter you have money, therefore you are a criminal to the greedy Big Government left. Never mind that you worked hard, sacrificed, saved and invested wisely. You’re a criminal!
@Julie Carter. The greedy Big Government Left doesn’t care about your capital gains or your retirement. They think every penny you have belongs to them and that you should be totally dependent upon them and not have your own savings.
I agree that removing the favorable treatment of capital gains and dividends would be an excellent way of raising revenue while causing minimal pain.
But this is not in any way mutually exclusive vis a vis more progressive tax rates (as AOC proposes) and/or taxing wealth along the Liz Warren plan. Indeed, it would go hand-in-hand with those efforts in making America a fairer, more prosperous, more dynamic nation, and allow us to afford a better, more available educational system and comprehensive universal health care.
It would make us what I remain amazed that no politician has yet adopted as his or her slogan: A Better America.
I am totally against this plan. A LOT of people who pay capital gains aren't rich. We have most of our money in stock, and now that we're retired we supplement our income from that. It is not a lot of money, and we are both working only part time and on Social Security. We aren't millionaires in the least. Tax capital gains on a sliding scale like the income tax.
4
We need about four more rates ending in a 70% top rate. rattner's math and reasoning is faulty. All income should be taxed alike.
1
It's not about raising revenue, primarily but reducing inequality. Because you're rich you've effectively become a uber citizen and have more influence, and in a sense more a vote. This will not end well for the country if you don't get behind better policy.
1
Steven, a huge problem with your ideas is that they do not affect only the very rich. Many ordinary people save their money in capital assets, so a lower capital gains rate is good for us. My wages have been stagnant for years, and I'm having a harder and harder time finding work. My savings are critically important to me, both now and in the future. The fact that corporate earnings are now taxed at lower rates is completely irrelevant to me as an ordinary saver. Many ordinary people die owning a home that has appreciated substantially and that forms the bulk of what's left to the families of those ordinary people. Eliminating the step-up at death would be devastating to us. (I don't have the same view about stocks and securities held at death.)
The beauty, and sense, of Ms. Ocasio-Cortez's proposal, is that is cannot reach ANYONE other than the super rich. 100% of the money owned by the super rich ultimately came from ordinary people. 100%. Consider that carefully and you will see that it's true. Marginal tax rates on very high incomes should be very high. Higher even than Ms. Ocasio-Cortez proposes. People have the right to earn a lot of money, and they should get to enjoy it, but not before giving an increasingly substantial portion back to the source as their income rises.
1
While agree with the basic financial assessment-- AOC is also speaking to perceived inequality/fairness-- as well as purely dollars in making such proposals.
@Rebecca
I think you are misinformed.
https://www.latimes.com/business/hiltzik/la-fi-hiltzik-aoc-taxes-20190107-story.html
Teddy Roosevelt, 1910
"The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of reatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax whch is far more easily collected and far more effective-a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate."
3
Mr. Rattner's scheme to increase the taxes on capital gains and dividends would hurt small investors as well as the super rich. Folks trying to save up for a house, for example. I think A.O.C.'s plan to simply start taxing income over 10 million a little extra makes more sense. And why the distinction in treatment between passive income vs earned income? A buck is a buck.
what about setting a tax rate of ?percent on everyone with ?percent personal deduction for everyone and then no deductions save for charity beyond that. The tax rate would be the same on all forms of income.
@Alan Fisher No, progressive taxation is better. See:
https://psycnet.apa.org/record/2018-03098-001
Getting rid of loopholes should be the first concern, but what about a wealth tax?
Taxes on financial transactions (sales taxes) would also work, and not run into the Constitutional law issues that affect wealth taxes.
As wealth is increasingly tied up in financial gambling, the moral reasons for property rights get weaker. One does not have to be anti-capitalist to support the right of society to rewrite the rules for wealth.
2
At last someone with a rational view about income taxes. The low rates on”unearned” income is selectively applied to those who can afford to invest, that is the wealthy, or at least, the well off. Income is income and all of it should be taxed on the same schedule wether it is earnings from an employer, investments in the market, gains from the sale of properties or income from deceased family members.
I will go two steps further.
First, Corporations should pay no taxes! They are not people, perhaps, but they are owned by people and that income should be taxed.
Second, tax rates should be estimated in such a manner that the Federal income balances with expenditures. They should be updated quarterly so that there is no additional Federal debt. Part of the “expenditures” should be a planned reduction in the Federal debt so that over the long term, perhaps 20 years, that debt should be eliminated.
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@Barry Rodgers
But proposals to eliminate corporate taxes are never alongside ones to tax the profits of a company. But even companies that show no profit are using the public infrastructure.
Another way of eliminating the debt is to vote Democratic. Funny how that works.
The main reason why AOC's proposal does not make much sense is that there are actually very few people earning wages of $10mm or higher. The so-called 1% (more like the 0.01% in reality) earn investment income far more than they do wage income, and a very substantial portion of their investment income is taxed at a lower rate, when it's not sheltered... legally or not. So before you change tax rates on wage income it makes a lot more sense to adjust tax rates on various forms of investment incomes and eliminate tax shelters (and I do not count the SALT deduction as a shelter, so the recent change should be overturned).
3
Raising the Capital Gains tax will directly hurt everyone but the wealthy - why?
Because it is super easy to buy lateral trades in real estate properties - of equal value - which totally defer having to pay ANY - meaning 'ZERO' Capital Gains - AT ALL - because every time one sells real estate one can purchase a 'like-kind' property and continue to defer Capital Gains --
And - if the property is passed onto to children - they will not be responsible to pay - ANY - ZERO - Capital Gains --
This Lateral Trade Real Estate purchasing works for anyone from any income bracket. If, Capital Gains Tax if raised - it will hurt everyone but the wealthy - for when someone sells their home - they will have to pay higher Capital Gains - leaving them with less purchase power for their next home.
Instead - it would be best to raise the tax rate on the wealthy. When they make more income they pay more taxes - just like the rest of us.
2
I am shocked that a man who claimed a net worth of between $200 million and $600 million back in 2009 doesn't like the idea of a 70% top marginal tax rate.
Mr. Rattner, if the effective tax rate of the top 1% has always hovered around 40% then what difference would a 70% top marginal rate make?
1
There are many virtually hidden tax policies that benefit our wealthy citizens at cost to the public good.
Another example: How about the 529 College Savings Plans? These allow well-off citizens to put away money for children's or grandchildren's college education, education that can then be paid for without paying taxes on that money. But students from families with lower incomes, unable to afford 529s, must struggle to pay for college with money that has been taxed.
As Gouverneur Morris, a signer of the U.S. Constitution, said, “The rich will strive to establish their dominion and enslave the rest. They always did. They always will. They will have the same effect here as elsewhere, if we do not, by the power of government, keep them in their proper spheres.”
5
The 529 plans are for people that have children that will not qualify for need scholarships. If the universities, states and Feds are not going to provide money except as loans, then these children will go to school the old fashioned way - family will pay. You can harp about false equivalence, but even that supposed lion Speaker Pelosi went running for cover when President Obama proposed a change.
1
@Michael Blazin Michael, I think there is a huge middle gap between those who qualify for need scholarships (which are inadequate) and those whose well-off families can afford 529s. The current student loan debt for 44 million students and former students is estimated at $1.5 trillion! Our policies, tax and otherwise, should try to help our lower-income struggling students, not our wealthiest.
1
When discussing tax reform we need to keep in mind several points. First, federal estate and gift taxes amount to less than one percent of federal revenue. The downward trend internationally of this source of revenue suggests a need for worldwide reform. No meaningful discussion of this issue will make any difference in the 2020 election.
Second, the two major sources of federal revenue come from individual income taxes (48%) and payroll taxes (35%). Corporate income tax provided 9% in 2017 and presumably less in subsequent years because of recent tax changes.
We should eliminate the payroll tax (including the Medicare tax), and replace it with a border adjustable consumption tax. Social security and Medicare benefits should be funded from general revenues (a side benefit would include getting rid of the ridiculous popular notion that these benefits are funded by the beneficiaries). Shifting from a payroll tax to a border adjustable consumption tax would make American labor more competitive than any of the tariff nonsense currently in vogue.
The corporate income tax should be eliminated. All investment income should pass-through to investors and be taxed at ordinary rates. Investment tax bases should be adjustable for inflation for purposes of calculating depreciation and gains on sale.
When some candidate proposes these changes, we will be moving in the direction of constructive change and not engaging in rabble-rousing.
1
Why is the old system that worked very well for 48 years?
Because it worked. Wealth had to pay their fair share and do real work to go on making and holding that kind of money.
I think we need to revisit the old rules on taking of money out of the country and those corporations who hold so much cash overseas.
2
@magicisnotreal
Should read; Why not the old system that worked very well for 48 years?
1
@magicisnotreal corporations hold cash overseas because greedy Big Government pay should them to. And the corporations are 110% to keep their (actually the cash belongs to me and other shareholders) cash where it gets the best return
1
@Larry
The first duty is not to you it is to the nation.
Your incorrect British Colonial view of capitalism was carefully cultivated since 1980 by those very same people in cahoots with the 1% and GOP.
Well -- increase estate taxes to where they were a decade or so ago -- with an exemption of $1million only (why all the concern for the children of the wealthy anyway? Are people really worried about the Paris Hilton's of this world?); stop the tax benefits of family "foundations;" tax dividend income at higher rates than "ordinary" income. I see no reason to discourage high tax states like NY and CA from trying to benefit their citizens...the cap in the current law should be eliminated. On the corporate side -- eliminate entirely any deduction for lobbying expenditures..and yes, to a financial transaction tax. Enforce the Johnson Amendment that prohibits charitable organizations from engaging in politics...and strictly construe "religious" organizations that want a tax exemption. Stop the Mitt Romney game of putting "low value" assets into retirement accounts that magically become enormously valuable...Limit contributions to retirement accounts to cash and readily valued assets such as publicly traded stock.... Ask the tax bar -- not the investment class -- to tell you where the "tax bodies" are buried.
4
@Vicki
Well, some good ideas here, but I gave a half-cheer when the Trump Tax Cut went through, capping state and local tax deductions at $10,000. Suddenly the curtain was drawn back and the Professor Marvels of California and Northeast state governments and government employee unions were revealed as the overfed pigs that they are, no longer protected by their advice to us overburdened taxpayers, 'Oh, just deduct your taxes off your GROSS income.' If they had let me deduct these taxes off my NET income, I would still be bugged, but slightly less complaining. And "benefits" from living in a high tax state like NJ? Do you mean our awful potholed roads? Tolls everywhere we travel? PAYING TO WALK ON A BEACH EVERY SUMMER (Do you do that in Florida?)? The highest-cost state colleges in the country? Our filthy roadsides and parks? Our out-of-control deficit due to paying outlandish salaries and pensions to too many government employees at too many levels --- local, county and state? How I'd love to not pay income tax at all like you do in Florida!
And yes, I agree,please enforce the Johnson Amendment, which only Catholic and Protestant churches with majority white congregations seem petrified to violate by even commenting about candidates from the pulpit. Maybe when majority black churches and many liberal-leaning synagogues are threatened with loss of non-profit status when they're used for partisan political rallies will there be a fair and level political playing field.
Mr. Rattner, thank you for pointing out that the top 1% have never paid a 90% or even 70% effective tax rates. I come from one of these families that even during the 90% top tax days of the 1950's my multi-millionaire grandparents often paid no taxes at all in some of those years. I remember that in 1962 they actually paid a negative tax, meaning they not only paid zero taxes for the entire year, but also clawed back taxes paid from previous years. As Leone Helmsley (the queen of mean) once said, "only the little people pay taxes", and that has always been true even when the top tax rate was 91%.
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@Sparky Some families could do that -- like those who mostly invested in tax exempt municipal bonds...But lots of other people really did pay high taxes....most public corporate CEO's in fact.
I'm all for taxing capital gains but progressively, just like income or at least like income used to be. The idea that you tax all capital gains like regular income does nothing but hurt the middle class or upper middle class, like the dentist or account who has saved and has a portfolio of over a million dollars. As someone pointed out Lebron James and Lebron James' dentist should not be in the same tax bracket for regular income or capital gains. I'm not dissing Lebron or athletes in general - they are paid well for doing well and not paid well when they do poorly - unlike the majority of CEO's
3
How about charging illegals retroactively for the cost of educating their children from kindergarten to grade 12. We should add to that all the emergency visits to our hospitals, subsidized housing and a whole slew of other benefits which have been penalizing the US middle class for the past 3 decades. This should be the cost for the path to citizenship which should also include the entire cost of immigration fees which amounts to about 5000 dollars. this will probably reduce a large portion of our National debt and discourage further illegal entrees. It will pay for lot more than a wall.
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A truly horrible idea as presented. However, adding brackets like those for income tax with much higher rates for higher captital gains and exemptions for lower gains would add some equity which was the main point of AOC's proposal.
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Steven Rattner's "A Better Way to Tax the Rich" is in no way an alternative to raising the top tax rate on huge incomes. His solution of raising the tax on dividends and interest would hit millions of small investors, not just the super wealthy. Many middle-class Americans have saved and are saving in retirement accounts that are invested in dividend stocks and fixed income portfolios. These savers need and are planning on that, in most cases, modest income for retirement. In what way could Mr. Rattner possibly include them in the category of "rich" or equate them with those whose income is $10 million or more a year? Is it possible he is trying to undermine the very good argument for a higher rate at the extreme top end by spreading the pain to the middle class? Moreover, his solution of taxing all dividends and interest at a high rate would greatly discourage small savers from investing in the stock market, which could lead to a decline in asset prices. The tax advantages of dividend income has been one of the few ways the small investor in the last decade has been able to grow his assets for retirement. Mr. Rattner's proposal would take away that option and treat him/her as if they were "rich". Shame on him.
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The only people that actually would have $10 million incomes are athletes, singers and lottery winners. Everybody else at that level can manage salaries. You would see all kinds of deferred compensation where the money remains in control of a firm, but that someone could withdraw later in life to stay under the threshold. When they do take it, they likely will max out their charitable donations so to stay under the threshold. Estimates of new funds to government seem wildly optimistic.
While I frequently disagree with Mr. Rattner's Wall Street Democrat's viewpoint, this is actually the most effective way to raise taxes on the super-wealthy. Unlike the proposal to merely raise the highest marginal rates (which is fully justified), treating all income the same for tax purposes eliminates the game that so many of the ultra-rich engage in: converting earned income into unearned income for tax purposes and thus significantly reducing their tax liability.
Many divisions of many big law firms are devoted to this single task. If income is income for tax purposes, regardless of source, that game ends. Certainly, there will always be other mechanisms for dodging taxes, but when income from sales of assets or from dividends is treated exactly the same as income from the sweat of one's brow--from working for a living--we go a long way towards tax fairness and raising needed revenue.
If you make money, you pay taxes at the same marginal rate as everyone else. Period. And the great benefit of this proposal is that it doesn't raise taxes at all on working people.
Because this is the way the rest of us have paid taxes for our whole working lives.
1
Yeah. I don't think America needs to take any advice from rich people on what the tax rates should be. That's how we got here. Time for a 70% rate on incomes over 5 million and a 90% tax on estates of over 100 million. You can either have a republic, or you can have these huge sums of generational wealth passed down to people who always, ALWAYS, use it to undermine democratic institutions.
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The first problem with this approach is he has misidentified the problem. Capital gains taxes are lower than taxes on Ordinary Income due to the time value of money. You can make the taxes effectively the same but the capital gains portion needs to accommodate the inflation incurred over the life of the investment - that is not accounted for today except by taxing them at lower rates.
The second problem is definitely the disincentive to work. My marginal tax rates exceeded 60% and my response was early retirement. Congratulations! Now society doesn't earn a penny off of me because they took too much. Yes, we can both lose. The golden rule is half (even in France) - you take more than half and I sit down. Oh, and only the most productive people have this option. Great plan folks. If any of you ever read the other national newspaper you'll discover that alternate economic research puts the optimal tax rate (for maximum tax receipts - not societal "fairness") at well below the proposed 70% rates.
It is very difficult to make over $10 million a year and very easy to stay way, way under it once you stop working and still have same lifestyle. I would agree for people at that level, if they do not manage to defer compensation, why work that hard to exceed it? 30% of the extra (yes, I understand marginal rates) amount minus state and local taxes may not be worth it. Every $ over the threshold you earn, you keep $0.15.
@legalsails you quit working rather than pay outrageous confiscatory tax rates?! Next Big Government will force you to work!
This sounds like middle income earners now in retirement who live off partially from equity accounts will be penalized with high capital gains taxes. Perhaps the higher tax should start when the capital gains exceed some minimum number. I like Senator Warren’s idea of taxing the wealth of the top 0.1% by % annually.
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With the issue of fairness of our tax system being raised, I am surprised that one relatively simple change—elimination of the cap on earnings subject to Social Secrity tax—hasn’t made it into the current debate. The future viability of the social security system would be assured, and one of the most regressive taxes—where the amount of Warren Buffet’s Social Security tax is exactly the same as any employee earning $132,900–would be made fairer by that change, with relatively little distortion of existing incentives for savings and investment.
@John Steed that idea hasn’t been raised because it’s a bad idea. You’re promoting a tax increase so massive the economy would never recover. Your idea also proves Social Security is a failed Ponzi scheme. You’re trolling for more money exactly like Bernie Madoff did.
It's better to tax wealth, earned, continuing, inherited, no loopholes. This rate-and-loophole line dance is not working. Tax cuts create bubbles and depressions, not prosperity. For this to happen, there has to be serious political change that comes from a sustained and rational movement. Not likely in an environment of exhibitionism.
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Mr. Rattner states that he is “all for raising taxes on the wealthy (in large part because we need to deal with our growing deficit).” With respect, there is a much better way to deal with budget deficits, while still adhering to the ideals of individual liberty and equality of opportunity upon which the USA was founded: cut government spending.
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Why not tax all income at the same rate. if 20% is good for business, set that as the target. Eliminate all deductions. Deductions are the reason we have higher tax rates on higher income brackets - so they can deduct the cost of multiple, larger homes. Instead, establish a fair, flat standard deduction for everyone, and have them pay 20%, or less, of their remaining income.
"At present, a beneficiary of long-term capital gains or dividends pays 23.8 percent of the profit to Washington." The 3.8% surtax only applies to those with upper incomes: singles earning over $200,000, married couples earning above $250,000. Below those levels, the capital gains tax is only 20%.
Will AOC listen to this expert view and adjust her plan? The mark of a leader is the ability to adjust as necessary, realizing the goal can be reached by more than one approach.
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@Bruce Maier God I hope she doesn't listen to Mr. Rattner. He's done enough damage to our society already.
Donald Trump and Leona Helmsley are two people who have said it best, each in a different way; only little people (or stupid people) pay all their taxes. The counter to this is that little people are propping up the rich who can afford to part with more money while we cannot. In the meantime 99% of us watch as gilded age progresses to the point where we cannot afford halfway decent lives and our children and grandchildren will wind up with even less.
Each time there is a tax cut, whether it's at the federal or the state level, programs that help 99% of us are cut back. Roads, bridges, trains, airports, and other things are not repaired or updated. Each time businesses successfully lobby for a regulation not to pass or to be watered down ordinary Americans pay the price. The poor pay an even higher price.
How much money/wealth does one person or a family need to have a good life? Do they truly need enough money to run a small country? Is all that wealth in their hands being productive? How much do they care about their country (which has helped them to become wealthy) when they waste money on avoiding taxes that will pay for the things that keep us productive and keep America as a country worth living in?
Gated communities and walls to keep the masses out are nice. What's not so nice is the attitude that the masses aren't worth investing in but are worth cheating on.
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taxing capital gains at same rate as income makes little sense:
- for long-held assets especially, a gain is the result of inflation, not actual earning
- unlike income, capital gains are the result of risk-taking. Gain are uncertain and losses frequently result as well
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Rebuttal points: Treasury Inflation Protected Securities are taxed as ordinary income for both interest and inflation adjusted gains at marginal rates and although assets that produce capital gains are risky they also allow income deductions due to capital losses.
1
Why not just eliminate corporate taxes altogether under this idea? Tax all income at the same rate, regardless of where it comes from. And let everyone pay the same tax rate. Better yet, let’s just eliminate the immoral income tax altogether.
Why are income taxes immoral? Do you not benefit from roads, schools, other infrastructure built by taxes? Do you not benefit from food inspections, medical research, airline safety provided by governmental programs. Did not government pay for the initial research that produced things you use everyday like internet, GPS to name just a few. Morally, how do you account for those service men and women who lost their lives in the nation’s wars over the last century or so. Many were drafted. Do you not benefit from their sacrifice. Pay your taxes!
Yeah no.
Perhaps someday, we'll re-visit the idea of a flat tax for all with no deductions. The poor would pay no tax. Granted, it would force some tax specialists and many IRS employees to look for other work, but life would be easier for most of us. While we're dreaming, let's think about how much is lost through child tax deductions. If we have 17,000,000 kids in the US whose parents receive tax credits of $2,000 per head, maybe we should eliminate that deduction for families with more than two children. Why reward people for reproducing when overpopulation is already a problem?
These ideas for revenue are all good and they would make a good complement to the AOC 70% marginal tax rate. But remember , we are talking about marginal tax rates, not all tax rates. Everyone one pays the same low rate on their initial income, even the billionaires. As the income rises and each incremental amount becomes less necessary or proportionate to effort, and therefore less valuable, it is , and should be, increasingly returned to those who helped create it. Namely the nation. The powerful and wealthy are still amply compensated for their good luck in life and their contribution to society. But increasing disparity in income and wealth at some point leads not only to unrest, but also to other bad effects like decreasing economic growth and we are well past that point.
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this proposal is another scam to benefit the rich. Have no doubt they will find loopholes to evade the tax. For one, there is the stepped-up basis their heirs get when they inherit which means they don't have to pay a penny of capital gains. Family wealth passes down untaxed generation after generation. Now you understand why they hate the estate tax so much, its the only reason their tax rate is above 0%.
Rattner stands steadfast in defending the interests of the wealthy against Democrats that want to tax them. I would not expect less from an investment banker. Here he proposes a tax increase that will fall primarily on the middle class that have scraped and saved for years to have investments they someday plan to sell.
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@Mike T. Actually he did address the issue you raise: “For example, the United States should eliminate the provision that forgives unpaid capital gains taxes on assets held at death.”
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@Mike T.
I will never understand why anyone says a tax on capital gains will hit the middle class. I am middle class and my friends are middle class. If any of us own stocks it is through a 401k or 403b. Savings made through these plans are taxed as earned income, not capital gains.
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@GB I'm also middle class, and yes I have IRA's, but I also hold mutual funds outside of tax deferred vehicles. But here's a thought...I'm willing to pay regular taxes on the investment gains when I actually take them. Why do I have to pay taxes on any dividends or capital gains when it's reinvested??? It's the same as Trump's real estate loophole. Why do you have to pay taxes when you reinvest? Why should business pay taxes on any profits that go to build the business? Everyone should pay taxes on income actually received and not on profits reinvested.
1
There are other ways in which to increase federal revenues that are not mentioned in Mr. Rattner's op-ed piece. 1. We could reform the current estate tax system. Right now federal law allows for a federal tax exemption for the first $11.4 million. 2. If corporations are truly 'individuals' when it comes to political contributions, then they should be treated as 'individuals' when it comes to income taxes. 3. Review and revocation of nonprofit status of nonprofit organizations that are not serving a public good/benefit. The NFL was one notorious nonprofit, until public scrutiny and knowledge forced the NFL to agree to relinquish their nonprofit status. Corporate-run hospitals that are no longer serving the public's needs (such as Froedtert Hospital in Milwaukee who recently turned away one of their own employees (who worked for the Medical College), who was suffering a stroke (because the ER was 'closed for the day') - they sent her away, and she died en route to another hospital, many miles away.
Our federal and state governments have squeezed the middle class to the point where there is no more blood coming out of these turnips. It's time the fat cats of our country begin to start paying their fair share, for once.
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@Think I would guess that more than 80% on non-profits, not for profit and psuedo-charities offer very little benefit to anyone. After the NFL, Corporate-run hospitals and universities with huge endowments are at the top of the list. Hospitals have no reason to be frugal (lean) when they are not for profit, neither do universities. The reality is they cheap out on the customers they are supposed to be saving.
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@Think Your point.
2. If corporations are truly 'individuals' when it comes to political contributions, then they should be treated as 'individuals' when it comes to income taxes.
Great point! Undeniably truth and should be the standard by which corps are taxed.
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@Think Never quite understood non-profit. If you don't make a profit, you don't pay taxes. Why the special filing status? If a non-profit's tax burden is less than it would be as a for-profit, why am I subsidizing it? Steve?
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Years ago back when in was in business school a fellow student asked a professor about the high tax rates--the professor's blunt response was that if one was in the top bracket and paid that rate the payer did not deserve to be in that rate because he wasnt smart enough to be there!
1
Rattner is right in arguing that eliminating the preferential tax rates on long-term capital gains and qualified dividends should be the first step toward restoring tax progressivity and plugging the fiscal hole caused by the TCJA.
It is a mistake, however, to assume, as Rattner does, that the cap on deductibility of state and local taxes is now a permanent feature of our tax codes. The limitation of the SALT deduction was Mitch McConnell's spit-in-the-eye to the blue states. It has been a target of conservatives for decades because they know that ending or limiting it will inhibit Democratic-leaning states from undertaking progressive policies to address housing and homelessness, education, public transportation and other pressing problems. Repealing the caps must be a priority for Democrats when they regain control of the federal government.
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@fbraconi Yes, limiting SALT deduction was a crass move to hurt coastal libs like me. But a serious progressive argument can be made that we should not be subsidizing people rich enough to own homes. Dems need to think big.
2
This is good. All income should be treated equally and taxed the same. At the same time, FICA should be applied to all sources of income, not just wages. This year, FICA is capped at $132,900 so there is no additional payin from high wage earners. In addition, many wealthy people have only non-wage income so contribute nothing (Steve Jobs famously worked for $1 per year). Extending FICA to all sources of income would allow a huge cut in the FICA rate and reduce the burden on the lowest wage earners.
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@frostbitten
"At the same time, FICA should be applied to all sources of income, not just wages. This year, FICA is capped at $132,900 so there is no additional paying from high wage earners."
That is actually not true. While the Social Security tax paid by employees is only due on this amount, the portion paid by employers is on the entire income. Furthermore, the Medicare tax paid by employees is due on all of their wage income, and those making more than $200,000 individually (or $250,000 jointly) even pay 0.9% more on their wage income, plus 3.8% of their unearned investment income, courtesy of the ACA (Obamacare).
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@frostbitten -- you DO understand that removing the cap on FICA payments means lifting the cap on future Social Security payments, right?
Because in order to preserve the fiction that payments into FICA are something we're all in together and not just a form of welfare for old people who either didn't earn much during their working years or who didn't save much during that time, the annual wage credit that is used to calculate Social Security payments is also capped.
So be careful what you wish for. It might help ensure benefits for current recipients, but it will create an even greater burden down the road.
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@JM Actually we could have a maximum individual dispersement for Social Security even if we collect FICA on all income, no matter what the source (investment or working income) or what income bracket. Collecting FICA on all income is a great idea and would save the Social Security program and offer a safety net for all elderly Americans.
7
How noble of Mr. Rattner. Now that he's amassed his wealth, he wants to impose higher capital gains taxes on aspiring capitalists so they will have a much harder slog of it. I'd find his gesture less self-serving if he included a 20-year look back provision so that his personal and family assets would be subject to the same tax rates he's proposing for others. We also shouldn't be confused by the sleight of hand Mr. Rattner employs to deflect the idea of a wealth tax that would hit him squarely as someone who possesses a large fortune.
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@Earl W. This is an important point. Relatively small numbers of people have amassed fortunes under rules favoring them for nearly 40 years, during which workers have had almost no wage increases. Warren's approach uniquely goes after these amassed fortunes to fund our government properly--an effort to undo some of the unfairness of the past that has harmed this country. Rattner's approach would raise taxes on people in the lower-middle class trying to claw their way upwards or provide for a secure retirement.
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@Earl W.and PJR . I missed the part where Rattner proposes raising tax on lower middle class. I don't know if he makes 10 million a year, but if he does, most of it likely comes from cap gains which he proposes raising rates on. He also proposes ending the step-up rule which let's you inherit tax free.
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@AMGOMG
You clearly don't understand the power of compounding. Read up on Finance 101.
Then come back when you appreciate the difference an extra 1000 basis points of after-tax return make over a twenty or thirty year span. Also, we're not talking about the lower middle class; they don't pay any federal income tax on capital or labor. We're talking about the people just below Mr. Rattner's level of wealth.
2
Way better idea? Tax consumption, with hefty rebates to the poor and working class. People like Warren Buffett would be taxed (somewhat...) lightly because he spends little but invests a lot.
Idle rich types who “work” at buying expensive stuff, on the other hand, would be taxed heavily.
The result is more tax revenue, less social friction resulting from too many rich people buying and showing off expensive stuff, and more money being reinvested in our economy.
