I would make just 2 criticisms here. It seems to be dogma that Reagan tax cuts increased deficits. This is absolutely not true. Tax revenue doubled over the Reagan years and for the most part the economy did very well. The problem is that government spending increased disproportionately over the Reagan years leading to higher deficits. If spending had been held in check, there would have been lower and nit higher deficits.
My second criticism is that capital gains are taxed at a lower rate to account for underlying inflation. As it is now, a person could sell a long held asset that appreciated at or below the rate of inflation, lose money in real terms and still owe tax on the sale. Raising the tax is not going to spur investment. This proposal makes more sense if it were indexed to inflation. Taxing dividends as regular income would also make sense, if they were not taxed as corporate income too.
6
Governor Cuomo, for all his faults, was never more correct or truthful as a politician when he opined that taxing the rich merely drives them away. You people who still insist on a ‘tax the rich’ approach really don’t understand history, economics, business, or human behavior.
7
@Alan and the high marginal tax rates in the 40s into the 70s drive them away??...I don't think so...
14
Those who think our income tax isn't progressive enough should review who really pays income taxes. Here's a reference: http://www.pewresearch.org/fact-tank/2017/10/06/a-closer-look-at-who-does-and-doesnt-pay-u-s-income-tax/
From Pew's report:
The top 0.1% pay 20% of all income taxes.
The top 1% pay 40% of all income taxes.
The top 5% pay 60% of all income taxes.
Individuals earning less than $50,000/year (60% of all taxpayers) paid 5.4% of all income taxes. (Most of these folks paid zero.)
Yes, this doesn't include Social Security taxes, but Social Security was intended as a mandatory retirement program, not an entitlement program.
6
Mr Rattner, your proposals are quite reasonable. I truly hope those on the Democratic side listen to them.
10
Steven Rattner reveals his low standards in calling JP Morgan Chase's CEO Jamie Dimon "superb". Under Dimon, this bank has paid BILLIONS in fines and penalties for fraud, manipulation, and willful contempt for controls relating to weapons of mass destruction, including more than 2 billion in penalties relating to Madoff. If the system wasn't so corrupt, Dimon and other executives might have been held personally accountable for their actions.https://en.wikipedia.org/wiki/JPMorgan_Chase#Criminal_investigation_into_obstruction_of_justice
1
The notion that taxing billionaires is only justified when it’s “spent well” is wrong.
We could bury that money in a hole and still be better off. Dynastic concentrations of wealth corrupt our civic institutions and invite self-serving conflation of wealth and virtue that’s even more profoundly corrupting.
34
The wealthy have made a cynical mockery of our democracy. Hopefully the New Democrats will tax away some of the wealth and restore some equality. The moneyed elite are fearful of losing control. These moneyed elites have stolen much of the wealth of the middle class by buying off the politicians. We the people can take back our democracy and put an end to the existing oligarchy. Go AOC. She is honest and she has guts. God bless her.
1
Scene: knock on door. Rattner opens door. A Man is standing there holding a live chicken. Behind him is a crowd of homeless people, blankets, bottles and needles at the ready.
Rattner: May I help you?
Man: It's your turn.
Rattner: What are you talking about?
Man: We're taking your house.
Rattner: Taking it? You can't do that. I own it. I worked hard for the money to buy it.
Man: But you have too much. It's not fair. We're taking your car, too. (hands chicken to Rattner)
Rattner: What's this for?
Man: Come home to roost.
Helping to support and maintain your country, and to make it greater, is not punishment it is patriotism!
17
It seems much of America is unaware that the "rich" already pay a great deal of taxes... and certainly it is always someone else who better pay more, not "me." How about the folks responsible for $6 trillion is expenses for our warmongering and Empire support building...400 overseas military bases...the Pentagon really enjoys the $15 billion per week sent over there. Taxing the rich ain't gonna cover it...
1
What we need is a real revolution.
What would do us good is to go after the known and anonymous families whose money has been used to destroy our government for the last 50 years. We need to strip them all of every penny and asset they have. Give them goodwill clothing and prohibit them from doing anything but minimum wage work for the rest of their lives.
Then we would eventually hear from these "great" thinkers about the real world and how it is they were mistaken in their views of the poor. And then we can pat them on their heads and say "awww poor little thing" and make them go on living desperate lives as the honest poor do in spite of the exceptional abilities and drives they posses but cannot profit by due to the construct of a system meant to keep them right where they are permanently.
1
Steven Rattner: This is a constructive suggestion, and I’d be happy to see a revamped capital gains and dividend policy provide for an exemption for the first $10,000 or possibly even more for Americans with incomes below some reasonable threshold.
Excuse me while I wipe tears of laughter from my eyes. As many other ordinary citizens such as myself have noted: it is not just the "uber-wealthy" who rely on income from capital gains. Like many average working Americans, I do not have a pension. I must rely on the capital gains & ordinary income from my 401k savings.
Is anyone out here in the real world naive enough to believe that good things will result for them when Rattner babbles about MAYBE (maybe) taxing capital gains at a lower rate for "incomes below some reasonable level" ?
1. What does he consider a "reasonable level" for keeping capital gains taxes low? Probably only those incomes well below poverty level.
2. Most of us over the age of 10 and with an IQ of at least 50 know that the IRS always has and always will come after us "little people". Increasing the capital gains tax rate will hurt us a whole lot more than it will the "uber-wealthy". Too many tax-loopholes for them and not enough scrutiny of their tax returns.
3. Far and away the best plan for fair taxation is the one proposed by Rep. Ocasio-Cortez. But hey, Rattner is probably one of the "uber-wealthy" himself.
Supple Side Economics is responsible for the ballooning of the Fed Deficit which was 25% of GDP when Carter left office; and failure to tax the rich. Add weakening the IRS's ability to go after tax cheats and the ruinous and ludicrous expense of our wonky healthcare system and you have a mess. Americans want all the benefits without paying for them. marvelous how the Scandinavians get good services. Sure they pay through the nose, but they can sleep at night and it appears their standard of living is as high as ours.
You, as an economist, know that high taxes do not redistribute wealth or income, they destroy them.
If you’re goal is equally shared misery and a much poorer society, you’re guaranteed of success.
But why would anyone wish to see massive amounts of wealth destroyed rather than see it unequally distributed?
The “rich” are already heavily taxed; far too many Americans pay no taxes at all.
The problem with the county is not that “the rich” have too much; the problem is that too many people are best with envy.
If your neighbor is rich, GREAT!! If he didn’t steal it from you, keep your mitts off of stuff that doesn’t belong to you.
No one is poor because someone else is rich. In a free system, some people, by dint of talent, effort, and luck, will outperform others; so what?
Aside from malice, what explains the leftist desire to destroy?
2
Thanks to progressives, this country has outlawed discrimination against people based on race, creed, color, sexual orientation, and similar factors.
Thanks also to progressives, not yet illegal but certainly and thankfully socially opprobrious has become morally repugnant discrimination based on such factors as body shape - "fat shaming" and the like.
I was delighted to see that the New Green Deal proposes to deal with one of the last bastions of pernicious discrimination: Against the unwilling to work. Lazy people are still people and entitled to essential human rights like guaranteed income.
My understanding of taxes is for each member of a community to pay a reasonable percentage of the cost of communal benefits. Can someone explain why it is fair for me to use the same (shattered) infrastructure and other communial benefits at a considerably higher cost than others?
I can live with a flat percentage based on income, but an escalating one seems punitive and detrimental to the entrepenueral spirit that is vital to our fiscal health.
I think Jamie Dimon's arrogant quote here is worth attention. When he says "as long as" the money goes to the right place, he is trying to exert control over where his taxes go. That's not paying taxes. That's refusing to pay. You don't get to decide, except via democratic institutions. You don't like where it gets spent? Tough. Vote for someone else. Lobby, legally. I don't like all the military spending. I want it cut in half. Do I get to not pay that portion of my taxes? Nope, I don't.
36
In addition to taxing capital gains as ordinary income, let's also apply social security and medicare taxes to all unearned investment income. 15.3% of unearned investment income would address the social security/medicare insolvency problem.
1
So we tax the über rich. Outside of making the masses feel better, how much money are we talking about here? I've asked this question several times, yet never have I received a response. I assume that it will be a continual flow of money from one year to the other. The followup to this question I've asked previously is; what specifically is to be done with this revenue? Since we'll be getting, from all accounts, a tsunami of $100 bills washing over our country our lives should be better off, no? Will any of this windfall go towards reducing our $21 trillion dollar national debt and why not?
1
There sure are a lot of NYT's readers who are for raising taxes, as long as it is on somebody but themselves. It doesn't make me optimistic that we're ever likely to implement something like Medicare for all, or any of our more ambitious liberal reforms, because most will require middle class tax increases. Raising taxes on rich people only raises a limited amount of money.
2
People forget that the tax changes (lowering rates) made under RR also greatly reduced deductions - that was the tradeoff.
My father was president of a very successful corporation -- we lived a very rich life in NYC. The difference was it was mostly supplied by the company ... this was the difference. Executives lived well off the company and received what could only be described in todays terms as "modest" salary. By the late 70's my dad's effective tax on his income was 80% (federal/NY state and NYC) ... it was crushing w/ 5 kids and college. All the company perks kept flowing .. but, we had no money. After the changes my dads income had to increase to pay for what was once a business expense and his tax rate went down ... he became wealthier.
The benefit of the above before the changes -- wealth was tied to employment. My dad had a great pension -- but he was never going to be a wealthy man. His pension died w/ my parents death. Today he would be paid 10m + and all of us would have inherited millions of dollars.
You can't tax people 70=80% unless much is deductible -- it's impossible. The old way was better IMO. We have too much inherited wealth.
1
Hmm, charitable contributions...I appreciate Rattner's position. However, if we deincentivize charitable giving, we need to provide alternative support to valuable programs. The deduction for charitable giving is in many cases the only governmental support still existing.
The National Endowment for the Arts, for example, is constantly under attack. The result of these attacks means that individual artists have a much more difficult time in our country finding funding, unless they, yes, market their work. Someone outside (and some inside) the art world may think this is a just solution. However, it is limited.
American Art is increasingly oriented to only the privileged few. Artists who succeed financially in our culture are those who make work for corporate lobbies and offices, or tailor their work to the collecting class. Collectors buy Art not because of its social value per se, but as a financial investment, then secret it away in a climate controlled space so as to protect its value, sort of like bagging a comic.
Art that challenges norms, questions Capitalism, or encourages change by making people uncomfortable, does not sell. People don't often want it in their corporate lobby. With exception, this art is only actualized through non-market forces. We need to find a way to effectively support it. Charitable giving can do that somewhat because it provides a private source for funding. Unshackling the NEA, though, would do wonders.
I am a tax attorney and agree with most of Mr. Rattner’s proposals. One major area I disagree, however, is removing the deduction for charitable contributions. Trump’s so-called Tax Cuts and Jobs Act has been punitive for tax-exempt organizations in myriad ways. First, because the Administration would like non-profits to have to compete with for-profit corporations, the TCJA is forcing non-profits to pay punitive taxes on things like providing free parking for church/synagogue employees. Second, because more people are taking the standard deduction (and can no longer deduct charitable contributions), much-needed charities are struggling with reduced funding. And third, because the TCJA doubled the exemption for the estate tax, fewer large estates are making end-of-life contributions to non-profits in order to get below the taxable threshold.
Although I agree that the NFL should not enjoy tax-exempt status, most non-profits do important work, and with an administration that slashes the budgets of federal agencies left and right, the work of non-profits is more important than ever. Any proposal that squeezes them further should be met with opposition.
1
While much of the debate on taxes involves income, and the focus on rich versus poor is income disparity, the other option for tax reform is wealth. Why do we only tax wealth upon death? Current income can be manipulated to avoid current taxes. Assets tend to accumulate but with better ways to track assets wherever they are, someone who has benefited from living in America can be taxed on assets exceeding X.
The super rich people want to make the country to circle a loop again with the same old mantra: “in particular, by increasing the tax rate on capital gains and dividends and closing loopholes.” They want the prolong the fight, confuse the public, and stay exactly the same way with their tax rate.
Just raise the marginal tax rates to 95% for annual income above 10M; 70% for income above 1M.
Also apply the wealth tax! Without taxing the wealth that they already accumulated by distorting the system, the wealth inequality will still live on. TAX THE WEALTH!!
1
@Ryan Envy...if Ryan were smart enough and worked hard enough and earned a million dollars/year he'd be singing a very different tune.
I read both of Mr Rattner's proposals and agree with his proposal to tax capital gains at the same rate as income tax, but I would like to add a few more things to tax:
1) Add a transaction tax for selling stocks and bonds. Over 7 billion shares are traded each day in the US. The federal deficit for 2018 was $780B - doing the math - ($780B /261 working days / 7 B shares) = $0.43 per share. (It could be taxed at as a percentage...) As a side benefit, maybe all the micro-trades would be exposed- shades of Moneyball.
2) In addition to reducing the estate tax deduction to maybe $2M, make that deduction per recipient - 5 heirs, $10M. Some heirs are really good with money, some aren't and will "stimulate" the economy by overspending.
3) I don't agree with taxing capital gains at death, but taxing capital gains at full board when the heirs sell is okay by me. Computers can certainly keep track of buying /splitting /selling these days just fine.
4) Life insurance should be part of the estate. No special treatment.
5) Bring back the 10 year charitable distribution mandate. No more self-managed/whenever distributions.
6) Yeah, until the deficit is paid back, a 1% wealth tax.
7) Capital gains should be considered self-employment for FICA purposes.
8) And, finally, for medical insurance, mandate an additional FICA percentage for workers. FICA is deductible.
1
Nice to see an article on taxes that strives to be thoughtful and fair.
I would only add that simplifying the tax code is also a necessity. Eliminating most deductions and increasing the standard deduction would go a long way to making filing taxes easier.