2
This is the classic error in tax policy - all or none. To spur investment at all levels we need to rethink these types of taxes.
For the vast majority of Americans, investment earnings (interest, dividends, capital gains) are some of most hard earned. Investment and SAVING require discipline, self-control and a commitment to delayed gratification. Most Americans are investors though they may not realize it. Savings accounts, 401k type plans through their employer or union, IRA and SEP accounts, HSA plans, etc. are common to most working people.
The tax on these earnings should be zero or close to it. At the least their should be zero to minimal taxes on these earnings until a threshold is reached, say $100,000 or so.
Why you ask? As a nation the vast majority of citizens and the federal government itself have become profligate spenders. We run endless budget deficits, savings are pitifully low for most and a complete focus on consumerism with no counter balance on conservation of capital (saving & investing) is the now the norm.
This formula is unsustainable for households, businesses, and nations. We must have policies that encourage savings and investment - not penalize it.
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@JNM
We just had a massive tax cut for corporations and very little of the additional revenue was used for investment. The vast majority went into stock buybacks and dividends to further enrich the 1%. Republican myths about tax policies are just that - self-serving myths that a gullible public has bought thanks to a compliant media.
@JNM This proposal would leave Retirees and their 401ks, IRAs, and/or Pensions distributions unaffected. Those sources are taxed as ORDINARY income; They are NOT taxed as capital gains. What we would need is protection for middle class households who sell their homes for a profit. Say, add a threshold that says the first $200k in profit is tax free.
Sorry, but this doesn't cut it. Not only will it never pass, but if it did, it would harm all of us little people more than it would the ultra-rich.
Yes, raise taxes on the wealthy. But that money is going to the government - to redistribute or pay down the debt the republicans have skyrocketed.
PEOPLE NEED TO EARN MORE MONEY. Raise wages and reduce the amount the upper management gets in the first place. Workers should be treated with more respect via pay (at least until jobs are taken over by AI)
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Of course I am sure that AOC would agree that the capital gains rate should be the same as the ordinary income rate. Taxing all income at the same 70% rate, as California taxes all income at 13.9% with no lower rate for so called capital gains, would render this whole article moot. I am sure 85% rates in California, and 82.5% rates in NYC would not raise any actual tax revenues, but we would all feel so much better knowing that no one was getting rich. Add a real wealth tax, say 20% per year above $1 million, and we could all enjoy much more equal income and standard of living. Yes, we may see over time our income cut in half, but our pleasure at not having to deal with rich people around us in society would be soooo worth it !!!
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@drcmd I get the sarcasm but I also know Sweden makes it work with rates 60%+.
Our current tax laws were written exclusively to benefit the wealthy. Your example of capital gains and the depreciation of real estate cause a loop hole to avoid paying realistic taxes. If we ever see trump's tax returns, it will reveal that little to no taxes are paid. The result is a inverted tax policy, where the middle class carries the burden. Finally, the removal of the deduction of State and Local taxes is also specifically designed to hurt residents of Blue States. The Blue States, in their taxation laws, believe that together we can.
1
I agree that all those lavish 'tax expenditures' benefiting the rich should go, even though they benefit me, since living in a decent, humane, and fully-functional society would in the end benefit all of us far, far more.
3
None of this deals with the serious issue of accelerating concentration of wealth. A better approach would be a tax on principal. Elizabeth Warren seems to be the only person in public life who seems to appreciate this.
3
In another comment I pointed out out that one of the possible beneficial side effects of taxes is to reduce inequality. Besides the obvious moral reasons to do this, there are good economic reasons to reduce inequality.
Economists have a concept called the velocity of money. It is the how often that money changes hands in domestic commerce.
For example, suppose the gov gives Dick a Billion for advice on how to read, If Dick puts the bucks in his basement, & forgets about it, that doesn't help the economy at all. That Billion has a velocity of 0. Also, if Dick loses a financial bet to Jane, & the Billion moves from Dick's basement to Jane's, that is a change, but the velocity does not change because it is not a useful change. It doesn't affect commerce.
Money going to the Rich has a lower velocity than money going to the non-rich. The Rich spend a lower percentage of their money. What's a guy or gal who already has so many houses he can't remember how many & an elevator for his horse gonna spend his money on? The answer is he is going to use it to speculate.There is a correlation between inequality & financial speculation. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 Speculation is bad for the economy. That money has a very low velocity. AND it increases risk which we have seen in 2008 ain't a good thing.
Since 2007, the velocity of money has plunged. https://fredblog.stlouisfed.org/2016/04/a-plodding-dollar-the-recent-decrease-in-the-velocity-of-money/
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My hope is AOC continues to evolve on these economic fixes to a wildly out of control march into the Gilded Age. All the strategies described by Mr. Rattner were the same one's I listened to in my Econ. 101 class many years ago. I would add, however, taxing wealth instead of income really brings out the plutocratic lobbying fire power and when talking to various publics is more complicated to understand then just raise the rates on monies over 10 million---but having said that, Mr. Rattner offers a more effective strategy for flowing monies back to the middle class.
I have always felt that our taxation system was fatally flawed because it is primarily based on the income side of the ledger. The wealthy avoid taxes because they can hire accountants to identify loopholes and money transfer schemes and they do this with remarkable success. First, I have noticed over the years that wealthy people buy expensive stuff, have stunning homes or condos, and lavish lifestyles. Rich guys buy Brooks Brothers shirts not those from Walmart, eat at posh restaurants not the local diner, drive BMWs or Mercedes not Chevys or Fords, buy and sell stocks and bonds not collectibles at flea markets or gun shows, and the list goes on endlessly. Second, I notice that each time I shop at a hardware store or get my truck worked on at the dealership, that the business’ inventory management software instantly updates the various classes of goods and services. There are only a finite number of types of things people buy and a finite number of services performed (remember the accountant mentioned above) and a team of professionals in Commerce could easily build and examine databases to determine the average price of a shirt, a bathroom faucet, or four-door passenger vehicle. With that data, progressive sales tax and services tax schedules could be created that starts at a modest rate, say 5%, for those expenditures below the mean and increase to something like 90% for the top 5% most expensive stuff. Rich folks buy expensive things by choice; tax just that!
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@Paul, I think you are advocating a sales tax. Essential items like food could be exempted and the rate on optional and luxury items could be based on revenue needs. I kind of like it if we can work out the kinks.
As far as your stereotype of rich people goes, I think you have been watching too much TV. 90% of millionaires have less than $5 million net worth and maybe shop Amazon not Walmart, but buy pretty much the same middle class stuff you do.
I am assuming you are middle class because the lower wage class is too busy working to opine on tax policy.
It is disappointing that this author had a role in the Obama administration because I liked and admired Obama and the disingenuousness or ignorance of this piece doesn’t reflect well on him.
Do this and any hope of a wage earner saving enough for a house down payment or anything else is gone, swallowed up by taxes on nominal gains that reflect nothing more than inflation. Meanwhile the truly rich don’t realize capital gains, they borrow against their wealth. You should know all this and probably do. Shame on you.
2
As someone who would be in the 70% tax bracket under AOC, let me say YES PLEASE!! Anyone who thinks I will be dissuaded from working because of a high marginal tax rate doesn't know me or anyone like me. I'm personally revolted by the inequality in our country and I sincerely hope the democrats don't shy away from "redistribution". I like working and less zeros on my paycheck isn't going to send me into retirement. Short term capital gains are already taxed as ordinary income and there are important incentives associated with longer term capital gains that Mr. Rattner fails to address and hence I suspect he has become a lobbyist for someone who doesn't want to pay their fair share of income tax. This op-ed is propaganda. There is no logical reason Mr. Rattner would prefer capital gains tax over income tax. Rattner suspiciously fails to suggest changes to our ridiculous real estate taxes too. Who is he working for???
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@Smithy This is not convincing. I don’t claim to know you, but to argue that the average high income person will work just as hard to keep 15% of his income as he would to keep 50% of it defies math and common sense.
You claim that you wouldn’t change a thing? Maybe. But you don’t speak for anyone else.
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@HenryParsons
You miss the point, the high income worker isn't working, he/she is investing. Are they going to do less research, invest less of their idle wealth? No, high taxes won't effect high income earners, you must be thinking of real workers.
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@HenryParsons
There are many interesting (to me) Psychology studies about how, after a certain level, more money really does not increase reported happiness. I won’t bother listing them here because they’re easy to find with google scholar or some such.
I can see how it works for me. Our family income puts us in the high upper percentages of wage earners. Even so, with our big house and school costs, I find myself thinking about money as much as when I lived in my van (which I did with delight for 4 years in my 20s). My point is that we humans are incredibly adaptable, as long as we are able to meet our needs. I agree with Smithy; the evidence suggests that rich people will not be less happy with less money. Meanwhile, the very poor will be happier with more. Where, therefore, is the ethical case for gross inequity?
19
More taxes? And why? So they can go to oil government bureaucracy even more?
I’m not against taxes or progressive taxes but it seems to me the US already tax it’s citizens enough. NY income taxes are already at a ridiculously high level. Cortez stupid proposal ignores what happened in France recently where they imposed a 75% rate. Thousands fled the country. Radicals who never produced anything love to extract from those who work hard to make money. Government must find ways of increasing public services also by increasing its efficiency and reducing expenses. Go to a DMV and see how poor the service provided is. This has nothing to do with taxes but to poor training and civil servants terrible customer attitude caused by job stability. Spit at a costumer? No problem. Job stability. Same thing with AMTRAK. Do we really believe it’s a tax problem?
It’s easy to increase taxes. Easy to get used to it too. Need more? Just raise the taxes. Who doesn’t like ever bigger budgets? America was built on people taking risks. Tax them to much and they stop taking those risks.
3
@MRA Republicans have already ruined the country by griping non-stop about taxes and spending without offering solutions. You are joining the party 30 years too late. How many shutdowns will it take for you to see the value of government?
Mr. Rattner begins this essay with a textbook example of snarky yawp about Ms. Ocasio-Cortez. Is it really necessary to characterize her as “our latest political supernova” before analyzing her proposals to create greater equality in the tax burden on the super wealthy? Other economists, with reputations equal to that of Mr. Rattner, seem to find her ideas sensible and worthy of discussion. Perhaps the ideas of a young, attractive female cannot be considered seriously as those of Paul Ryan, the Republicans’ tax guru and all the other males who brought us the 2008 collapse and the brilliant Trump tax cut for the entitled class.
4
Or better yet, do it all!
1
Maybe we shouldn’t spend $700 billion a year on the military.
6
Here's a thought. It's not one or the other.
2
Mr. Ratner seems to think that calls for higher taxation on high earners/wealthy Americans can be discussed reasonably with the intention of arriving at a reasonable non-punitive outcome. But that’s not the goal of the progressive left. The economists Emannuel Saez and Gabriel Zucman wrote an editorial in this paper last week calling for higher taxes on high earners, not because they raise revenue, but “about regulating inequality and the market economy.” It will be interesting to see whether limousine liberals like Mr. Ratner will remain true to the cause when their keisters are bitten.
3
@Shiv
Again and again we see this fantasy that the rich are rich because they 'work harder.' Let's take a moment to reflect on how income-producing work gets done, and who is doing it. What we refuse to acknowledge is the moral component here. Any serious analysis will show that, yes, wealth is theft. Ask anyone working part-time for Starbucks or Amazon. Those who own our government, and their mouthpieces, will of course simply laugh this fact off, though not without a lot of vacuous and purely theatrical moral posturing. We're already more than waist-deep in a ruinous profit-over-people ethos. Our government's true ruling principal is simply to protect and augment economic injustice. It's what pays.
Did we just conflate capital gains taxes on individuals with corporate tax rates? I think so!
There seems to be general agreement we need more long term investment. Why not redefine capital gains to whet they were always intended to be-payouts on long term investment. Like starting at 5 years, with lower rates for 10 and 25 year holdings. Who ever said a capital investment is 1 year? If it were a loan, it woudl be classed as current
2
If you tax the rich, they'll just steal it back. Forget about it.
Can anyone explain to me why the wealthy have any reason to whine and complain when their unearned income (investments, rents, capital gains, etc.) are taxed? They would whine if the tax rate was .5% and would be more than happy if us "working stiffs" were dumb enough to hand that over to them as well. You see, fundamentally, those whose wealth has increased because of the rigged tax system feel they are "smarter" than those of us who actually work for a living. Their earnings are somehow more important. Of course they use language like "why do liberals want to "punish" the successful. Stop with all the drama. Please. If the top 10% Americans were taxed at 50% of all their earnings, they'd still be rich.
2
All AOC is calling for is to go back to pre Reagan tax rates.
@Teri Szucs Not true. Ore Reagan era tax laws also had tons of loopholes, which made the statutory rates meaningless. I’m pretty sure that she doesn’t want those back.
Yes, I want more of other people’s money. Gimme, gimme, gimme.
3
How about a national sales tax?
@EJ
Regressive?
This all sounds extremely sensible.
However, considering the last sensible Republican Administration was Dwight Eisenhower's, it's chances of getting enacted anytime soon are probably somewhere around .0000014%.
Some suggestions for the next time the Democrats really control things:
1) Get rid of the Electoral College. Who ever gets the most votes wins.
2) Limit the states ability to rig elections by standardizing all federal election rules. Ballot designs. Registrations. Etc, etc, etc.
3) Make federal shutdowns illegal. Either that, or make those responsible for them foot the bill for the cost to the economy. At a cost of $11 billion for this latest exercise in stupidity, that would work out to a little over $20 million dollars for every member of Congress and the President.
4) Become a signatory of the Rome Statute of the International Criminal Court. Bush and Cheney belong in the Hague for what they did. Signing on would go a long way towards insuring we don't repeat that kind of criminal and illegal mass-murdering of innocent people.
5) Expand the Supreme Court to 13 and fill every position with a well qualified, socially conscientious individual.
6) Enact legislation to override all the abuses of the Citizens United decision.
7) Enact Single-Payer healthcare.
8) Raise the federal minimum-wage to $15.
9) Experience all the benefits of a fully functional government that truly serves the people. All the people. Not just those running it, and the obscenely rich.
3
Rattner talks his book, but don't we all? He gives some good ideas that are worth considering. Perhaps the best one, not allowing for cap gains to die at death. Not there is a a slogan to get behind.
Tippecanoe and Tyler Too.
We Won't Relent on 70%
Don't Let Cap Gains Die at Death
Nah, sounds to much like the Death Tax, but you can't blame a guy or girl (AOC) for trying.
The rich elect the power, the power is beholden to the rich, end of the big fat hope(less) story. It will never happen in a poor man’s lifetime, because the poor will never, ever elect anyone.
Every couple of years or so a dreamlike idea comes along to redistribute wealth.
Haha haha oh well....
It's time the rich take one for the team. They've reaped the benefits of the labors of everyone else; so it's time they pay their fair share for all the privileges they've been granted. It's time to go to the Roosevelt playbook. Tax 'em.
So those elite few, like Rattner, with a comfortable pension to look forward to can kick back in style while those who are saving for the future or a rainy day can lump it. Typical hit to the self sufficient middle class sold as making the "rich" pay.
1
And why not apply payroll taxes to unearned income as well?
1
And include so-called non profits like NCAA into the mix. They don't make a profit because they pay their top leadership (and enablers at the various universities like coaches) ridiculous sums as salary while milking the so-called student athletes for what they are worth.
3
Any erasure of income to the wealthy due to government taxation will be quickly recovered by same wealthy sorts by
increasing their income in equal offset.. The result would be a push to celestial levels of worth and critically widen the wealth
gap that inclines the thinking to go after the rich... if Tom takes a chuck of Dick's money .. Tom merely awards himself
more to patch the difference ... Harry stands on the sidelines
watching still as forever looking upward...
PATS 34 RAMS 18
1
Is that for real? Capital gains taxes are forgiven at death? If Bill Gates sells his stock on his death bed, he's liable to capital gains, but if dies and leaves it to his children, they have no capital gains tax liability? That's insane.
2
This looks good. Until you read that Mr. Rattner is a Wall Street executive. That's a red flag whether he worked with Obama or not.
"Nevertheless, an expert at the Tax Policy Center told me that Ms. Ocasio-Cortez’s proposal could raise around $300 billion a year."
Bingo!
1
Right, an investment banker worth half-a-billion dollars is advising us on how to tax the rich better? He already claims that the top 0.1% (he is one of them) pays nearly 40% of their income in income taxes which is, in the least, highly suspect and likely to be incorrect. AOC's tax rate of 70% on over 10 million/year income is more than fair and quite considerate of the rich. That's how much they paid when Reagan became the POTUS. Since then their tax rates plummeted to below even a secretary's share of taxes. Even Warren Buffett admitted it. It is not "soaking th rich" as they claim. It is a must if USA is to survive as a Republic and a Democracy. If we don't raise the income rates to 70% at least then US will become a fascist state in the near future. We are already tasting the results of money power owning the Capitol and the Presidency.
The naivete of the armchair socialists is breathtakingly scary. When has a tax proposal to supposed soak the rich ever really soaked them? More likely, it will soak the middle class, which I contend, is the goal. The rich want the middle to be powerless drones; the "liberal"s want the middle to become poor, so that the dependency class can be grown to near infinity. No thanks. Begin by reducing government spending and yes, that includes expensive adventures like the Iraq war as well as useless social policy interventions at home that fail time and again to get result. Push interventions that work to the state and local levels where local problems can find local solutions. One country yes, but multiple local solutions. Index long term capital gains to inflation. Then only real wealth is taxed. But tax velocity trading and short-term speculation at regular rates or higher. These are professional traders, not investors. Reform "disability" and put the malingerers back to work. Uncap the Social Security and Medicare taxes. That would take care of the greatest financial problem and be a "flat tax" that could not be gamed away. And let's have an open debate at the local level about how taxes should be spent. Most people, including me, would pay taxes to support common infrastructure, police, fire, etc. Not so much taking my money and giving it to yet another self-defined special interest, whether the homeless or real estate developers, and especially not the politicians.
3
I think the rich should pay more taxes. I am horrified that there is continued assault on Estate Tax, the easiest tax in the world, you're dead. Sure your children don't get as much, but that makes the playing field more fair anyway, and its not like a $50 million bequest that gets whittled to $30 million is a bad bequest. But the actual benefit of taxing rich doesn't mean that it gets transferred immediately down the ladder. The lowest income group pays little tax, so they don't get a big benefit, and the extra upper tax may just go to debt service or payoff anyway.
The main problem we are facing with income disparity is what we see in France and perhaps the 2016 election, a loss of faith in the system; hating of "elites"; breaking of the Social Contract. Working people have built their own self-esteem system that is breaking down, while the millionaire's are flying in private jets and have 5 properties, and can't spend money fast enough and are getting richer daily. People feel this.
If the rich would voluntarily pay extra tax to retire debt and stop fighting safety net systems, (pollyanna policy), we little people would feel better even if we struggle to pay rent.
However capital gains are taxed, in the interest of fairness, the cost basis should be adjusted for inflation. Inflation is an almost constant aspect of our economy, and taxing gains that are not real just gives politicians a tax increase they do not have to vote for.
1
We always talk about income taxes as if those are the only taxes people pay. The payroll taxes, 15.6% of every dollar earned up to the cap is taxed. We could easily lower the rate and expand the tax base for payroll taxes by eliminating all loopholes. Tax every dollar of income at 10% instead of 15.6%.
Unlike corporate income taxes which have no effect whatsoever on prices or competitive position, payroll taxes are part of the cost of goods old. Reducing payroll taxes for workers and increasing them for shareholders would make our products significantly less expensive.
1
The fundamental problem may actually lie in the reduced, even eliminated regulations in many aspects of life. This allows for the loopholes, not covering the healthcare costs of the workers, not paying the fair tax rates because of the loopholes, the behavior of the media polarization, and on and on. The unregulated capitalism is a runaway system and damages the society even itself.
Focus on what needs to be regulated for the system to start functioning for the society rather than the few at the top. Taxes will take care of themselves in this process.
1
Teddy Roosevelt, 1910
"The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective-a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate."
12
Mr. Rattner gives us the impression that the question of how to tax the uber-wealthy is an "either/or" choice between what Alexandria Ocasio-Cortez has proposed (Top tax rate of 70%), or his own proposal, which is to raise the capital gains tax and treat investment earnings like ordinary income.
Do both. At this point, the uber-wealthy are so rich from decades of gaming the system that they can afford it.
8
There’s always a lot of crying about how if we don’t give the wealthy our wallets they’ll leave. Congratulations, such worriers, you’ve been successfully duped.
The US has a lot to offer: infrastructure, talent, stability, large market. We don’t have to hand over our treasury to the rich.
5
AOC, Elizabeth Warren, Kamala Harris, and the Dems who are stoking the passions of their electorate base forget that the economy is soulless, heartless, and cares not about politics.
But the government manages money poorly and government money spent contributes to the economy only a fraction of what private money spent does. Nevertheless government spending is necessary and taxes should increase to meet the obligations.
Any substantial change in the tax code should be married to a balanced budget bill and a serious push for an amendment. Taxing ordinary income at a modestly higher marginal rate for all is the best way to raise money for the government. A progressive estate tax on large estates with limitations on charitable trusts and family trust tax aversion strategies would also help.
A wealth tax would annihilate the stock market and push money into murky private equity deals mostly overseas and other similarly poor tax shelters. Same for a 70% marginal rate. Reject those dumb ideas and support good ones.
2
Thank you Steve Rattner! Your headline says it all. No need to read any further. Such a common sense strategy. I recall that George W. Bush even questioned his economic adviser when they came back to the well for a 2nd reduction in the capital gains tax!
Some part of our problems with investments in this country boil down to too much emphasis on short term returns. While I think Steve's approach may be better than a 70% marginal rate, it seems that such a plan would likely exacerbate our problem, assuming I am correct, with too much focus on short term returns.
1
What is interesting about Steven Rattner's essay on an alternative method of taxing the rich is that wealthy people like him already know how to lower his taxes under his own proposal.
AOC should go ahead with her proposal AND raise the capital gains tax. These are certainly not mutually exclusive.
3
But why do we have a huge deficit? Because of all the money we spend on warfare. If we raise taxes let’s earmark the revenue for social spending on so-called entitlements
3
AOC's proposal, while not perfect, is easy to understand. Mr. Rattner's proposal, while not perfect, is difficult if not impossible to understand. AOC's proposal has one moving part, the marginal tax rate. Mr. Rattner's proposal has scores of moving parts.
2
Most people don't understand what capital gains are, why Warren Buffet doesn't have to pay, and why the IRS has been unable to tax the year to year wealth appreciation as ordinary income. It is also true that untaxed wealth appreciation has been an important part of saving for retirement (IRA, 401k, etc.) and supplementing social security and pensions,
The Rattner plan does not encourage lifetime retirement savings or sensible business decisions. It encourages tax avoidance structures that encourage corporations to trade assets without selling stock in the parent corporation.
Antiquated legal case law has prevented mark to market tax solutions because judges believed that assets could not be fairly valued until there was an actual sale and profits were realized. Modern banking and internet markets have made asset evaluation easy and fair. The underlying legal rational is no longer valid.
Modern tax structures should tax net wealth and income inversly so the poor and lower middle class pay lower income tax rates and high wealth families pay higher tax rates. Estimates of family wealth and income are also important factors for determining government benifits for housing, health care, education, family leave, etc.
Consider the explosion of non-taxable trust funds (a bit like Roth IRAs) that enable people to live tax free or close to it. It is not fair to the rest of us. Families with more than a million dollars in assets should pay for the government services they get.
2
We talk about taxing the rich, but it seems all Congress ever does is lower their taxes.
5
Deblasio's quote says it all, "the wrong people have the money". It's not about fairness, it's the creation of a class war. Our tax regime already excludes 50% of the population from income taxes and the top 1% pays more than 90% of the population combined. Further, the government spends money regardless of the tax regime, today spending $1T more than they collect. So,gov spending is hardly being impinged by people making money. All of that said, Steve Rattner is largely on target for his proposed reforms in particular, the tax advantages to real estate holders, the ability to write up assets on death allowing for generational wealth to be created and Elizabeth warren is not totally crazy to tax assets though I'd argue, it would have to start with $1B. The problem is that this is not a debate on fairness, it's a call to arms to create a class war. It's not about policy it's about AOC feeling her oats and making political instagram hay. Finally, it's about progressive candidates who want to use pitchfork politics (like Trump on the right) to rile the masses to get them to the voting booth for their own purposes of power.
4
@Chris As Warren Buffet has already famously said, there already is a class war - and the rich have won.
We need to stop comingling SS finds with regular tax income. Now we are paying three times. The deduction, then repay them pay interest. Crazy. If that money were not available existing tax rates would need to be addressed along with proposals on how and what to tax.
1
How about this: Raise corporate taxes back to where they were. Then give a cut for the percentage of profit shared with the employees in increased salary or benefits. Not just one time bonuses. In other words...corporations were handed the cut because they felt taxes were unfair. The nod, nod, wink, wink was they would share that windfall. Alas they did not, although a few did. Reward those companies and let the others pay more. Doesn't it make sense that if the private sector does not share the nation's wealth, the government will have to fill in the gap? People lament that the poor are taking advantage and gaming the system. Yet when corporations do it it is viewed as patriotic. Why is that?
3
My problem with Mr. Rattner’s proposal is - in contrast to the proposals put forward by Warren and AOC - that it dies not follow the time tested principle of progressive taxation i.e. those with more income and wealth can an should pay more. In a nation with a large and growing population of retirees who live on the investment income generated by the investments they purchased with hard earned savings, it is preverse to saddle all levels of such income with the same tax rate increase. The solution could be as simple as making the cap gains rate progressively steeply higher such that any income of the top 1% and up is taxed as the same rate as ordinary income. This in line with the words of fmr. AFL-CIO chair, John Fitzsimmons:
“ Government should seek to care for the poor, the sick, the unfortunate, and let the rich fend for themselves!”
5
Don’t agree. First I would start at the beginning.
1. Tax at 70% any american directly or indirectly moving their money or assets out of the country, e.g. corporate inversion or giving up their citizenship.
2. Over a million dollars a year of any kind of income pay the top marginal rate of 37.5%.
3. Over 5000 dollars of charity, pay the top marginal rate, then give the remaining money away.
4. Raise the retirement age slowly to age 70.
5. Reduce social security disability by finding jobs those people can perform.
6. Eliminate dynastic wealth with a 70% estate tax over 100 million dollars.
7. Reduce healthcare costs by eliminating law suits against doctors thus eliminating defensive medicine.
2
@Leonard Gehl
As to your #7 right wing canard, it's been calculated that ALL of the legal cost burden on our health care system is niggling. Something like 1%, or a bit more.
OTOH, I recently had a procedure that required a simple iodine swabbing of the injection site. They billed my insurance $22. They do that for free when I give blood!
How about re-thinking the entire legal fiction of 'a corporation is a person'? Either be consistent and treat them TRULY like people, or abandon the fiction altogether.
3
I'm glad AOS and Elizabeth Warren are talking about taxing the ultra-rich. However, this solution will effect many like myself who are not ultra-rich, or even rich. I have my modest nest egg invested in dividend stocks and if Rattner's plan became reality people like me would be hit fairly hard in the pocket book. If such a tax is instituted I suggest it be applied to dividend and cap gains over a certain amount, say $500,000 or $1 million. If you're gonna tax the rich, by all means tax them. But don't drag down those in the middle class with them.
7
The wealthy do not contribute to deficit reduction; they do not pay their fair share of taxes; they do not have to decide between buying groceries or prescription medicines. All they do is make decisions that control the everyday mechanics of life in this country and, not inconsequently, this includes determining the best ways of eliminating jobs. Why a majority of Americans support the many, many politicians whose futures depend upon patronage from those who live on more than their fair share of tax friendly income is amazing.
7
Sure there are always better ways. Let's identify them all, debate them to death, and in the end decide it's too complex, or just grind us down with the pros and cons so that we get tired and lose heart. Again. Or we could just act. The perfect is the enemy of the good. Or in this case - to paraphrase he-who-would-be-indicted -- of the people. Tax fairness now.
3
AOC has the right idea, Mr. Ratner, does not. We have a super wealthy problem, not a need for higher taxes, of any kind, for regular people trying to save and invest enough for retirement. Tax the dollars above $10 million at a much higher rate and the only consequence is Hamptons homes will sell for $4million instead of $14 million. Everyone can live with that.
7
A debate between imposing a wealth tax on top earners, versus taxing capital gains at the same rate as earned income -- I like the direction the country is moving!
6
Add this:
To encourage "small fry" investors to "get into the market" make the capital gains tax on investments progressive, something like 5% for gains under $100K, 10% for gains under $500K, etc.
That way for a small investor like me, the "hit" feels more like sales tax than a penalty for being willing to take a risk and winning.
8
Why do we need to raise taxes? The US can borrow whatever it needs at basically zero interest rates—the Fed is the only reasons real rates are slightly above zero. Why raise taxes?
For the last 35 years pundits have stoked fear of the debt and deficits. Gloom and doom. The debt is over ten times higher, inflation is a third as high, interest rates are dramatically down, the economy is booming. Why raise taxes?
Is this simple jealousy? Stick it to the rich? Make the inequality index a little stronger by taking money away from the richest? Is that fair? Why raise taxes?
If the debt must shrink then tax everyone. If it is truly important tax everyone. Create a balanced budget amendment. Do something real. If it is a crisis, and we must raise taxes, raise them on everyone.
If not, why raise taxes?
1
The purpose of the tax code is to raise revenue for necessary government operations, not to provide "equity" or "fairness" to taxpayers. Let's look at what government programs can be reduced or eliminated to narrow the deficit, not just tax revenue enhancers.
5
@David Ricardo - How about if we start by shaving $100-200 billion from our annual military budget? Seems like as good a place as any to start. A chunk of that could go towards a nationwide infrastructure renewal program, providing some instant jobs at the lower end of the wage scale, where the money moves back into the economy more quickly.
5
@David Ricardo - Yes, the purpose of the tax code is to raise revenue for the government. But one must decide who pays how much. The purpose part doesn't tell you that. Seems to me, since that leaves one with no restrictions on who pays how much, fairness is the best way to go. It's only fair, after all! Of course we all disagree on what would constitute fair taxation. Still, your argument does not rule out fairness in the tax code.
@David Ricardo, the purpose of the IRS is to collect revenue according to a tax code that is nothing but rules to influence behavior. Every exemption, deduction and special rule favors someone over someone else. They effect charity, investment, spending, earning and every other financial interaction in our society. A highly progressive tax rate on AGI will encourage ultra high earning taxpayers to leave some income for those workers lower on the scale, rather than hovering up every nickel they can only to pass it to the next generation unearned and untaxed.
1. Increase the upper end tax rates to 50% for income over $10M.
2. Close all tax loopholes.
3. Tax long term capital gains at the ordinary income tax rate.
4. Tax short term capital gains at 2x the ordinary income tax rate.
5. Raise the corporate tax rate to 30%.
6. Use the revenue as long-term investment in America: repair and build infrastructure, incentivize the conversion to renewable energy, and pay off the national debt.
7. Sit back and watch Wall Street become a vehicle for real investment instead of its current role as a high-stakes casino.
11
@Duke
I'm in but for #4: capital gains should be taxed as ordinary income, no special conditions. If you want to reduce the casino effect, and stay simple and fair, create a tiny percentage per share of securities transaction fee, which won't hurt the small time investor (and won't add extra lines in filing income tax returns).
2
All good ideas. Add two more
Implement a financial transaction tax on every share
Tax stock buybacks aggressively at 25%
3
@Duke
Duke for president!
The summation of this article is an easy one. Something needs to be done about taxation. Mr. Rattner has many good ideas, and no doubt, if implemented, would raise considerable revenue. What are the chances of any of this stuff getting done, including Ms. Ocasio-Cortez's suggestion? Probably zero. At least not for a few years or more, since it require a turn over in the Senate and a 60 plus vote majority by the Democrats, as well as a Democrat as Presdient, assuming the House stays in control of the Democrats.
But the teller in this article is the chart. It clearly shows that lower taxes for the wealthy dropped the bottom out of the middle class. Mr. Rattner should address those apparent tell all realities before coming to a conclusion that at best is short of a solution.
5
The US economy had been growing for the last 8 years. As was stated the 2017 tax cut stupidly lowered corporate tax rates, supposedly to repatriate notorious tax scofflaws like Apple, and to super charge the economy. Which did not happen, the main promises of the tax cut have not happened. Politicians benefitted mightily from the real estate portions. Unsurprisingly Trump and Sheldon Adelson were huge winners. 1.5 trillion was added to the debt and corporate America rated the tax cuts effects an overall bust. The capital gains tax is a rip off of the tax system since most wealthy people use that to measure income tax. Tax loop holes and poor IRS tax enforcement cost the gov't billions. So taxes need to be raised on the wealthy. But as the economy slows the GOP will claim that the tax cuts must be sustained, like the Bush tax cuts, because raising taxes would harm the economy. The GOP propensity to lower taxes when the economy is growing and then blackmail the gov't when the economy is slowing is dangerously bad policy. But the voters keep allowing the GOP to harm the financial condition of the country.
7
Today, the country is unable to provide its basic obligations to many of its people.People in the US are going hungry, going without shelter, many go without good public education. The country goes without infrastructure repairs and has many underfunded services. All the while the tax code provides protections for the next 10 generations of unborn children of the wealthy.
The single biggest boon to the economy and perhaps even more importantly to getting the cream of the crop to run the country in and out of government would be 90% tax on inheritance over a limited amount ($5MM?). This will do 2 things.
1. It will bring $25 to $35 trillion dollars back into the government over the next 30 to 40 years. (It wipes out the deficit and provides trillions in infrastructure money.)
2. It means each new generation of leaders in government and industry will have to rise to the top on merit, not on a pre-stocked bank account. This is great for the country.
The notion of passing fortunes down to future heirs is the undemocratic gorilla in the room. The only thing we need to do is convince all of the wealthy people running this country that they have to consider the interests of the country today, not the family dynasties they are trying to build and protect.
That is the essentially the unidentified driver in the disorganized Populist movements.
4
I don't know where this table comes from but something tells me that it is unlikely that Bezos sent 100 billion dollar to the tax office.
I saw somewhere an estimate that there is now 40 trillion dollar of offshore capital in the world. That is a problem.
4
Yes. Yes. Yes. That this is not standard operating procedure is simply the greatest fleecing of labor in history.
5
This theory assumes that only the wealthy have capital gains to tax. In fact, most fiscally responsible Americans save in the form of investment portfolios and/or primary homes which are subject to capital gains taxes so the primary beneficiaries of this proposal would be non savers (the “fiscally liberal”, as Michelle Goldberg calls them in the Times today)of all income levels.
3
Nominal capital gains are mostly inflation. Real (i.e. inflation-adjusted) capital gains are income, and should be taxed as income. But unrealized capital gains (i.e. when an asset has become more valuable, but hasn't been sold) don't show up at all.
Tax wealth.
1
Fairness and equity must be embodied in the tax code through progressive taxation of income, treatment of income from all sources as ordinary income, and closure of loopholes that allow avoidance of paying taxes on income when it is earned and at the standard rate, including among other things elimination of the cap on taxes for social security, the carried interest deduction, and the waiver of capital gains not realized before death. Aggressive progressive taxation makes sense because those who earn the most are profiting the most from our societal investments in infrastructure, the rule of law, defense . . . and monetary and economic programs that provide the stability and opportunity that enable them to make a lot of money. The best retort to the socialist label is that the unfairness must end, everyone must be treated equittably, and the rich cannot be allowed to have preferential treatment that builds on itself and creates more unfairness and inequity.
3
@Sal
How is that those that earn the most profit the most off infrastructure, rule of law, defense? In fact, I would say the wealthy use less of what they pay the most for. I would think you should be saying thank you to the rich paying more than their fair share in taxes that they do not benefit from.
Why do you think SS is set-up the way it is? SS is a very poor investment for the wealthy. The 'poor' get far more out of SS than the 'rich'.
@Driven
"Please, sir, may have more porridge?"
Yeah, why is it some live like kings and others are in the gutters? It's all their skills and fault, accordingly.
How about a simple flat tax starting at $30,000 up to $500,000 and then some sort of progressive tax on everything over $500,000 (Under 30 some minimal number just to participate in the process.) No deductions, no scamming, no using loses (dump) to offset gains. We need the wealthy to pay their fair share. They don't and have not since the 1960's. Also, FICA should be collected on every payroll dollar. It would fund SS and medicare forever.
4
@Pat
The problem with a flat tax, even with a floor that won't effect most Americans, is that the wealthy will still game the system. Their 200 foot yacht will be built and paid for out of another country, and will be registered in Panama. All paid for by offshore accounts.
Paying 40% of one's income in taxes to federal, state and local governments is enough, no matter how high the income might be. Of course, in liberals' minds there is no limit on how high the rates should be....at a time when almost half of American families pay no income tax whatsoever. Isn't that "progressive?"
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Good for ACO for inciting what seems, to this respectful neighbour, a much needed debate on fairness in taxation in the great republic. And good for Mr. Ratner by providing another example of how taxes could be raised fairly
Canada has already raised taxes on the rich while reducing them for those with middle class and lower incomes. Canada has kept its corporate tax rates competitive (our left and centre left disagree here) largely because it works for our much smaller economy. Though recently there's been a very modest increase in some business taxes. Generally our tax rates are higher (depending on local variations in your states), core medical care is free, and income inequality, while a real concern, is less than US levels.
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Steve forbes recommendations of FLAT 10% tax rate, with NO deductions, will make the tax structure simple and wouldn't punish the wealthy for all the hard work they have put in to create wealth. The flat tax rate should be fixed for the next 20 years to keep the uninformed politicians such as AOC out of the pockets of the hard working wealthy. A 10% flat tax with no deductions will satisfy US governments basic needs. We must remember, wealthy people create jobs for the rest of the US population to keep economy going. Punishing the wealthy by raising tax rate is simply punitive. Did I hear the Mayor of NYC utter words " The money is simply in wrong hands" when asked how he plans to pay for his wonderful plans to help out the illegals. This is what I mean the uninformed politicians trying to get Kudos to get reelected no matter how unfair their ideas are about the taxes.
@Sam Soni You're assuming the wealthy put in "hard work", yet the reality si so many of them just simply won the birth lottery.
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I agree provided it's set at a progressive rate -- I don't think the "little guys" should be penalized at the same rate as the multi-millionaire and up earners. Ditto for the regular tax rate.
2
Raise the rates, close the loopholes.
The included Tax Policy Center chart shows that without closing tax loopholes, simply raising rates would not be enough.
Also, raise the earnings limit on Social Security.
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The odd thing, Mr Rattner, is that you think it has to be either AOC’s plan OR your plan.
I don’t think she ever said that she wouldn’t be open to other taxes targeting rich folks. I sure am.
So let’s do both.
Your plan and hers. And, of course, I’m open to a wealth tax, which you didn’t mention. Any other idea for taxing the absurdly rich?
We’ve got a lot of work to do to get our poisonously unequal society under control and, thanks to tax policies pushed by the rich for years, a massive debt to service.
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I work and I earn money. I invest, and make easier money. Why in the world does my investment income deserve a lower tax rate? Mr. Ratner makes eminent sense here. I would add that we should also tax ALL income for Social Security purposes. The rate could be quite modest-- say 3 or 4% on dividends, capital gains, rental income. This should eliminate all the concerns about our ability to pay retirement benefits.
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I don't have time to read all of the comments as I'm going to have to leave for work soon but I guarantee that there are at least a dozen or so of the current 507 commenters who are crying about this proposal being "punishment" for savers, retirees, small investors, etc.
So, I would ask those who believe this would be "punishment" why they are OK with "punishing" those who work? If the tax rates are the same for all types of income, how can it be "punishment" if applied to capital gains but not "punishment" if applied to labor? Please explain that dichotomy.
Think about this: if you invest money and it earns you capital gains, unless you're also an employee of whatever entity you've invested in, someone else had to work for that so that you didn't have to. Why are you entitled to a lower tax rate than the people who actually earned that money but didn't receive it because it was paid out to you instead? And please, don't start whining about "risk." There is no riskier existence than that of an American employee these days: no unions, low wages, no economic security, employment at will, no safety net, no control, and more and more anti-worker legislation every year. An employee bets everything they have on their job and can't hide their personal assets behind an LLC if things go bad.
But I digress. My point is that if we are a country that values hard work you sure couldn't tell it from our tax code. In fact, it looks like the exact opposite. Why is that acceptable?
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A clear description of WHAT-options for Federal taxes and their direct outcomes. If, indeed, one sets aside the dimensions of ongoing realities: uncertainties, unpredictabilities, randomness and lack of total control, whatever the types, levels, and qualities of efforts to make and sustain changes. The author is listed as a "Counselor." Of what? How successful was his counseling? How often did he fail? What is his record, using Beckett's quote did he "fail better?" Perhaps a followup OP-ED would enlighten us readers about the range of known barriers-conditions as well as individual and systemic stakeholders, as well as helpful enablers, conditions, and individual and systemic stakeholders - to successfully implementing his tax suggestions. Lastly, what needs to be considered re tax policy changes about an ongoing culture enabling personal unaccountability by elected policymakers. In the simple language of the streets, urban, suburban, gentrified, rural: "What's in it for me?" can/will ask a DC national elected, selected policy maker. Particularly when s/he, an electioneering veteran, spends, on average, 1 hour a day in their mandated work, for which they were elected, for every 4 hours fundraising for themselves and for their party! It would be interesting to learn how many of the newly elected, of both parties, become acculturated into this enabled tradition, and WHO, and how many, do not. Lastly, in addition to the projected tax gains, what is the sum of GVT waste?
Why not do both? Treat all income as "ordinary" income and set the top rate at 70% on incomes over $10 MM. And while we're at it use Warren's plan for a wealth tax on the super wealthy.
We've been allowing the tax system to become more and more regressive for nearly four decades. It's time we returned more than a bit of progressivity to the system.
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All income should be subject to tax, including ss tax and Medicare taxes. The Code is full of special treatment for special industries--example: the very preferential treatment for real estate developers. The recent tax "reform" modified overly generous depreciation rules for example---that is, for every industry except real estate development. The fiction that calls commissions earned by hedge fund managers "carried interest" (taxed at 15% , the nominal rate before all the credits and deductions)is another plum lobbied into the Code by special interests. If everyone was actually paying taxes, there would be sufficient funds to provide universal healthcare and decent education for all Americans.
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Every tax change has its proponents and they are often correct. Preference for lower taxes on capital gains promotes investments and the economy could be hurt by a major change in that. Deductions on real estate investments is surely a loophole but change that and the housing industry might be seriously affected to the detriment of homeowners. Lobbyists wield such power that the best ideas might go down the drain anyway. Perhaps a combination of changes would be possible without singling out a single group or group of states. Changing tax policy may be needed but is fraught with risk.
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LIMIT CAPITALS GAINS TO ENTREPRENEURIAL GAINS
Favored capital gains tax rates are completely appropriate for gains on new-business and venture investments: Steve Jobs, Bill Gates, and Sergey Brin earned their favorable rates on the gains they created. So did their early venure investors.
But investors in liquid securities -- traders, hedge funds, private investors in stocks and bonds -- are simply using their own wealth to create more; they are not CREATING wealth, simply replacing their labor with accumulated wealth to earn income. They should be taxed at full ordinary income rates, as the idea of using wealth to earn income instead of using labor to create income does not deserve favorable treatment.
In my opinion, non-creative capital gains deserve, if anything, unfavorable treatment.
@Randallbird Yes, they are appropriate, but I want to know where in the book of life it says any gain is inappropriate to tax.
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Why not both Steve's proposal and AOC's proposal? 82.7% on income over $10M seems about right to me. Add Warren's wealth tax and I think we finally find both a way to address inequality and raise enough revenue to address real problems like healthcare, infrastructure and climate change.
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We could have a separate debate track for business giants seeking the presidency. Howard Schultz could debate Ronald McDonald and Colonel Sanders.
1
Your proposal would increase the tax burden on us middle-class earners who have been investing in stocks for our retirement.
An income tax is the best because it taxes at the point of receipt in portion to the quantity. Loopholes that artificially lessen this quantity need to be addressed.
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@PS if your retirement savings are in a 401(k) or IRA it all will be ordinary income when you take it out. So Ratner’s proposal wouldn’t affect qualified retirement accounts.
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You are correct, but I, like many middle-class workers, also have personal investment accounts.
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I strongly agree that the reset of capital gains tax at death should be eliminated or greatly reduced over time. However, doing so suddenly likely would:
1.) take a sledgehammer to certain asset prices enough to push us into recession, as real estate and stocks that owners or heirs want to liquify but currently hold onto until death to avoid capital gains would be sold en masse, reducing prices enough to spook others to sell (including some baby boomers nervously eyeing remaining retirement years)
2.) result in an unprecedented sudden break-up of existing large farms and estates near suburban areas that are far more valuable as buildable lots than for agriculture, resulting in the most environmentally unfriendly type of sprawl (perhaps just before driverless cars make that type of sprawl all the more attractive)
These likely would be almost negated if there were some way to gradually remove the capital gains reset instead of removing it all at once, but what would work? The best I can think of for gradually eliminating it would be a lottery by social security number to determine who loses it first... but that would probably be deeply unpopular and increase likelihood of the cureent status quo being restored before full implementation.
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@Laura. It could be done progressively, both on the amount taxable and the tax rate. Start with a modest rate on very large estates, then ramp it up a bit every year. Tax property that was inherited by the current owner more than true "entrepreneur" property owned for the first time, if it was bought with already taxed income from work.
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Tax is one instrument for regulating conduct; we need to look at other instruments that complement it including: minimum wages that reflect the minimum cost of living. In NYC, as one example, that would be closer to $30 an hour than $20 (Consider at $30, your after-all-those taxes take-home pay is roughly $3000/mo which is enough for modest rent ($1200), food for a small family ($500) transport, etc and a bit of savings for emergencies. To pay a proper minimum wage would mean a cut to the bonuses for the entitled bankers who crashed the economic system. Indeed in one case the bonus of one banker would have enabled an increase in pay to 4,000 minimum wage workers in the banks orbit. That's right: one guy got a BONUS equivalent to fair pay for 4,000 people in the same company.
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@Penny you seem to think that everyone’s salary in NYC comes from bankers. How would a struggling corner deli afford to pay all the staff $30 an hour. A minimum wage like that would massively increase prices, negating the effect of the increase.
But how much is enough Ratner?
I agree that the Liberal Elite donor class has created a tax policy that burdens the ordinary worker. Those that toil for years saving money in 401(k) and IRA’s should keep their lower rate, all else should pay ordinary income.
But first these Liberals must explain the difference between need, and punishment. And most of all, just like Republicans, they are avoiding the looming issue: unsustainably of entitlements.
HRC has mentioned she will run again. She is starting to look like a Conservative talk show host compared to these other candidates. Schultz claims he’s a centrist, Really? Flip a coin.
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A number of commenters suggest taxing religious institutions.
But why stop there?
“Religion” is in the eye of the beholder.
End all non-profit tax exemptions. Tax the 501cs that funnel political dark money. Tax educational institutions and environmental organizations. Tax identity-based organizations. Those are all religions by any other name.
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There are two reasons to highly tax the super wealthy, and one of them has nothing to do with raising revenue.
When the Supreme Court ruled that money = speech, it formalized something that we've all experienced for a long time: that those with resources can alter the rules to game the system. Therefore, the relative power of people is related, not only to their absolute economic status, but to the ratio of wealth between the players. In a country, in which 38% of all wealth is owned by 1% of the population, who are the politicians going to listen to? Who has bargaining power in a market society that determines the distribution of future productivity growth? The answer is obvious. And the solution, if we want a democracy, is to reduce the vast power differentials caused by money.
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The most efficient way to reach that goal are term limits for federal elected officials.
With a two year electoral cycle congressional representatives arguably spend a substantive fraction of their working time raising funds for the next electoral cycle.
Let’s consider increasing a congressional term to 3 years and limiting re-election to 3 terms.
Three - 7 year terms in the Senate is not unreasonable.
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@David Loiterman When the Constitution was written, most members of Congress were landed gentry with independent incomes and a business to which they could resume leaving office. Today, what's a 3-time congressman going to do after 21 years out of conventional employment? Lobbying, of course: selling his or her knowledge of government decision-making and access to current office holders to the highest bidders. Watch Paul Ryan as he joins corporate boards, essentially sinecures, as he "just reward." Rational officials, unless they are saints, must tailor their political careers to make a living after leaving office.
The following idea will never be implemented, but wouldn't it be better to provide a pension for life along with a prohibition of any lobbying activities, broadly defined, post service. Effectively retirement. Put them into the situation that conservatives only complain welfare recipients are put into: reduce their pension income by the 2 x the amount of any income earned outside of office. Alternatively, require any official who loses office to work as a staff member for other members for the length they've held office with similar requirements on future income.
Harry Truman, famously, refused board seats and sinecures after his Presidency to avoid turning the job into a resume builder for entrance the Plutocracy (as opposed to Clinton, and now, perhaps Obama).
Make selfless public service, selfless public service for real.
I have read through many of the comments and the article. I truly am not sure of the right answer, or even a right answer, when it comes to taxation. I am also not sure if there are enough super-wealthy people around that all of this will impact the average American in a positive way. Truly --- I am not sure. My approach would be to figure out ways to lower the cost of living for everyone, starting with medications and the subsequent decrease in insurance premiums. Anything that hurts small business I do know would be a bad idea, but I find a lot of the math here to be complex.
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Remember it’s not just about raising revenue: it’s about reducing inequality. I believe we should implement multiple tax increases (carried interest, cap gain, highest marginal rate, wealth tax, etc). Even if it raises little revenue, it will reduce the net income of the most wealthy making things a little more equal.
This will also benefit our democracy— which due to super-pacs— gives the wealthy more influence than the poor.
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The math isn’t that challenging Mark.
Republicans just cut taxes in the wealthy and the government deficit skyrocketed to 1 trillion a year.
So if course taxing the wealthy more can make a difference.
When I read in National Review or whatever mouthpiece of the plutocrats that “there just aren’t enough rich people to tax to make a difference” I guffaw and then think... actually there may be people who believe that.
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@Objectively Subjective Thanks. So by my math by equating our drug prices with the rest of the world our country would save about 200 billion per year, before reduction in insurance premium reductions. To me this is one example of simple math. The reason why I find the 70% over 10 million math or overall wealth taxation math as complex is who is gonna count paintings, fancy car collections, yacht valuations, stock option values, diamonds in a safety deposit box and all of that. And then how can we count the taxes lost when the uber wealthy change their citizenship and become Bahamians or just incorporate and become corporations that any of us can do. This is why that math is fuzzy as two obvious examples. I'd really rather just have our cost of living go down for everyone.
The effective top tax rate should be highly punitive for a time, in order to send a message that rich folks should stop lobbying for giant tax breaks AND huge deficits whenever the GOP controls government. Somebody has to put a stop to these constant attacks on government solvency. Rattner is just another rich guy, and will have to pay for past benefits.
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I've been an entrepreneur now for 12 years having sold a company to Microsoft and another to Google. I've done relatively well and have now invested in 25 other startups.
I sort of feel that my kind of investing should not be treated the same way as investing in a hedge fund, normal stock or real estate. I'm directly helping create companies in many areas taking very large risks.
Higher capital gains on me will definitely start to lower my risk threshold. I can think of one company already that had no prospects but I took a risk on the guy, that he'd find a way. 2 major pivots later, he did. Never would have happened if my expected rate of possible return were a good deal lower.
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@BarryG Ultimately, beyond addressing extraordinary income inequality that's exacerbated by valuing capital over labor, we should also appreciate the message of the dignity of work. As much as I may appreciate what you do, your work as an investor should not be viewed (although I believe it is) as more dignified than raw labor. In turn, your investment capital should not be given preferential tax status to money earned by labor.
To paraphrase, President Lincoln: Without labor, there is no capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is prior to and independent of, capital.
So, while I appreciate you being inclined to invest more in the example you gave, I would argue that given the choice of earning off of your capital vs. earning off of your labor, you still would prefer to earn off of your capital -- even if it were taxed the same as your labor. Would you not?
Respectfully.
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@BarryG Well isn't that just peachy. It's terrific that you have the funds to build a portfolio of companies in which the individuals actually working there have concentrated risk. That you think that companies will never be successful without you is a kind of hubris you might reflect on. The notion of some kind of special entitlement you have for your risks is ludicrous. Your cleaning woman takes greater risks commuting to your mansion.
Income is income. It flows from this great country and the immense opportunities for all. Those opportunities are enabled by a capitalist economy supported by dependable transportation and other infrastructure, law enforcement, and the courts. We are also supported by our military, our foreign service and those entities that ensure we all have clean water, air, and soil. Taxes support those many entities. We have a graduated income tax. The biggest income beneficiaries pay the most income tax; that's fair. Income is income. The income I inherit from my father is my income; it is not my father's income being levied twice. The income companies make is income, too. So is investment income. If I hold any investment for any arbitrary length of time, the margin over my initial investment and expenses is income. One graduated scale based on dollars. Minimal deductions that help the struggling, not the successful.
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I don't necessarily support the AOC proposal, but let's be crystal clear about what the proposal says. It is a 70% top marginal rate on people that make MORE THAN $10 MILLION A YEAR IN INCOME! This is not a tax on assets, it is really about the taxing the top .0001% of income earners. It might not be the most focused proposal or even raise much revenue, but let's not dismiss the general concept that people that earn this much income owe an important debt to the society that has enabled this type of wealth and protecting it (this is Teddy Roosevelt's idea). If one earns $10 million in a year, that person, using prudent money management, would probably never have to work again and still live a comfortable lifestyle after just one year of work.
The more glaring error this article is that the double taxation on dividends is a result of corporate taxation occurring prior to the distribution of dividends. Everyone knows that corporations never paid the top corporate rate prior to the Trump tax. The REAL double taxation is that in order for that money to be invested, at some point in history, it was taxed as ordinary income. True, it might have been generations ago, but someone, somewhere worked to earn that money through work, and they invested it. It might make sense if all income is taxed at the same lower rate, but it should be phased in to take account of this.
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Flat tax for all regardless of income. You make more, you pay more. Doesn’t matter how you derive your income. Fairest way forward. Raising taxes on the rich will not close inequality. It won’t even put a dent in it. It’s only a good taking point for politicians.
What we really need is to rein in spending on the military, Medicare, Medicaid and other government programs.
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@I Heart I could not agree more. I think if they there was a flat tax they would get so much money they would find a way to spend it.
@I Heart A flat tax is a regressive tax. 25% to someone making $50K is far more painful than 25% to someone making $500K. There is a reason that we have a progressive tax system, each marginal dollar is less precious to those that receive it than the previous one. 25% at $50K means you are making choices about the basics in life, 25% at $500K means you are deciding between the big and smaller BMW.
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@I Heart A flat tax is a recipe for a unjust and miserable society. Compare the ones that have it with the ones that have progressive tax. A few former Communist European countries have a flat tax, and workers have left them in droves for countries with progressive taxes, because they are decent countries to live and work in. The only countries where the middle class is smaller than flat-tax countries, are places like Greece where only half the people pay their taxes at all.
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Yes, but let's also have a progressive graduated income tax, like we had during our most glorious years, which are behind us.
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Steven,
I am so glad that you are bringing this concept back into the public debate, from which it has been remarkably absent.
Let me add an argument in support of tasing capital gains, a.k.a unearned income, at the same rates as ordinary income, a.k.a. earned income:
Some of the rich get rich by exercising initiative, creativity, leadership, and courage, by working hard and taking risks. In so doing they create wealth and jobs, which raises the tide and benefits everyone. We allow them to be rewarded for this, which is good.
But then we reward them to stop working, by taxing their salaries and bonuses at a higher rate than we tax them for sitting around fiddling with their stocks. That robs our economy of the benefits of our most productive workers. I know many successful people who continue to strive and innovate because it's in their blood (and they genuinely enjoy the benefits they bring to others by working), but I also know many who stopped working because we pay them to stop working.
I expect someone to argue that we all benefit from this trove of talent sitting around making the stock market more efficient, and I will scoff at that idea.
Equal capital gains tax is a solution to our runaway inequality that might actually be enacted. A 70% marginal tax rate is a delicious target for cries of socialism. It will be buried in a mudslide.
I have written to Ocasio-Cortez, Harris, O'Rourke and Warren promoting this concept, to no avail. Can you reach them?
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I would also suggest changing the corporate tax to a flat tax with no loopholes, no deductions. Corporations would no longer need teams of accountants and lawyers for tax strategy. This would also stop all the bogus tax deductions that end up supporting political causes. So, yes progressive tax for personal income, flat tax for corporations.
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The first step in tax reform is radical simplification. One filing status. One income class encompassing earned, dividends, cap gains, gifts, inheritance, gambling, theft, found-- everything. One standard deduction, say $250K. One tax rate on all income after the $250K deduction.
Couple that with an assets tax of say 2% on personal assets (with maybe a $5M deduction) and you have a code that is understandable, hugely fair (most people pay nothing), and can still be very incentivizing, while putting something of a brake on over-accumulation.
It could be done differently, with different parameters, but the key is simplicity so that everyone can understand the code in its entirety.
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Sure, let's do that, too. Anything to stop the hemorrhaging of wealth to the top less-than one percent.
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While I don’t agree, in full measure, with Congresswoman Ocasio-Cortez, I do feel that taxes should be fairer, and political campaigns and political responses should not be so expensive.
Under the current system it seems that you get as much political response and tax relaxation as you can buy; hence, we are living in:
“The land of the fee and the home of the gave.”