And let's get rid of the marriage penalty. Rates for married people should be exactly double that of single filers. Not slightly higher.
1
So Jamie Dimon agrees to pay more into the pubic treasury "as long as the dollars are going where they can be most effective." I suspect his idea of "effective" is "back in my pocket." Actually, all tax dollars end up back in the pockets of bankers and businessmen. Spend on infrastructure? The big engineering firms, construction companies, software companies, heavy equipment makers, get it. Food stamps? The big grocery chains and agribusiness companies get it. And on and on. Doesn't he realize that? He should be cheering for ALL government spending because all of it comes right back to his tribe.
My husband and I are both self-employed, so we both pay DOUBLE Social Security tax on 100% of our income. So our marginal rate on earned income (including CA state taxes) is often as high as the 50 percent Stephen Rattner whines about having to pay. And we make WAAAAAYYY less money than he does. It seems to me that he can well afford to contribute more.
Why not raise taxes gradually and see what effect each level has? Isn't that more scientific than guesstimating 70 percent and going right to it?
It was encouraging to read this piece, a dialogue airing plenty of good ideas. The relative merits of those ideas, though, does not strike me as the main issue; the ideas are good, the specifics and balance of their implementation can be worked out; right now, it may be the discussion itself that matters most, the growing recognition that some combination of these approaches is justified. If we continue to amplify the discussion, to make it prominent on the opinion pages and around the dinner table, then translation from talk to legislation has a chance.
1
I would advocate a universal flat federal income tax rate to 20%, but with no deductions for anything. Eliminate step up in basis for inherited assets. Eliminate unlimited spousal exemption from inheritance tax.
If you are going to tax capital gains at the same rate as wage income, then the basis of the assets should be adjusted for inflation.
1
We don't have to tax the rich to make this a country where the economy works for everyone (although it would be a good start.) There are other things we could be doing as well.
One is raising the minimum wage to $15 an hour for a start - and indexing it to inflation.
Another is giving everyone a basic income and making access to more education free - or heavily subsidized at least. This would allow people to pursue work on the basis of what they want to do, not what they have to settle for.
Another would be to give employees a voice in the management of corporations. In Germany for example, company boards include employee representatives, to get their input from the bottom up, and a voice in decisions. Running companies exclusively to benefit shareholders is one of the big drivers of vulture capitalism - and that only benefits the financial class.
Single payer healthcare may be a bridge too far for some, but allowing anyone to buy into Medicare would be an advance, especially with income adjustments for premiums. It would free people who depend on employee plans to look for better jobs or survive layoffs - and make it easier to start a business. While we're at it, add dental and vision care too.
Raise the cap on Social Security contributions, and raise benefits. That would make retirement more secure, and put more money right back into the economy.
We can do all that, AND tax the rich. It's not an either/or choice.
2
The wealthy have a wide variety of mechanisms to avoid taxes.
They can incorporate themselves, move money offshore, setup trusts, etc.
The debt is so huge, it cannot be paid down by any short term effort. So, every attempt to rationally address the debt will fail as various groups oscillate in and out of power.
The folks who promise responsible budgets to get elected simply don't do what they say.
So, my cynical opinion is we are the walking dead. We just refuse to believe what we see in the mirror.
"I’ve been in the working world for more than 40 years, in tax regimes where my marginal rate on earned income was as high as 50 percent and as low as 28 percent"
Steve, I don't care about your or anyone else's marginal rate. Effective rates are what matter. Marginal rates are a tool that can be used to create effective rates, decrease inequality, and achieve what democratically governed society things is equitable. Marginal rates by themselves mean little. My marginal rate is 28%, but when the marginal principal is applied, plus factor in IRA and 401k contributions and deductions, I pay an effective rate of around 18%. You seem to be using high marginal rates here as a rhetorical tool. It's very unhelpful to the debate.
2
If there are those who have been blessed with large incomes, Buffet and Dimon, and they wish to pay more, they can just stop using deductions and stop classifying income in beneficial ways.
You can also ask the governors of NJ, NY, Conn, Mass and Ill how the tax the rich or a simple limit of SALT deduction is effecting their revenue intake or their population movement.
FED TAX REVENUE
Nothing demonstrates how unpatriotic, immoral and destructive the Republican agenda for America is than its cry for reduction of corporate taxes. According to the Office of Budget and Management corporate taxes in 1950 amounted to approximately 25% of Federal Tax revenues. In 2010 the share of Federal Tax revenue that came from corporate taxes was reduced to approximately 7.5%... A 70 percent reduction. The payroll tax on working middle class Americans meanwhile has gone from 10% of Federal Tax revenue to 40%.....a 300 percent increase...putting the overwhelming burden of funding our government on the true patriots, the American worker. Corporate taxes need to be increased not decreased. Workers payroll taxes should be decreased not increased.
Nothing demonstrates how destructive the GOP agenda for America is than the reduction of corporate taxes. According to the Office of Budget and Management corporate taxes in 1950 amounted to approximately 25% of Fed Tax revenues. In 2010 the share of Fed Tax revenue that came from corporate taxes was reduced to approximately 7.5%... A 70 percent reduction. The payroll tax on working middle class Americans meanwhile has gone from 10% of Federal Tax revenue to 40%.....a 300 percent increase...putting the overwhelming burden of funding our government on the American worker. Corporate taxes need to be increased not decreased. Workers payroll taxes should be decreased not increased.
I'm a liberal democrat but the tax argument is looking a lot like we want to punish people who have "unjustly" profited from the system.
If the system is unjust the answer is a budget and tax system that is just. At least we are finally debating it.
Punishing the rich to maintain the status quo of an unjust system is a bad solution.
We need a budget that prioritizes what we want to do and tax system that funds it. Relatively balanced in good times, deficits in bad times and surpluses in very good times.
We need to increase taxes on passive income to bring it at least in line with earned income. We also need to expand the tax base and increase the stake holders in our government. That takes higher incomes among the lower and middle class. Organized labor is the best way to achieve that.
1
I think people should have enough money, health care for little or no cost, food and shelter. They are not rioting and suffering (beyond what happens in life anyway) in countries like Costa Rica or the Republic of Ireland. I started writing a lengthier comment but you all can figure out how to do this fairly.
1
I don't accept the presumption that we're in competition with other countries for the best deal for corporations. That's misguided.
We have by far, the largest market, most stable economy, and best protections, so if a corporation wants to sell here, it should be willing to pay it's way. Same for the billionaires who took advantage of the financial and structural infrastructure to get stinking rich.
The footprint big companies (like Amazon) have on the local economy is reason enough to raise taxes to pay their way.
But the biggest problem is the billions of dollars we spend on politics -- campaigns, advertising, lobbying, donations, etc. -- to shape legislation to benefit the donor class.
Fix campaign finance and many things will fall in line.
1
TRA'86 provided for capital gains and dividends to be taxed at the same rate as ordinary income. The rich did not like this and lower rates for investment income returned several years later. I have yet to find any solid explanation for the return to lower rates that is supported by anything other than "might or could cause" arguments to explain the return to lower rates.
Only real explanation is that the rich want to pay lower taxes and the politicians work for the rich.
1
Before you go nation-wide with higher top marginal income tax rates, I suggest you perform an experiment in your state first.
Raise your state taxes:
– see wealthy individuals and business move to other states
– see state revenues drop
I love capitalism, and I don't think rich people are (necessarily) evil, and I am still strongly in favor of progressive taxation and everything Mr. Rattner suggests. One can be down with all of the progressive economic agenda without necessarily loving their rhetoric. As Prof. Krugman explained today, a lot of people like 'socialism' because Conservatives have for decades labelled everything left of Goldwater as 'socialist', even though the rest of the world calls that mainstream capitalism.
I think the best argument for high marginal taxes on the very successful is not about 'fairness', which is pretty subjective. Rather, we live in a developed society, which sets its own rules to incentivize various kinds of behavior. Without society none of us would have accumulated more wealth than a shed full of squirrel skins. It is our prerogative as a society to set rules that improve the functioning of our own society.
I don't believe in the 'great man' theory of history, so whether or not a higher marginal tax rate causes 1000 hundred-millionaires to be marginally less productive, I don't think that would outweigh improving the lives of 300mn Americans, and thereby making them more productive.
3
Maybe the govt can start naming parks, highways, museums, sports arenas (whatever) after the people who pay the most tax in their lifetimes.
But make it a one-off. So Bezos and Gates would get one facility each with their names on them. List out the possible sites and such for naming rights. Prioritize them lowest to greatest, and let the naming begin.
It might do a great deal so salve the egos of people who've made lots of money, paid lots of taxes, and feel they've not been recognized enough or have paid more than their fair share. Recognition and celebrity might go a long way.
Always good points made by Rattner, reminders of when things changed for the worst as in Reagan's tax plan and the trickle-down theory his economist later resigned over, after making the plan, David Stockman. Yes, we need to look at capital gains for the wealthy, the inheritance tax again, and those so-called non-profits. We must plump up Social Security. Bush II made deficits the norm again, with Cheney's rejoinder that debt didn't matter. Not only can he not aim right, he's wrong on so much more. The most recent tax cut from Trump just screams the idea that the rich must be encourged to be wealthier, and the poor, well you know: always with us.
2
Fixing the tax system alone is not going to improve the economy for the bottom 2/3. We need to stop incentivizing the destruction of middle class jobs and economic opportunities by global capital.
Start enforcing existing anti-trust laws and pass some new ones to address the 21st century. Taking money from the wealthy and giving it to the government is not going to create the jobs that technology and wealthy are eliminating at light speed right now.
1
Deregulation did not "revive" the economy. Overall performance of the economy since 1980 has not improved. What deregulation did is increase the frequency of financial crashes. It led immediately to a rash of bank and S&L failures that were the main cause of the recession of 1990. And has Rattner already forgotten what happened in 2008?
The economy revived in the early 80's because the Fed reduced interest rates from the punitive levels that caused several recessions. Rattner should know this - if not he has little authority to speak about economic matters at all.
1
Thank you!
I appreciate Rattner's civil responses to comments. It also makes me feel as though comments are valued. We can and should argue about the details. As an exercise in many heads being better than one, this sort of back-and-forth is the best way to develop a good plan.
1
I really appreciate Mr. Rattner's responses to specific comments. NYT editors, please arrange more like this! (Maybe start with Douthat; I'd love to see him respond to commenters who often make much more sense than he does.)
3
Increasing the top marginal rate for Social Security premiums could be arranged to raise as much additional funding as would removing the income cap on contributions, but appearances matter. The optics of removing the cap are far better; the highly-compensated should be taxed more in proportion without limit. This is after all *social* security, not only individual security; part of the purpose of the program is to keep society happy and functional. Fairness and equitability are important for keeping participants satisfied. We can't have Warren Buffet paying the same amount in Social Security taxes as does his administrative assistant.
1
Is Dimon's idea just the arrogance off the uber rich? has a good idea. I
Mr. Rattner, the proper comparable to the charitable deduction is the business expense deduction. The government subsidizes/has a matching program for your private ("selfish") business interests so why shouldn't it have the same thing for your selfless interests?
Is Dimon's comment the arrogance of the uber rich? I would like a say in where y tax dollars go, too. It would not be bombs and walls. I would take an ax to the budgets of the Pentagon and Homeland Security.
1
I remember now... March 18, 2008.... Over the weekend, the Federal Reserve bailed out JPMorgan Chase.
No, that is not a typo. On Monday, JPMorgan’s stock closed up 10 percent in a down market, increasing the bank’s market capitalization by more than $12 billion. Even assuming that JPMorgan ultimately has to pay more for Bear than its $2-per-share-offer — a big assumption — the market’s initial view is that this takeover of an imploding Wall Street firm was a wealth transfer to JPMorgan’s shareholders of this amount.
Where did this transfer come from? Well, it came from the Federal Reserve and from Bear.
2
"Jamie Dimon, the superb chairman of JP Morgan Chase." No need to read any further.
I really appreciate this Q&A format with Steve Rattner. I'd like to see more of this style of discussion in the Opinion section.
2
Rattner stands hip-deep with all the other Trumpites. Call what you do "tax the rich" but then have the actual incidence fall mainly on the poor. You know, just like that "middle income" tax cut Trump and Friends passed which passed almost entirely to Rattners investment banking pals and other Davos attendees.
1
How much does Mr Rattner make and from what sources? I'm not sure he lives in the same world as the rsst of us.
1
Trump sowed the seeds for class warfare. And Sen. Warren's wealth tax is a good start in that direction. The greed of the super rich is insatiable. They already own 70% of the wealth, and unless we have some sort of wealth tax, their wealth will continue to grow until they own it all. They don't even have to work for it; wealth acts like gravity, drawing wealth to wealth.
As thinking Americans who value our thoughts, we tend to be heavily invested in finding THE best idea. But the flow of political and economic change in society is much less of a rational debate than a whirlwind of emotion, attitude, and the charisma of politicians than the pure rationality of ideas. Thankfully, the feeling that too much wealth is falling into too few hands is getting out there. Looking forward to see what comes out of the sausage making.
And thanks Mr. Rather for getting the ball rolling, and for dealing with us commentators. Could use more of that,especially from the guys whose opinions are a lot weaker than those who comment. You know who you are.
3
Lets just tax all income from wages, salaries, capital gains, inheritances, all at the same progressive tax rate.
Conservatives are always complaining about the Government picking "winners and losers."
Why are they picking those with Capital gains and large inheritances as the winners and those with incomes from work as the losers? Could it have something to do with who is financing their campaigns?
2
Oh, pity the poor rich, having to pay taxes. All these people making six figure incomes complaining that a marginal tax over 10 million or a higher tax on investment income will destroy their ambition. Baloney. The average individual income in this country is @ $30,000. Our education system is starved, our healthcare system is broken, our infrastructure is falling apart. Stop already with the burdens of the poor rich people. Greed is not a virtue. Taking more than your fair share of resources is not admirable.