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Why is it that no one focuses on corporations, which is where all the money starts? $2T sits untaxed offshore. Corporate America effectively pays 9% as an over all tax rate now. It was 33% in 50s. Surely, especially after this last ruinous tax cut, corporations can pay more. How can it be ok for high growth companies like Google and Apple to pay an effective rate of less than 10% (1% in some years) whereas a retiree living on dividends, interest and a modest social security check, which all add up to far, far less 10M, pays 40%? While we are discussing the Federal budget, why does no one talk about cutting spending? The Pentagon can't find trillions, but we are more worried about tinkering with cap gains/dividend rates, which effects all savers regardless of income?
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Mr. Rattner takes a typically “liberal” middle-of-the-road stance with regard to issues of taxation. Eliminating the current gross favoritism in the tax code toward earnings from capital vs. wages and salaries is a necessary and long-overdue corrective. But it is not enough, from either a fairness or a revenue standpoint.
We should probably preserve some sort of mechanism that would avoid unfairly taxing illusory gains from inflation; this could be accomplished by limiting a reduced rate on “capital gains” to the sale of assets held for a substantial time period, a minimum of five years in my opinion. That preferential rate could have a lifetime per-taxpayer cap of, say, $1 million; this would insure its application to such legitimate transactions as the sale of a family home owned for 20 years, and not open the tax code to being gamed, as has gone on in America for decades, by clever methods of converting what is “ordinary income” into apparent “capital gains.”
But we need to make real progress in reversing the extreme income inequality we now have in the United States, a trend that began in 1981 (a year not chosen either carelessly or arbitrarily.) To do this, we should follow the example of Teddy Roosevelt and others in the Progressive Era by re-instituting steep rates of taxation on the transfer of wealth between generations. This can be made politically feasible in a simple way: do NOT tax estates, tax BENEFICIARIES. Wy should they get tax-free Income?
In my area, there's a tech founder who makes $9 billion per year. That works out to $4 million per hour of work assuming 8 hour days. Or $2 million per hour assuming 16 hour days.
Yep, we can afford to raise taxes in multiple ways. Trickle down only works for good dogs on leashes.
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@Connie They don't make 9 Billion a year. They usually take a salary. Maybe 5 million for their living expenses. Everything else comes from selling stock options.
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@Connie I cannot make sense of income of $9bn...cannot IF it were income from assets earning as high as 10% p.a. it would imply assets 'worth' $90bn.
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The obscene amounts of income and benefits and golden parachutes must be addressed in some way or we will continue toward just two economic classes of lords and serfs.
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The nice thing is we are talking about taking back some of the tax breaks and loop holes of the last 40 or 50 years. It has been drip drip drip to long in giving the breaks to the rich and making them ultra rich.
The more we talk about it the more sense it makes. The Democrats now have a good chance to set the agenda.
4
Eliminating the step up of the cost basis of assets at death and phasing out Section 1031 of the tax code are the policy levers I’d pursue to add some much needed friction to the greasy rails of multi-generational wealth transfer.
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I'm all for closing loopholes and eliminating tax shelters (including Switzerland and the Cayman Islands!) but here's my breathtakingly simple idea: force the affluent to pay for the programs and services that are specifically designed to assist the poor. It may be that such an additional surcharge can be modified on an individual basis for members of the patrician class who actually go out and HIRE the poor- provided that those jobs come with good salaries and good benefits. Otherwise, let's obligate the wealthiest members of our society to care for the poorest, thus enabling the working class to take care of themselves and to not be manipulated by the masters of the universe into believing that the aged, the infirm and the "welfare queens" are somehow responsible for the high taxes with which they've been saddled. C'mon, lets all help the rich get into Heaven.
2
So it is mandatory to hire people because their qualification is being poor?!?!!!!
@SB: Nope; they can just see their taxes raised to the extent that they're paying for the poor and the rest of us are not.
Great idea! I've always thought it was outrageous that capital gains are taxed at a lower rate than ordinary income. And the argument that earnings shouldn't be taxed twice seemed to go out the window in the recent GOP tax cut bill - now individuals in relatively high tax states will have to pay federal tax on the income that has been taxed at the state and local level.
6
Maybe a little off topic - but why should people pay more for their effort to have a good life?
We all have the same possibilities today - if parents don't have money to pay college - then the kid has the option to have A's and get a scholarship.
Someone chooses not to be smart, not to go to college, etc. Why should those who want to achieve something in this world pay for those who are lazy/incapable?
I'm not talking the top 1 %, I suppose they don't care - but progressive tax is not a solution.
I'm a doctor, my classmates are teachers which is a very bad job in CZ, low payed. They want to tax me more. Why? I chose to be a doctor as well as they chose to be teachers. I chose the most difficult job because I loved it and I know I won't ever be short. They chose the easiest way out, they spent five years of college getting drunk every day etc., I didn't. Why should I now pay more in taxes when we all had the same options?
Absolutely makes no sense
it makes sense when you realize that a billionaire pays less tax than a doctor.
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@Martin Martin, you clearly have not spent much time in the United States, and you clearly don't know much about how our educational system works. Here, public school is free, but it is paid for by property taxes. So kids who grow up in poor areas (where very little $ is collected in property taxes) go to struggling schools where the quality of education is lower, and kids who live in wealthier areas get a higher level of education, because their parents contribute more in property taxes to that school district. Read the book, 'Savage Inequalities,' by Kozol, which explains this inequitable educational system in detail.
Also, our higher education system is more expensive than the low- & mid-priced universities you have in Europe. Here, students must take out tens of thousands in student loans (with high interest rates) to pay for a university education. Even our public universities, which are less expensive, are still very expensive compared to tuition rates in Europe.
The U.S. doesn't give everyone the same opportunities. Here, if your parents are poor, you have very few opportunities, and if your parents are upper middle class or wealthy, you have many more opportunities. This creates inequality in our educational system, and that contributes to income inequality.
Come live in the U.S. for a decade. And don't just live in Manhattan. Live in the South Bronx, Appalachia, rural Mississippi, and a reservation. Maybe then you'll see that the U.S. is not Europe.
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@Martin You have a good question. The tax proposal is still progressive, and still makes people to strive, work harder and get better paying jobs. In your case, your net income (assuming it is the same bracketed income tax as in the US) is still more than that of the teacher.
As far as your question about why you are getting punished for working harder, read https://en.wikipedia.org/wiki/Veil_of_ignorance and what John Rawls wrote.
Unlike your specific case, at some high enough income level, it becomes ridiculously obvious that the extra income is not due entirely due to own hard work and instead increasingly more dependent on those that are working for you and increasingly more of them.
2
There should be a strong incentive to invest and lower capital gains taxes, perhaps higher than they are now but still lower than the tax on earned income is very logical. I like the idea of a wealth tax. There should be a disincentive to just sitting on unused wealth. And a lower capital gains tax is fair compensation for risk.
4
Research on what people know about the tax system is shocking; many people only know the top rate, and many think they pay it. The IRS could do a public service and drop the tax tables, forcing people to calculate their taxes and see how marginal rates work. Because of ignorance, raising or lowering the top rate has always been the sexy political act, but this shows how ineffective that is. Starting by taxing capital gains and investment income at the regular rate is a good start, but there are lots of other loopholes and dodges that need fixing, and given the disparity in wealth Republicans have achieved, a wealth tax should be on the table. What we really need to do is get Trump's tax returns, see how he has managed to pay little or no income tax for years (I'm assuming here), and outlaw those practices.
6
@rawebb1 Keep the tables, but make the number in the table a percentage.
2
CBO had their annual "Jaws" moment in which they say "We're gonna need a bigger...revenue amount."
Taxing the rich helps with two of our biggest problems: inequality and an unsustainable deficit trajectory. Since the rich tend to save their next dollar, taxing those marginal dollars has the least adverse impact on GDP, the inevitable effect of reducing the deficit in the short run.
Eliminating tax expenditures like the preferential treatment for capital gains and dividends, wealth taxes, higher marginal income tax rates, removing the cap on the Social Security payroll tax ($132,900 in 2019), etc. should all be on the table to get the budget deficit back under 2.5% GDP.
The CBO director's comments are a great read:
https://www.cbo.gov/publication/54943
3
What ever happened to the half cent tax on stock transactions? This would have two benefits. Raise revenue and cut down on High Frequency Trading.
12
Thank you my friend for bringing some simple sanity to the tax debate - I,big course, would go further and tax ONLY income earned from capital - in addition to capital gains etc it would add in deemed rent on second (and third) homes, of course eliminate the real estate loophole, wealth and others - to take it further the tax rate should be high enough to enable elimination of all taxes on earned income including corporate profits
3
You made one big error in your description of capital gains taxes. They are NOT double taxation. If you buy a stock and sell it for a profit, that gain is income, and it does not come from the profits of the corporation but rather the market valuation of the company. Dividends are a case of double taxation because they are a distribution of profits, but capital gains are not. Further, capital gains are unearned income, so it could be taxed at even higher rates than earned income. Since only gains are taxed, they are not a reason to stop investing. Investments are made based on gains, not taxes.
10
@Rich Davidson, The value of your shares reflects the potential cash flows of the company, which has paid taxes on its income. So, first, the company pays taxes on its income. Then, second, you pay taxes on your dividend from the company (or on your sale of the stock at a price that reflects the potential for dividends). Taxed twice.
@SO Family. Nonsense. Potential cash flows of the company flow to the shareholders, when they arrive, as dividends, which is double taxation, but the value of a stock does not flow from the company, but rather from the person who buys it from you, and therefore, is not double taxation.
40% seems like more than someone's fair share of tax liability. We could save $56 billion by eliminating the "earned income tax credit". If we make taxes onerous enough, why wouldn't the rich and highest earners just leave the country for someplace less grubby?
We should be trying to attract top talent, earners, investors, consumers and employers. Not chase them away.
America's success was built on the premise of hard-work, entrepreneurship, investment and ownership. Not collectivism.
Perhaps those yearning to breath free, should look elsewhere
@James
It depends on where your hypothetical rich person would want to go- at 40% marginal for the highest incomes the US would still rank behind most of the western democracies. Is Park Avenue going to flee for Paraguay? That'd be some kind of dinner party. Perhaps "those yearning to breath free" are in fact the poorest Americans, who have suffered under policies that overtly benefit the already rich at the expense of everyone else? I write this as someone who absolutely depends on the 1% for his income and similarly knows they can spare more, and will.
7
@Brian US citizens must pay US taxes no matter where they live and work. Any income tax paid to a foreign government is a credit toward US tax liability so no double taxation but still you can't be better off living abroad (other than state taxes).
1
@James I doubt that those people would pack up and leave but if they want to, fair enough. I think the truth is there is a huge unacknowledged value for those people to live in the USA, however tangible or intangible. For one, they have the security provided by our military service members which protects them and their financial interests. But hey, if some extremely wealthy people want to be that greedy, they can renounce their citizenship and go.
4
Thanks for this Steven, these are practical proposals that are EXACTLY where tax change efforts to more fairly tax the wealthy should be focused before moving even farther radical left wing plans like 70% income tax or even a new wealth tax are even discussed. I'm fairly conservative and fairly wealthy but support these types of efforts to more fairly and evenly tax high wealth by eliminating tax loopholes such as capital gains. But I think you should go a step further a just propose a single highest tax rate that applies to highest wages AND capital gains AND corporate taxes all at the same level without ANY deductions. My guess is that if the wealthy were forced to pay taxes without capital gains and other deductions the tax revenue would MASSIVELY increase at current tax rates, raising even more income than a 70% tax or wealth tax would bring in. This will eliminate all tax arbitrage shenanigans and make sure the wealthy pay what they owe but not be vindictive about it (like Warren proposes). Closing the tax loopholes like capital gains and real estate tricks should be the first step before moving on to radical income tax rates or a wealth tax (and will probably raise even more), but unfortunately those radical proposals make for better headlines.
Could you please talk to your colleague Paul Krugman about this.
3
That’s a bad idea . Why should I pay taxes on the meager amount I may earn from my meager investments
TAX THE RICH THE RIGHT WAY . They won’t miss it
3
@KarenE Where you would pay a few bucks on your meager investments, they would pay hundreds of thousands. Investment is their main source of income, it's not wages that gets them there. Wouldn't you gladly pay your fair share of a few bucks, all things considered?
4
While we're at it, why does the Social Security tax (FICA) stop being collected when earnings reach $133,000? That's just a big break for the people making the big bucks. There should be no limit, and that will solve SS's solvency problem as well.
34
Keeping cap gains taxes lower than ordinary income is one way to compensate for the fact that for many assets, if not most, their rise in value over time is largely due to inflation.
1
@P.P. Porridge
Basic, vanilla, index fund: Vanguard 500 Index Fund was $76.64 per share on Jan 23, 2009 and $246.24 per share on Jan 25, 2019. While the average inflation rate between 2009 and 2018 was only: 1.76%.
The rise in value for most financial instruments/assets is largely thanks to basically-free money from the Feds.
2
@P.P. Porridge
Since cap gains are unearned income, they could be even higher than taxes on earned income.
The main problem is that capital gains rules have become welfare for the rich who have the disposable income to buy stocks.
3
@P.P. Porridge The consensus for stocks is that, on average, the expected yearly return is around 7%. If you account for 2% inflation that leaves a not too shabby 5%. Think of the rate you're paying on your mortgage for comparison. Yes it's an average, some years you may lose some, but then, losses are tax deductible...
1
I've been in favor of this since the 2001-2003 tax cuts which slashed the CG and dividend tax rates. The idea has such obvious populist appeal to the middle class--most of whom are wage earners and most of whom don't get a lot of their income from CG or dividends.
The reason this idea has not gained more momentum in congress is because the people who bought the congresspeople are not in favor of this idea. After all, when you go to the store and buy produce or other consumables, you are not paying for them to jump up off your plate and go rogue on you. You are paying them to lay down on your plate come dinner time and get eaten.
4
I own a small business, which I hope to someday sell. My salary is the lowest of the entire payroll, no gimmicks / no dividends.
If the company fails I lose everything. My employees lose income while they are in between jobs, but (obviously) nothing more. It’s not like I can or would ask them to pay back some of what I’ve already paid them in salary.
Shouldn’t my and my salaried employees’ tax rates reflect this fairly major disparity in our relative risk...?
4
@Henry-I agree with your point. You are a founder with all the risk. I believe in your approach. It appears though that “rich” people are not viewed as founders, but just managers for a company someone else built. These same “managers” are often receiving years end windfalls and extravagant severance packages then hired 60 days later with millions in hiring bonuses. Some call this competition and while some CEOs are worth it, most aren’t. There are two items here and we need to highlight this differences.
No, because you chose to take that risk. It’s part of the cost of doing business. From a former small business owner...
2
If there is no reward or greater compensation for taking risk then nobody will start businesses. I am a small business owner in the same position as the original commenter.
The common theme in nearly every comment is to punish (tax) those who have accumulated any level of wealth. No effort is ever made by Democrats to figure out an alternatives to higher taxes. It is always easier to spend someone else's money rather than earn it.
4
@Jim Hayes, the alternative is often to punish (deny social services) to the needy. The money you pay in taxes doesn't stop being your money, it just becomes all of our money. It's used to benefit all of us.
5
How about " It is easier to accumulate wealth far away in lets say Somalia than comply to ethical obligation towards economic development in Somalia."
Rural America , GOP's base , are behind virtually in everything - from capital flight , stagnant social services , anti-development , etc...Redistribution of wealth is not a case where someone receives tangible cash , as most would imagine. The concept of a fair tax system is to mitigate economic pressures , close the gap between the Uber rich and the poor , expand the middle class with quality social services.
1
@Jim Hayes I don't know about you, but I paid 46,000 in taxes for the largest war machine on the planet. I would gladly take that money for healthcare and education.
1
Baloney! Before the Reagan era we had both 70% tax rates and high capital gains taxes. And our country thrived like never before. It’s going to be a huge fight to try and take down the Uber rich. But it’s a fight we must have and we must win. The tired old excuses from the rich aren’t going to cut it. I truly believe TARP was the turning point for most Americans. The 1% got bailed out while the rest of us lost our homes. Since then it’s only a matter of time before the masses rise up and take down the over privileged.
8
A different time and a different tax system.
The primary objective of a high top marginal tax rate is not to raise revenue. Even at 82.5% in Manhattan, it is not high enough. It should top off at the symbolic and intentionally dissuasive 90% rate. And of course, capital gains must be taxed as "ordinary" income. Look ma, no loopholes.
The primary objective of a 90% rate is to prevent executive board members from doling each other hefty paybacks and hush money. It makes no sense for a corporation to compensate a CE0 $5m when he (and it's almost always a white he) gets only $500,000. Better spend it on investment or wage increases to the labor force who may actually buy stuff with their money.
The fact of the matter is that the last 40 years have been a power grab by the white and wealthy, and that has to stop. The average American stopped believing in work during that time, stopped believing in education and politics as well, and soon will stop spending. Market shutdown, if you will.
The hf class are welcome to move to mainland China if then they believe their biggest markets are in Asia. Let's see how it works for them as second-class citizens there.
4
What about a wealth tax above and beyond income taxes? Perhaps the most serious aspect of income inequality is the continuous and increasing accumulation of wealth that is passed from one generation to the next. Progressive taxation at higher marginal rates, restoration of estate taxes and the creation of a wealth tax would shrink the enormous disparity between the super-rich oligarchs and the rest of society.
4
So, you’re proposing that income be taxed when earned, then taxed again as “wealth”, then taxed a third time as an inheritance tax. OK, but let’s go one step further and tax all income this way - for every taxpayer - including you.
1
@MDB, there used to be a luxury tax, which was a kind of wealth tax for people who could afford yachts, limousines and diamond jewelry. Perhaps that could be reinstated. Inheritance taxes are taxes on heirs, who did not earn the money and have no claim beyond an accident of birth. Nobody has ever stopped being wealth because of them. And I'd be happy to have my income taxed that way, if I had that much income. Or maybe not. Who knows?
4
Raise taxes on the middle class. And the 48% of Americans who don’t currently pay Federal income taxes. That’s the only way to pay for all the programs progressives demand.
4
@MDB
You just cut all the middle class tax deductions in exchange for a tax give-away to corporations and the 0.1%. I didn't hear any Conservatives crying when we jacked up the debt 1.3 trillion over that.
1
Like almost everyone on earth I think that hedge and pricate equity fund managers’ “capital gains” (hahaha - it is ordinary income dressed up as capital gains) should be taxed more heavily, but the fact is that investments carry with them risks that ordinary income does not. Your employer cannot tell you after years of work that actually, you won’t be getting paid / you have to give all your wages back. To a small business owner drawing little or no salary in hopes of increasing the value of his/her equity however, that can and does sometimes happen.
The rewards need to match the risks, and a lower capital gains tax rate sort of helps. Make hose risky gains subject to higher taxes and fewer new businesses will be launched, meaning fewer new jobs.
Not a good idea.
1
@HenryParsons I owned my small business for 7 years and had my own 457F plan. I paid into it every month and paid myself a salary to boot. I don't recall ever having to give anything back when I left.
1
I largely agree with the author's perspectives. I would take it a step further. I would eliminate the corporate income tax. Tax all dividends and capital gains as ordinary income.
For the most part corporations don't pay taxes. They are passed through to the people that buy their goods and services.
Eliminating the corporate income tax would be a step toward honesty in government. Wow! What a crazy idea!
4
What about the small investor - should his/her meager capital gains be taxed at the same rate as a billionaire. Would it be possible to have a graduated capital gains tax based on net worth?
8
There are so many arguments about estate taxes. Why not just consider any amount received by the recipient/beneficiary as taxable income?
1
Capital gains - and carried interest - should be taxed as income, just as wages are. Income is income.
4
@Carol simple and comforting, but false. Investment income carries with it the risk of loss. No matter how hard your job is, you will be paid for it. No auchvguqrantee with investments, whether they are in stocks, bonds, real estate, new businesses, etc.
1
@HenryParsons
Not clear why investment risk should justify a lower tax on gains either in general or specifically when losses can be used to offset gains. And if you think jobs do not carry risk of financial loss, you haven't been listening these last few weeks.
6
@HenryParsons, and those losses get written off, just as in any other kind of gambling, you pay taxes only on the difference between your winnings and your losses.
There are several reasons to have a lower rate on Capital Gains:
1. It encourages investment in business.
2. It really is a lower rate on LONG TERM capital gains, which this author completely ignores. That encourages long term investment, rather than short term speculation.
3. Many retirees depend on investments to live on, long after they stop working. They need a lower rate, unlike someone whose income is enormous.
4. He does not ever say why his way is better. It's just different, and in my opinion, much worse.
8
@Steve, taxed as ordinary income, they would have the same effect. Capital gains of 1000 would be taxed at a lower rate than gains on 1,000,000. Besides, the money isn't taxed until the assets are liquidated - just like your IRA.
As to point 4. I agree. It doesn't go far enough.
1
I do not understand why supposedly smart people such as Mr. Rattner cannot learn a simple fact:
THE FEDERAL GOV (THRU THE FED) CAN CREATE AS MUCH MONEY AS IT NEEDS OUT OF THIN AIR.
Thus the reason to raise taxes on the Rich is not to raise revenue since the gov never needs revenue. The reason we have taxes is that if the gov has to create so much money that we cannot produce enough stuff to use all that money, then there will be excessive inflation. Taxes take some of that money back.
Taxes are also useful for their side effects. The one we are talking about here is the ability of taxes to reduce inequality. Another would be reduce carbon emissions by taxing their production. And so on.
So let's see how we can structure taxes to reduce inequality. Because Mr, Ratner mistakenly thinks the purpose of taxes is to raise revenue, he completely misunderstand why the high marginal rates of post WWII were successful & why AOC wants to go back to them.
His graph that shows that the effective overall tax rate on the Rich hasn't changed much really just looks at the revenue raised by the taxes on the 1%. The point is that the high marginal rates did not raise a lot of revenue because the the Rich took lower compensation to avoid them thus achieving the desired result to lower inequality. That is the purpose of these very high rates.
Again, the purpose of high marginal rates is to discourage the Rich from taking obscene compensation & encourage them to pay their workers more.
7
@Len Charlap, it is that, but it is also, most definitely to generate revenue, as are stare taxes, sales taxes, import taxes, and parking tickets. The money is used to fund the government, and the bloated military. It could properly be used to raise the Federal minimum wage, something that is sorely needed. The wealthy are obsessed with not paying taxes, and can give you a thousand reasons why taxes shouldn't be raised. They could raise their employee's salaries, then their employees would be paying more taxes, alleviating their burden. But no! they'd rather send their money on a holiday to the Cayman Islands, or pay smart CPAs (probably more than their tax bill would be) to help them avoid their taxes.They've managed to convince the middle class that they are the targets of tax increases, so the middle classes vote against their interests (infrastructure, health care, etc.) in order not to pay a couple of hundred more, while the plutocrats are not paying millions.
The rich only took lower cash compensation, allowing the corporation to buy their homes, planes, and yachts. Inequality was not changed. Only strong unions were able to do that.
1
@michaeltide State and local governments are very, very different than the federal government since they cannot create as much money as they need. They cannot create money at all.
You write that (tax) "The money is used to fund the government, and the bloated military." Since the government can create as much money as it needs or wants, why would it need tax money to fund itself?
It just doesn't make sense.
This op ed offers Americans a bad deal. Let me explain why.
The proposed 70% marginal rate on income of $10+ million applies to the top .01%, or just 23,000 earners. (Data from Saez, Piketty, Zucman)
A marginal tax of 70% on $10+ million would produce a much greater overall tax bill for 23,000 super-rich Americans than if instead all Americans who own stock pay a higher tax on dividends and capital gains.
Thanks Rattner, but your offer is a bad deal.
5
What about eliminating long term capital gain tax on upto 50k of investment income.
Also add remove some benefit on expenses claimed by real estate people like property tax..Any property taxes on combined investment property value of 10M and above can't be deducted.
Also why there is depreciation of property value taken when real property value appreciate. Can't they be removed if actual property value is already appreciate twice the purchase amount ?
2
Tax all income the same as earned income. The idea that capital gains is some kind of magic, pixie dust income that needs protection from taxes is bogus. Some guy, working construction, building a mansion is just as important to this country, as who ever is going to live in it. And if you think regular working class people pay less in taxes, then add up the portion of their income paid for Social Security, unemployment, grocery tax, gasoline tax, tax on a home and taxes on just about everything we buy. It adds up fast. And there is a much smaller pot to draw from. There isn't any special magic income. Tax it all the same.
4
@Michael ok. If the house sells for less than it cost to build, can we claw the construction worker’s wages? Seems fair. After all, if we are going to make tax rates the same - on the workers’ wages and on the gain (if any) earned by the real estate developer who paid for construction of the mansion - let’s equalize the risk too.
You cool with that? Want to go run it by some construction workers?
@HenryParsons
You seem to think that somebody will continue to build those houses. The workers have even more risk than the investors, because they lose their jobs. The investors just lose the investment. Actually, there is a pretty good moral argument for taxing capital gains at a higher rate than ordinary income.
1
In Mr. Ratners world if capital gains are taxed as ordinary income then capital losses should also be considered as negative income and deducted without the $3000 annual cap. That would revive the tax shelter industry and treasury would not get much benefit. And taxing dividends and capital gains will impact the wealthy much more than super rich. The effective taxation when rates were > 70% was 23 to 25%.
2
@FACP bingo. Risk and reward are going to walk along side one another, one way or the other.
What we need is a wealth tax, not an income tax. This is the only way to actually effect existing inequality: by taxing the already accumulated wealth, even if only at a seemingly very modest rate, say, 1-2% a year, but doing this *forever*.
3
OK, but let’s apply this new wealth tax to every taxpayer, down to those with $500 in the bank. To, you know, be fair.
@MDB
So if you make 10 million you have 3 million left.
If you have a 1000$ you get 300 bucks.
Completely fair!
It is not plutocratic influences that have created our tax system, but foolish squabbling over imagery and preconceived notions. This is a sensible, workable improvement. He shows super high marginal rates had illusionary effect. Home sale capital gains are exempt. Middle income taxpayers would pay tax on gains at their tax rate not the top 37% rate.
1
How about applying the alternative minimum tax for all income above $10 million? No tricks, no deductions, no depreciations, etc.
2
Is it ?
Tax rates Sweden, a progressive Scandinavian State
Top income tax bracket 56.4 %
Capital gains tax rate, 30%
So why does Sweden not tax capital gains as income, as proposed here ?
Very, very simplified because capital will flow to where it is taxed least.
This unpleasant effect is the consequence of globalization, where with one click of mouse a billion dollar can move from the US.
And flow it will, if it is taxed higher in the US than abroad
2
@Woof please let us know if Sweden is suffering from a lack of capital, given that its capital gains tax rate exceeds the US one by a significant margin. Surely by your logic, all Swedish capital would have moved to the USA?
6
@Woof, and I bet everybody in Sweden pays their taxes. We could do the same here, if everybody paid.
1
I would be willing to pay a higher capital gains tax , but it should be indexed to inflation, particularly for assets held for a long time
4
Rattner's proposal would bite the middle class, including small estates, every bit as hard as it would bite the wealthy. Now every family would be able to look forward to paying a hefty tax on the sale of their parents' house.
Meanwhile, capital gains are optional. One doesn't have to sell assets, especially if there are already millions in annual income. Locking up assets is bad economics. Taxing income in excess of $10 million per year at a confiscatory rate is not just good for revenue, but an effective incentive to pour would-be profits into business growth-- much more effective than trickle-down.
10
The reason for lower rates on capital gains versus income is because of the inherent risk of loosing the investment that produced the gain to be taxed in the first place. There is no such a thing as a leftist star actor not getting paid for showing up on the set, but an individual who invests in that very production may loose all his money.
1
@Just Saying maybe there's no sufficiently "leftist" and "star" actor to whom this has happened, but actors and other people in the creative/media sector fail to get paid on all kinds of projects.
Somewhat typically of the POV you're espousing here, you ignore the opportunity cost of a person investing their labor in a failing project, which is typically much more significant than the capital loss. Why? Who invests "all their money" in a project? Almost nobody - investment is done with surplus capital, the investor still plans to eat, pay utility bills and generally live as before. By contrast, people who invest their labor are typically investing the only asset they have that has any substantive value. If the company/organization they work for goes belly up, their opportunity cost could be catastrophic, even for their basic living costs.
6
One can only hope that after the "dust settles" with this debate a CPA with 20 years of experience will be still be able to file a "simple" tax return... The moniker of "tax simplification" has turned into an oxymoron. Most of the time the title of any new laws probably should be called "The Tax Attorney and CPA Welfare Act". Of course their fees will only go up but never be counted as part of the tax burden.
1
Taxing all capital gains at higher rates penalizes every household that owns stocks, regardless of how much other income that household has, whereas taxing higher income at higher rates (progressive taxation) is equitable. For this reason, I disagree with the author's conclusion that increasing the capital gains tax rate - for everyone - is somehow fairer.
8
CG taxes could easily be mean-tested. I see no problem whatsoever taxing capital gain as regular income. Of course where we draw the line is important.