1
I can’t get past Jamie Damon’s comment that he’s willing to pay more in taxes as long as he controls where his tax dollars go. This is why I find the wealthy to be contemptuous. Their arrogance is unlimited.
2
If we kill the "Fatted Cow" or the "Golden Goose" to have a feast today for the wealthy, there will be no feasts in the future. Our best interests are served by keeping healthy herds and flocks with enough for all to live healthy & productive lives.
On the one hand, we do not want a total welfare state where every deadbeat feels that it is his/her birthright to have all the same staples and toys of everyone else, including the super-rich. Investments in affordable, if not free, education is the only sustainable way to keep a healthy talented base that is productive. Many will castigate me for my belief that laconic nature & overweight/obesity are 2 of our greatest dangers. We need a healthy, educated fit base to support our productive contribution to the world base AND to compete as the world is not standing still.
And on the other hand, when nothing that those on the bottom do gives them more than enough to survive until the next payday (My take home pay won't take me home.), we do have a problem. The top brainwashes the bottom to throw their reality out of kilter, preaching that they must have the same 75" UHD TV that their neighbor has and giving them life starving loans to pay for it so that the rich can have greater returns on those payday loans.
Summary: I disagree greatly with Mr Rattner but I do not go quite as far as AOC(I love her like Mr Rattner admires Mr Dimon.). We must have a balanced rewards for efforts system that allow growth from nothing to being rich.
Unfortunately I missed the first column, but I’m glad to see that Mr. Rattner is calling for dividends to be taxed as ordinary income. I have long argued for the same with the response often being something akin to are you nuts. When we see billions of dollars of stock buy backs it is ridiculous to argue, as some do, that we a need a lower tax rate on capital to keep the supply of funds for investment flowing.
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The Trumpublican tax cuts helped the rich, ad punished blue states. Then they took the money to buy back stocks, making many many more idle rich. They didn't work for it. They didn't even do anything but hire tax attorneys to file for them. They have FoxNews to propagandize for them, about how Trump, 60% idle and never misses a game of golf, is the 'workingman's" billionaire, said over and over on FoxNews. "Yes, tax the rich?" When? We are doing the opposite. Where is the bill in Congress? Will it be held like a carrot over the 2020 elections? Why not hire a full fleet of IRS tax evaluators, so they can do their job on the rich? A machine can do the 1040EZ, but rich people file a thousand page return, and the skeleton crew at the IRS would rather go after a 30k/yr tax mom, because they have no staff. Please don't speak until you have a bill unhand. This is all just talk.
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When he disclosed his personal wealth before working in the government, Rattner's net worth fell somewhere between $200 and $600 million dollars. He doesn't need that money. It gives him little to no pleasure, possessing it. He derives practically no utility from it. If tomorrow he had ten or five or one million instead he would still be able to afford his rent and food and insurance co-pays and whatnot. But our society would have at least two hundred million more dollars with which to do useful and necessary things.
He wants this to be a discussion about loopholes, and rates, and esoteric verbiage that can only excite an accountant. Instead let's talk about the Americans who starve and freeze while Steven Rattner and his ilk sit on more money than they can ever spend. Let's talk about the millions of Americans who live in constant anxiety and fear about how they will make the next month work out, and how we decline to help them so that people like Steven Rattner can pay less in taxes.
The only reason anyone thinks this is complicated or controversial is because the media gives billions of dollars a year in free coverage to people like Rattner so they can try to convince us that it is complicated and controversial.
He doesn't need the money. His fellow Wall Street traders and fancy business executives don't, either. America does. The problem and the solution are an inch apart.
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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.
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Right, Tax the rich!
1. What do you call rich?
2. Congress and state legislatures will provide so-called 'Loopholes' as they always have in exchange for 'legal bribes' called campaign donations for rich people who need accountants!
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Without 60 votes in the Senate, the House and the WH, it is difficult to see how any of these lofty ideas go anywhere but off into the ether.
Highly unlikely the Dems can obtain 60 votes in the Senate since it is rigged for the red states. Matter of fact, our entire political system is rigged in favor of the old confederacy and against the Union; wait until you get your FED tax return back this year. What a coincidence!! That's exactly how the Devil and folly would construct a political system.
The GOP knows what the Dems have to learn: tax cuts are easy, and the GOP can always find some Dems to go along with them, but tax increases are almost impossible.
"Stoics, who sought to exercise complete mastery over themselves, saw hope as involving both dependency and incompleteness, and so viewed it with suspicion."
Terry Eagleton
Criminalizing success and wealth creation is a great idea. How come nobody ever thought of that before?
eliminate the cap on Social Security taxes, and raise the top marginal tax rates, and tax capital gains as regular income...also, you write about the possible marginal tax rate in New York...why not New Hampshire (no income tax and no sales tax)?...I think the deductibility of state and local taxes should be eliminated...
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Stop using “Marginal Tax Rates” – it’s only a data point. A point for lobbyists and special interest 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!”
The effective tax rates generate revenue. 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 (105% 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.
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An article, the authorship of which befits not only a crypto-socialist radical Democrat, but any card-holding member of any of the anarcho-socialist-communist parties. It is driven by the envy of the "haves" by the unfortunate "have nots", and it has understandably no plan for improvement of the latters' lot from the redistributed or rather confiscated wealth.
Tax the rich! And don't just tax the earnings they claim at tax time. Tax their wealth - the trillions hidden in their offshore accounts that never see their tax returns.
In a country where 1 in 4 children do not know where their next meal is coming from...for god's sake!
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America's founding, in a large part, had to do with a fairness doctrine. Whether it be for religious freedoms, economic opportunity, or taxation without representation. (OH yeah, by the way, the immigration occurred from Europe, who were all governed by authoritarians, otherwise known as King's.) So people escaped this "class culture", defined by economic discrepancies, even greater than todays. (Note 2 - NONE of these "Kings" remain in power today, or as "ornaments" of the past.
So Mr. Rattner, you and other "masters of the universe" think so very highly of yourselves, and most of you really believe that you deserve every penny of the wealth your accumulated. You're not that smart, and you don't.
While you are likely smarter than most of us, it's the economic system, that the "Middle Class" funds, and has since the beginning of time. Our money, built the highways, the education system, the technology infrastructure, and innovations, that have allowed the rich, to be rich. And increasing, we are being "taxed without representation".
Corporate and wealthy political contributions now control policy, for both parties, and the suckers (Middle Class) gets smaller and smaller, have had nearly now wage growth in 20 years, still pay the bills. Last years tax bill was nothing more than a giveaway to the corporations and people who least need it.
It's time to "bleed" both, and steer the funding to the majority, "fairness" should be the order of the day!
How about not taking money from others that isn't yours? This rising leftism is going to be Trump's only path the victory. The center, including myself, won't tolerate this latest round of "soak the rich" policymaking.
I think the headline should be: "Let's talk about taxing the rich. But let's not actually do it. Talking about it is more fun."
The estate tax has been one of the worst scams pushed by the GOP, and they did right over the political malpractice of the Democrats, but I'm glad the middle class is finally waking up. Our kids pay taxes on the money they work hard for. But some Paris Hilton who gets $10 million for doing nothing but lying around the pool waiting for their parents to die don't have to pay any taxes?
Don't get me started about the total fraud that is the step-up basis.
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 withe the size of the estate."
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As Rattner noted, Jamie Dimon has said he'd pay more in taxes if the "dollars are going to where they can be most effective."
And therein lies the problem. Mr. Dimon's idea of where tax dollars should go is very different from that of most Americans. Polls have routinely shown that most Americans have different opinions from the uber wealthy when it comes to where the gov't should spend money. And Mr. Dimon's vast wealth also gives him vastly more power to influence the gov't in how that money is spent.
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Lifting the cap in social security taxes is not equivalent to raising the top marginal rates. The social security revenue should be dedicated to replenishing the trust fund; special interests would have different designs in general revenues, and bolstering the social safety net is not among them.
Those of us to whom capital gains accrue within a tax deferred retirement account, (401k, IRA) already pay capital gains taxes at the full rate. Another gift to the rich.
@Steve Bruns Is that actually right? If the account is tax deferred, the capital gains are not taxed while in the account. When you take the money out, it is taxed at your ordinary income rate. So I don't think you're correct on the details.
(Though many of us do pay higher effective rates than the rich for other reasons.)
Using scare tactics to force concessions is what right wing extremists are, and have been doing for decades. From Rush's incantations that "Liberals are destroying America" to Trump's invading brown hordes, the extreme right wing has moved America, or scared America toward their Dystopian realm.
On Cap Gains, isn't there a combined income threshold ($75K?) where no gains are taxed until it is breached? So if you earned $50K you could realized $25K in cap gains and not pay tax on those gains?
Social Security funds are solvent for another16 years. Where as Income Tax funds have been insolvent for decades. The current $21 trillion in National Debt is the result of too few income tax dollars, not too few payroll tax dollars. SS is the largest CREDITOR of the National Debt.
Just sayin.
Regarding seniors taking the short end... How about removing the 7.2% of AGI threshold for expensing medical expenses. Companies write off 100% of their expenses, individuals should too. Imagine if tax law said companies could deduct only those amounts that exceed 7.2% of their gross?
Estate taxes got the huge exemption increase and yet maintained the step up basis. Maybe allow step up basis on the first $10M and then start taxing them at progressive rate.
Finally, Reagan's big tax reform cut the top rate but didn't it also raise the bottom rate (to 10%?) as well?
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"but I’m not sure why the government should be in the business of providing subsidies of this sort."
--because the government has been cutting back the social safety net for 40 years and charity is now the last resort for many people on the edge, so this seems like a fair and responsible thing to do until we modernize and expand social welfare programs.
Instead of increasing the capital gains tax and hurting the small investor, we should raise the minimum wage to a living wage. People who work at least 40 hours a week should be able to have a roof over their heads and feed their families.
One fixed rate for income of all kinds with large personal deductions and the EIC left intact while eliminating all other deductions would reduce paperwork and tax avoidance. A ~.5% tax on all transactions would target only those with large disposable incomes. Paying a large sum once a year is an anathema to most tax payers. A regular tax is just a continuous minor nuisance. Targeting classes or individuals will only breed a backlash.
@Mhevey -- a friend always said that if tax day (April) was the week or month before election day (November) then voters would go to the polls newly refreshed on the taxes they (just) paid. Right now we have 6 months to forget the sting of the tax hit.
The only thing I appreciated from reading this column was no mention of the rich paying their "fair share". Instead, the word "more" is used. At least that's honest. I must have missed the debate as to why government, every level from local, state and federal, continually need more money.
I also appreciated reading the "Times Pick" of many commenters who are professionals and are making six figure incomes due to their talent and hard work but don't want to see their taxes increase to exorbitant levels.
By the way, Mr. Rattner's view that President Reagan tax reform plan that eliminated "loopholes" made me laugh. Those loopholes were mortgage and interest deductions that even lower middle class families like my parents used. Those deductions reduced their taxes. I was always fearful that lowering the tax brackets and getting rid of various deductions would someday lead to.... just increasing the tax rates again. Precisely what's being debated.
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@Ben R The loopholes that he removed include those that you mention, but also many of the tax shelters used by those with enough money to make it worthwhile.
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@Ben R -- Govt's continually need more money because they do no take in enough revenue to cover expenses.
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So, Mr.Dimon offers to pay more taxes “as long as the are going where they can be most productive.” Ah, the rich and powerful are different than the rest of us...they believe their wisdom outweighs those of elected legislators, who generally make these decisions. So, I wonder...is feeding hungry children “productive?” Is heating the homes of the impoverished elderly? Is building roads—or does that depend on where, precisely, the roads are built? I am betting that tax benefits to corporations are considered terrifically “productive,” but what about munitions contracts that enable warfare—productive or destructive?
That’s the thing about taxes—we are all willing to pay for the things we value, but our only tool of choice is the voting box. Mr. Dimon demonstrates why CEOs should not be presidents or policy makers (as the current occupant of the White House so perfectly demonstrates). Unlike corporate leadership, there is no real control. It is all about moral suasion and reasonable compromise.
America should tax the uber rich in a manner that makes them pay their fair share, measured not in absolute dollars but in the impact on their incomes because that is how average Americans judge their tax burden — is there enough left for me and my family after I render unto Ceasar (or the US Treasury, as the case may be) what is his to demand?
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@Rosemary Kuropat -- Would be interesting if the tax form added a page that let each tax payer give input on where and how they want their tax dollar(s) allocated.
A bubble sheet like any exam test where they select where they want their tax dollars spent. Might be nonbinding, but would be a window into how Americans think about taxes and services.
Too bad AOC didn't live in Britain in the 1960's, where the maximum tax on earned income + investment income topped out at 98% and there were stiff inheritance taxes as well. In those days, Britain was known as the "Sick Man of Europe" because of its poor economic performance. In the 1970's, the Economist magazine contained lots of ads encouraging people to open high interest rate accounts in the Channel Islands, notorious tax havens in those days.
Personally, I have never been upset by that fact that Bill Gates is a billionaire and I'm not. I have been using Windows products since version 3.1 and have never thought I was being gouged by Microsoft.
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@Howard Jarvis -- the 60's was a relatively short time since the end of WWII when much of Britain's infrastructure was destroyed. And how much debt did they take on during the war? If they were trying to rebuild their infrastructure it might explain the high tax rates. Plus, their population is relatively small compared to the U.S. so they could only move forward to these extents.
Today's debate on the Goldilock's tax rate is dealing with different inputs..
Gee, wait a second. How about reigning in all the spending? Cut each and every Department agency by 15%. Cut Defence by 20%. The government barely registered a blip with the government shutdown. That goes to show the amount of bureaucratic waste in current budgets.
@Del Miller Can we have a list of what programs you don't think are needed? I don't think you are aware of all that happened that is quite unfortunate for a lot of your fellow citizens as a result of the shut-down (though I'm not sure how you could have missed it), but I'm open to your specific suggestions.
So often, the 15% (or more) that people believe to be waste is simply things they don't care about that others do. I'm happy to cut the 15% that you care about that I don't; I'm not so happy to cut the 15% that I care about that you don't. Compromise results in each of us paying for about 15% of things we don't care about in order to get the remainder that we do. Real life.
Tax capital gains as ordinary income, but adjust the amount of gain for inflation.
@Michael Dulin -- and set a realistic threshold to begin taxing them. Retirees living on fixed incomes (Social Security) and gains off their nest eggs should be allow a minimum (combined) AGI before paying cap gains.
Some interesting ideas here. Another idea is to have a 'holding' tax. I don't mind people making a lot of money if they truly earned it and it is appropriate. but I hate their rationale that they deserve this because they are the doers and are great for the Amercian economy. Instead I see people taking WAY too much $ out of good businesses that could be used for R&D, new product or service development, new locations and more employees at a better wage. I see these very high wealth people as taking $ OUT of the economic system and stockpiling it where it do no good. So we need a holding tax for money taken out of the economy and basically sitting around doing nothing, and also off shore. They aren't creating business with this money, they are hiding it from flowing up, down and all around the economy. This is anti-capitalism. I"d say above $10-15M, any money just sitting around should get taxed at a very high rate and that money go into business development and starter loans and training in poor rural and urban areas. Their investments would get less credit than actually starting or running a business because it does much less for the economy.
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I'm one of these odd people that think everyone should pay taxes - all of us. I pay about 45% now and I don't think that I should pay more than that. I see many people who pay nothing at all. Even the poorest person should pay something - we all need skin in the game. But take away the loopholes. All of them. Take away the mortgage deduction, contributions, etc. Everything. Level the playing field in that way. If my taxes get about 50% I will probably stop working or get a job that pays less.
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It is interesting that billionaires fight tooth and nail to keep money they will never spend and quite often give away as political contribution to corrupt the system or to put their names on buildings. Why not implement the wealth tax proposed by Senator Warren and use the money to fund specific projects identified by congress and let the wealthy select among the various project. We can even put their name on inner city schools, hospitals or highways their money built rather than on luxury research centers in big universities with huge endowment.
I have long been OK with higher taxes for high earners (I realize that it is easy to be for such taxes when you do not have to pay them). Steve is probably correct that 70% is too high. People will work around such a rate anyway (deferring their comp, bigger charitables, switching their closely held companies to C corporations, etc.). One of the things we must realize, however, is that there is not nearly enough tax revenue available from the upper earners to fund the various ideas that are being floated. They will require massive middle class tax increases. So, go ahead and raise taxes on the wealthy to a level that will not stifle innovation, but, realize that is only part of the game. The higher earners taxes may help close the deficit, but, new programs will require that the rest of us pay.
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How about a 0.125% (0.00125, so people don't think I'm saying 1/8) tax on stock and bond trades?
Why is moving money around more valuable than teaching, treating sick people, or being able to fix things?
Why is anybody being paid a quarter of a billion dollars to play a sport? That's easy. Why aren't we taxing them at 80%? That's a bit more difficult, apparently.
The relationship between capital gains tax and the tax on earned income should vary and it should be set based on policy concerning whether or not to incentivize investment. That has its own logic. How to tax surplus wealth is another issue rendered urgent by the present entirely unsustainable level of inequality. It should be done through a combination of estate taxes, income tax and wealth tax. Perhaps wealth tax should be in the form of a tax on uninvested wealth and it should be coordinated with capital gains policy. Billionaires might kvetch but aside from affecting a statistic associated to their annual tax documents it would affect their lives vanishingly insignificantly whatever they say. What is the diffference in lifestyle beween having 10 billion and 15 billion really.
Social Security is a flat tax on wages that penalizes the most lowly paid up to the exclusion of those earning more than $132,900. Treating cap gains and dividends as ordinary income is a start - all income should be treated equally and taxed equally. And so, expanding FICA taxes to all income, would bring in more funding for social security as well as likely reducing the rate substantially.
In addition, all forms of ‘percs’ and/or deferred income (options, stock awards, etc.) should be taxed as current income excluding only IRA’s and other legislated retirement accounts.
I like the idea of taxing unrealized capital gains at death. The problem is that inheriting a business or farm that has greatly appreciated can require selling the asset just to pay the tax. With special provisions for real assets such as those (long term schedule to pay such a tax) I agree it is reasonable.
For those who are nervous about the rich paying more taxes or have the impression that it is really not "fair" to tax the rich more than they pay now (most people?) should take heart from this article and discussion. I wish MORE would be said about the phenomenon of "money making money". Once a sizeable nest egg is obtained - let's say assets from investments totaling 1.5 million or more - that nest egg, even with the most conservative of investment strategies, begins to make considerable money on its own. And it just sits there and grows during times of moderate to great prosperity. Those assets allow one to hire experts to manage investments to guard against recession and to benefit in other times. That maximizes growth with "no work" by the investor. And this "unearned income" also called capital gains is taxed currently at lower than "regular income" rates. The argument that the "rich" work harder and deserve tax breaks is so spurious - is patently bogus - when one sees this actually happen - "money making money". How could it possibly be considered "fair" that "unearned income" is taxed at a lesser rate than earned income? Rattner essentially agrees with the fairness of raising tax rates on "unearned income". But why? I go back to the point that "money making money", as opposed to "working making money" provides the WHY. Maybe "unearned income" should be taxed at a higher rate since at some point it represents income derived from no work at all.
Interesting discussion. I have a suggestion, solicit voluntary contributions from private wealth, (not charity foundations owned by wealthy real estate developers as a tax shelter) to retire the debt. Once a person or family contributes, say $50 million, that person's name is added to a wall in the capital as patriotic citizens contributing to the health of the nation. $ 1 billion, you get a statue. And the list of contributors is published yearly (while the newspapers can find those billionaires who didn't contribute and publish that list as well).
I'm fine with taxing capital gains as income, provided they are gains: this is to say, you should be able to calculate use as your cost basis the actual cost inflated into current dollars.
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Why tax the rich? Because that is where the money is. The alternative is to rob the bank.
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as a conservative, I'm not oppose to increasing taxes on the rich, but to give Ocasio-Cortez so much attention for a plan that offers not just raising taxes, abolishing air transportation, gas powered cars, universal income for those who choose not to work is just insane. Suggesting that we move 80% of the country who has private health insurance to Medicare for all is clearly not going to get any traction from those who like (not love) their current plans. Lastly, it seems we are comfortable with how much the Federal Government spends today to the point that we would want them to spend trillions more. These progressive programs will ensure a Trump victory in 2020, the progressives may want to re-think their strategy and programs as they will not sit well outside the extreme blue states.
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I have always thought that the simpler the tax system is, the better. Transparency and openness are virtues. A few years ago when the French economist Piketty visiting MIT came out with the 1% wealth tax, the rich (all over the world) and their defenders of all colors, the Wall Street Journal included, trembled. Nothing has happened since. Tax rates above 50% are hard to justify and will not bring as much resources as the 1%wealth tax.
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Why can't we have this debate in Congress---reading this entire piece helped me understand how taxes worked for the rich and middle class but more importantly, would at a minimum, provide the basis for shaping effective tax legislation. This type of discussion is what our Congress should be doing on a daily basis. There are a number of pressing issues---health care, child leave, climate regulation---that deserve this type of deliberative discussion. And, if we had a responsible media, this type of discussion should be televised. Speaker Pelosi and majority leader McConnell need to restructure committee hearings that are merely show trials---Benghazi--to formats that lend themselves to substantive discussions of policy alternatives that matter to the American people.
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I've been arguing in these pages that the earnings of a dollar bill invested while sitting on my couch should not be favored over the earnings of a day laborer who had to sweat to get it. Both should be taxed as ordinary income. Now I would like to see a discussion of reducing or eliminating taxing levels of income that barely can support life for a family. If this country is truly the shining city on the hill, none of our citizens should have to choose between buying medicine or food, paying the rent or giving up the car. An economy is a machine of many moving parts. Someone might be a small cog not the ignition switch but without enough grease to permit free movement to contribute their part the whole machine is bogged down.
Unless corporate taxes are included in the mix, American society will continue to suffer massive inequalities. Most corporations pay very little in taxes, and are able to offshore which allows them to hide profits. It's not just the ultra wealthy, of which there are very few, it's the big corporations, which as we know, are now 'people', so they should pay up like the rest of us and contribute to our society, rather than just take, take, take while giving little or nothing, back.
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What about a tiny transaction tax on stock market transactions, which Wall Street has fought tooth and nail?
This is all cogent, data-driven stuff, but it seems to no avail. The chart that matters is the effective tax rate, which evidently has been fairly level for decades, even when marginal rates were high. So what the advocates really want is the appearance of taxing the rich, assuming (reasonably) that if the marginal rate increases to a politically satisfying 70%, the taxpayers in that bracket will find or receive loopholes and exemptions that bring their effective rate back to the norm. Or those of us in NY should hope, lest the mission here is to drive the extremely mobile high earners out of the high tax states (to avoid the cumulative burden), a problem already being suspected in Cuomo’s revenue forecasts.
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I don't understand this aversion to a top marginal rate above 80% - it's a view that lacks any historical perspective. From 1940 through 1965 the top marginal tax rate averaged just over 90%, and from 1965 through the early 80s it averaged about 70%. During that same period average overall tax rates on the wealthy were only slightly higher than they are today. Sure we were paying off the debt from WW2 through 1965 - we're facing comparable levels of national debt today, coupled with pressing needs to reform health care before it eats our economy whole and to put a more sustainable foundation under critical entitlement programs like Social Security. People like Mr. Rattner seem to forget that we built the greatest economy the world has ever seen while taxing very high incomes at confiscatory rates - a practice that helpfully drove corporate managements to take sensible compensation packages (reflecting something closer to what they were actually worth) and ensuring that the gains from growth were shared down the organization in ways we simply do not see today. Time to get back to that, before the whole enterprise blows up in our faces.
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@Michael Hogan
Once again, during those golden tax years in the 1950's, ALL federal income tax rates were about double what they are today. The rich paid more of their income, and so did the middle class, and almost anyone with reported income.
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@Bob Krantz are you implying that it was better in the 50th's - are you insane - take a look at employment, poverty, economic growth, wars we were in and about to enter - you're kidding right? btw - the effective tax rate was much lower then, as the number of tax breaks offered to the rich were significantly greater than today, just look at the SALT tax, your telling me that's not killing the rich in NY and other blue states, just ask Governor Cuomo!
I've not seen a mention of the fact that we already have a reduced capital gain tax rate -- zero -- for people in the (former) 10% and 15% brackets. My wife's and my primary source of income is Social Security, but we also own stock outside our IRAs that we have been liquidating for years at a zero federal tax rate, which has enabled us to pay no federal income tax most years.
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@Portland Early Riser when I first heard this a few years ago I didn't believe it...it's still hard to believe...
Keep the exemption from cap gains ( stepped up basis) in place for those below the threshold ( I agree that we should lower it). This can give a family with less assets a better chance to have their heirs "catch up" with the more fortunate, who would pay cap gains at death ( inheritance).
Why is it that when the proposal is to increase taxes on the super-rich we need to study, and justify, and yammer, and agonize over things like whether the super-rich will get out of bed in the morning (or alternatively just lie there and pout all day), or whether there will be a "flight of talent" (as if the super-rich are so many migratory birds who'd expatriate en masse and leave their homes and families to save some marginal bucks on top of their already vast fortunes), and also (of course) make sure it's OK with Jamie Dimon, and on, and on, and on...
But when the Republicans want to give the super-rich a massive tax break, they just do it. No comprehensive (or even cursory) analysis of the societal or fiscal implications. No Congressional hearings. No debate. Heck, no letting the public or for that matter the Democrats in Congress even SEE the draft of the legislation until hours before the vote. Just some half-hearted, walk-by-the-reporters mumbling about trickle-down and then BAM! The exercise of raw political power. Done.
Progressives need to take a page from that book.
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Rather than an income tax increase we should look at all tax exempt or tax deferred entities that have benefitted from tax deductible contributions and yearly benefit from tax exempt growth of those tax deductible contributions. We need a tax levied on those entities assets each year. This will reduce their yield by a small percentage but the revenue can be used half to reduce the deficit and half for progressive purposes thereby appealing to both party bases.
The US is a plutocratic anti tax country now. The IRS does not enforce taxes nearly enough against wealthy schemes and or fraud to evade taxes. They seem more interested in making sure people claiming the earned income tax credit are legit. Inherited wealth is one of the places where income disparity gets its most unfair boost. Donald Trump would be nothing without his fraud tainted 250 million$ inheritance. To say that a person who earns their money through capital gains, at a much lower rate than income tax, is a legitimate system is wrong. This country has vast wealth mal distributed with the most wealthy largely protected by politicians. The Citizens United SCOTUS decision promotes the interests of big money in politics. Which has created a perverse incentive to cater to the interests of the very wealthy.
1
Once the legislature relinquished the higher income levels from paying their commensurate share into the revenue, there's no turning back to higher withholding for those people and corporate entities. Only by means of a violent revolution, alas always a possibility in a society that counts over 200 million gun owners, could any such change be effected. I whose very livelihood consists of collecting and protecting the revenues of the United States Treasury do not hold out any hope for an initiative that purports to raise the taxes on the rich...
1
By all means, increase taxes on the rich, but it is not a panacea for the ills in the American economy. We also need structural changes to level the playing field and spread economic gains around, such as more stringent enforcement of anti-trust laws, and more power to workers by ending unfair arbitration requirements and barriers to organizing. And it is equally important the increased revenues are used in ways that don't reinforce economic inequality under the guise of doing the opposite. Let's not get so involved in debating the "perfect" tax law that we lose sight of the big picture.