1
Where we draw the line is always right above our income, whatever it is
There maybe better ways to tax than her plan but the simplicity is the reason it’s a winner. No room for exceptions, loopholes or any other nonsense. By the way these aren’t her ideas - she’s standing on the shoulders of lots of our best and brightest
3
@Russell But it's never going to be simple. Defining taxable net worth and enforcing this will be very complicated.
@DRF it is Warren who is proposing a tax on net worth (a so-called "wealth tax"). AOC proposes increasing the top marginal rate. No need to define taxable net worth - just fill out a 1040 and compute the (new) tax owed.
The approach proposed does not mention the estate tax, and this is a mistake. The very richest have made the largest gains in the past 30 or 40 years, and it is on them that the largest burden should fall. Their gains are most effectively captured by restoring the estate tax to a reasonable level. In 1980, estate taxes started at $160,000 (at 18%) with a highest marginal rate of 70%. We have slashed the estate tax since then. The large reductions in the estate tax rate (coupled with the asinine stepped-up basis that the article describes) ensure that wealthy families will be wealthy forever. We now have a permanent aristocracy in the United States. To undo this anti-democratic, anti-meritocratic stance, we must have a higher estate tax.
Note that in 2017 we had a lesson in changing tax rates with only a majority vote in the Senate. The estate tax could be raised with 51 votes in the Senate.
5
@David H. I think this is exactly right. Resurrect a robust estate tax, and eliminate the loopholes, and this does what an annual net worth tax would do. Plus, the "victims" of the estate tax are (1) dead people and (2) their heirs who didn't create the value. Perfect positioning.
3
@David H. "The very richest have made the largest gains in the past 30 or 40 years, and it is on them that the largest burden should fall."
Do the 'very richest' not already assume the 'largest burden'?
What % of the tax revenues on individuals is paid by the top 5%?
Instead of finding ways to double and triple tax citizens, why do we not slash government spending?
Government expenditure is where capital is mal-invested.
Tax policy is mostly just noise, though more unfair to some than others.
2
@Tryggvas, The current US annual exceeds $1,000,000,000,000 during a sustained economic expansion. We cannot sustain this level of deficit. No realistic amount of budget cutting will restore the deficit to sustainable level. If you'd like to, you could start by reducing Defense spending. To $0. That would be enough to bring the deficit to a sustainable level ($300,000,000,000).
It's meaningless to write phrases like "slash government spending." You have to propose specific cuts to specific programs, and you have to have enough cuts to generate the outcome you desire.
3
Perhaps eliminate the capital gains tax and tax the recipient of all inheritances and gifts as income, which is what it is.
4
I'll also add, echoing a comment below, that capital gains should be adjusted for inflation. The "gain" on an asset held for, say, 20 years, is not the difference between the purchase a sale price. It is the difference minus 20 years of inflation.
6
@Daphne NOPE. The "gain" is actually the difference between the acquisition price and the sale price PERIOD. INFLATION INCREASES the cost of something; it doesn't decrease value.
For example, when Amazon first hit the Stock Market in 1997, the share price was $2.23. The current price is $1637.89 per share, an increase of about 735%. Using your premise, if an Amazon shareholder holding a share were to be taxed, they would pay tax on the first $2.23 they spent, even though they had a gain of over 730%. That is foolish! If people can declare stock LOSSES on their income tax, then they should be taxed on the GAIN. PERIOD.
@Elizabeth Moore
No, that is not how it would work. $1637.89 in 1997 dollars is $1,051.58 for a capital gain of $1049.35 per share.
@Daphne.
You are absolutely correct BUT there must be @ meaningful minimum holding period, say five years, before ANY preferential rate kicks in. We CAN build in protection from unfair taxation on illusory gains that are the product of inflation. To keep tax filing simple, there could be a 20% DISCOUNT from ordinary income rates—the rate on the sale of an asset held from 5-10 years would be 24% if 30% would have otherwise applied.
Similarly a 30% discount could be applied to assets held 10-20 years with a 40% discount reserved for any assets sold after 20 years. This would keep tax preparation relatively simple, avoid people (and hedge funds) from getting preferential rates on trading assets held for just a year (essentially the basic way many asset-rich earn their basic income, and ONLY build in a rate of inflation roughly comparable to what the Federal Reserve regards as optimal to purposely engineer.
Last, there could be some sort of lifetime per-taxpayer cap on total usage of this benefit, say $2 million, in order to prevent this proviso from being used as a mechanism to avoid what MUST BECOME semi-confiscatory (40-75%) rates on inheritances over a designaged level, say $5 million or more. This is where appreciated family homes and reasonable amounts of wealth being passed to the next generation could be protected. There would be TWO crucial benefits: fairness and knocking away specious and disingenuos right-wing scare tactics aimed at middle-income voters.
Want to get any of this done?
First:
--Publicly funded elections, with low three digit limits on individual campaign contributions and NO corporate, organizational, church, or (yes, even) union contributions. No PAC's, 501's, or any other letter/number combinations.
--Reinstatement of the Fairness Doctrine.
--Legislative repeal of the Citizens United decision.
The effect of cash on campaigns and politics is just about the most pernicious thing going; you can't get representatives representing their actual constituents when they're dependent on a handful of libertarian oligarchs for their continued political careers.
And you certainly can't get them discussing a more equitable taxation agenda when they risk losing massive campaign funds for merely suggesting it.
63
@Glenn Ribotsky you cannot legislatively repeal Citizens United. The SCOTUS ruled that the law overturned in that decision was unconstitutional, not a violation of existing US Code.
Also: do you really want it to be possible to ban a not-for-profit from publishing a book about a political candidate because it constitutes electioneering? Although Citizens United is frequently spoken of in the context of corporate election spending, the actual case was about the concept of ANY corporation (in the case, a not-for-profit) being allowed to claim free speech when publishing "election related" material.
Be careful what you wish for.
@Glenn Ribotsky
We are discussing it now, because the Powers That Be foresee pitchforks being sharpened.
3
Makes sense. It is what Reagan did years ago. The wealth tax is really a bad idea from an administrative perspective. How much is your closely held company worth? How about art works? What about deferred comp, do you present value it.? What if you are a secondary beneficiary of a trust? And so on. These questions would enrich valuation folks. Changing the capital gain tax would be much easier as would no basis step up at death.
2
Thank you, Mr. Rattner, for an exceptionally well-thought out column. Your proposals are spot on. Robert Reich also made these points a few years ago, though he thought speculative capital gains should be the real target to be taxed more. I like AOC's spirit and creativity. But I think your proposals make a lot more sense. Of course, we could do BOTH. Wow, I know... dream on.
8
End poverty now !
Poverty is caused by people who are greedy and who are cruel and who have much more money and wealth than they ever will need.
Poverty is caused by the actual enslavement of human beings human beings; and poverty is also caused by human beings paying employees insufficient incomes.
Neither do many of the rich and wealthy, nor many of the underpaid, including the poor, know how to effectively budget their money : Nor do they know how to be realistic and reasonable about their spending. The rich and wealthy do not have to because they can just reach in their "pockets" and spend without thinking. The underpaid, and the poor do not, because they have not had enough money to make ends meet, and also to plan for the future. All Americans should be educated about budget management throughout the school years.
2
Every economy whatsoever starts from Land. The backlash , or rather , the commence of poverty , whether we want to admit it or not , begins when few owned most lands. But now we have to deal with not just lands but taxes , technology , intellectual property ,
@Lenny
Oh yes! I am going to tell the dying homeless man and disabled veteran on the Santa Monica Ca Promenade that he needed budget managing classes in his education.
Mr. Rattner,
I usually agree with your opinion pieces, but not this time. Baby boomers like myself who have been well paid employees and invested in our retirements, as instructed, would pay an unfair share of the burden you’re proposing.
How about this as an alternative, anyone who has benefitted from the carried interest loophole has to pay your tax retroactively for the last decade. I bet that would raise a tidy sum needed to invest in our great country.
3
@rachel - Actually, no. Only about 15,000 out of 165,000,000 returns use carried interest, and the amounts of money involved are tiny relative to the Federal budget. The difference between the 23.8% tax they pay and the 37% ordinary tax rate is not that large, either.
2
@rachel I'm a baby boomer who was not WEALTHY enough to afford to but stocks and bonds. After 47 years of work, and scraping and saving, I am just getting by on a pension and Social Security. Most of the people who are not/ were not in 401(k)s, and who own stocks and bonds and who see "wealth managers" that take care of their portfolios can afford to PAY. Let them give up their expensive round the world vacas and their greens fees. Let them give up their expensive $200,000 motor homes and their McMansions. Let them give up their expensive clubs and their excessive homes and lifestyles. NO ONE NEEDS THOSE TO SURVIVE. It is well past time for the rich to PAY their fair share and get off all of our backs!
@Elizabeth Moore It's a grand plan like yours that would wipe out entire industries and the jobs that go with them. The wealthy have money and they spend it, which is good for everyone. Punishing them for spending will only push them come up with creative ways to avoid it.
2
Smart policy, Mr. Rattner. Unfortunately, does not make for a great sound bite, so ignored by most voters and politicians, who may not be aware of the difference between capital gains and ordinary income.
3
@Mark Arizmendi
All the more reason to go for it, if most voters know it has nothing to do with them.
1
"For starters, Ms. Ocasio-Cortez seems to be ignoring the burden of state and local taxes, particularly for residents of places like her hometown. For us New Yorkers, the top rate for those levies is 12.7 percent. And thanks to the 2017 Republican tax cut, it is no longer deductible, bringing her proposed top rate to 82.7 percent."
This is incredibly patronizing. Who says she hasn't considered that? Nobody deserves to keep more than 13 cents of a dollar they make over $10 million.
Anyway, why are the two mutually exclusive? The rich have been undertaxed for decades and public services starved of resources as a result. Increase both the capital gains tax and taxes on the highest earners.
16
I say add your ideas to AOC's. And I say make your ideas progressive as well, not just flat. And I say we need a wealth tax.
You seem to be looking for sources of revenue to make up for what Trump just gave away, to bring things back into balane.
But what we need is a massive transfer downwards to make up for the blatant robbery of the last 35 years by the super-rich.
11
"Among the justifications for taxing profits on capital at a lower rate than income from work has historically been that companies pay taxes on their profits, so taxing shareholders on their gains represents a form of double taxation."
I can't believe a man as smart as Rattner would peddle this fake news.
It's like saying the money I pay to my plumber on which he pays his income tax is double taxation.
The definition of double taxation is a tax on a tax.
Example:
A state's tax rate is 6%. Single taxation would occur if only the first 94% of my wages were taxed by the federal government. Since 100% of my wages are taxed by the feds the tax money I pay to the state is taxed twice: by the Feds and by the state.
That is the real reason why state taxes are deductible from your income before federal taxation is determined on your tax form; to prevent double taxation.
A better example might be the payroll tax, the money that goes to the SSA after being federally taxed also.
Worse, when you retire and collect SS, and you earn more than $24K then 50% of your SS benefit is federally taxed as ordinary income, a form of triple taxation.
Since the corporation and the shareholder are two separate tax entities it is impossible for double taxation to happen as Rattner describes.
The reason the capital gains tax is so low is because that is where the majority of a rich person's income comes from. Duh!
30
@Paul, I just point out that the people who limited the deductibility of state taxes, hence causing double taxation, are the Republicans in Congress.
3
I get your point about double taxation, especially as I live in NY state. But I also get the unfairness of deducting state taxes from federal. If the citizens of one state decide pay for something extraordinary that doesn't benefit out-of-state taxpayers (let's say Prop 13 in California), why should taxpayers in other states that decide to live by their means (let's say Kentucky) have to pay for it? Fed taxes are zero sum, one states gain is another states loss. I live in NY and am losing out on this deduction, but it's fair. It's SO telling about liberal hypocrisy that they oppose this additional property (e.g. wealth) tax on the wealthy in NY and CA while proposing other wealth taxes on wealthy people (that presumably live in other states besides NY and CA).
1
@Paul
He’s not saying he agrees with it, only that it’s been offered as an argument—and is a pretty weak one
Ah, another Obama democrat makling the big bucks in hedge funds. Am I the only lifelong democrat who finds this offensive?
10
No, this is not a substitute for a broader wealth tax. Sorry Steve. It may help you, full disclosure?
5
Hear hear!
2
Treating investment earnings as ordinary income is a great idea for achieving fairer taxes. Now, if we eliminated the cap on social security and closed narrowly based loopholes, we would make real headway in shrinking the gap that currently exists in income. It may be possible because the social security trust fund could be in huge surplus to reduce the basic tax on social security.
I don't really believe "the swamp" would allow the Congress to get away with it but if your idea, coupled with closing loopholes, and eliminating the totally unfair cap on social security payroll could be enacted, it would create the "great society" where most of our citizens would have a greater opportunity to realize the dream of a free and fair society.
I am confident that you were the reform President that the United States needs in order to keep its global leadership position.
1
@james jordan
correction:
I am confident that you are the reform President that the United States needs in order to keep its global leadership position.
A wealth tax. Annual levy on the value of owned assets and companies. The first million is tax-free, so as not to soak middle-class householders. Then it goes in brackets. If you hide your property in shell companies, then the value of the shell companies gets taxed.
6
And does your million dollar home get taxed until you have to move out? And if not why would you leave your wealth in cash vs. investing in a better home? The devil is in the details.
"There are other, better ways to raise revenue — in particular, by increasing the tax rate on capital gains"....I wish people would think these things through. In 1980 my wife and I bought a piece of undeveloped (no buildings) farm land for $2000 an acre. Adjusted for inflation that would be $6000 an acre today. If we sold the property for $6000 an acre today we would have to pay capital gains on $4000 an acre. It seems to me that having to pay capital gains on inflation is unfair, yet alone having to pay the tax at the earned income rate. And never mind the fact that we have already paid property tax on the land every year. A better way to collect more revenue would be to tax stocks and bonds transactions. And while we are at it why not add a property tax on stocks and bonds. Why should people pay a special penalty for owning undeveloped land?
9
@W.A. Spitzer
What!!! You and your wife were lucky enough to have $2,000 in 1980 and now through that same luck have $6,000. For doing what? There's something called the social contract. And don't I don't buy this business that for the past 40 years the land remained undeveloped, i.e., unused and/or not generating any income. Even if it did, how much personal income tax did you avoid in deducting the property taxes? There's a lot missing in your fact pattern. Why did you buy the land in 1980 in the first place if it has remained "undeveloped" and it's in its original state? Had you put $2,000 in an index fund in 1980, you would have a lot more than $6,000.
@Robert Plautz....."Why did you buy the land in 1980 in the first place if it has remained "undeveloped" and it's in its original state?" ......Have you ever heard of wanting to own a beautiful piece of wild land because you want to save it from development? Did you know that some people actually do that?
Great, now my retirement income gets treated like I'm a millionaire with a huge income. Try again.
32
@Sunny Izme
As a retiree who invested and lives off savings, take into account that obtain an amount of money to invest, I paid ordinary income tax at full rates so the amount invested should be looked at as the remainder of the amount that we paid tax on. We took the risk of investing over a period of years and lost money on some investments and gained on others. Mr. Ratner is extremely wealthy and lives in a different category than so many who relied on the concept of capital gains. Without a floor of some sort this feels punitive to how I've lived and what my family and I planned for. Why isn't it reasonable to tax super rich differently????
14
"While I’m all for raising taxes on the wealthy (in large part because we need to deal with our growing deficit)...."
Another way to deal with our "growing deficit" would be to cut spending.
6
@Cal....Which by the end of the year will have doubled since Trump took office.
@Cal - About 75% of the Federal budget is Social Security, Medicare, and Medicaid. Don't look for any cuts in those programs - it's not politically feasible. Nor is it possible to cut the interest on the debt, about 7% of the budget.
2
@Jonathan Please provide source of your assertion. Military is around 50% of gov't spending so it doesn't add up.
While not exactly on point with the taxes mentioned in this article, tax reform should also eliminate the cap on the earned income that is subject to Social Security and Medicare taxes. All earned income should be subject to the Social Security and Medicare taxes.
Presently, the cap is about $127,000.00 a year on earned income. There are plenty of people earning far more than this amount each year, and for many years, of their working lives. They pay no SS and Medicare taxes on this additional income. I'll go so far as to say that if the cap was lifted, the flat rates for these taxes that are applied to everyone could be substantially reduced for everyone. Thus, what is mistakingly thought to be a flat tax, would truly become a progressive.
11
@Robert Plautz- Robert - currently there is no salary cap for Medicare taxes, unlike SSI taxes.
But I agree with your basic argument that all wages and salaries should be fully taxed for SSI / Medicare without a wage cap.
And I think you're leaving too much on the table by not including ALL reportable income as being subject to SSI / MC / Income taxes.
2
@Robert Plautz... "All earned income should be subject to the Social Security and Medicare taxes."....That would make SS a welfare program not an effort to compel people to put something aside for their retirement. That's
ok if that is what you want, but understand that it would completely change the original intent of SS.
2
@Robert Plautz - Medicare tax already goes all the way up, and applies to investment income as well.
If they removed the SS cap, it would raise only a tiny additional amount of money. My estimate is $30 billion added to the $980 billion already collected.
1
Staff the IRS, close loopholes, go after wealthy tax evaders, raise the social security tax cap.
37
This is a good idea. It would be politically plausible if it were paired with a much-expanded IRA (such as an account that would let one save up to. say. $25,000 a year tax-free that could be used for any purpose). This would shield middle-class people from these capital gains taxes.
1
A good suggestion, one of many. Another approach to be adopted in parallel is to eliminate the step-up in basis of capital assets on death. Dying should not be a reason to avoid taxation, merely to defer it until the inherited assets are eventually sold by the heirs. They would then pay the tax computed on accumulated gains from the acquisition by the original owner, not from the later date of death. The "step-up" is a convenience when an heir does not know the original basis, but in this day and age of comprehensive electronic records there is no reason to continue the gift.
4
Yes we should do this too. Along with 70pct top marginal rates and a wealth tax it should help.
4
Ordinary income hasn't seemed ordinary to me. I found it quite useful. All income is income no matter the source. Giving special tax status to certain kinds of income was granted probably to serve certain special interests or provide incentives for some desired outcomes. I'm sure something as simple as a graduated income tax on all income no matter the source as the price you pay to live in the United States would ruffle plenty of plumage. If something along those lines were put in place, accountants and tax lawyers would attempt to find ways for their clients to pay less.
As for me the only loop hole I ever worried about was the one I passed my fly through for a proper head knot. Gone fishin'.
5
Capital gains taxes prevent the the efficient flow of investment dollars. Just like rent control ultimately prevents people from moving, even when they have the chance.
7
All very good ideas. But why not go for the whole enchilada: identical (but still progressive) tax rates for all income, whether wages, dividends, capital gains, or whatever? Perhaps allow an inflation index for the time capital assets were held, but otherwise such uniform treatment of income would vastly simplify the tax system in real life.
6
@Jim S. - While we're at it, we could abolish the corporate income tax and have corporations pay out their earnings to the stockholders, to be taxed at their ordinary rates.
If they need capital to expand, they can issue more stock.
@Jim S. Every single time I hear a wealthy person whine about having an "inflation index" on the money they made I want to rip my hair out.
What about a COLA on the minimum wage? That has been stagnant for years. In fact, the current federal minimum wage of $7.25 per hour is now worth only about $6.53, because it hasn't kept up with inflation. Currently, millions of working poor people are being paid at 1967 rates, not 2019 rates.
Some experts believe that the minimum needed to be raised to $12 FOUR YEARS AGO in order to keep up with current inflation. The minimum wage is now equal to only about 57% of the federal poverty line.
Poor working people are completely under water, and rich people are asking that their high value investments be valued in dollars from the time they purchased them? They want all of the MONEY THEY MADE to be tax free? How is that fair to people who make the minimum wage and who have to struggle every single day? Why isn't the minimum wage indexed to the rising costs of goods and services?
Give me a physical break! SMH!
1
exactly!
The SALT issue is a very fair point, but that could be addressed simply by removing the cap on it, which is a good idea anyway. Most if not all of the Russian-Republican (etc. etc. thanks Socrates) tax scam should be rewritten.
I do agree in substance with the rest of your column, especially about very rich people who at this point are just making money with their money and banking on loopholes.
In sum I'm really glad folks're having this meaningful debate and agreeing in shape if not substance that the tax code needs a serious overhaul.
2
@Roarke The solution to the SALT issue is to be active citizens and get your county, city, town to reign in spending. There is plenty of trimming to be done. Most never cared about property taxes as it was deductible when in reality it is partially deductible. If you are in the 25% tax bracket, the tax reduction on $10,000 in property tax is $2500. Most people don't understand that and if they did these confiscatory rates in the North East, CA and others would not be acceptable.
Why aren't we taxing every trade on the stock exchanges? That goes right at one of the biggest areas of dysfunction without hurting anyone but those taking advantage of the system.
18
@T. O'Rourke At least tax every electronic Bid at $.25, if they want super-fast, investor destroying algorythms, then they will pay for every bid made, not just the ones taken, but all bids given need to be taxed that way. Would slow the market back down to realistic, in some ways.
6
During the recent federal government shutdown, I learned that a federal agency gives home loans directly to people in rural areas--many in Red states. THIS IS WRONG. This is just one example of the massive overreach of the federal government that could and should be cut out entirely. Military bases, endless welfare, subsidies to industries, on and on-- if such expenditures were reasonably trimmed, the tax burden could be more fairly be placed on everybody. Neither Dems nor Republicans seem to be interested in doing that.
2
Dividends were taxed at a lower rate because they came from after tax corporate earnings that were already heavily taxed. With the tax rate cut for corporations, it is appropriate to return to taxing dividends at earned income rates. Long term cap gain rates were established to address the different dollars received versus invested because of inflation. In a low inflation environment, the definition of long term needs to be changed from one year to a longer period - say 5. As for estate taxes, just make the cost basis go to zero at death and the acquisition date the date of death. Use the KIS (Keep it simple) principle.
7
It's an interesting idea but misses the fundamental point AOC is making - 70c out of every $1 above $10M is going to be missed a lot less than the proposed 14c out of every $1 made by low to middle income hobbyists or 'ma 'n' pa' investors. Spreading this burden "evenly" ignores the growing unbearable unevenness of wealth distribution and unlike AOC's proposal does nothing to address it.
30
I completely agree that returning capital gains tax rates on the richest Americans to levels closer to their pre-Reagan levels should be a central part of future changes in federal tax policy. To sell this general concept to the many Americans not rich enough that "capital gains" enters their lunchtime conversations, though, a more effective messaging strategy would be:
Unearned income should not be taxed less than earned income.
8
@Sad for Sailors
Exactly! Tax unearned income. Tax unearned wealth.
The comments uniformly have the same suggestion; tax everyone who has money but me. Want fairness, a progressive tax, and elimination of the deficit? Let's do what the Nordic countries do, tax everyone on all income earned at 40% and no deductions. Not fair you say? Well the person who makes 1 mIllion a year pays 100 times more than the person who makes 10,000 a year. Is that not progressive enough?
The challenge of course is then everyone has to pay, and as I noted, everyone wants someone else to pay
19
@Dr B
That is not how tax in Nordic countries work. Yes, it is higher than in US overall, and yes the VAT is essentially a flat tax on expenses. But the income tax is not flat. For example, in Sweden there is no income tax on the first $2K in income (all converted to dollars and very approximate), 32% on the next $46K, 52% on the next $20K, and 57% above the amount of about $68K. So it is a progressive tax.
3
@Dr B Let's follow your idea to its conclusion.
The problem is that at a flat 40% tax rate a person who makes $1 million a year would have $600,000 a year to live on (very, very doable), and a person who makes $10,000 a year would only have $6000 a year to live on. That would put the $10,000 person completely under water at about 50% of the Federal Poverty line, while the person with $600,000 would be living high on the hog at over 4800% of the poverty line. Furthermore, the low income person would also be sleeping in a homeless shelter because the average US rent of $1400 per month is impossible to pay on a take-home pay of $6000 per year.
The effective tax rate for somebody who earns their income and honestly reports it in NY state is already well above 40% (above the rate you quote for "Nordic" countries.) The problem is that most wealthy people don't pay anything near this income tax rate, mostly due to re-classification of income as capital gains. That is exactly what this article proposes fixing.
NO this isn't the answer either. it punishes the people who have scrimped and saved and otherwise live on a fixed income after they are forced into retirement. If you can't do better than this then keep your ideas to yourself.
35
@Fiffie If it had a $5 million floor (a person would have to have more than $5 million in financial assets) it would be very fair because the average American only has about $164,000 in retirement assets if they have worked 15-20 years. Only the wealthy have financial assets exceeding $5 million (that is not consisting of a family farm or business).
Anyone who is living on the investment interest from $5 million (about $50,000 a year) is wealthy enough to pay taxes on that. I must pay taxes on my pension. The rich should too.
1
@Elizabeth Moore Unfortunately $50,000 is no longer enough to support one in a major US city and as one ages, medical expenses, no longer tax deductible, can eat that up in no time. But I agree with you--- there should be a more meaningful floor if a concept like Mr. Rattner's is to work.
I have a middle class income. I enjoy the 0% qualified dividend income tax rate and the 0% long-term capital gains tax rate. Anybody with my income, that is, the rest of the middle and lower income classes could also enjoy this 0% tax rate. But when I tell them how to not pay taxes, they are too fearful of losses and won't take their money out of CDs and savings accounts.
2
@Jim - Living in Texas, you don't pay any state income tax either. With the standard deduction, a single can have up to about $50K in stock dividends with no income tax, and a married couple can have up to about $100K.
1
Haven't we been there and done that? Honestly you have had it your way for 40 years and it is what got us into this and other financial messes.
Next you are going to explain how it will all trickle down....Enough already.
2
Get ready for people to dump all their stock. The market will crash, no one will invest, the economy will stagnate, but we'll all be equal.
8
@Michael
Nobody actually believes what's good for "the stock market" is good for anyone other than the idle rich.
@Michael
Then I guess you've never heard of an "IRA".
What an innovative idea. let's raise taxes!
Gosh, if the Democrats had thought of this earlier they could have won all those elections they lost.
9
@Asher You mean hurray for the stupid who caused the struggle of inequality by voting for Republican wealthy tax cuts against their own economic interests?
These are solid recommendations, but please let's not forget the carried interest loopholes.
A blended approach to normalizing all income for tax purposes would streamline collections and enforcement and redirect all these smart people towards more productive activities than gaming the system.
3
It's understandable that a guy as rich as Rattner would prefer to ease the burden proposed by Dem lefties for the rich by spreading it around among all those with capital gains, regardless of income or wealth. But since the rich have been so relentlessly soaking the poor ever since Reagan came to town in 1980, it's time to soak the truly rich for a change, and redistribute their enormous profits from the rigged system they've bought with donations to those they've paid so little in these decades. It's no accident that the generation that has tilted away from the needy to advantage the rich has been the Boomers, of course, since the mantra for their whole lives has been "looking out for number one." It's time to make "number one" repay to society all he or she has raked in at the expense of everyone else in the "culture of narcissism" the Boomers have transformed America into in the last forty years.
1
Short term Capital gains taxes were nearly 80% before the Reagan 1980s tax changes. Since short term capital gains tax is pegged to your effective income tax rate, when the top bracket dropped by more the 50%, so did short term cap gains tax rate.
The result has been the exponential growth in speculation in the financial markets, and the subsequent crashes: '87, '98, '01, '08 & '09. There is scarcely a tax difference between an trade held for 1 day and a 5-year holding. That is pushing all our investment behavior to the short term - bad for the economy, bad for the markets, but wonderful to speculators.
Democrats should jump on this speculators gold mine and promote sound investment behavior once again in our financial markets. RAISE SHORT TERM CAP GAINS RATES: i.e. any trade closed out under 1 day tax at 90%, 1 week- 85%, 1-year 80%, 2-year 70%, etc. All derivative income and gains (that includes options, futures, etc.) should be taxed at 90%. Derivatives should be used for insurance, NOT speculation.
I have explained this to investment bankers on Wall Street and they all agree. If you want to make the markets safer, more investment oriented, change the tax code so that short term trading is not profitable.
This simple tax change will have no affect on the average tax payer, but will change how hedge funds and day traders behave. Wall Street won't be happy, but the rest of the US economy can then sleep easily at night...
33
How can derivatives serve as insurance if you tax away 90% of the payout? No one could afford to buy 10 times the coverage they need.
@Michael Tracy
Taxing short term cap gains at those high rates would put a cap on volatility, for sure. And zap the speculators.
@cheryl - It would also destroy liquidity, and raise the bid-ask spread to monstrous levels.
If there was one of those unfortunate events that happen from time to time on the stock exchange, stock prices would plummet 90% instead of 20%, because there would be no bids at all.
1
Why don't we do both?
2
Agreed. Its pernicious and shameful to tax passive income at a rate lower than income earned by hard labor. Just that single fact is more than enough to condemn the current tax code as anti-poor and pro-super-rich.
8
and lets not for one nanosecond forget about returning the ol' "death" inheritance tax back to what it was so the do-nothing kids of billionaires dont get to pass their ignorantly untaxed and ill-gotten gains to them to squander after they're worm food. I kinda wonder why he forgot that obvious one.....