The top 3% of taxpayers already pay 50% of the taxes. Sounds like they're already paying their "fair share" and the fair share of 47% of other people.
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@Smiley Jackson one would think that were true, but it's not...also, I'm sure the famous 47% would love to pay taxes (that would mean that they were paid a decent wage, and have enough of an income to pay taxes)...
Steve seems reasonable, but I have to say, I have no sympathy, empathy or concern for anyone so rich that they might find themselves subject to an 82.7% marginal tax rate. They'll still be rich, but they might have to sacrifice that $234M penthouse in the sky for something more modest, say in the $100M range.
@Peter also, I don't see how we can have a policy of federal taxes based on a few very high tax states...why not base it on, say, New Hampshire (no income tax, and no sales tax)...
"Soak the rich."
"Jamie Dimon, the superb chairman and chief executive officer of JP Morgan Chase, said he would be willing to pay higher taxes, as long as the “dollars are going where they can be most effective.”
Don't all payers want their taxes well spent? Do most grown ups who are not "superb" realize that tax money is generally not that well spent and there is no "willing to pay" decision to be made?
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Before we get around to figuring out what "their fare share" of taxes might be, it is necessary to understand why the federal government collects taxes. And such an understanding must begin by dissuading the simple among us of their unsophisticated views.
Firstly, the federal government doesn't pay for anything out of tax revenues. It pays out of its accounts at the Federal Reserve, and the Federal Reserve ensures it has enough money in its accounts by adding whatever is necessary by tapping a keyboard. That's it; that's all that's done.
Secondly, if you paid your taxes in cash out of your wallet, the Treasury would throw the bills you gave them into a burn bag and toss it in the furnace. The same thing, virtually, happens when you send them a check. They destroy an equal amount of money -- that is, the balance on its accounts at the Federal Reserve is reduced.
So why do we pay taxes? For two reasons:
1. To reduce the amount of money in the hands of consumers -- individuals and businesses. Less money means less demand and thus, less inflation. Note: rich people save a very large part of their income (thus, they don't cause inflation). A "fair share" is the middle class paying enough taxes to prevent inflation since it's the middle class which generates the demand for goods and services.
2. To prevent the creation of a feudal aristocracy -- the barons of yore. But it's not "their fair share." It's a social necessity to limit the power of our barons.
Around here in Scandinavia the thinking has long been "Tax capitalists, not capitalism", which is why corporate rates here have been lower than in the US. On the face of it, there's no compelling reason why not Democrats and Republicans alike should be able to run on that slogan (although the reverse policy may better endear you to billionaire donors, of course).
1
There are a lot of small investors who are not rich who depend on capital gains for income. Why increase taxes on them at all? I thought the point of a more equitable distribution of wealth, taxing small investors doesn't do that, taxing the very rich does.
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@Vicki Ralls read the article...
I see no comments or discussion about the unfairness of the capital gains tax because the cost basis is not adjusted for inflation. There is a big difference between a sale that produces a 100% gain from property held for two years and property held for 25 years . If the basis is adjusted, the gain may be negligible or could even be a loss depending on the inflation rate of the last 25 years. As a reminder, inflation hit 12% in 1974 and 14% in 1979. We have been fortunate with low inflation in the last decade, but this need not be the case in the future. And no doubt, baby boomers and the generation before that hold securities or other assets purchased before 1974 whose values have been greatly increased principally by the many years of inflation since the purchase. If the capital gains tax continues to be on the books, it should take inflation into account. But that is rather unwieldy and probably is impractical. A wealth tax and progressive tax rates on high earned and unearned income are fairer ways of raising money from the wealthy. Graduated rates for capital gains taxes would do not make those taxes fairer unless the cost basis is adjusted for inflation.
Many of the vastly rich in this country have made their wealth through unrealized gains. For example, Bill Gates's vast fortune in stock remains untaxed until he sells his shares. (But he does pay taxes on the dividends.) He is infinitely smarter and more enterprising than I am, but I have had to pay tax on a very high percentage of my total real income throughout my working life. The capital gains I get to defer are a vastly smaller portion of my real income than that of the 1% Taxing unrealized gains opens up a huge can of worms and may simply be impossible to execute. But the top 1% has a huge portion of the nation's wealth. If their unrealized gains were taxed, it could be huge in dollar terms.
I wish Mr. Ratner had said more about tax shelters, especially those involving foreign entities and real estate, that have the effect of making large amounts of income and wealth invisible to the tax system. A 70% tax rate is close to confiscatory and makes tax shelters even more profitable. Better to stick with a moderate maximum tax rate, say 35%, and aggressively eliminate the tax shelters.
I disagree that capital gains and dividends should be progressively taxed, because it would impact too many people negatively. The bill needs to stick with a higher tax for only those above a certain large dollar threshold (I'm thinking something that impacts thousands or hundreds of thousands of people, not millions) so that more voters are in favor of the bill - otherwise it will never pass.
I would think Steve Rattner is aware of this and hence why I am skeptical of his first suggestion that you increase taxes on everyone's capital gains and dividends...
Thank you for a rational approach and discussion about how to fix some of these issues. Very constructive.
I have one pet peeve here about the Clinton balanced budget commet. During his tenure the national debt increased by 40% - was that just off balance sheet financing techniques employed by the government? Secondly tax receipts were dramatically inflated by the dot com boom and not sustainable.
All that being said I still agree with the thoughts and ideas discussed here.
Anyone who is not a millionaire or billionaire will not be opposed to the higher tax rate on the rich. Which is to be expected but if the increased revenues are not going to pay down the debt and just allows congress to go on a spending spree then the country does not benefit. Many in congress will not have the courage to tax the rich because that could drastically effect their reelection campaign finance and could result in fewer jobs and less investment in the economy. Many may also leave to countries that have less taxes.
Boris Becker the German Wimbledon Champion used reside in Monaco to avoid high German taxes. Many rich NYorkers are leaving NY state for states like Florida, Texas, Tennessee to avoid state taxes if they are taxed more. The rich are not fools, they will stay rich somehow and paying high taxes will cut into their wealth. Talk of taxing the rich should go hand in hand with cutting spending drastically to balance the budget and pay down the 20+ trillion debt left behind by all the presidents before Trump took office. Howard Schultz is the only potential 2020 candidate who mentioned reducing the national debt. Not a word from Trump about a balance budget in his state of the Union. That is one promise that Trump seems to have forgotten. He did call the wasteful useless wars as foolish but then the defense budget was increased and his effort to bring home US troops has been thwarted by members of both parties.
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There are many interesting ideas floated by the readers. I am a fan of progressive taxation but firmly believe that the overall tax burden on individuals should not exceed a certain percentage of revenues (i.e. 50%) before it becomes a polarizing topic. I'm not a billionaire but pay approx. 46% and I'm fine with that. Additionally, I fully agree that it's about time we increase the ceiling on social security tax to secure funding for future generations.
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Why does the FICA tax stop when someone earns more than $130,000? There should be no such limit. That will solve the Social Security / Medicare solvency problem.
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@Horace
You'd increase the eventual benefits to those folks too, right?
1
"The whole point of Ocasio-Cortez’s plan, and similar proposals, is to tax specifically and only the rich, because they are the ones who are perceived as having inequitably and unjustly profited from the existing capitalist system."
That should mean taxing that wealth, not just future income. They've had forty years of that, and piled it up, and it has now distorted our politics and economy and government debt. That must be clawed back. It is not enough to say, "I won't do it any more."
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A refresher... virtually nobody paid 70% or 90% income tax rates when these were the top marginal rates. The code provided for many more deductions and adjustments to gross income such that taxable income was far lower than gross income.
Since WW-II, annual tax revenue has averaged about 17% of GDP regardless of the top marginal rates or any other machinations & loopholes that allowed people to reduce taxable income. If 17% is the 80 year average, then adopt a flat 17% rate on all income, no exceptions and scrap 90% of the IRS. 17% of a $100,000 income is $17,000 in tax. On a $1,000,000 income, it’s $170,000 in tax.
Under a flat tax system, ‘the rich’ will absolutely pay their ‘fair share’. Everyone will have skin in the game too, as they should.
1
How refreshing to have the GOP trope that all human activity is driven by financial incentives, that higher taxes over $10M would discourage entrepreneurial activity, etc.
Nonense.
The big drivers of industry, innovation and small business embrace risk, enjoy challenge and feel rewarded by the battle.
Changing their marginal tax rate 15% is psychologically trivial.
Carried interest was not emphasized here nor how to tax computer day trading. Let's take a nibble of that empty activity- let's reward work more than hedging risk !
3
@Sara
Day trading? That's not long-term capital gain. Ordinary income tax rates apply - or worse, like here in Massachusetts where short-term capital gains are taxed at more than twice the rate as ordinary income.
A test of whether the top tax rate is high enough might be: if Rupert Murdoch doesn't make the U.S. better off by moving somewhere else in the world, then the tax rate is not high enough.
2
"The whole point of Ocasio-Cortez’s plan, and similar proposals, is to tax specifically and only the rich, because they are the ones who are perceived as having inequitably and unjustly profited from the existing capitalist system."
Or maybe they worked harder to make a success of themselves and earned their spoils. Ya know, went to college/worked 16 hour days/came up with an idea or product that no one else has thought of. But let's go ahead and punish them for that. After all, the wealthy only pay the vast, vast, vast percentage of taxes already. If you don't think capitalism is the greatest system in the world, name a different system that has had a greater positive impact on the world.
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@Keith I worked as a worker bee at an investment banking firm for beyond modest corporation and when my group brought in huge contracts our central office overlords in a different city who had spent large sums of money without results co-opted our achievements an ultimately laid off everyone in our group for unrelated bogus reasons. The head of our branch, though he was not directly in the supervisory loop called the President of the company and eventually got us some competition which in retrospect was a pittance, So don't give me this myth that people who are making huge salaries and compensations are always the ones who deserve it through their as opposed to others hard work.
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@Keith
The bootstraps narrative isn't working the way it used to. Lots of people work hard and did well - bravo - but their success is also linked to what we have helped created.
Plenty of wealthy people offshore boatloads and this is just wrong.
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Keith,
Taxes are not a punishment. AOC is talking about billionaires and a 70% rate which would only apply to the amount over many millions. Billionaires would still have a lot of money left over. The poor do not have enough and the middle class would not have much left over. Neither of these two groups would be in the 70% bracket.
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I don't understand the idea that 82.7% tax rate on income above $10M would be too high. The idea appears to be that rich people would have an income above $10M. However, rich folks from long ago, such as Rockefeller, diverged their income to common-good causes such as the Rockefeller university, a top research institution. If rich folks did this, their effective income would be reduced and the 82.7% tax rate would never touch them. The common good would be served. Isn't *this* the actual point of the tax proposals? To get rich folks to do something useful with their money, something that serves the common good, rather than buy stocks or just put it in their bank account?
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Fallacy. Saving and investing is virtuous behavior - as it creates jobs and grows the economy. Consumption also creates jobs and grows the economy. Silly to value one over the other on economic grounds. (And people who do neither and put money in their mattress get punished by inflation.)
Both savers and spenders should be taxed. Taxes should be spent to fix things that inefficient markets won’t.
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@Jeff - "Saving and investing is virtuous behavior."
But speculation is not. There is a correlation between inequality & financial speculation. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746
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@R The $10 million income figure where the 70% bracket would kick in would soon drop to $5 million, then $1 million and perhaps to $100,000. In 1977, the year I moved away from NY State, the maximum state income tax rate reached 14% at taxable incomes above $23,000 for a single individual. NYC had a city income tax on top of that. Since then, the state has lost a lot of well paying middle income jobs and corporate headquarters. Much of the state's economy north of the NYC suburbs is an economic basket case.
2
I live in NY, am not rich but I do have a relatively high 6-figure income.
My taxes, taking federal, state, and local/property tax, is already approaching 50%. It was 42% last year, with the Trump "tax cut" I expect it to be substantially higher this year.
Why is it that the professional class--doctors, lawyers, etc have such an enormous tax burden compared to those above them and below them on the income scale?
Are we part of the "rich" that are going to get hit with even higher taxes?
I'm tired--as I think the majority of the professional class is--of being trapped in the middle. Apparently we make enough to suffer the highest possible tax rates, but not enough to have any political power like the ultra-wealthy.
My money is derived from my work, and the more I work the more money I make. There comes a point where I'd rather spend that extra hour riding my bike than being "productive" if my taxes are going to get raised yet again. At nearly 50% taxation, some days I don't know why I even bother working more.
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@John Welcome to the Republican Party. The answer of all answers is simply this: we have a government we can't afford.
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@John so wouldn't it then be a great time to enjoy your retirement? or contribution to something else?
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@John,
You are right; it isn't fair.
People whose income comes from their labor, even high salaried professionals, pay a higher rate that those whose income comes from capital gains and rents instead of salaries.
Revision of the tax code should rebalance the taxes to make capital pay it's fair share, and reduce the burden on labor. The rentier class has tilted the playing field in their own favor for far too long; inequality is increasing, and it's damaging our country.
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I definitely would like much more progressive tax system. As an upper middle class but not rich New Yorker I pay an inordinate amount of taxes and at a rate much higher than billionaires. The loss of state and property tax deductions has led to a significant increase in my tax burdens. Why should my tax rate be the same as billionaires? Why should I have paid the same exact maximum payroll tax rates over 40 years as Mike Bloomberg and Warren Buffett?
I feel that the tax rates should be incrementally progressive on payroll taxes as well as income taxes and that no one should be double taxed as residents of blue states are! I also feel that capital gains taxes and dividends should be taxed at a lower rate for average people than for the extreme wealthy.
Currently the top 0.1% have at least 40% of the wealth in the US. In my opinion our horrifically unfair tax system that favors the wealthy contributes greatly to this unfortunate and disgraceful situation.
Our tax system should help the middle class and not favor the wealthy class as it does. The Republicans should be voted out of office just for their recent tax scam that they rushed through Congress without any vetting and public scrutiny. It is sickening how they can get away with such horrible tax policies and continue to lie about it with little if any political consequences.
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@IN The reason you pay the same payroll tax as Mike Bloomberg is you will receive the exact same Social Security check on retirement as he does. That is the concept behind the program.
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@Todd
IN is right. He is paying a higher rate than the millionaires like Bloomberg, but he won't receive the same amount of Social Security as Bloomberg. The Social Security retirement benefit is based on years worked and wages earned. It is based on an average of wages over the highest 35 years of working.
The higher the income, the bigger the benefit.
And to add insult to injury, Bloomberg is getting a better deal on his Social Security taxes. Bloomberg only pays the payroll tax up to the cap (now around $132,000). If he makes way more, say $2 million in salary, he won't pay one penny more Social Security taxes for that money on any amount over the $132,000). So guys like IN who makes less that the cap are paying higher taxes relative to their income up front for their Social Security, and the millionaire is not.
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@Juanita No, benefits are capped at the maxim amount you pay taxes on. If two people hit the limit for the maximum number of calculated quarters it doesn’t matter whether they’re made 132k or 10 million the payments are the same
6
I agree with taxing capital gains and dividends at the same rates as "ordinary" or wage income. There used to be an argument to the effect that since corporations pay an income tax, a tax on capital gains and dividends was "double taxation. But now, after a huge corporate tax cut, and with most corporations paying an effective rate of zero, there's no reason to tax capital gains and dividends at a special rate....except that the .01% tend to make their mints with capital gains and would rather have wage slaves bear the cost of government.
As part of that package, I'd eliminate all the special breaks for businesses that stuck their hand out when the corporations got a tax break for 2018.
I have a sole proprietorship, that is, self employment, no employees, and I was able to deduct 20% of my business income off our taxes for 2018, in a complete surprise that I had to research to make sure there wasn't a mistake it seemed so crazy.
My wife, who works for someone, paid full freight. Why?
We are both working a job. We are both creating the same number of jobs..one apiece, by working. But I got a huge tax break.
It's time to stop taxing wages like they were a societal ill we are trying to discourage and start taxing capital the same way as wages.
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The problem with collecting on the estate tax is that wealthy individuals with large estates generally set up trusts for their heirs before they die, so they actually have very little personal wealth, even if they run the trusts. How do you forestall such unjust, but legal, accounting practices?
If you ‘run the trust’ then it’s not out of your estate and it will be included in your gross estate calculation and it will be included in the estate tax calculation. The grantor trust rules see to that. Trusts by themselves often do not avoid estate taxation but they can help create plans to handle the taxes. Irrevocable life insurance trusts for example use life insurance within a trust to pay taxes at death. But the insurance must be purchased and the tax is still paid - the death benefit just helps preserve the estate. With all due respect, you are mostly incorrect here.
1
Corporations do not pay taxes, they just increase their prices to cover the taxes at whatever rate is set. It's the consumer of the goods and services who ultimately pay the tax. Unfortunately when corporations do get a tax reduction, they don't lower prices but rather increase dividends, do stock buybacks or something similar.
1
Though I make use of the deduction, I fully agree that the tax deduction on "charitable" giving needs to be rethought and most likely revoked. Why should tax dollars, in effect, be given to the (predominantly) wealthy to decide on which of their favorite projects (eg, elite schools) should be funded?
The idea that the federal gov has to pay for things, good & bad, with taxes or borrowing is just plain wrong.
The gov doesn't need your money. It can (thru the FED) create as much as it needs out of thin air. Just think about where money you pay your taxes with came from in the first place. Unless you have a printing press in your basement, it originally came from the federal gov.
But there's a catch. If the gov needs to create too much money to do the things we want it to do, we may not be able to make enough stuff to soak that money up & will have too much money chasing not enough stuff, i.e. excessive inflation. This is rare & is usually caused by shortages, e,g, of oil.
But that's easy to solve & where taxes come in. Taxes allow the gov to take back the excess money & prevent inflation. The purpose of taxes is to adjust the amount of money in the private sector. The more we can produce, the lower taxes can be.
So the way to run things is to spend money to facilitate production. Tax cuts do this, but in an inefficient way. If we cut Daddy Warbuck's taxes, he does not need to spend the money; he uses it for financial speculation. If we cut poor Joe's taxes, he spends the money on stuff--food, house paint, etc.etc. This promotes production of food, etc.
Even better if we pay Joe to fix a bridge, the money still gets into the economy, AND we get the bridge fixed.
Just remember, the federal gov will run out of money when the NFL runs out of points.
This comment was written BEFORE the Trump cut of corporate taxes:
One of the many myths propagated by conservatives is that our corporate taxes are high compared to other countries. It is true that our nominal rate of 35% is high, but because of loopholes, this figure is meaningless.
A good parameter to look at is total corporate taxes actually paid divided by GDP because neither of these figures can be fudged by corporations. If you look at developed countries, you will see that Norway has the highest value at 12.5%. The US is tied with Turkey for the lowest at 1.8%. If you look at all the countries touted by conservatives as low tax countries such as Ireland or Canada, you will see that their corporate taxes as a percentage of GDP are higher. http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/
In addition, during the Great Prosperity, 1946 - 1973, this figure was about 3 times higher than today
How nice of Jamie Dimon to offer to pay higher taxes, so long as the revenue is used for worthy projects. I'm sure all taxpayers would love to have the option of determining how their tax money was spent.
I have an alternative suggestion. Raise tax rates on Dimon et al, and tell him to complain to his congressman if he doesn't like the way the revenue is spent. Then he would know how the rest of us feel.
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@James Lee Thank you--my thoughts exactly!
2
"The real villain is Ronald Reagan...". Truer words were never spoken but add to Rattner's comments how Reagan's comments about government being the problem, welfare queens, etc. with that genial smile and manner, poisoned discourse in America. W might have been more incompetent, bit Reagan did more permanent damage.
3
What, no mention of the repeal of the estate tax?
Gimmicks like irrevocable trusts ate used to make sure that all of that generational wealth passes unhindered from, say, Fred Trump to his motley assortment of spawn.
Those loopholes need to be closed.
As for Jamie Dimon, it is the height of arrogance to think he should have a say in government appropriations. I would certainly take a hatchet to the military budget. Because Jamie is a big hitting CEO, he might have say? Um, no.
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Great discussion. More of this!!
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“Never trust a rich man when he offers you a truce.”
From: “Touched By Fire” Black 47
Set the tax rates at the level that brings in the most DOLLARS! You can't pay for your government programs with percentages, only dollars. If you set the wrong rates you may not get the dollars you expect.
1
Under Eisenhower, charities promised to take over many services that the government used to handle. In return, the upper tax rate was dropped from 90% (which no one paid because of loopholes, etc).
I agree that taxing dividends at a lower rate than earned income makes no sense when corporate tax rates have been lowered. Cap gains rates are lower to account for inflation (when you sell something you are getting dollars worth less than you paid). However, in a low inflation period, long term should be redefined to 5 years (from one year).
As for the estate tax, given the work required on the IRS side to process a sizable estate and sign off, I have a much simpler proposal. Make the basis zero on all assets transferred on date of death and the acquisition date be the date of death and let the taxes be paid as the assets are disposed of.
The fact that unearned income such as capital gains is taxed at a much lower rate than earned income is a travesty. That is why Warren Buffet pays a lower marginal tax rate than his secretary. Tax capital gains as income. And while you are at it, fix it so real estate investors like Donald Trump can get by with lower rates as well.
Setting aside the substance of this discussion on taxation, I'm compelled to comment on how wonderfully refreshing it was to read civilized discourse on a public policy issue! It was like rain falling in the desert. Imagine, a back and forth exchange of ideas with no name-calling, cursing or stereotyping. I remember such exchanges from my youth...I think. I'm going to re-read all of it simply for enjoyment.
5
The 15% long term capital gains tax rate is the ultimate giveaway. When I was a stockbroker back in the 90's the rate was 20% - we thought this was low. And then W lowered it to 15% and this has stuck. The easiest way in the world to raise some revenue and lower the deficit would be to bump this up - doesn't need to be taxed like income. In terms of the estate tax - inheritors of the ultra wealth tend to drive more golfballs than innovation. An estate tax forces the most privileged to work and contribute - and do something with themselves and for our country.
7
I'm no expert in economics, but I know injustice when I see it. Changing the tax structure could have unintended consequences, but I believe that the consequences of Reagan- and post-Reagan era tax cuts were very much intended, as an upward wealth transfer.
I believe that estate taxes are a just, and relatively disruptive, way to reverse this upward transfer. The original reason for them should still stand - to discourage the formation of a permanently privileged aristocracy.
Unless I misunderstood something, Mr. Rattner didn't mention a stock transaction tax, which I believe could raise lots of money, would be hard to avoid, and would not change anyone's lifestyle for the worse. A tax of 0.20% could raise $100B annually. As I've suggested elsewhere, it should be called a sales tax. We all pay sales taxes at a much higher rate for most our purchases, which should put things into perceptive for most voters.
5
Could we tax trading equities, such a penny per share traded?
I'm not an economist. Could somebody tell me if this makes sense? Seems like it would raise a lot of money.
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@Catracho A Piketty suggestion which makes sense!
How much more should the rich pay in taxes?
The country needs a healthy and well educate work force. The money for this should come out of taxes. Figure out how much money is needed and tax the people by progressive marginal taxation.
When a rich man hires an engineer or an accountant, he has not paid for their education. He is free-loading.
3
Mr. Rattner, I generally agree with your responses to other readers questions and comments and i believe that your honest effort in finding a fair way to tax is notable. However, there is a path near the end of this exercise here (global corporate rates) that could be applied universally to all taxes in the U.S. Why not carve an exclusion for income at the poverty line and then tax proceed to a flat tax. If 21% is what makes us competitive globally, then why not make all forms of income equal? Eliminate carried interest, long-term capital gains, foreign earnings, estate tax exemptions, (including the lack of capital gains) and any other lobbyist funded carve out, and then say fair-is-fair and we all pay the same. At the same time, begin eliminating all of the deductions that become barriers to tax collection. Yes, many of those are treasured, but if fairness is going to be the goal start with a fair idea. As someone who has experienced all facets of our tax code: starving student who manged to work through school instead of taking on debt; entry level employee; middle manager; senior manager, small business owner and now a shared recipient of an estate from a parent, I have found that just like you i always worked hard and tried to accumulate some capital, but what struck me as unfair as a student remains unfair. Pick a percentage and let's go.
3
If the goal is to tax rich people because you don’t like them then all these proposals are fine. But if the goal is actual to raise enough money to balance the budget, fund any of the current left’s wish list of social programs or even try to pay down the national debt we would have to raise taxes on the middle class. When AOC tries to tell us when she admires socialism she is thinking Denmark not Cuba someone should tell her than the cradle to grave welfare state of Denmark only requires a 25% sales tax and a top marginal income tax rate of 55% which kicks in around $50,000. So tell a NYC school teacher making 80k a year how much her socialist utopia will cost. On a different note how will the Democrats ever bring back state and local tax deductions when over half the benefits go to the top 1%? That’s a pretty hard social justice argument to make.
2
@Todd The NYC school teacher would be making a decent wage in that "socialist utopia". Plus, people wouldn't have to worry about being bankrupt because of medical bills or education. People may have less discretionary income, but they wouldn't have to pay for as many things out of their own pocket.
2
I live in DC, so the loss of the SALT deduction is a big negative for me, but I think you are wrong about the likelihood of it being restored in 2021 if the Dems take the Presidency and Senate and keep the House. The SALT deduction mainly benefits high income earners. The restoration of this deduction is out of step with the current mood in the Democratic Party. So, as much as I would like to see that deduction restored, the only way that will happen is if divided government continues after the 2020 election and Republicans seek a restoration of the SALT deduction.
1
Thanks for agreeing to answer the questions. But in regards to the "superb" Jamie Dimon, why does he think he should only pay higher taxes if he thinks they are "effective". Apparently the rich think taxes should be voluntary for them. Wish I could choose the laws I wish to follow.
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@Jim P Or that they're uniquely qualified to decide what the money is spent on.....
"Just the other day, Jamie Dimon, the superb chairman and chief executive officer of JP Morgan Chase, said he would be willing to pay higher taxes, as long as the “dollars are going where they can be most effective.”"
More like Dimon, the entitled chairman ... Who gets to dictate how their tax dollars are spent? Do I get to say I'm only going to pay half my tax rate because I don't want to fund a bloated, unnecessary military budget? Or I don't want to subsidize foreign aid that is used by recipients to order weapons, the corporate welfare that subsidizes our military industrial complex.
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How about “I’m not paying my taxes if you spend a cent on a useless wall!”?
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@Christopher G that's a good example too
5
Thank you, Mr. Rattner, and this American enjoys the calling of 'The Uber Wealthy', a far more distinctive label than 'The Elite', which sounds like a rich boutique on Mad Avenue.
If I am correct, you mentioned the need for more scientists and mathematicians in our Nation, and sending your opinion to a skilled water engineer in Baltimore, who will have a better handle and understanding of what you have to relay on the taxing matter of taxation, where here in a green valley there is reason to believe that we are headed on the road to bankruptcy.
1
He may rate the chances of restoring state tax deductability, how aren't they pretty much exactly the same as taxing the rich? I would rate the chances for this Senate to even bring this to debate as low and chances for Trump to sign, exactly zero. However, the chances after Trump could be bright. It's good to lay the groundwork now and work out the details.
1
I'm all for taxing the ultra-rich at a rate higher than ordinary working people.
However, is there anyone here who is old like me, and who remembers the high marginal rates of the Eisenhower and Kennedy administrations? My point being: How, if we have a 70% top marginal tax rate, do we arrange for the rich to pay actually pay it?
I think all of these schemes (including Ocasio-Cortez’s) are just self-serving red meat that ultimately will include loopholes that let the elites off.