6
@sam This only punishes the middle class who saved money. The ultra-rich will never be affected by this. They will figure out a workaround. I never have understood the desire to punish those who save some money to pass on.
2
I would be OK with this if capital gains were adjusted for inflation. Obviously, if you bought stock for $1000 in 1980, and sell it today for $2000, you have lost money.
Eliminating the basis step-up is, I think, more important. I would suggest eliminating estate tax while doing this, to avoid double taxation. If the heirs don't want to sell the assets, that's fine, but that means they don't get any money.
Another abuse I would look at is excessively large IRAs and Roth IRAs. These vehicles were designed to provide a comfortable retirement, not to accumulate a huge fortune tax-free. I would suggest a $5 million cap on each account, adjusted annually for inflation.
3
@Jonathan.... "If the heirs don't want to sell the assets, that's fine, but that means they don't get any money".... Back 20 years ago when the exempt amount of estate taxes was $600,000 this idea would have saved a lot of small farms.
1
@Jonathan - Think you need a quick recap.
Every IRA has an annual contribution cap of $6,000. Every 401-K account has an annual cap of $19,000. Monies in both IRAs and 401Ks are taxed as income when withdrawn.
Taxes are deferred, not avoided.
Roth IRAs are funded with after tax dollars so no one is avoiding taxes by using a Roth.
1
@GTM - I understand all these rules. However, our buddy Mitt Romney has managed to come up with a Roth IRA with $200 million in it.
I agree he must have rather clever lawyers and accountants, but there should be overriding limits.
2
Mr. Rattner’s approach is a nice counter to increasing the top marginal rate. I don’t know what the top rate should be, but I’ve never liked a separate capital gains and dividends rate, and certainly don’t like excusing taxation upon death.
We could rationalize the inheritance tax debate by always taxing capital gains at ordinary rates upon death. A small annual wealth tax would keep the wealthy from avoiding capital gains by holding the assets indefinitely. It shouldn’t be hard to enact a package including all these elements at some level that would not be outright confiscatory.
2
While you're at it, let's also apply the social security and medicare taxes to all unearned income. 15.3% of all unearned income should make social security and medicare sustainable indefinitely.
14
Bring back the Estate tax to where it was when it was introduced. If you did I guarantee another Trump would not be President.
5
Do we really want to punish the accumulation of wealth? Really?
7
It isn’t punishment. It is biblical: of whom much is given, much is expected. There isn’t any reason to treat income differently based on how it is gotten. Paychecks are taxed, savings account interest is taxed. Why not dividend checks?
7
This depends on how wealth is accumulated. Often, it involves the hiring of lobbyists who can dictate favorable tax policy, something those with more modest means are unable to do.
5
Why is treating capital gains like income you work for punishment? I have always felt that the tax rate should be lower on labor than it is on investment, not higher. I know that a day of real work makes me much more tired than reading my Fidelity statement.
22
Well said. Treating capital gains and dividends as ordinary income for the rich is a key step, as most of the income going to the top is from capital and not labor.
Eliminating such "tax expenditures" (basically anything that reduces taxes relative to applying the rate tables to all income) is a huge opportunity, as they were about $1.8 trillion in 2018.
This also allows us to tax stock buybacks, as taxing them won't work as well today because corporations will simply shift to dividends. Tax buybacks are the main upward wealth redistribution path today.
CBO estimates that the top 1% get 17% of all tax expenditures, so about $300 billion/year. The top 20% get 50% of the tax expenditures, about $900 billion/year.
So we could roughly eliminate our deficit by eliminating tax expenditures for the top 20%, plus taxing stock buybacks and higher marginal rates on the top 1%.
CBO did a nice report on stock buybacks a few years back:
https://www.cbo.gov/publication/52493
1
@David Doney - You could just prohibit stock buybacks - that would be the most straightforward approach, and would be highly beneficial to the stock market and the economy.
1
The normal tax rate would be a good start. Remember we only recently cut it in half.
However, it is not enough. We've had decades of piling up the loot from all that income on which tax was not paid.
That must be clawed back. That is the only way to fix what was so deliberately broken.
We don't want to create an aristocracy of wealth. We don't want oligarchs. That is what we've created.
It does not reward hard work. It penalizes hard work. It makes off with the profits of the hard work of others, via the rentier rights asserted by the power of money.
25
The OECD 20 countries need a wealth tax on global assets, for any individual doing business, visiting or owning property anywhere in the OECD 20 (which is where most oligarchs make or park most of their wealth).
1% of assets over $5m.
Credit could be given for wealth tax paid in other OECD 20 countries.
The US should lead the way. Enough about income taxes, clearly that is just for the 99.9%.
4
I've always loved the sentiment expressed in Shakespeare's line "First thing, let's kill all the lawyers."---though I view some, maybe even most, lawyers as assets to society.
For some time now, my feeling has been: "First thing, let's kill all the billionaires." (Though I have to admit that I'm hard pressed to relegate lobbyists second place.) Not literally kill them, but we do need to make them extinct as a species. To that end, a 70% tax on excessively large incomes AND Sen. Warren's 2% wealth tax AND closing all of the loopholes and exemptions and evasions Mr. Rattner mentions are ALL good and useful things to do.
To my mind, this isn't about reducing deficits or redistributing wealth; the Fed can burn the monies so extracted for all I care. It's a political statement about eliminating a class of people and a frame of mind that's corrupting and terribly toxic to a properly functioning democracy.
So cut the billionaires down to a manageable level of wealth... and change the mindset of aspiring wannabes by making it clear that such excesses are neither acceptable or achievable. It's time we made the transition from "Greed is good" to "Enough is enough---or else."
35
@GH
Your frame of mind seems a bit toxic and threatening to democracy. Honestly, you're going too far. Tax wealth until there is none left to tax. Right. That certainly makes a statement.
2
I think Mr Rattner missed the point of AOC’s proposal- to reduce the growing gap between the haves and have nots by putting a handbreak on super high incomes. It’s not just about raising revenue, its about pitchforks in the streets.
If we really wanted to raise revenue we’d increase the budget of the IRS (it might be the only government agency where you can get a positive ROI by increasing it’s budget) and start collecting all that’s due.
7
Get rid of special rate for capital gains, yes. Get rid of carried interest, yes. Fully tax hedge fund managers, yes. Bump up social security cap to $200,000, yes. Carbon tax, with eliminating income tax for virtually everyone except the 1%, yes. Reverse the government mandated transfer of wealth to the wealthy, since 1981, yes. The latter fully supported by the republicans and some Democrats named Clinton.
3
SALT exemptions are now and have forever been a terrible idea. I dislike a lot of what Trump's tax increase brought out but the removal of SALT exemptions have fixed a serious political loophole in our system - it represented a way for states and municipalities to divert federal income to their needs without any cost and could be used as a free money pipe for local governments.
I'm well aware that the tax to benefit ratio is unbalanced for a lot of areas that took advantage of the SALT exemptions but the was not the correct solution for the problem, the country benefits from investing money where it will have the most effect and that means that government spending should unequally benefit dense areas.
1
The idea that raising the capital gains would effect the same population as raising the top tax bracket is absurd. Plenty of medium income folks pay capital gains. Many of us working stiffs still sell an occasional stock or piece of real estate.
13
@Alan You are protected on the sale of real estate up to several hundred thousand dollars (ie untaxed), and unless you hold a stock for longer than a year, pay ordinary income taxes on the stock sale.
2
@Alan
Speaking as one of the millions of working stiffs who do not own stock or real estate -- there is absolutely no reason your passive income from such investments should be tax free. You should, at the very least, pay the same tax rate on your passive, unearned income that the rest of us do on our wage labor.
I think raising the tax rate on dividend income and capital gains for the wealthy is a good idea. Why should it be at a lower percentage than many middles class workers pay. I think it should be raised at a graduated rate though, since many retirees depend upon their CD and dividend monthly payments to survive retirement. Higher rates should only kick in at greater income amounts so as not to penalize the lower tier of beneficiaries that would experience significant hardship if all rates rose equally.
7
I agree that the capital gains should be taxed like earned income. But I do not see how this will put a dent in the trend toward ever higher compensation for the very wealthy, which began in the Reagan years and rose to ridiculous levels in the 90's. If you believe that lowered marginal tax rates stoked this bonfire, then raising them back again should eventually allow more income to flow to the rest of us.
2
@James Ferrell
Excellent point.
I saw a news show with a guy worth 30 plus billion taking about his retirement and moving into philanthropy. He said the philanthropy was his wife idea.
What he'd wanted to do was keep it in the market and help America with the taxes raised from his stock.
First I wondered, what if we all did that? Don't buy anything new or repair anything in our homes or business, or help anyone. We just keep adding to our 401k's?
I'm no one. I only have questions, like, if capital gains were taxed the same as regular income, would people with money to burn, instead put it into building things, buying things, and get their tax breaks there? I also wonder how many people don't have a spouse like the dude on the news show.
1
Ratner has good ideas, but alas the lobbyists will defeat it. How many times have we heard that lobbyist opposition defeated sound legislation? And, I don't even remember ever voting for a lobbyist. Representative democracy is so confusing and hard to understand.
2
As an aside, there is no reason not to move forward with a wealth tax, the discussion about capital gains taxes vs. a direct income tax is worth having but wealth is, in effect, a security, and we should be transferring that security from those that have plenty to those that have none.
5
Actually, the reason is that wealthiest taxes are not permitted under the U.S. Constitution. I don't know about your home of Canada.
Really, all you need is all income taxed the same and an AMT of 70% on all combined income over, say $10 million. Simplicity!
Remember the flat tax? File your return on a post card. Of course the Republicans never meant that because there was no way they were giving up their fat cat deduction goodies. I recently met a lawyer who bragged about saving his client over $2 million on a real estate deal. Time for that guy to get a real job. Public defender's office would be good.
We just went through the best exercise ever about the value of our valiant public sector workers. School teachers, the most important asset we have for building wealth in future generations, are finally having their voices heard. You might just find, Mr. Rattner, that the effort it takes to make more than $10 mil a year just plain isn't worth it. If there are psychic benefits to the work, then who cares about the money? If not, then what's the point? Warren Buffett says he can buy everything except time. Take some off.
1
Adjust the basis and tax capital gains as ordinary income. Small investors would pay less in taxes on capital gains than they do now because their income tax rate is less than the capital gains rate. High earners would pay more. Tax inheritance, minus a $5M deduction perhaps, as ordinary income. This proposal is certainly less rigged than the current system.
If you never sell a stock, you never pay the capital gain. The very wealthy can still game the system. How about doing away with the "Carried Interest" scam.
7
@Jack
If you don't sell the stock than you have no profits and not paying tax on it isn't gaming the system as that money was already taxed when it was originally made.
I hope middle class Americans realize that when politicians say "let's tax the rich" they mean "let's tax you".
6
I don’t think middle class Americans have any income over $10 million!
7
@Mary Sampson
The 1% starts at 250 k and goes to 700 k depending what state you live in. Note how these comments speak of the top 1%, or 20%. So yeah, lots of people will be taxed much more if commenters here get their way.
1
@Mary Sampson The middle class carries the highest tax burden because that is where the tax money is. You can take all of the money from the ultra-rich and it won't be of any consequence. Why steal it from them when they are typically the biggest spenders.
Raise the capital gains tax, income tax, and especially the estate tax on the wealthy to end dynasties that manipulate elections like the Murdochs (Fox News), Kochs (Tea Party), and Mercers (Breitbart), and the Waltons (Walmart) and Mars (candy) whose sole accomplishment was being born from the sperm of the company founder. More important, raise taxes on banks and corporations and end corporate tax incentives. The capitalists aren’t investing in the domestic economy but in themselves, through stock buy backs, acquisitions and monopolization, and speculation on the bubble of the moment. Neo-capitalism concentrates wealth in the one-percenters, and only government action to radically redistribute income to the American people in the form of a green new deal jobs, guaranteed jobs, free health care, college, and daycare, and living wages and retirement can save democracy and a future for all of us.
13
Wasn't it Bernie who pushed for a financial transactions tax? That would be better as it wouldn't hurt most middle-class investors who trade infrequently. In addition, let's go with Warren's 1% wealth tax!
7
Raising the capital gains level is necessary, but not a substitute. The rates need to be progressive and include capital gains.
There is enough necessary flexibility within accounting rules to game the system. The wealthy will always game the system.
1
Yes, yes and yes! We were scratching our heads as to why Warren and AOC are out of the gate with income proposals. Not only is Mr. Rattner’s proposal more practical, fair and doable, it exposes the lie (that the wealthy of all political persuasions espouse) that the majority of the wealth in this country is earned through hard work.
5
There are two categories of dividends - ordinary and qualified. Ordinary dividends are subject to the taxpayer’s tax rate for ordinary income; only qualified dividends are taxed at the taxpayer’s (usually) lower capital gains rate. Unless something changed with the shady 2017 tax law - and I can find no evidence that it did, Mr. Rattner should have noted the distinction.
And capital gains are taxed at a preferred rate except when they’re not, which is when they are tax-deferred (in an IRA or 401k). I have never understood this unfair treatment of capital gains. Why is the government punishing those who save for their retirement, lessening the potential burden on society?
Many middle-wage earners invest modest amounts in stocks and mutual funds, either directly or through tax-deferred accounts, because banks pay lousy interest rates on savings (despite charging exorbitant rates on credit cards). There are too many elements of both our financial systems and our tax code that are skewed to the wealthy. A high tax rate on incomes above a given million, with no loopholes for carried interest or ‘fake’ expenses, seems the fairest way; it worked well in the 50’s, providing funds for infrastructure.
3
The marginal tax rates on the rich should go up, may not be up to 70%, though during Eisenhower administration the top rate was 91%, on over about $2-3M in 2016 dollars.
Since 1965 top rate dropped to 70% on $650-1.5 million. There was widespread prosperity. Medicare was also in place. Civil rights legislation passed. With all these progressive measures in place, the readiness to sacrifice shrank. The rich felt bold enough to resist high taxes.
In 1980, all incomes over $650K ($215,400 then) went to uncle Sam. How can a business man get rich, without cheating? They crafted the so-called Supply-side economic theory & managed to cut the top rate to 28% on over about $63K ($29,750 then) by 1988. Sen Bradley was so proud of his role in crafting that! That 1986 tax-reform was just horrible, which started a mentality in the public that tax-hike on the rich was a terrible idea while tax-cuts are great; JFK advocated it but he only wanted to reduce the top rate from 91% to 65%. LBJ could only reduce the top rate to 70%; still the arch conservative Sen Goldwater (R-AZ) voted against it in 1964.
Robert Reich proposed to raise the top marginal rate from 35% to 70% but only on over $15 million in 2011, now it would be about $17M. Nevertheless, when AOC suggested a 70% rate on >$10M, because she explained it clearly & forcefully in just a few words, the entire country warmed up to it. If Democrats win in 2020 with majorities in both Houses, a top rate of at least 50% will happen.
7
If I may add, the 2016 tax-reform proposal of Bernie Sanders was great. For all his progressive measures a high revenue was necessary. Because the upper middle class also would pay more it was criticized.
His top rate was only 54.2% on over $10 million. I would suggest some tweaking. If we keep the top rate at 50%, like tithe, it could be justified and most people would go along with that. Indeed, in the Reagan tax-cut of 1981, top rate was 50%.
I would think if that top rate of 50% were on over about $5 million, instead of over about $275K ($85,600 in 1982), there would have been little resistance to it. The top rate might not have come down to 28%. There was only one other rate of 15%, which was a big burden to lower income groups, while a windfall for the rich.
I would theorize that the very low 28% top rate was an incentive for crooks to break the law, after starting to bend the rules. Michael Milken made $550million in 1987 (1.2B now). He was sentenced to 10 yrs but served only two. Perhaps the 1986 tax reform was a "curse in disguise" tempting shrewd people to bend & break the law.
The worst tax-cut, which Steve Rattner criticizes, was the Bush tax-cut of 2003 when the so-called carried interest was introduced for $billion incomes of hedge-fund managers. In 2013 Steve Cohen made $2.3billion but paid $1.8B in criminal & civil penalties still pocketing $500M! Between 2009 & '14 Preet Bharara secured 85 straight convictions on insider-trading.
3
Better yet, tax all income the same regardless of source and subject all income to SS and Medicare taxes, which will raise taxes on the super wealthy, plus allow us to cut taxes on the bottom brackets. In addition to taxing all income the same regardless of source, I’d propose a significant 90% tax discount on the first $10,000 of all federal taxes owed, including payroll taxes. For instance, if pay $5,000 in income and payroll taxes, you get $4,500 discounted off your final tax bill and only owe $500. This way, everyone gets a tax cut and the focus is on working Americans and small business.
4
Addressing many commenters:
The dividends and capital gains should be taxed at higher rates only for people in the top brackets. Ordinary folk who receive dividends and capital gains on their investments or retirement portfolios should not be burdened.
We are trying to reduce inequality of income and wealth, not further pauperizing regular people. Beware of shrewd and self-serving bankers no matter the sheep suit they are wearing.
I trust Saez, Zucman, Reich and Stieglitz.
6
It already works that way. Joint filers in the 10% & 12% brackets, which is taxable income up to $78,950, pay a 0% rate on qualified dividends & long term capital gains. It was the Trump tax reform that made it that way too. Anyone else want to give Trump credit for it?
1
If having more tax is the answer social problems then why do most blue cities have huge social issues
2
@Longtime Chi taxes are mostly raised to pay off our debts. Hardly any of it is actually used on social issues.
Talking heads like Rattner always fail to mention the work by Saez, Piketty, and other serious economists on tax rates, which is consistent with AOC's proposal.
1
@John Williams
OK, so tell us about the work of Saez and Picketty. I'd really like to know and so, I think, would other people reading your comment.
I’ll take your proposal plus AOC’s plus Warren’s wealth tax. And bet you a dollar that inequality keeps rising anyway. Oh my, the poor individual with income in excess of 10,000,000 paying an 82.7% marginal rate on dollar ten million and one! That has to be bad, so obvious it requires no explanation.
2
I agree with this approach, and it would embody tax simplification as well, and perhaps slow down the day trading. Try to get it through congress, though.
1
Why not both? (i.e. raise capital gains taxes AND 70% over $10M) Seems pretty darn reasonable.
13
@io
You took the words "out of my keyboard": what you wrote is exactly what I intended to write. I am sure many other readers will agree with you. Let them "recommend" you, as I did, with thanks.
3
A friend of mine keeps talking about taxing wealth rather than income claiming the idea originated with Alexander Hamilton. Is there any merit to this idea and how would it work?
@Cab
You keep taxing the wealth until there's none left.
@pamela
Point taken, but dividends and income are not taxed at the same rate; something I never see discussed.
The Real Rich do not have incomes as we Middle Classers think of it. They have their money working for them and do not "work" for a living. Rather, they live off of our efforts.
Can this be taken into account to create a system that is more fair?
Great. Move from a plan that would only soak the super-rich to one that would put an extra tax burden on people who read Kiplinger's and Money Magazine - the middle class.
3
This cap gains idea (instead of progressive rates) troubled me too, because it still hits all brackets. Beyond a certain threshold how much money does a rich fat cat really need? How much hardship would be imposed by a whacking high marginal tax rate?
I am in the "both" camps. Tax capital gains no differently from income from labor - why should passive income get a preference; AND hit the super-rich with a hefty marginal rate. They can cry and whine all they want but they will not convince they are feeling real economic pain as a consequence. Give me a break.
4
@peinstein
"it still hits all brackets": how much capital gains do you think the "lower brackets" get?
1
You have some good points - capital gains and dividends should be taxed as ordinary income. However, raising the marginal rate still makes good sense. Even when the marginal tax rates were high, there still was a provision in the tax code for a maxi tax of fifty percent on earned income, that is, W2 income was capped. We could still do this for wages above a certain level - even several million per year. This would reward work and raise more revenue.
1
Very good point @bikegeezer.
Look people, the government has big bills. Cutting expenses is unpopular so taxes must be raised - of course on someone else.
3
Excellent idea. Top individual rate of 50%, Corporate rate of 30%: eliminate deductions for things like corporate jets, 2nd, 3rd, and 4th homes ( business or otherwise), getaway homes and escape palaces, any number of things not absolutely necessary.
I can hear the screams already...
3
@Barry
And business lunches . Bernie wrote offf 9 k in lunches. Mr socialism.
Bite your tongue, Sir.
Not all stock owners are wealthy.
3
@New World
Not all wage laborers are wealthy (very few are) but we all pay taxes on our income. Why shouldn't stock owners pay the same taxes on their passive incomes, at the very least?
Stop using “Marginal Tax Rates” – it’s only a data point. Its a point for lobbyists to begin negotiations and to make payments (sorry contributions) to Elected Politician for them to reduce. The result a 75,000-page tax code book of favors reducing tax rates. To tailor a successful political slogan:
“It’s the Effective Tax Rate - Stupid!”
That’s what taxpayers pay in taxes to fund the operations of our country, and it is substantially lower than the Marginal Rate.
Trump and Republicans knew this when, though their lies and half-truths, they sold their Tax Cut on the higher “Marginal Tax Rates.”
We must find a way to hold self-interested and self-enriching Elected Politicians, government officials, their staffers and operatives from both parties personally and financially liable, responsible and accountable for the lies and half-truths they have told US, their gross mismanagement of our county, our $22 T and growing national debt (107% of GDP), and our $80 T in future, unfunded liabilities they forced on US jeopardizing our economic and national security, while benefiting themselves, their staffers, their party and special interest donors.
1
You’re right. We should increase the effective tax rates not the marginal tax rates. Oh, does that really mean that taxes become LESS progressive? Never mind then.
We could do this and what AOC is suggesting. Just sayin.
3
Another thing you could do to get more of the wealthy to pay for things is announce specific deductions on your taxes...like donating to pay for a 'big, beautiful, pointy metal barrier" between our country and some other one.
Say, like...Mexico.
1
Investment banker and NYT commentator Steven Rattner tells us he has a better idea than Alexandra Ocasio-Cortez's proposed 70% income tax on the superrich. Instead simply returning the capital gains tax rate to the pre-Trump rate and closing some loopholes could raise the same amount of money. He admits his calculations are murky, and he doesn't explicitly say how each approach would affect him personally, so he's really just saying we should trust him instead of Ocasio-Cortez and her advisors led by Emannuel Saez.
So who should we trust? Well Rattner worked for years in the Obama administration before leaving to cash in on Wall Street. You might recall that the wealth gap between ordinary working Americans and the top 1% (including Rattner) became even larger under Obama, as it did under Clinton and the Bushes before him. On the other hand Ocasio-Cortez was a regular worker before getting elected to Congress, earning far less than Rattner. Further Saez is a Nobel Prize winning, left-wing economist who has spent his life quantifying the widening wealth gap and suggesting ways to fix it.
We would be fools to trust Rattner, given his failure to address the widening income disparity when he was in a position to do so. In fact a better question might be, why isn't Rattner required to specifically state his personal financial interests in the two competing tax plans (which would cost or benefit him personally?) before the Times presents his opinions to millions of readers?
16
Well, this article just shows you can get someone to give you any number you need to make your point. The author says that one think tank gave him an estimate of the 70% tax rate raising $300 billion a year. I listened to a podcast on npr (https://www.wbur.org/onpoint/2019/01/08/ocasio-cortez-70-percent-tax-green-new-deal) where Brian Riedl, (senior fellow at the Manhattan Institute, where he focuses on tax and economic policies) said the following- “...analysis of IRS data shows this would raise only 0.25 percent of GDP — about $50 billion annually — in part because nearly half of the income earned by these 18,000 filers comes in the form of capital gains that would be left outside a 70 percent tax on salary income.”
Which number is right, i have no idea but two very respectable organizations comes up with numbers that are not even close. If it is really true that there are only 18000 tax payers above $10 million of income, i tend not to think that $300 billion is going to come from only 18,000.
.
Here is a link to an article by brian riedl where he covers the topic
https://www.nationalreview.com/2019/01/alexandria-ocasio-cortez-70-percent-tax-cannot-finance-socialism/
2
And while we’re at it, stepping up basis is inequitable, vastly expensive and widely abused.
And can we finally drive a stake through the Carried Interest Rule?
I’m not holding my breath on any real tax change, because the only people that understand it are the ones stuffing money in their pockets.
2
AND! We pay taxes for social security & Medicare on every penny we earn: so must the wealthy.
Same concept as public education: every citizen benefits from an educated -and healthy- populace.
5
@DugEG
If there is no limit to what one pays in, the next one should get vastly larger pay outs at retirement.
Spoken like someone who made a fortune with the carried interest deduction and now wants to make amends.....
I thought the idea of a lower capital gains tax is that you pay a higher rate on the income you earn, and then having paid that tax, you are entitled to a lower rate on the growth of your savings. This proposal would attack individual investors in the upper middle class who have accumulated wealth outside an IRA and don’t have the means to pay clever lawyers, accountants and bankers to structure around it. That’s the problem with all these proposals: the ultra rich can afford to work around them. The merely wealthy are the ones who pay.
In the meantime, the deficit is primarily driven by entitlement programs. The only way to fund those programs would be a broad based tax, and a value added tax probably makes the most sense. It is a much better way to fund universal health coverage than running around trying to collect medical insurance premiums from everyone in different amounts using complicated paperwork and threatening people with financial penalties. It would also be a good way to fund a base level retirement benefit for every individual. The current system relies on individuals accumulating savings over time and assumes a level of employment stability that is no longer available in a large part of the economy. The limited balances in most IRA and 401K accounts indicate that it is not effective.
12
So you don't make as much money off them, you wouldn't be taxed much. Why is that person working 3 jobs being taxed more than you mid-level investors? That is some serious labor and investment.
2
Beautiful. Our corporate masters destroy most of our pensions, which forced us in the middle class to fend for ourselves in stocks and bonds and mutual funds. Now, just as we are growing old, and we’re about to start trying to live off the interest of whatever we’ve been able to scrape together into an investment portfolio, this capitalist suggests taxing it all at a higher rate like ordinary income! Please, someone tell me: is this what this man is suggesting?
27
We (as a country) need to re-think the concept of taxes- the concept appears to be permanently etched in American minds that all democrats want to raise taxes (which is bad for the rich), and all republicans want to lower taxes (which is good for the rich). This line of thinking has create a permanent system of rich people supporting republicans (with a few notable exceptions, which we have seen stand out in the past couple of years- thank you Messrs. Bloomberg and Steyer...).
Instead, any tax increases should be coupled with the concept of giving wealthy families something a little extra. Why not? Anyone who pays over a certain amount (let's say $100,000/year) in federal taxes every year deserves a little extra. Give them some benefits that only the federal government can provide. Free tax return preparation every year. Free credit monitoring, and an ability to change out SSNs in the event of identity theft. Extra use of car-pool lanes. If you can identify some extra things like this that the wealthy can get, there will be a sense of "quid pro quo" every time a billionaire writes a huge tax check. Without changing our way of thinking (and for example, just raising capital gains tax), eventually wealthy people will leave the U.S.
Repealing capital gains tax should be coupled with repealing the free "step up" in basis at death. Currently, that allows families with capital gain assets to avoid capital gains after a parent dies.
1
As I recall from Samuelson’s Economics first edition 1948? wages and dividends had the same tax rates at that time.
3
@George R Cochran
And now it shocks people!
Mr. Rattner is partially right, simply raising the income tax rate on the upper echelons of the wealthy isn't going to solve the problem, by itself. Looking at capital gains is actually part of the solution, however, it's not long term capital gains, but short term capital gains that need to be taxed more aggressively. Long term investments allow for business expansion, R&D, employee wages and benefits, and these should be encouraged, not discouraged. But short term profit taking discourages all that, and simply rewards hoarding of wealth and not making it productive to the economy or society.
It's no coincidence that from the New Deal until Reagan we had the largest expansion of the middle class, and widest sharing of wealth in history, and during that time the tax structure was based upon the above ideas. Since Reagan, under "trickle down" economic policy - endorsed by both parties - which was structurally erected on slashing tax rates, both income taxes and capital gains, along with changing how executives are compensated from salary to stock dividends, we've seen to economy serving only the most wealthy and leaving everyone else behind.
Ms. Ocasio-Cortez is on the right path, she just needs to widen her aim.
6
@Kingfish52: "It's no coincidence that from the New Deal until Reagan we had the largest expansion of the middle class, "
Wrong. The middle class began losing wealth in 1973. Some labor sectors faired well in the late 1970s but the manufacturing-driven economic party was over with events of October, 1973.
1
Let's just tax everyone building companies, creating jobs and providing things to better society. I mean giving the money to the government to waste or redistribute to others- why not ! is that not the American Way. No question, taxes are needed to run a government that is responsive to its citizens and modeled after the founders but the current systems don't work. I love it when all the former Obama people turn up under every rock trying to tell all us sad hard working saps how they will take away are resources. Lets have a system where everyone pays, especially those who take the most, but only pays enough. In 30 plus years of helping people with this mess we call the income tax system I have never heard anyone say that the government spend THEIR money better than they can !