In Canada everyone pays taxes. Little people, big people. In the U.S. we want the rich to pay for everything (campaign rhetoric) while in fact they pay next to nothing (reality).
I'll tell you what the real radical idea is. A value-added-tax. A progressive, flat-tax in-each-bracket system that has no deductions nor loopholes. It's great to preach 70, 80, 85, 199% rates without meaning it. How many people would be satisfied seeing the elites paying, say, a REAL 40% marginal rate?
Cortez may or may not be sincere. I knew in 2016 that Sanders was. He wanted to raise the payroll tax to fund Medicare for all. He explained to O'Reilly one night that to pay for Sanders' programs, he'd have to pay higher taxes. Democrats who tell me I'm getting more free stuff and Bloomberg is going to pay for it will get instantly written off. Show me a pol like that, and I will show you somebody who's getting money from Wall St.
1
@Charles Coughlin,
There is every reason to believe the sincerity of Cortez; one that may prove to be an obstacle for this young political voice, where honest politicians are rare birds. Mr. Rattner is not questioning the matter of her sincerity, passionate as it may be, but he is more seasoned and reasoned, more experienced with pitfalls, and your input brings to mind the popular American saying that there is no such thing as a freebie.
3
Thanks to The NY Times and Steven Rattner for this follow-up.
4
This is very meta... comments on an article about comments.
2
Rattner's original proposal was already a major contribution. It was so especially because it was un-blinkered - based on actual distributions and tackling the special case of investment income that so distorts the value of labor vs. capital.
The Q&A show however how difficult it is to discuss this topic without grasping how crucial are both actual data and "small" print in any plan. Thus it is refreshing to see the effect of having questions bring out the importance of the details.
There are many ways to kill these ideas, of which practitioners of FUD (fear, uncertainty, and doubt) are going to go like gangbusters.
If Mr. Rattner can continue to update his proposal and the NYT can continue to re-list it to keep an up-to-date, single proposal in one place so any earlier confusions, having perhaps been settled, do not persist. (Just askin'!)
2
"....Jamie Dimon, the superb chairman and chief executive officer of JP Morgan Chase...."
This is presented as a matter of fact--not even up for debate. I think it suggests a personal connection between Mr. Rattner and Mr. Dimon which the author is anxious to preserve.
Ask yourself something: Would Mr. Dimon prefer the salary and other compensation he has received over the last decade, or the billions JPM has forfeited in fines and penalties on his watch? Superb chairman and CEO indeed. Some people are bulletproof. That does not make them "superb".
5
First, eliminate all loopholes that make offshoring assets possible. If you don’t do that the wealthy will just evade whatever new tax plan you come up with.
Eliminate the step-up basis at death, which is allows a huge amount of gains to never be taxed. Do make an exception for the value of a primary residence. For middle class people, the home is the only thing of value they can pass to their heirs.
Tax capital gains as income, perhaps with a small carve out as mentioned in the responses to protect middle income retirees.
Micro-tax financial transactions and data sales. We all pay with our privacy for the second; we should get something out of businesses selling our data. Put the proceeds of these two taxes in a sovereign wealth fund. Use it to create a universal basic income when AI takes away jobs.
Raise the SS cap enough to make the program solvent. Or apply the payroll tax to types of income that currently can be used to avoid it. And get rid of the carried interest loophole.
A wealth tax of, say, the average rate on the one-year T-bill in effect over the 4th quarter of the tax year on wealth over a very high threshold ($50MM as proposed? More?) would encourage the wealthy to invest their money rather than sit on it.
We could pay for a lot with these things.
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@Kay
I agree cap gains should be taxed as income, but only after indexing those gains to after-inflation.
Winston Churchill said it so well: "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”
Someone should remind America's Socialists that the poorest, most despotic places on earth, are those with no billionaires--except for those in the ruling class who instead of creating wealth--steal it.
There are no billionaires in Cuba, North Korea, or Venezuela--and no large, successful corporations either--and there is a reason.
Look at any thriving tropical reef. It has big fish, little fish, and every size and shape in-between. When the big fish disappear, the ecosystem gets seriously out of balance--just as in socialist countries.
Those who strive for income equality should go live in Cuba--where the average per-capita income is $23 a month. "But wait!!!" scream Liberals, "...you're forgetting they get free health care! The point is--none of us would live there. We wouldn't be free.
There is a reason why American technology and culture are found in every corner of the world. There is a reason why Apple, Microsoft, Google, Facebook, Intel, Amazon, Netflix, and nearly every large pharmaceutical and technology company started in the U.S.--and not in France, Korea, China, Russia, or Scandinavia. It's about freedom--the freedom to get rich.
So far, we have resisted ludicrous calls by Liberals---to eat our Billionaires. That we have so many is the very sign of a successful nation
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@Jesse The Conservative - Someone should remind you that the happiest countries are: Denmark, Iceland, Switzerland, Netherlands, Canada Sweden, Australia. I didn't see Cuba, North Korea, or Venezuela on the list. The US is 18th.
All you or anyone else has to do is Google "happiest country.
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@Jesse The Conservative I don't see anyone here advocating socialism. They are simply advocating a return to more balanced income tax brackets. You remember, the tax brackets that brought us the greatest middle class the world had seen.
Those onerous brackets of the 1950's and 60's sure didn't prohibit Americans from being successful or wealthy. The difference is the last three decades is the increasing disparity between the wealthy and those who are less than that.
You can add this thought as well. There is nothing wrong with being a billionaire. They've all done remarkably well as the top marginal rates have decreased. I'd just like to see less disparity between them...or you...and the rest of us.
Finally, your mention of Cuba, North Korea and Venezuela of sound examples of taxation, income equality and lack of successful businesses is frankly, pretty lame.
No one is here suggesting we become a socialist country...just a return to a more level playing field for the middle and working classes. You know, those of us that comprise the bulk of the working stiffs in our great country.
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@Eric Hendricks you are advocating the tax brackets they have in Europe. Most of the Euro Zone is stuck in neutral. Those countries don’t grow. They have high unemployment. Adults delay marriage and live with their parents. Want that??
But what about the family farmer!
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The constitutional amendment which permits the US to impose taxes on income doesn't permit the "superb" chairman Jamie Dimon to decide to what uses his taxes may be put. That you can call him superb in such circumstances just demonstrates that neither you nor he really want to raise taxes on the wealthy. You want to pretend. Can you imagine Warren Buffet, who actually is fabulously wealthy and a superb human being, saying anything similar to what Jamie Dimon said and you embraced? You don't fool me Mr. Rattner.
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@James Ricciardi,
Read the headline 'Tax the Rich. But do it Right', while Mr. Rattner is not attempting to be foolish by trying to pull the wool over our eyes, and fleece us.
Can you imagine the chairman of a large bank giving a bonus, rated on merit, to his staff representatives during a recession? Mr. Jamie Dimon appears to be a rare exception, and this is based on fact and not a democratic fabrication, as the naysayers would have it known.
@Miss Ley Jamie Dimon is not a god and no one gets to decide how their taxes are used but the Congress and the president, ultimately subject to the voters.
How about revoking the tax exempt status of religious organizations? Only their efforts at feeding/clothing/housing the poor can be tax exempt. And outlawing direct to consumer medical advertisements and forcing pharmaceutical companies to lower their prices. More money by far is used for advertising than R & D. And of course, federal funding only for all elections, with donated tv, space, and internet advertising. No personal funding, dark money etc. And the same health care benefits for congressional members that everyone else gets on the ACA health exchange.
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@j let’s not forget overpriced colleges with billon dollar endowments
3
In addition to revision to taxes, we need government to prune its expenses as corporations do all the time. For example, with few exceptions, pensions are a thing of the past except for government employees and people who belong to labor unions. Unlike private industry, many of these employees even get cost of living increases. 401Ks and similar retirement savings that a minority of employees can afford to use to save for the future and social security are all that most people have available after retirement. Perhaps it is time government and union employees to have the same benefits as the rest of the population. The post office just increased rates because mail delivery has gone down. If delivery is down, maybe they need fewer post offices and maybe delivery should be limited to as little as 3 days a week. Maybe even top government officials should have a cap to personal and campaign travel expenses including the cost for secret service protection.
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@Motherdubby Maybe we need to get private salaries and benefits back up to the level they should be. Why drag everyone down to the bottom?
"The top 1 percent accounted for 69 percent of reported long-term capital gains in 2018; the top 0.1 percent (average income over $10 million) accounted for over half."
Nuff said...
I'm probably close to the 1% in terms of income (not wealth!) but live in a high cost of living area. I've never come close to materially taking advantage of the lower dividend rate, it's kind of hard to when you don't have millions in an investment portfolio. The GOPs argument that raising the cap gains rate will adversely affect the stock market is HILARIOUS.
How about a stepped up basis cap? First few million is exempt ... after that tax the gains at the prevailing income tax rate.
1
The current rates on married couples currently stop going up after $500,000 for individuals and $600,000 for married couples. Federal tax rates should change so that individuals making more than $500,000 and married couple making more than $600,000 pay incremental tax rates. The rate increment increases should be as much as 4% for each additional $100,000. This is the same 4% increase married couples have to pay for the additional $85,000 they earn between $315,000 and $400,000.
Income loop holes should be identified and removed so all are people are treated equally. For example, special types of corporate stock options that aren't taxed, as well as real-estate and private equity firms that are currently able to defer taxes on gains if the money is reinvested should be eliminated.
FDR had tax rates as high as 75%. In the 1950's federal tax rates were as high as 90%. We are facing a debt crisis. We need revised tax rates and reduced government spending now so that our debt does not destroy our economy as well as the savings of all but the very rich.
@Motherdubby and just think about what we were able to accomplish when we were taxing the rich at those high levels in the 50s and 60s-- we went to the moon!
It is telling that many of the comments argue against treating capital gains as ordinary income for retirees and small investors. Goes to show the truth in the statement: "Don't tax you, don't tax me, tax the guy behind the tree."
But if we really want a fair tax system we should do the following:
1. Eliminate ALL itemized deductions. It's only the richest who benefit from those deductions. I might accept allowing a nominal amount for charitable deductions, but only for cash contributions - not appreciated assets. The latter policy has allowed Bill Gates and others to avoid huge amounts of taxes on their wealth.
2. Tax all income at the same rate regardless of source. No special treatment for "carried interest" or capital gains.
3. Eliminate the corporate income tax and tax corporate income at the shareholder level. Even Paul Krugman would agree that corporations don't pay taxes; they only collect taxes paid by individuals. Taxing individuals for their share of corporate income would make this explicit. Yes it has some complications but it's not impossible. This would have the side benefit of eliminating thousands of lobbyists.
4. Make payments to Social Security (and maybe Medicare) deductible from pretax income, but then tax those benefits when they are received. This would benefit the lower income earners by reducing their taxes when younger, and would likely not increase their taxes when retired much.
None of these proposals will ever happen, however.
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Mr. Rattner says that he has no problem taxing the rich and then he discusses a number of different ways to do this. He gives little or no time to the "wealth tax" currently suggested by Elizabeth Warren. In 2009, as he entered government service, he declared his net wealth, to be between $188,000,000. and $620,000,000. Is he trying to distract us from the "wealth tax", which would obviously hit him harder than any of the others?
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@An Observer
I don't think it should be called a "wealth tax". Taking 2-3% of one's wealth indiscriminately every year just adds fuel to the GOPs argument (See! They're taking away your money!).
Since the wealthy are able to defer or shield a significant amount of their income by hiring tax experts, there needs to be a way to tax them fairly and not let them perpetually avoid taxes (the estate tax threshold at $22MM for married couples is laughable). I agree that something like a "wealth tax" would make them pay their fair share of taxes, I just think it needs to be sold in a different way.
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Just watch what happens when you destroy many elderly people's retirement. They surely won't be happy when they can't afford life due to changes in the tax codes.
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@vulcanalex Retired people have the lowest level of poverty of any age group in the US. There are certainly older people living in poverty but I doubt that many are paying taxes on capital gains.
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I said it before, but I'll say it again: it may be true that if you raise marginal rates, some of the wealthy will work harder to avoid paying them. The answer is not to resign ourselves to the idea that it is impossible to make the Rich pay more, but rather to use some of the windfall from raising rates to properly fund the IRS, and put tax-cheat billionaires like Trump in prison where they belong.
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Additional foodf or thought:
1) Eliminate the "carried interest" sham - long overdue
2) A very modest tax (tenth of a cent?) on each share of a listed stock bought or sold. The impact would be negligible on long term investors but put the burden on high volume day traders and maybe, just maybe, help put some sanity back into the markets.
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First, Jamie Dimon is not "superb". He has grossly (pun intended) profited from government subsidies, payoffs to politicians and abuse of small depositors and investors. He was part of the reason for the 2008 crash, and it never touched him. Yet he seems to feel entitled to say that he would pay higher taxes if those public dollars were spent in a way he likes, thereby proving that he is part of the problem, not the solution.
And yes, the estate tax should go back as it was. I stand to profit considerably by the change and I think it's immoral and ridiculous. Very Republican.
The hedge fund loophole has got to go, and the state and local tax exemption must return. Using the tax system to punish voters who did not support you is disgusting. And again, very Republican.
Historical data shows very clearly that the country as a whole does better when the tax rates on the highest earners are high. The corporate rate needs to be internationally competitive, but if corporations insist on usurping up the rights that should accrue only to human beings they should also be forced to take the downside: death and taxes. Claim to be an individual, pay the individual rate. And when a corporation has put in a lifetime of work, it has to die just like a person, and its assets dispersed. Corporations lord if over people precisely because they are immortal and never have to dissolve. They get to be one or the other, but not both.
And everyone, including charities, should pay.
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''...as long as the “dollars are going where they can be most effective.” - the problem with this scenario (so far) has been that representatives do not represent us, and only seem to work for their rich backers.