2
The logic doesn't make any sense.
It's a strawman argument.
That not the reason there is a lower amount for long term capitol gains.
There are many reasons that justify taxing capitol gains at a lower rate.
The money a person earns is taxed when that income was earned.
I could spend my after tax income on buying a car that cost ten thousand.
Let's say instead I invest it and make some money and make a profit of three thousand.
Now lets say I want to buy something equivalent and that car now cost three thousand dollars more.
I say perfect except you want me to pay taxes on that three thousand dollar profit and I can no longer buy that car.
Now instead of making three thousand I lose the whole ten thousand.
Do I get the money back I paid in taxes when I earned it.
no.
I took a risk knowing that I could lose it all.
I should pay less taxes because of this reason.
It's in the interest of the government that people invest because that money invested is used by businessmen to build businesses that are needed to put people to work.
These are just three reasons capitol taxes should be taxed at a lower rate.
I am sure there are more.
5
It's probably a good idea to tax both Income at a higher rate and wealth. A combination of AOC's and Warren's proposal should be seriously considered.
If the target is to reduce inequality and level the playing field somewhat, we should consider proposals that would make a real difference and not proposals that would be just for cosmetic purposes.
2
I think dividends paid should be taxed as ordinary income by the recipients of those dividends. But they ought to be 100% deductible from profits for the corporation. They should be treated by the corporation the same as employee payroll, an expense.
That would incentivize dividend payout. And it would reduce stock speculation, as dividend stocks would be inspected based on the earnings, and dividends.
Capital gains should also be taxed as ordinary income. It makes little sense to call investment income different, when it crosses a year of holding time.
4
@votingmachine I agree 100%
@votingmachine I agree. But, I'll add that the 100% deductible should only apply to dividends paid to US taxpayers. Foreigners own something like 30% of US stock. If the rationale for the deduction is to avoid "double taxation", then it doesn't seem to apply to foreign owners.
1
I think this is an excellent idea. Capital gains income is not “earned” by the investor. It is earned by the company, its management and workers. The investor cashes in by essentially lending money to that company. It seems entirely reasonable that that money be taxed at the same rate as people who are actually going to work to build a company or contribute to society in other ways through their hard work.
7
Regarding many of the comments objecting to Mr. Rattner’s ideas, I don’t read his essay as calling for changes in the way tax-advantaged retirement accounts are taxed; and I presume his proposal to eliminate the real estate loophole applies to investment property, not a primary residence.
So as I understand him, a middle class person with a tax advantaged retirement account, a primary residence, and some money in a savings account would not pay more in taxes.
If that person also had some money in a mutual fund then that person’s share of the funds’ net capital gains and dividend income would be subject to the higher tax rate.
5
I’m glad you clarified that. Thanks. The essay made me livid.
You are missing a key double tax. I have a job, earn a salary, and pay taxes on that salary. Then I invest some of what I have left after taxes, hopefully the investment grows, and then I pay taxes on that growth. This is the double taxation that many Americans face and it does not seem particularly fair.
9
@Nick
That isn't double taxation. In your example, say you earn $100 in salary, and pay total income taxes of $30, leaving you with $70. You then spend $60 of that, leaving $10 for investment.
When you invest that $10, you don't pay taxes again on that $10. Instead, you pay tax on any gains achieved over and above the initial investment of the $10. No double taxation.
Double taxation occurs, for example, with corporate dividends. Say a company make a profit, and distributes some of that profit to stockholders via dividend. In that case, there is double taxation because the income earned by the company is taxed once at the corporate level when the income is earned, and again at the stockholder level when the dividend is received.
8
@Nick Really if you pay taxes and then pay the plumber he has to pay taxes. Why is the transfer to another individual taxable but not the transfer to an investment.
1
@GMooG The double taxation argument is something the GOP drags out every time people discuss this issue. It is their main reason they demand lower taxes on capital gains. When they lowered the capital gain tax under bush this was their dubious talking point.
2
I hate to break it to Steven Rattner, but capital gains and dividends are not just received by the 1%. Many middle class retirees have incorporated after-tax capital gains and dividends into their retirement funds. And what about tax-free municipal bonds, which are currently tax exempt and popular with retirees - is he proposing that they will now be fully taxed as ordinary income? Also people will just time the capital gains to better match the losses. One thing that Rattner does not point out is that the average effective tax rate (rate actually paid) for the 1% was 36.4% in 2014 (Tax Foundation) - pretty close to the top rate of 37%. This proposal will impact more and more people since most have investment funds in their 401Ks.
4
@Terece, 401K distributions are taxed as ordinary income. No tax break for 401Ks as they are for the little people.
1
@Terece: "Many middle class retirees have incorporated after-tax capital gains and dividends into their retirement funds."
Disclose the income and asset levels of those "middle class retirees".
You'll then hear AOC and followers screaming "off with your heads".
@Terece I receive 69% of my income from dividend in my retirement. I watch me pay an income tax that is the same as someone earning 20 thousand less. I love it, the question is: is it fair, is is good for our nations. My answer No. There is a growing resentment across America about the special privileged capital receives over labor. I suspect we may need another Democrat to save Capitalism from itself.
If you peg the capital gains tax at the same rate as ordinary income, you really have to provide for an inflation adjustment to calculate real gains.
So grandma who sells her house for 1.5X in nominal terms but only 1.2X in real terms only pays tax on the real (inflation adjusted) gain. That will complicate things (what is the "true" inflation rate?) but is only fair to avoid paying taxes on nothing more than inflation.
I would perhaps even go further and grant all investments a tax free rate of return--pegged to some risk-free T-bill or something. We still want to incentize risky and uncertain investment (that's why the capital gains tax rate is lower) so maybe can say the first X% annual return is exempt from taxation. This could all be swallowed up in the inflation adjustment exemption calculation.
And really you should eliminate the corporate tax if you tax corporate dividends at 37%. Otherwise double taxation would be a huge drag. Certainly won't encourage any privately held LLCs to go public.
Finally, the step up in basis for inherited property is really for administrative convenience--so a seller does not need to track down records from a prior generation (which are most likely lost to time). If we had an estate tax with a "high wall" (no loopholes--which we certainly don't have) and a "big gate" (generous net worth exemption--like we already have), then tax free inter-generational transfers just seems like less of a concern to me.
2
@Mmm Fine Idea it would be simple to determine the inflation rates over any time period. This is not an impossible barrier to treating capital gains the same way we treat income.
Excellent policy and clear thinking form Mr. Rattner. Now perhaps explain the morality of it? Is the government under this Constitution supposed to punish rich people or to be driven by revenue maximization, or is it limited and supposed to treat people and classes of people without rancor and retribution? Perhaps even to be a limited government, for the people?
1
The changes Mr. Rattner recommends attack the GOP donor class. Unlikely with a Republican Senate either tax idea survives.
1
While your proposal has flaws, the good thing is that finally serious tax discussions are finding their way into the pages of the New York Times. With any luck, the editors (and maybe even columnists) have been reading enough of the comments to realize that we as a nation are at a serious tipping point. This must be a correction, else we truly become an oligarchy, banana republic, or have a real revolution.
10
Sorry but you are no match for Emmanuel Saez and Gabriel Zucman. Discuss your ideas with them and Thomas Piketty. Then come back to us.
You are a shrewd investment banker who can write a few lines coherently. No match for experts in the field.
What is good for the bankers and the 1 Percent is not usually good for the rest.
7
@Blunt
$20 says that if you understood Saez & Picketty you would have tried to explain why, using their theories, Rattner is wrong. Clearly you understand none of this.
1
Tax capital the same as labor?! This is the most radical and subversive idea ever proposed! Stand by for maximum vilification, Mr. Rattner, if this ever becomes a seriously-taken proposal.
6
Do both.
4
It is obscene that income from labor is charged at a higher rate than passive income. This is an inequality that helps the rich get richer without actually lifting a finger.
53
Let’s add to this a high tax on inheritances. The children of the wealthy should pay a significant tax on inheritances. They didn’t earn it, it fell into their “lucky sperm” laps. Not only is this fair, it will help to reduce the establishment of a monied aristocracy in America. Every generation should earn their keep, not inherit it.
25
@John
I paid taxes on my earnings. I decided to save and leave what is left for my son so he can take risks such as starting a high risk business which I could not pursue because my parents clearly told me I was not allowed to depend on others should it not work out.
My money and I decided to invest in my son. And believe me if he did not shape up he wouldn’t have received it.
With all due respect I paid for enough Poli science undergrads’ tuition to do with rest of it what I want.
2
@fc123 You paid taxes on your earnings. Your son didn’t. He could go to a bank for a business loan, and pay interest, along with repayment. Like every other business. That you decided to give him your money does not absolve him from paying taxes on the bounty. Anymore than if you were a Rockefeller, giving your son a stake to start a business, or to buy a yacht. Inheritance taxes are not about you, they are about the next generation receiving money they did nothing to earn. You can give your son that money, no argument there. But he should rightfully and fairly pay taxes on it.
3
@fc123
"My money and I decided to invest in my son"
Just gonna savor that one awhile. What a beautiful country, god bless our loving families.
‘Workers’ can invest too
1
@Michael Zelenko - Let us all celebrate the majestic equality of the law, which forbids the rich as well as the poor to sleep under bridges!
1
@Michael Zelenko Everyone can invest, That is not the issue. The issue is the questionable preference earning from investment have over earnings from labor.
1
It should be noted a capital gain is not calculated based on the actual gain in purchasing power enjoyed when the investment is liquidated.
With a long term capital gain, the tax is applied to the nominal dollar gain, much of which is just appreciation by inflation.
For example, for a $10,000 invested in real estate in 1990 and sold for $30,000 in 2019, about half the "gain" of $20000 is just inflation. Taxing inflation is good for government revenues, but not so much for the investor.
2
@Lee Edwards I would be easy to factor inflation into any capital gain tax calculation.
1
link that 400 B /year in tax due under present tax code is uncollected and 7000 millionaires in 2011 paid no tax
http://www.economist.com/news/united-states/21578387-irs-has-behaved-badly-real-villain-congress-who-will-tame-taxman
1
I expected a dramatic demonstration concerning the taxation of the rich and all I see is a reactive state of the tax law based on the current way that state and local taxes are handled. It offers no new ideas or meaningful thought as to the best way to craft a taxation system for the rich that maximizes revenue, encourages compliance and equitably represents the economic contribution of the behaviors of the wealthy to the economy as a whole. Treating taxation as a zero sum game will not do that.
I would suggest a system that taxes income and spending. An investor that tends to keep his money invested as opposed to buying expensive airplanes that he doesn't need or lavish houses, should not be taxed the same as someone who invest instead of spends.
1
Another suggestion to tax capital gains from a (retired in splendor?) banker. News flash: the entrepreneurs who actually build companies from nothing, often foregoing compensation for years, rely on the favorable capital gains regime to compensate us for our deferred, and often foregone, wages. How about outlawing carried interest, or differentiating between owner-operators and financial opportunists instead?
Maybe if we continued to reward business creation, but stopped rewarding financial engineering, We would still have a middle class and good jobs in the US.
Just sayin’
Rens
11
@Rens Good point we don't really award job creators we reward money manipulators. Manipulators who have been implicated in the last to recessions. Our response to financial shenanigans," thank you sir may I have another".
2
Somebody tell me why this would not work in practicality ( not politically) : Abolish all taxes and put a tiny fee on every single electronic transaction. This would be expand the tax base to maximum conceivable. The vast majority of which would fall on the on corporations, and the wealthy- it would be progressive to the penny.
1
@Ray Gridley ... because it forces arbitrary places in the internet to be responsible tax collectors. Practically speaking, it is a sales tax on what? What is an electronic transaction? When I hit submit here, is there an electronic transaction? And who pays?
Practically speaking, it has huge problems in identifying what is being taxed and who is collecting that tax, and how it is being recorded as collected and paid.
Are you limiting transactions to online shopping? If so, recognize that the in 2018 US online shopping totaled $500 billion. US government is $4 trillion. So every purchase would need to have a 800% tax added.
You aren’t seeing the scope of this. The only transactions that are not electronic are cash transactions. What I envision is for the IRS to have a tap into every bank and just like an ATM fee, every single time money moves from one place to another a tiny bit goes to into public coffers. Quite possibly this could be done without the govt knowing anything about the individual accounts.
(1) Deficit hawkery has been disproven and is outmoded, please spare us; but
(2) I agree that it is ludicrous that income is treated differently for tax purposes. The steady transfer of wealth from the bottom to the top clearly demonstrates there is no need to preference passive income sources.
4
I agree with this article insofar as it argues that raising the top marginal rate will not raise significant tax revenue. In my view however, the point of raising the top marginal rate is not to raise revenue. It is simply to penalize ridiculous salaries. Salaries for the top 0.01% of earners in this country are offensive and should be penalized (the top 1% is barely relevant to this argument, they make semi-reasonable salaries no where $10million). It will also have the effect of directing some of these ill-gotten gains into performance incentives like stock options (which, I agree, should be taxed like normal income). There is more than one reason to adjust tax rates - one of them is simple justice.
2
That's all fine and well, but we still need to increase tax rates for upper earners to restore progressivity to our tax system. We need to do this for a number of reasons. Income inequality must be addressed. We need universal healthcare. We need to fix our schools and our infrastructure. We need higher education and research. And, above all, a truly progressive tax system is a fair tax system. The wealthiest, by definition, gain the most from our society (see, e.g., trade policy, infrastructure, transportation systems, our courts and laws, our capital markets that exist in large part because of our courts and laws, etc.) and they must pay back to maintain the society that has given them so much. It is their civic duty. Without recognizing and cultivating that idea of civic duty, the rich will hide away in their gilded prisons while society crumbles around them.
2
I say do all of it. Close loopholes, raise income tax to pre-Reagan levels, and raise taxes on capital gains/dividends.
No one should be contemplating buying their 4th luxury car, 3rd home, and 2nd $150,000 watch when many people can barely afford a studio apartment.
8
@Matt Add a stiff luxury tax, another tax the GOP eliminated,
You might also consider having a national sales tax that taxes all items we buy (notable exceptions would food items at grocery stores, clothing under $100 and medicines which would not be taxed). Since we're a consumerist society it would be somewhat self-regulating since the ones with more disposable income who like to snap up things like $250 million pied-a-terres in the sky would buy more things and thus get taxed more.
1
Sales taxes are regressive, and so they actually have effects contrary to the writer’s recommendations.
2
@Peter B A good idea, but I'd apply it as a national 'luxury tax'. Put it on jewelry, gourmet foods/dining, 3rd+ car, 2nd home, international vacations, designer brands, etc.
A flat national sales tax on top of the state sales tax would hurt normal people just trying to get a new PC, car, bicycle, a few nice outfits for work, etc.
3
@Koyote
Almost all other advanced nation have a VAT - value added tax - on most purchases. These taxes and others not only support free higher education, universal healthcare, and a stable safety net for the less fortunate among them.
But hello, the US can really not be called "advanced" any more, slowly crawling into isolation and populism.
3
'Every law has it's loopholes'; in Spanish: 'hecha la ley hecha la trampa'. And, as long as the rich and powerful keep writing the laws (that corrupt politicians sign), nothing will change; to the contrary, as shown already by Trumpian republicans with last year's corporate tax cuts.
6
Yes it is disgusting that capital gains should be taxed less that income. The argument corporation already paid taxes is nonsense. I pay taxes on my income and my plumber pays taxes on my income I give to him. No different than the nonsense we here from conservatives, This tax difference is totally unfair to working Americas and rewards the investing class. Never forget this is the rate those billionaire hedge fund folks income is taxed at because they claim their income qualifies for carried interest. The GOP will never betray their investor class so it is up to Democrats to correct this injustice to income earning Americans,
7
Sorry Mr. Rattner but Ocasio Cortes isn't about raising revenue. It's about preventing the further accumulation of riches by people like you. Nothing personal here but the survival of our Democratic Republic depends on it.
Societies always rot from the top down. Ours no exception, and the agent of disaster has always been the concentration of too much wealth in too few hands.
How much is too much? No idea! But we are way past the danger point.
The warning signal? When the rich grow rapidly and extraordinarily richer without a commensurate growth in the nation's wealth. When at the same time the bulk of the population sees its standard of living fall. When a feeble 3% growth rate is lauded as a mighty achievement and becomes the new normal. When the nation starts to engage in frivolous military adventures.
That's us.
How do I know? Well... Rome, Greece, Egypt , Imperial Britain, Imperial China, Louis XIV's France, the Ottoman Empire, the Austro Hungarian empire, Tsarist Russia, Imperial Spain, Imperial Portugal just for starters.
7
@Andrew Smallwood
You hit the nail on its head. Add to that the Holy Roman Empire of the German Nation which lasted almost a thousand years, and gave the Austrian paper hanger his dream of a Thousand Year Reich, calling the Third Reich.
As to Louis XIV he should be exchanged with Louis XVI and Marie Antoinette with Mr. Wilbur.
2
Taxing capital gains & dividends as ordinary income will not just affect ‘the rich’. Many middle class retirees are also investors who depend on dividends and cap gains as part of their retirement income. It is not merely ‘the rich’ who are investors.
If you want to hit the rich in their pocketbooks, eliminate the triple tax-free treatment for municipal bonds. See how much more ‘the rich’ end up paying in high tax rate blue states. Don’t hold your breath for that though. People like Rattner will always ensure that the richest in states like NY & CA always have a way around what he’s proposing.
8
Whatever tax the Dems support should be nicknamed the "Greed Tax". Let's learn from the Frank Kuntz and the GOP.
@TonyZ, Gee, I thought greed was good!
Inequality accelerated with the Bush tax breaks that lowered capital gains below ordinary income for the first time. Trump lowered it even more. Lower rates for investors without limit is immoral, unethical and destructive to our republic. There is no basis for or history to justify investors (gamblers/manipulators) paying lower rates than workers...this is just payback to political donors. All should know - your 401K is taxed as ordinary income - workers never get investor rates...never.
5
Let’s just bypass the middlemen and eat the idle Rich.
4
Sorry Mr. Rattner,
I like Alexandria Ocasio-Cortez's idea better.
She wants a 70 percent tax rate on incomes above 10 million.
Honestly. Bang my head into this computer. Slap me silly.
If you have 10 million in income a year, you don't NEED anymore money.
In fact, I would go out on a limb on a windy, stormy day and say after an income of one million, you don't need any more.
Ten million? Are you kidding?
Tax the super wealthy higher rates. They have made their money in America in large part because of the structure and organization here, the educated populace and safety, blah blah blah. They didn't just do it on their own.
There are also millionaires and billionaires who have made their money by cheating and lying and taking advantage and being Wall Street Wolfs who fleece their own clients and manipulate the markets and collapse the US economy to build vast fortunes that they can never use.
We would be taxing at 70 percent people like Trump who in many cases don't even pay their plumbers and carpenters and bankrupt companies when it suits their needs. They play fast and loose with other people, fast and loose with laws.
Cry me a long, long river for those millionaires and billionaires who don't want to be taxed at 70 percent over a 10 million income. Poor them! Pity them! They might not get a third yacht! No one deserves 10 million a year.
I'm trying to figure out how to put kids through college and retire before I'm eighty, by the way.
161
@Katie
If I may suggest a solution to putting kids in college and retiring 15 years earlier than 80:
Send them to college in Germany. Top-notch in any field, especially science and engineering. Classes are taught in English in many of the big universities to attract foreign students, and the tuition is free. Student housing is heavily subsidised for all, healthcare is universal and nobody needs a car for anything.
9
@Yasser Taima You definitely need a car in Germany. Big status symbol :-) apart from that, yes studying in Germany is free even for international student, up to the masters level, at public universities. https://www.studying-in-germany.org/what-does-it-cost-to-study-in-germany/
6
Says the guy who pleaded guilty to pension fraud in NYS, was fined millions and was prohibited from engaging in pension investments for institutional clients for three years. In addition, he’s Michael Bloomberg’s primary financial advisor. Maybe “Morning Joe” appreciates his contributions but the rest of us should take them with a “large grain of salt.”
9
Much better ideas than Ms. Ocasio-Cortez’s plan? Then why didn't you pass them in 2008 when you had the votes? So sick of Obama administration experts coming in a decade after the fact and telling us all how wrong we are to demand more.
Same on a carbon tax, same on immigration reform. Stop attacking fresh ideas unless you're going to own up to how Dems have sought for 40 years to become republican-lite.
1
Oh great idea! Lets discourage people from making investments.
1
@Dave
When 1950s marginal rates were what they were, there was no shortage of investors or investments.
Everyone should know by now that wall st. is a rich man's shell game, where the rules are written by the rich men to benefit the already-rich.
So a member of the ruling class says that a better way to tax the rich would be one under which “we capitalists would be no worse off.” The object of taxing the rich is to reduce inequality as well as to raise revenue. In a recent column Prof. Krugman pointed out that the optimal tax rate for the highest income earners takes account of expected behavior in response to changes in tax rates - which must include what Mr. Rattner calls “gaming the system” - and that what Ocasio-Cortez has proposed is close to that optimal rate.
4
As to capital gains:
If someone owns a house that is not his primary residence and whose value has risen over some time, he/she can avoid capital gains with a so-called Starker Trade and invest that money in a new and more expensive home.
At some point the owner when selling a Starker Trade house has to pay capital gains tax. To avoid these taxes the quite well off in our midst, including my family, can put such property into a trust for their heirs, and even when it gained in value again those who inherited it will not be taxed with capital gains.
The problem with this whole sorry charade of a tax system in the US of A is that only the very comfortable off and richest in the country can use all these loopholes helped by CPAs to keep more money and pass it on to the next generation.
Another folly that hurt this country already considerably were Dubya's tax cuts in 2001 and 2203.
He reduced both the capital gains tax and the one on dividends in addition to income taxes.
Those making less than 17K were lowered by 5%.
Those below 68K stayed at 15%.
Yet all those making more than 347K got their taxes lowered by
4.6%
2
@Sarah......"If someone owns a house that is not his primary residence and whose value has risen over some time,'......Most of the increase in value will be the result of inflation, and further the owner has paid property tax on the house every year. Why should the owner not be able to discount the increased value that is do solely to inflation and deduct the property tax paid from the the accrued capital gains?
I agree. Income is income; what does it matter where it comes from? IRAs would still be shelters for retirement, and we could make exceptions for sales of a primary residence or other special cases like passing on a business.
The only part I disagree with is the death tax. Trying to figure out the cost basis for a long-term, active brokerage account without the account holder there to explain what he'd done could be ridiculously confusing.
1
@Amanda...Income is income; what does it matter where it comes from? ....Unless of course the income is derived from inflation.
While this kind of reform is needed, whether by raising the marginal rates or be treating dividend and capital gains a regular income (I favor both), we also need to beef up the IRS, especially their enforcement division.
The Times recently published an article showing that despite all the tax breaks real estate developers get, Donald Trump and his family also evaded hundreds of millions of dollars by giving fraudulent values for real estate to decrease the taxes owed.
If the Trump family did this, you know that many other wealthy people also played this game.
One has to wonder how Paul Manafort avoided scrutiny of his money laundering until he made the mistake of associating with Donald Trump. Trump himself has sold real estate to Russians at very high values, with the payments in cash. This screams “money laundering”. Why did the IRS not scrutinize these transactions? Because Republicans have systematically starved the IRS of the money they need to do their job, in service to their wealthy donors.
9
Fine idea. To work, one should also make dividends tax deductible for businesses, and then these can be taxed as ordinary income without the "double taxation" argument.
3
A lot of not super rich people have planned their retirements, in part at least, on capital gains from stocks. So there’s something to think about. Eiizabeth Warren’s wealth tax is better targeted and seems fair to me. I pay a wealth tax on my home every year, so a wealth tax on assets above fifty million seems only right.
3
@Philip Eubanks
Pray tell, what is a "wealth" tax on your house? Everyone owning a house, houses or condos, pays taxes to the respective county they own property.
And no, the wealth tax should not kick in at fifty millio, but at a much lower thresh hold.
2
A really good article on taxation and how we focus on the tax on earnings rather than all other forms of income. It's all income and should be taxed accordingly. We shold be talking about loopholes and trusts that evade taxatioon.
1
Steve, while I like the idea, others are pointing out that many middle-class retirees have planned for this income to be part of their post-employment income stream.
But there's no reason why we can't create a lower-middle class exemption for capital gains and investment income that would be phased out at a stipulated level - and perhaps even adjusted for the age of the recipient.
And there no reason why we can't further combine this approach with Elizabeth Warren's 1% wealth tax, which if memory serves me is reminiscent of Thomas Piketty's suggested approach in his celebrated, "Capital in the Twenty-First Century".
What we know that is that marginal tax rates will have to go up on somebody, if not everybody, as we go forward into the 2020s, inasmuch as our budget deficit is becoming unsustainable - and that the Trump tax cuts were as productive of long-term economic growth as a driver flooring the pedal in an automobile while already heading speedily down a steep hill.
1
I take it that Mr. Rattner has probably been earning at least 80 thousand dollars a year and isn’t counting on investments in order to afford to retire. Unless one oversees one’s own investment accounts, often offered by one’s employer as a means of saving during decades of employment, and carefully monitors the true cost of capital gains in order to avoid a high tax—and please explain to me how one learns to do this consistently well during the years of one’s employment?—this just ends up squeezing the hard working middle class just at the moment they assumed they could relax. Inflated income is what makes the rich rich enough to have excess money to pay their fair share of taxes. This just sounds like a great way to add to the nightmare of already inflated property taxes.
1
I would agree with abolishing the estate tax but I would tax unrealized capital gains at death [elimination of step up in basis].
Suppose X buys stock worth 40K.
X holds stock and when X croaks stock is worth 90K.
Y inherits stock worth 90K when X croaks.
Y later sells stock when it is worth 120K.
Y pays a capital gains tax on
120K - 90K = 30K.
90K - 40K = 50K of gain is untaxed.
This loophole costs government 40 B /year.
8
@david
There is also the appreciation of real estate the value of which is reset to zero at the death of the owner passing it along to heirs.
Mr. Ratner's proposals include worse ways to tax the middle class.
Let's not forget that capital gains tax applies to the sale of one's home. Taxing these gains at a higher rate would make it harder to buy the next home.
Let's also remember that many people who are nowhere near rich may have some investments in stock and may even inherit capital assets (including a home). Increased taxation of these people is not a better way to tax the rich unless there are appropriate thresholds and graduated rates to limit the effect on the middle class.
Mr. Ratner's argument against the 70% rate includes the observation that the deduction for state and local taxes has been capped. Rather than using this as an argument against taxation of the very rich, Mr. Ratner should be advocating the repeal of the cap on this deduction. In states like New York and New Jersey, the cap on this deduction mostly harms middle class people.
19
@Elliot
Lets not forget that "buying the next" home shouldn't be an option. Buy a house and live in it. Like people used to do and stop using it like some sort of magical retirement egg.
1
@matty. Don't you know that lots of people have families that outgrow their first homes, and years later need to size down? Given the rise of home values in places like NY and Boston over the past decades, the current law actually penalizes people who stayed in their homes. After the tax bite on a home owned for 25 years, a smaller home in the same area may not be affordable. This may be a reason for the current shortage of home resales.
The tax code can penalize flippers by providing for a holding period, but "to tax the rich" it shouldn't penalize the normal life cycle.
I totally agree...but do it right when the next Democrat Party President takes office.
The DJIA will lose about 40% of it's value in a week, but at least it will be fair.
2
Let's tax consumption, and tax it very progressively.
By a consumption tax I do not mean a sales tax. Rather, every year you compute your net consumption which, in simple terms is:
in-year consumption =
in-year income/earnings
- (in-year net contributions to savings, investments, or other assets)
- (in-year net decrease in principle on loans, mortgages, or other liabilities).
Here, earnings would be of all kinds.
Once consumption is calculated the rate on consumption can be very progressive. Basically 0 for a good chunk. But, that second yacht is going to cost you a lot at the margin. E.g., the rate on consumption above $100 million could be 100% or more.
The great thing about a progressive consumption tax is that it gets away from the "but you're taxing my hard work and smarts" argument. Americans have an iffy relationship with that notion. But I think a lot of Americans are ok with taxing profligate spending.
I don't know how the numbers work out to generate sufficient income but there are certainly some progressive tax ladders that would make the numbers work.
Conservatives would get what looks like "zero friction" on investing--you can move your money around as much as you like; you only pay taxes when you spend it.
To integrate estate taxes, passing your money on to another tax entity would be considered consumption in the above formula.
2
@NA Expat
Interesting thought. In calculating taxable consumption, I would hope you'd also subtract rental payments for one's primary residence.
@Annie M.
In my mind, the tax would be steeply progressive. For example, you would pay no tax on consumption up to a reasonable/set amount. This amount would be calculated to include the bare necessities for food, shelter, healthcare, transportation, etc. The marginal rate of the next bracket of consumption would terribly high amount, e.g., 10%.
There would be no explicit carve out for rent. That said, a consumption tax turns the home mortgage interest deduction on it's head. Right now you get to deduct all the in-year interest you pay on a home mortgage from your taxable income. In the scheme above, your in-year mortgage interest payments become consumption (while in contrast, the portion of your mortgage payments that reduce your principle are not consumption--they are reducing the principle of a liability). This would discourage people from taking on large mortgages.
@NA Expat....and drive down real estate prices.
The problem with any plan is that is does not take into account an all of the above strategy, while closing ALL loopholes.
What will happen is the same thing that happens throughout the United States and as an extension, the world. You will have states or districts/nations that will offer less (or none) of the taxes that should be Progressively appointed to.
In the United States you have red states that offer little or no tax, and expect others to pick up the tab for infrastructure. (you the taxpayer) In the international realm, you have massive banks that work out of postal boxes in island or obscure nations.
Water finding cracks on a sidewalk.
3
Taxing capital gains and dividends seems unfair to the small investor. This would make sense if the investor had a lot of stock but for the individual who has just a few shares this seems inequitable. There should be a cap as to the amount the little investor must pay. This may deter some from investing in the stock market if ever passed.
1
@WPLMMT There used to be an exclusion for the first $200 (I believe) of dividend income. This could be reinstated, with the actual number set to a reasonable value.
3
This plan ensures that working people pay income tax on the sale of their primary home as they retire. Many seniors, especially people that are forced to retire early get saved by low/no taxes on this income.
We’re hardly ultra-earners, but I’ve been amazed that we didn’t pay tax on dividends and capital gains, as mid-60’s retirees, who don’t need to pull our SS income or from our retirement accounts currently.
It’s a weird boon, what, we don’t pay any capital gains tax on appreciated stock that we’re shedding? Or we can fill our buckets with retirement distributions up to the bracket amount, before it triggers tax? Nice.
But we can also afford to pay our fair share.
3
Do that and some if not many retired people without a pension will see their lives destroyed. Elderly folks who have the rest of their lives destroyed might be very angry, and would vote out many if not worse.
1
I wish more politicians would champion this, as part of a broader radical simplification of the tax code. Consider this: say you had $50k to invest. You could spend it on your own education, and your salary increase would be taxed as ordinary income. You could open a small business, and the money you made would be ordinary income. Or you could put it in the stock market and be taxed at a much lower rate. Markets are important, but the first two options do so much more for society, ourselves and our country and yet we privilege the third.
3
As the graph shows, the real villain here is Ronald Reagan. Despite the best efforts of Clinton, we've never gotten taxes on the rich back up to healthy, pre-Reagan levels.
Reagan caused this country more long-term economic harm than any other president, including Coolidge and Hoover.
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@Dr. J.: Kudos to you. Reagan did more harm to the country than virtually every other president, save Bush 43 and trump.
9
@Dr. J. Reagan through his 1986 tax act eliminated one of the biggest loopholes that was available through RC 469 : Passive Activity Losses and Credits Limited. The ability to deduct losses from passive real estate investments against earned income such as wages, was perhaps one of the biggest tax shelters available. After the 1986 act, that was no longer available. The 1986 tax reform act broaden the base of taxable income in exchange for lower rates, which is why although the top marginal rate plummeted, the average effective tax rate (the tax rate that the rich actually pay) actually increased. This was not only the only case; many tax shelters were eliminated, and ability of interest expense to be deducted (other than mortgage interest) was taken away. As the graph that you refer to shows, the average effective rate for the top 1% has remained consistently around 40% since the 1950's.
4
Tax capital gains on the same sliding scale as wages.
Usually the media reports the wage income of billionaires, but if you do the math its usually not nearly enough to make billions of dollars. They make most of their money from capital gains.
Having a capital gains tax that is too low not only taxes the richest too little, but subsidizes the replacement of workers with machinery. It is one thing to lose your job to a machine because it is more efficient. It is another to lose your job to a machine because it gets preferable tax treatment. That is not good for the economy.
Our fascination with giving tax breaks to capital has created a mismatch between productive factors. Over-investment in machinery paid for with under-investment in humans (some of the most incredible "machinery" we can imagine) means we can not manage the technology efficiently, leading to productivity lag.
And, not paying workers what they are really worth (even merely as fancy machinery, never mind the morality of treating humans worse than machines) means that consumers can't grow the economy, because workers are the consumers.
Tax cuts do not reduce inventories. The only real reason to invest in increased output is to reduce inventories. The only reason you need to reduce inventories is if demand goes up. Demand cannot go up when all new income is going to people that have so much money they can't spend it.
23
The problem with this approach, while it makes theoretical sense, is that some of us have spent many years planning a retirement based on dividends being taxed at a reduced rate. Changing the rules of the game in a dramatic fashion mid-stream is bad tax policy period. Slow and small incremental shifts in tax policy would helps us all plan for our futures.
39
Unfortunately many changes have been made over the last couple of decades including taxing SS income. I think you are right about resistance from those of us that planned but I would make five points about things that IMHO are more significant. The ability if younger workers to generate payroll taxes to keep SS solvent. The value of the companies that are providing the dividends. The prevailing interest rates if you have bonds. The age at which you retire. YOUR HEALTH. Having said that, many useful suggestions in this set of comments are trade offs where people can get advantages by giving up other advantages.
I like the consumption tax mentioned but why stop there. Why not a wealth tax on everyone with a floor of the median house value. Make it 1 % and include every American’s total assets including corporations. Exclude the first xx,000 = median income in consumption and give a bonus back to buying locally produced food. Include a transaction tax on all transactions including selling of capital assets. In exchange make STCG taxable as income dropping down to zero if held for 5-10 yrs. principal executives or share owners would have to pay 50% if their share losses when they left a company. Withholding 50% and paying 5% per yearly value over 50% over 10 yrs of value equaling lower of original sales price or present value.
Give those companies that pay that tax and have the median non exec have equity equal to a years pay a very low corporate tax rate
Yes! A billion times yes!
I will vote for any candidate that closes the Carried Interest loophole. It would raise $180 billion a year.
But more importantly, it provides a fairer tax system. The wealthy don’t need this break. I’m still mad Obama never closed this. Wealth inequality is the greatest threat to democracy right now. We have hedge fund guys buying $238 million second homes now.
According to Oxfam 26 people own as much as the poorest 50% of people on earth. When such a small group owns so much wealth they will use all that money to maintain power and accumulate more wealth through unrighteous means.
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@Manish So vote for the president he proposed just this, congress unfortunately would not follow through.
2
A 70% tax on earnings over $10 million per year OR taxing investment income like ordinary income?
Why not both?
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@Dennis Callegari
70 percent marginal rates are confiscatory and debilitating. Like it or not, the ability in a capitalist economy to become rich has induced many an entrepreneur to make huge personal sacrifices (time, money, energy, lost time w family and friends) to build companies and products that have benefit us all. Nearly 50 years ago The Rolling Stones escaped to the south of France to avoid the UK’s extreme taxes. Exile on Main Street was the happy product of their “exile,” but we cannot expect such Happy results if we follow suit. Who would want to make huge sacrifices if Uncle Sam is just gonna take it all? Treating capital gains like ordinary income seems a better way to go.
1
@Mike.
If I personally earned $10 million per year. I would not even notice a 70% tax on every dollar over that $10 million.
Rich people have never been made poor by paying taxes.
You quote the example of the Rolling Stones who made themselves tax exiles? Their top marginal tax rate was effectively 98% on a much smaller annual amount than the one proposed.
44
Because if “earnings” only applies to salary, then it means that most really wealthy people will still pay federal rates of 18%, because most of their increase is via capital gains.
I’m fortunate: my spouse and I earn high salaries. (We also live in a high cost-of-living city in a high-tax state.) Net, we pay a total of about 42% of all of our annual increases as tax because most is in the form of regular income. We exist in an extremely obscure portion of the US tax code, of AMT, ISOs, and the marriage penalty.
I don’t mind paying a higher proportion of my income in taxes, but I do mind that Mark Zuckerberg pays a lower rate than I do – because his salary is $1 per year and all of his money is from long-term capital gains on equity.
41
The best way to tax the 1% is any way they and their lawyers and accountants can't dodge. It will probably take more than one tax to accomplish that. I would revive the luxury goods tax. Yachts, private planes, auction art, designer clothing and jewelry, whatever it is they spend all that money on they can't seem to live without. The list of taxable items can grow as the tastes of the rich change. It would give me a lot of satisfaction if every year Congress added a few things to the list. As I understand it, there's no point in being filthy rich if you can't buy things that tell the world, "I'm filthy rich."
4
All good ideas. I would prefer our tax policy is not formulated by first term children with great social media chops but zero experience in world affairs. We already have that in the White House.
4
My head spins. Why can’t ALL income be taxed fairly?
Wages and capital gains seem to be equal.
8
Pre-Reagan tax rates protected the country for decades, by recirculating money throughout society. This powerful tool to reduce income inequality and return exorbitant incomes to the general economy needs to be reinstated.
96
@RC,
Agreed! The societal benefits of progressive taxes are sometimes overlooked.
It's the circulation of money that creates a prosperous society. Just breaking up some of the "log jams" in the system would go a long way toward fixing what's broken in the US today.
I'm not sure that the academic economists actually consider this factor at all. It may just be too hard to quantify. But that's not a good reason the that we (the People) should suffer an almost medieval system.
6
It is inheritance more than income that is creating the American oligarchy.
Do we really want more equity, more accountability, more meritocracy?
Do away with or severely tax major inheritance. I don't care if you pick 1 million or 10 million as the maximum inheritance before 90% (75%?) taxation. Of course, close the loopholes.
Democracy, capitalism, humanity, empathy, real world experience, grappling with bills, etc, ... are impeded when one inherits tens of millions or billions of dollars.
It is inheritance more than income that is creating the American oligarchy.
8
Was it really necessary to take a swipe at Alexandria Ocasio-Cortez to make your point? Give you street cred with centrists?
The very rich will always find a way around taxes as long as they are the donors of the politicians who make the laws and craft the loopholes. There is no reason why both marginal and capital gains taxes can't be raised, and state and local taxes also addressed.
7
@Peter Wolf Everyone can see that AOC is not an intellectual superstar. It wasn't a "swipe." It was simply stating the obvious. I do, however, agree with the writer that it makes no sense to tax capital gains at such a low rate. A billionaire in NYC who makes millions on capital gains each year pays proportionately LESS in taxes than an experienced welder at a shipyard in Pascagoula, Mississippi making $65K a year. That's horrible and immoral and requires correction. Regardless, AOC is a mental lightweight. That's so obvious, it embarrasses me to point it out.
@Peter Wolf I wish you and others would stop writing about AOJ. Of course the young lady has opinions but others do as well like yourself.
You are correct that the wealthy and republican presidents who changed the tax laws. I specifically refer to Regan and trump.
Tax rates will not changed until we have a Democrat President, House and Senate.
1
@KLM
I wasn't really trying to glorify OAJ (I have never written about her), but just about the need to marginalize someone just because they are left of center. She is far from the first person to say that the US did pretty well when marginal rates were much higher, but she is the first one who called herself a socialist, which makes her a bogeyman (or bogeywoman) for the "serious" (i.e. centrist) people.
I do really like her dancing, and I think that is a sign of having a heart and soul, which implies a humanistic politics (though I doubt that Bernie dances that well- no first hand knowledge).
1
The Democrats simply want any personal property or wealth to be illegal so we can all be completely controlled by the Government.
Drastically lowering the corporate interest tax rate, while charging all income at all levels the same tax, say 35%, whether you make $10 or $10,000,000, would make the system much fairer and raise more money.
1
uhhh... wrong. Lowering taxes will DECREASE revenue. That's simple logic.
The voodoo stuff failed. We tried it and it destroyed our economy.
2
@Moishe Pipik
Easy Hoss. Such is a hasty generalization, and a glib regressive unlogical anti-government conspiracy remark.
The Regressive Conservative wants the all wealth and personal property concentrated, protected, and safely ensconced within private hands. All of it. Everything. Absolutely everything.
The thing is that we've already been there and those systems have been soundly rejected by the modern world or free, democratic societies. You want to go back to 1750, ok, make your case for it.
Now, tell us, what recourse would YOU have when the rich own everything and there's no government to protect anyone?
Even better- get rid of capital gains and treat investment income as ordinary income, then raise the marginal rate to 70%. And then reinstate the inheritance tax and set the rate to recoup all the cuts in top tax rates (including the "death tax") since Kennedy cut the marginal rate from 90%.
7
Tax religious institutions.
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@not wealthy enough
Many religious institutions provide significant services and facilities at no, minimal, cost. Consider how many AA groups meet in religious facilities, often at no cost. Many religious institutions provide food and clothing and a warm place to those in need of same. Many more examples are for the seeing.
7
@trs777 All that they provide will be a cost and hence, not taxed.
14
@trs777
Many religious institutions are money-grubbing, fantasies who should pay tax.
50
This adds complexity and decreases the clarity of simply raising the marginal tax rates on extreme wealth. Capital gains are what lifts countless working people, as investors and employess with 401K's , into a secure retirement. Funds held in mutual funds are already taxed for capital gains - even in years when the market tanks and share prices have fallen. Trying to engineer a clear and equitable capital gains tax structure would be difficult. On the other hand, since so many of our wealthiest citizens derive their annual incomes from dividends and receiving those capital gains as cash, treating all income as taxable (and giving large estate tax rates another look) is the most logical way to fund government. We've had periods of strong economic performance despite having high tax rates on wealth. I'd be happy to pay a 70% tax rate on every dollar I'd made (taken as income) after crossing that $10 million a year threshold.
6
Steve M., it actually decreases complexity. Income is income, whether you work for it or not.
3
So taxing capital gains is bad because the rich paid taxes when they were earning the money that became capital gains but taxing me on my social security receipts and money I withdraw from my pension is okay even though I paid taxes on my income when I earned this money and benefits.
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@Henry Julien....There is more to capital gains tax than just stocks and bonds. Start thinking about capital gains on property held for 20 or 30 years and you realize that a good part of the capital gains that are accrued are the result of inflation. Then consider that the owner has already paid an annual property tax assessment.
1
@Henry Julien
What I paid into my pension was tax deferred, so it is appropriate I pay income tax on what I withdraw since I retired. I can resent paying taxes on our SS benefits as a function of our other income, but accept it as fair. It only becomes burdensome when we shed assets and are liable for capital gains on them, raising the rates on SS. I really don't feel cheated. Perhaps I am simply dumb.
2
There has typically been a more favorable tax treatment for assets held for over a year, than for assets held for 10 minutes (or just under a year). Elminating the incentive to hold onto assets will certainly have other implications as well.
4
@Bear Facts
Yes, and altho' I am basically in favor of treating cap gains like earned income, I'm aware that one purpose of having long term cap gains taxed at a lower rate was to keep money invested for a longer term and to discourage frequent trading.
A perfectly reasonable alternative that should be part of the discussion of how to change our tax system. Certainly, carried interest should stop.
I'd like to add one more aspect - remove the income ceiling on Social Security tax so that more money goes there. It's ridiculous to keep hearing arguments about how SS will go bankrupt when there's this simple change available that Congress refuses to consider. Might not fix the problem entirely, but imagine how much would be added from all those hedge fund managers who make $1 billion or more a year on top of those with stock option gains of hundreds of millions of $?
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@JW Don't just remove the SS ceiling, include capital gains in the income subject to SS taxes. Again, why should the working stiff have to shoulder the entire burden? The money from capital gains spends just as easily and has the same impact as money earned as wages.
10
@BigFootMN Agreed. Why I mentioned the stock options, but all capital gains and dividends should be included in SS funding.
3
@JW
Because SS is considered insurance and is out of the General Revenue.
3
Good suggestions however many of the wealthy escape taxes by forming foundations, trusts, with respect to estate planning as many avoid the majority of the taxes they would owe by establishing these entities. Non profit education institutions such as NYU and Columbia hardly pay any taxes, and then pay very little in real estate taxes. this reduces the supply of taxable real estate in NYC which increases the amount paid by tax paying properties. Even though Bill Gates is worth approximately $100 billion gained mostly by stock potions and in establishing the $ 30 billion Bill and Melinda Gates foundation, he hardly paid any taxes in his lifetime. All existing foundations, trusts, and estates should pay a one time tax of 33% to take part in redistribution. Harvard has over $40 billion, does not pay taxes. NYU and Columbia just keep buying more property and then property taxes are not paid.. Capital gains tax should be raised but lowered for those who make less then $ 2 million in capital gains. Hedge funds should have to pay ordinary income tax not a lower capital gains tax. Anyone making over $ 10 million a year should have an additional tax of 15% added to their taxes. This would also be charged every year on stock option plans.Stop delaying the obvious.
7
@Ralph Petrillo I'll add that colleges/universities have capitalized by claiming non-profit status which allows them to skirt nearly all taxation, while at the same time spending like there is no tomorrow. The kicker is that it is on the backs of those taking out student loans to attend. Why be responsible with money when you can just raise tuition which in turn causes their customers (students) to borrow more money to attend. Like many well-intentioned government actions things go awry. In this case the college/universities figured out how to game the system.
Taxing capital gains as ordinary income is so obviously the right thing to do, I wonder why it doesn't happen; it makes you wonder whether maybe it's the rich who are writing the tax code.
50
@PNBlanco I don't wonder whether the rich write the code. It became even more obvious when some RepubliCON legislators stated that they had to pass the tax break or the donors would dry up. Talk about quid pro quo.
2
@PNBlanco
The rich DO write the tax code. Of course.
1
Here, here! I have always found it absurd that actual labor is taxed at a higher rate than sitting back and letting your money do the work.
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@Bill White: For most investors, they're nervously "sitting back" and hoping their money, which was already taxed, grows; that a bear market doesn't hit them at the wrong time.
They're taking a risk to invest in businesses that employ other people. If any gains were taxed at 35% or more, who would take the chance? How would businesses raise capital if there were no middle class investors? And with interest rates at less than 2%, who can afford to invest "safely"?
Just like with "earned" income, you need to treat the small investor and the uber-rich differently. A progressive tax on capital gains makes more sense.
13
@Bill White
I could not agree more. If one has the money to invest to "earn" capital gains - when so many Americans do not have such spare funds, let alone the three-months emergency quantity suggested - that ought to be taxed at a higher rate than labor.
Otherwise it is a "tax the poor and middle class" cry!
5
@mijosc To clarify, are we talking about the portion of investors that actively seek out growing businesses and spend time evaluating prospects before investing in, say, a Series A funding round?
Or are we talking about people with money to spare who are investing in the stock market so they can make money faster?
The two are related and public money in the stock market provides more of an assurance on any money invested in early funding, but don't think that the second type of investment provides the sorts of serious benefits to our society that justify it being subsidized below the cost of labour.
3
Raise Taxes, raise taxes, raise taxes. When are Democrats going to come up with something besides this?? Mayor Bill de Blasio consistently says: "charge a millionaire's tax." Whether it's to raise money for the subway or for his pre-kindergarten program, that is de Blasio's only idea. Do any of these men have other ideas to raise revenue--besides stealing money from people who work hard? How about de Blasio looking for waste and mismanagement in the current state budget and Rattner looking to streamline the federal budget? I bet we would find a lot of pork and padding in those budgets, but nobody wants to do the hard work required to find it. Taxing the wealthy is the easy way out--until the wealthy move their money elsewhere. New Yorkers move to states like Florida and elsewhere to escape taxes. Wealthier people in this country now move their money off-shore. Is that really what we want? Be fair. People deserve to keep the money they make. Ocasio Cortez's plan is outright theft. Rattner's increase in the capital gains tax is at least a bit more fair. The fairest of all would be for everybody to pay the same percentage of their income.
4
@FK, "The fairest of all would be for everybody to pay the same percentage of their income."
So mistaken. The fairest would be to tax the poorest and give it to the richest since they're obviously the most creative and talented and deserving, and they would make so much more money that then they could hire all the people paying the taxes!
1
The low capital gains rate is the exact reason why Warren Buffett’s secretary pays a higher tax rate than he does. Likewise the estate tax loophole means Buffet’s heirs pay no taxes on the gains. Making this change strikes most directly at income inequality.
90
I agree, all income should be treated the same, regardless it manner of production/earning. It is all earnings--some of us get it only in wages, others are more fortunate and get it in rents.
4
Fine, tax the rich and ultra rich, meanwhile the middle class gets stick with what Congress passed last year. Those receiving Social Security continue have to pay taxes on combined Social Security and Retirement income, because they did not index for inflation fro what qualifies as taxable Social Security.
So, yes tax the rich, but give back to the middle class what Trump, and Congress, took away from them. And, also raise the limit on when Social Security income becomes taxable.
It6 is pretty bad to have t o pay taxes twice on the same income. Once when I paid into Social Security and again when I receive it. This was wrong when it was enacted, and it is wrong now.
112
And Senator McConnell just proposed getting rid of the inheritance tax, because the rich are just too overtaxed these days...
6
Why not make capital gains taxes progressive regardless of whether they’re treated like regular income?
174
Capital gains tax is already progressive. Look at the tables.
6
“Among the justifications for taxing profits on capital at a lower rate than income from work has historically been that companies pay taxes on their profits, so taxing shareholders on their gains represents a form of double taxation.”
In the eyes of the law, corporations are “fictional individuals,“ with all of the advantages that status confers upon them – – including limited liability, a voice in the political process, etc. Like all other individuals, those corporations should be taxed on their earnings - and hence the “double taxation“ claim has always been disingenuous.
13
In the spirit of bipartisanship let's combine the best of both proposals and have the top marginal tax rate at 70 percent and increase the rate for capital tax gains and dividends to match. That is to say the rate for capital gains and dividends should be the same as one's marginal tax rate.
31
If this road is to be followed, associated taxes should be progressive, perhaps the current rate for the first $100k and higher rates as the amount of int/div increase. Else the impact on the elderly will make this idea DOA.
A bigger long term equity issue is the intergenerational passing of wealth. Is there doubt that Fred Trump was the only one skirting the rules to pass on dynastic wealth?
Disagree with Rep Occasio-Cortez, it is not immoral for someone to earn extraordinary wealth. The problem is when that wealth is allowed to track across generations. A monarchy does this - wealth goes with the office - a democracy suggests each generation should have reasonable opportunity to earn their wealth. Raise the amounts someone can gift during their lifetime, but enforce inheritance taxes including perhaps in the way suggested by Mr. Rattner.
7
Im all for egalitarianism. How, though, do we account for the dramatic affect this would have on retirees who have studiously parked their savings in retirement accounts?
4
@Scribbles, Any withdrawal from a 401k, ordinary IRA or similar account where the earnings weren't taxed on the way into the account is subject to income tax at ordinary (not capital gains) rates. Roth IRA withdrawals are not taxed because the contributions to the account were made with after tax earnings. Also, interest income is taxed at ordinary rates. Your point is correct with regards to longterm capital gains and much dividend income.
2
What's wrong with a top rate of 82.7%?
4
Reading about some guy that has paid $238 million for a Park Avenue apartment in New York City is beyond the limit. And it isn't even his primary residence. What's wrong with a top rate of 90%? And yes, tax capital gains and dividends as regular income, but above a certain amount, perhaps $10,000 a year. Not all people who own stock are wealthy. It can be a significant part of their modest retirement nest egg, for example. I'm talking about me.
That it's too low?
How about a 99.9% rate to raise funds necessarily to pay for the hordes of 'people' who think nothing of having two kids but no education or job before they are 20.
Or prefer a life on drugs.
Or to pay for all the illegals the new governor of California has invited into the state, assuring them that taxpayers will gladly pick up the cost of their housing, medical care, food, and incarceration.
1
@RLS
I suggest that we spend the additional funds on improving our public education systems for everyone, including public higher education. And on making sure that every citizen in our nation has access to good medical care. And on improving our nation's infrastructure so that we can compete with the likes of China. Keep in mind that the cost of providing services (I mean the overhead) is less when the government does it than when a private company does. No government high-level administrator is paid like a corporate CEO.
1
Why not both? Treat capital gains as income and tax very high income at progressively higher levels.
14
The best plan would be to do both of these things. Definitely capital gains should be taxed as regular income. There should be a tax on short term trading too - 2 cents per trade.
11
Why don't we match capital gains and dividend to the marginal tax rates in general?
If someone makes 90k at their job, earns 10k in dividend, and sells 10k in stock, they should be taxed at 110k. It's simple and straight-forward.
2
@Alton I think what you mean is has 10K gain in stock, not sells 10k in stocks. You shouldn't tax people on the capital that they've invested in.
3
This is not persuasive, Ms Ocasio-Cortez' proposal is very clearly targeting the ultra wealthy. The counter proposals in the oped cite that "most" income comes from capital gains, how much is "most" income? How much revenue would increasing taxes on capital gains actually raise? I think these questions were intentionally left unanswered.
2
Excellent proposal. I have a couple of points to add. First, since 2002, the profit margins of corporations have risen while wages have been stagnant. The reasons are complex but globalization and effective capital investments have helped companies improve profitability but hurt workers. The investors in companies have captured the income gains while income growth of workers has been muted. Why in the world is it fair or effective to tax labor at a higher rate than capital gains?
5
1. I agree. Original thought behind low capital gain/dividend rates was to avoid double taxation. If corporate rate goes down, the individual tax rate can go up.
2. For 70% tax rate lover: during 50s, after WWII, USA was the only economic power. Not any more. 50s are irrelevant.
3
Increasing taxes, how ever it's done, does not address what our real problem is. We have a spending problem. Until that is reigned in anything else we do will have little long term impact.
4
@Mark
In some regard, I agree, we spend far too much on the military and not enough on infrastructure and other needed programs.
However, most economists would contend we have a revenue problem, rather than a spending one. In comparison with most OECD nations, our tax rates are far too low. Most advanced nations have higher rates and get a great deal more services for the taxes they collect than do we.
This notion that government is wasteful and less effective than the private market is simply false.
5
@Mark Close to 90% of the federal budget is spent on entitlement programs and the defense department. You pick, reduce social security and Medicare or scale back weapons programs and reduce the number of overseas military installations.
@Mark
What does that mean
Are you saying money is being spent for services the government provides that are not needed or spending money unwisely and that we can get the same services and spend less.
I disagree.
I don't see a problem with the budget and don't see how we can cut the budget without cutting services and I don't see any services the government provides that are not needed.
It's not an either/or solution. Doing away with the capital gains giveaway is part of the solution, along with more sensible graduated income tax rates, and ending all sorts of loopholes for individuals, corporations, and all those sneaky instruments like S-corporations, etc. Do it all.
10
While Rattner laments those taxpayers who pay state and local taxes he seems to miss that most of them are not people making more than 10 million a year.
Few outside the Republican party would begrudge S/L tax deduction so make that a non-issue and bring them back.
I agree with his other proposals. Why can't we have a combination of them?
2
We did fine in the 50's. Infrastructure, Highways, social services, etc We need to bring those 70% tax rates for the super wealthy back. Why ?
Because that's where the money is.
252
@Getreal
False. Why? Because the "wealthy" don't pay the high tax rates. They move money into tax shelters and don't realize capital gains. The data actually shows that today the higher brackets pay a much larger share of taxes paid and even an actual effective percentage. Back in the 50s the effective tax rate for those in the top bracket was about 30%.
Second you're looking at the 50s with rose colored glasses. American prosperity in the 50s was a by product of Europe and Asia being in ashes, destroyed by WW2. America was the only industrialized nation that wasn't bombed to the ground. That situation was a one-off in history.
10
@Getreal
Didn't Willie Sutton say that about robbing banks.
It's also stealing.
You don't have that right.
3
@Getreal If you want to return to the halcyon days of the 1950s, then you also need to restore all of the deductions that existed. As Dave noted, almost no one actually paid those top marginal rates. Plus, you'll have to eliminate all of the government spending programs that arose after the 1950s (e.g., Medicaid, Johnson's Great Society programs).
2
"my concept would apply to all capital gains and dividends, not just income above $10 million a year."
That would be a mistake. I'm not saying that the cutoff should be at $10 million, but give the small investor a break. Let them get a reduced rate for capital gains and dividends for the first $10,000 or so. This would benefit the many and not effect the real targets of this tax change.
65
@Padfoot Maybe we should allow a 12,000 personal tax exemption. Income from investments should be treated the same as income from labor.
6
@GUANNA
That's a good idea. A full deduction would stimulate investment.
3
@Padfoot -- The small investor break is already built into the system. The "capital gains rate" is really the _maximum_ CG rate. If a taxpayer is in a lower tax bracket (say 10 or 15%), they pay the lower, ordinary income rate rather than the CG rate.
1
It was the bush tax cuts that reduced the tax on dividends and capital gains. There is no reason they shouldn't be rescinded .
122
Clinton cut the rate on capital gains before Bush. Capital gains tax revenues subsequently increased as people became more willing to sell appreciated assets and harvest gains. Still think we should raise rates?
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@Alan
Yes! We have to if we are to save American democracy. And we have to put that money into public education, infrastructure, and universal single payer health care. It's time to join the developed world and leave behind the vestiges of feudalism.
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