Poll any Progressive initiative or policy and it is wildly popular (even among republicans), and if there is any deviation from the norm, then there are calls for ''moderation''. There are also the usual slurs of ''Socialist, Marxist or some other kind of ist'' .
If you make more money, then you should be paying more taxes Progressively upwards. There should not be loopholes, and there should not be subsidization of the taxpayer if the person or the corporations are making millions upon millions. (let alone billions)
That goes for their profits (from whatever means) and that goes for their contributions back into society and the infrastructure that allowed them to get rich in the first place. (no caps)
There is no more study that needs to be taken and no more moderation required. (or giving in to 99% of republican demands - especially when they shut down the government)
The only thing ''left'' is fairness.
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''...as long as the “dollars are going where they can be most effective.” - the problem with this scenario (so far) has been that representatives do not represent us, and only seem to work for their rich backers.
Poll any Progressive initiative or policy and it is wildly popular (even among republicans), and if there is any deviation from the norm, then there are calls for ''moderation''. There are also the usual name calling of ''Socialist, Marxist or some name that is not understood'' .
If you make more money, then you should be paying more taxes Progressively upwards. There should not be loopholes, and there should not be subsidization of the taxpayer if the person or the corporations are making millions upon millions. (let alone billions)
That goes for their profits (from whatever means) and that goes for their contributions back into society and the infrastructure that allowed them to get rich in the first place. (no caps)
There is no more study that needs to be taken and no more moderation required. (or giving in to 99% of republican demands - especially when they shut down the government)
The only thing ''left'' is fairness.
1
REPEAL THE STEP UP IN COST BASIS CAPITAL GAINS AT DEATH. This is how uber wealthy pass wealth to next generation and avoid ANY capital gains taxes. What did Steve Jobs do? He borrowed against his Apple stock (asset backed loan) for living expenses, and when he died his heirs got the stock with zero embedded gains.
Provide a low amount of capital gains with a zero tax burden, for small investors, like 10K as another person suggested. Increase cap gains tax, the highest cap gains tax is now of 20%, for incomes over 1 million, make it progressive with brackets.
Increasing the cap gains tax rate without eliminating the step up is a fools errand. You don't have to realize gains, and people don't as they near life expectancy.
5
Ocasio-Cortez did in fact stimulate discussion along with Fox hyperventilation. Medicare for all and free tuition likely to stimulate debate surrounding both issues. Nothing wicked or wrong about serious proposals regardless of the issue. Policy usually steers toward the a sensible result especially where we have history as a guide, success or failure with given solutions.
5
It is necessary to reform both the income tax and the estate tax at the same time, and possibly institute a wealth tax.
If all that is done is to increase the marginal rate on incomes, that will effectively give a huge benefit to those who already have great wealth. So we need to be sure that we do not create a closed hereditary plutocracy.
One way to do this is to end the stepped-up basis for inherited property. Because of the huge estate tax exemption all but the 0.01% can avoid paying any tax on what they inherit. Another way would be to abolish the favorable capital gains rate but allow for the basis to be adjusted for increases in the cost of living.
All this should be on the table in 2021.
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To some degree capital gains are a product of inflation. Think about if you bought a house in the 1970s. Clearly the value of that house today is much higher than when it was bought, but much of that is simply inflation over a large number of years.
If capital gains are to be taxed as ordinary income, the the cost (basis) of the asset should be indexed for inflation.
That said, I would have no objection to lengthening the holding period to, say, five years before a sale of an asset would qualify for capital gains rates.
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@A Mann But interest payments are also a products of inflation and they are fully taxed. Small savers pay full tax on any interest, even when the interest earned is less than inflation.
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@Nancy But taxes on interest are paid annually, so there isn't the situation where a large one time payment (i.e. selling a house) pushes the taxpayer into a substantially higher tax bracket.
Also, only a portion of interest is to account for inflation. The other portion is "rent" for someone (i.e. a bank) using your money.
Why is "a combined 82.7 percent marginal rate for those of us who live in high tax states like New York is a bridge too far?" If it's 1000 x easier to make an additional buck if you've already made $10,000,000 why not pay 10 x more marginal taxes for those easily earned dollars? Seems only fair to me.
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Exceptional colloquy here, thank you!
You write, "That said, I would agree that there is some tax rate above which individuals either work less or try harder to avoid taxes."
Why not force the wealthy to retire early and write that novel or get to know the grand kids? Why should a successful restaurateur own three, four, five restaurants? Pull back and let somebody else have a chance!
What I fear we have forgotten is the old view that not just income, but autonomy is the goal of political economy. Even if we take a microscopic hit to overall productivity, why can't the goal of political economy, like the goal of the Homestead Act and of the American Revolution, also include promoting fewer hierarchical structures and increased opportunities for sole proprietorship and partnership? What about autonomy and independence? It' ain't only about the cash.
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We must tax all income as ordinary income and eliminate lower rates for investors/donors. It's just wrong. Investors were taxed at higher rates until Clinton made them even and Bush 43 crossed the line and took them lower than workers and that has accelerated the shenanigans in the market. The 2017 GOPTaxScam lowered taxes on investors to below the rate the average worker pays and now we have a huge revenue problem during a time of rising interest rates. It is unsustainable. It must be addressed - it is as important as climate change.
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I don't always agree with Mr. Rattner's opinions but I always respect his intentions. He gives the impression of a person who would like to live in a fairer and better world. As such, he always deserves to be heard.
Thank you Steven, and thanks for your appearances on Morning Joe.
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It seems that most folks can agree that we need to tax the rich at higher rates, but not exactly which rates, so I'm actually fine staying out of that bit of haggling.
The more important consensus to build, to me, is that we need to tax rich capital, as multiple commenters pointed out. When a huge tax cut prompted incredibly self-serving behavior on the part of corporations and stock-owners, that's a sign that they need some firm incentives in the opposite direction.
If they leave the country over that, as so many conservatives warn, then fine. It means they love the dollar, not the country, and it will be better for everyone in the long run to force them to come out and prove that rather than lying about it.
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@Roarke I always challenge such individuals to name a list of countries where these rich might flee. There are several lovely states with little to no taxation, Congo and Russia come to mind. Unfortunately for them, most of the desirable, stable and developed countries have higher rates than the US: Japan, Australia, Belgium, Spain, Portugal, all of Scandinavia, Switzerland, France, Canada, UK, Italy to name a few. To them I say "Do svidaniya!"
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@Roarke A view from a country with a wealth tax: if the wealth tax is so low that nobody is moving to avoid it, it is too low. First, because it isn´t bringing in the revenue that it should, and 2) it is allowing the sort of inequality that breeds distrust and corruption. It is better to let a few super-rich people leave and take their money with them, than it is to let them stay, drive up the price of real estate, and finance right-wing populist politics. The U.S. would arguably be better off if Sheldon Adelsen and Rupert Murdoch took all their money and left. And like @Scott says, where are they going to go?
Norway´s rate is currently .85% on net wealth above about $120,000 with primary residence appraised at maybe 20% of market value, which means it hits a lot more people than Elizabeth Warren´s 2% above $50 million. But less than what a lot of people pay a mutual fund manager for a marginal increase in income.
7
DISTINGUISH ENTREPRENEURIAL CAPITAL GAINS FROM TRADING CAPITAL GAINS
Jeff Bezos earned his reduced tax rate on gains in his startup, Amazon. Hedge fund operators with carried interest from investing other peoples' money do not.
22
''...as long as the “dollars are going where they can be most effective.” - the problem with this scenario (so far) has been that representatives do not represent us, and only seem to work for their rich backers.
Poll any Progressive initiative or policy and it is wildly popular (even among republicans), and if there is any deviation from the norm, then there are calls for ''moderation''. There are also the usual denunciations of that what is not understood.
If you make more money, then you should be paying more taxes Progressively upwards. There should not be loopholes, and there should not be subsidization of the taxpayer if the person or the corporations are making millions upon millions. (let alone billions)
That goes for their profits (from whatever means) and that goes for their contributions back into society and the infrastructure that allowed them to get rich in the first place. (no caps)
There is no more study that needs to be taken and no more moderation required. (or giving in to the demands of others- especially when they shut down the government)
The only thing ''left'' is fairness.
19
Thank you Mr. Rattner for taking the time to respond constructively to readers' questions and thoughts. The one area I would disagree with is the "simplification" of the 1986 Tax Act. My copy of the Internal Revenue Code post-Act went from one volume to two. Twice the heft did not ring like simplification to me, and to get it signed there were many earmarks/pork for special interests. I agree the tax code is complicated, but the readers (and you) have made several practical suggestions for immediate and quick improvement. Getting any of it through the Senate though will take a monumental shift from where things are today. Thanks again for responding....
2
There are many kinds of taxes and many kinds of wealthy. Progressive taxation has been an accepted principle since the Sixteenth Amendment was enacted, creating the income tax. But that's where progressivity has stopped. And so high income earners are the only ones relatively aggressively taxed. Those with high net worths skate by.
Logic and fairness would require that property taxes, sales taxes, estate taxes and excise taxes be progressive. Capital gains and dividends should be treated similarly. If all taxes are graduated, there is no reason to make any particular tax unfairly onerous. The point is to tax all the wealthy at an agreed graduated rate and that is most effectively and fairly accomplished by progressive rates across the board.
1
How to fix the tax code:
1. Eliminate ALL deductions (that means mortgage, charity, child, state and local tax, business loopholes, etc.) If Congress really thinks something is worth supporting, they will have to appropriate funds for it openly and defend the decision. After all, every deduction someone gets means everyone else pays more, since government must still be funded.
2. Institute a single, progressive income tax that covers ALL income--there is no reason to tax income one does not work for (i.e., capital gains) at a lower rate than income one puts in time and effort to earn. Set these rates to actually cover our obligations. Now that the Supreme Court has recognized corporations as persons with equal free speech rights, tax them at the same rates as persons.
3. Disallow any political contributions from non-constituents--representative government can only function if those in office actually represent those who elected them rather than those with deep pockets. Set representative pay and privileges at the mean for their constituents.
The current system breeds distrust and contempt, as our purported representatives ignore their constituents in favor of their corporate paymasters, obscuring their bought-and-paid-for favors with endless, incomprehensible layers of taxes and deductions. Time to clean House (and Senate).
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@LJ
Regarding #3 "Disallow any political contributions from non-constituents-", I have a problem with this, and so does the Constitution. Ever heard of the First Amendment?
1
@Eric Gertler
Verbal support, or putting a sign on your lawn, is one thing.
Giving huge amounts of money to a candidate is quite another.
I'd like to see NO organizational contributions allowed--no union, PAC, corporate, religious, 503 or any others--and a very low three digit individual limit on contributions to any given campaign. Our elections should basically be publicly funded, in the hope that our representatives will then at least be able to a certain extent to represent their constituents rather than their campaign funders as they do now.
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@Eric Gertler
Do you think Ben Franklin, Thomas Jefferson, James Madison etc in their "enlightened" political wisdom anticipated corporate citizenship, corporate wealth, the digital media and etc? They would have been supernatural.
9
The top 1% have about 40% of the wealth, vs. 25% pre-Reagan. What is radical is not taxing them far more. We can address inequality and unsustainable budget deficits with higher taxes on the rich, perhaps reducing their political power at the same time, a triple-win. Further, taxing the rich is one of the most efficient ways to reduce the deficit, as it impact GDP less than other options.
Mr. Rattner's suggestion that we treat capital gains and dividends as ordinary income recognizes that the further up the income distribution you go, the more income is from capital as opposed to labor.
Treating capital gains and dividends as ordinary income is also necessary for us to tax stock buybacks (the primary upward redistribution method), as otherwise corporations will just switch payouts to dividends. If forced to use the money in other ways, corporations will pay down debt, do M&A, or (heaven forbid) pay workers more.
The reader's suggestion that an exemption floor (such as the first $10,000 of such dividends and capital gains) is a great idea, as that will exempt nearly the entire middle class.
Senator Warren's wealth tax is a great idea; the wealthy pay about 0.5% of their portfolio to their brokers each year to manage their money, so another couple of percent on wealth over $10 million should work fine.
Higher income tax rates and removing the cap on the payroll tax ($132,900 in 2019, about the top 6% of wage earners) are other good ideas.
16
The reason you ended up with President Regan in the first place was that taxes were so high in California, it would have cost him more than his actual earnings, had he made a second movie within one year.
With Blue State taxes rising all that you're going to accomplish is what is happening to New York right now, a mass exodus of wealth and increased fines on the citizens like the city of Furgeson did, and we saw how that worked out.
Palm Beach County is flooded with former New York, New Jersey, Massachusettes, and Connecticut millionaires. By the way, Thank you. Go ahead and do it again, we could use another President Regan.
2
@Robert Furst
We never had a President Regan, though there was a Reagan. If he had been paid less as an actor he could have afforded to pay his taxes and would have been paid what he was worth to boot.
6
Remove the cap on the Social Security tax.
Means test for to receive Social Security benefits.
Exclude a reasonable amount of capital gains each year, to protect small investors and retirees (say, with net worths of up to $1,000,000, which is not unreasonable for a middle-class worker to accrue over a career).
Do not tax each purchase or sale of a financial investment. We need to encourage more saving and investing, not discourage it.
Make 401(k) plans opt-out, not opt-in. Currently, this would have to be at the plan level, but tax incentives for those plans/sponsors could be implemented.
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@Texan
No means test for social security; if you think you don't need it then donate it. This is not an entitlement program but an earned benefit and should remain so.
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Please define for me the difference between an "earned benefit" (I worked for this so I am due it) vs an entitlement (I was told this is the deal, so I am due it). Social Security is a benefit of our fiscal policy--laws--and social contract. Many people drew much out of Social Security who never paid much into it, and many of us who have paid much into it may never draw it because it will be bankrupt, without major reform. Both could be said to be entitled to it, but which group could be said to have earned it?
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