No super-wealthy individual or household will pay billions in additional taxes when $10 to $20 million will buy political alterations.
The 2020 election cycle has begun, and a widespread campaign promise is”liberated Everything” compensated due to new taxes on the super-wealthy. Who does not like free stuff? Who will vote for anyone offers them free things? No wonder it’s a favorite campaign promise.
Proposals to “Tax the Rich” feed the growing consciousness that the fiscal wealth generated since 2000 has mostly flowed into the very top of this wealth-power pyramid, and so it is payback time: tax individuals who’ve pocketed the lion’s share of earnings and wealth increases.
Fair enough, right? Even the super-rich publicly affirm that the super-wealthy should pay at least the same percentage of federal tax as their employees.
Public Pronouncements are naturally high PR, but the real issue is what will the super-wealthy do behind closed doors to protect their wealth from extra taxation. There are two issues here: one is that the wealthy already pay most of the federal income taxes, and the second is the compelling cost-benefit of financing political alterations into the new taxes.
If a person has a taste for details, it ends up the U.S. federal tax system is highly progressive: the top 1 percent pay the highest tax rates (see CBO graph below) and about 37% of All federal income taxation. The top 5% pay almost 60 percent of all national income taxes. (Notice Social Security payroll taxes aren’t income taxation.)A Fantastic source for this sort of data is the Congressional Budget Office accounts (scroll down to Distribution of Household Income and Federal Taxes).
The new idea in current”tax the rich” suggestions is to increase earnings on the super-wealthy: mega-millionaires and billionaires. Given the oversize gains secured from these mega-wealthy folks, it makes sense To nail them to the tax revenues needed to pay for more free things. At this stage let us reacquaint ourselves with all the enormous size of national expenditures: roughly $4.75 trillion yearly outside Of a GDP of about $20 billion. State and local governments spend trillion.
Total personal income is about $10 trillion a year, with the best 1% (about 1.4 million people) earning about $2 trillion of this personal income. From this, they cover $538 billion in federal income taxation. (Source: Overview of the Latest Federal Income Tax Data, 2018 Update)
Under this excellent overview of the top 1 percent, never mind the 1 percent: let’s talk about the 0.01 percent, the super-wealthy (top.01percent ) earn approximately 5 percent of income, roughly $500 billion.
So say some new tax legislation was really able to catch 50 percent (half) of all This income: that could total $250 billion, a first chunk of change but Barely enough to finance a trillion or two in extra”free” programs.
Non-partisan CBO, jacking the speed from 34% to 50% is just 16 percent more, or An extra $80 billion in tax revenues. Look at the chart of current Federal expenditures ($4.75 trillion) and then reckon the effects of an It is a drop in the bucket, Baby.
Jacking the top tax rate to 70 percent on the super-wealthy would just raise a Total of $180 billion, an incredible boost but hardly enough to finance trillion
This brings us to the following fact: it’s much cheaper to purchase political alterations to the new taxes through lobbying and campaign donations than paying the additional $180 billion. A mere $10 million will purchase a great deal of political alterations, and $100 million will become pretty much anything you need in the way of political adjustments.
The listing of special dispensations and obscure tax code loopholes is unlimited: that the Wealth could be guarded in a philanthrocapitalist family trust, or even an Occupations in America (or equivalent political cover)– the techniques to escape a 70% tax fee via political adjustments is genuinely infinite.
No super-wealthy individual or household is going to pay billions in extra taxes when a portion of the will purchase political alterations. The point of view of this super-wealthy, 2/3 of whom are self-made via building companies, they already pay enough taxes, plus they have the wherewithal to get politicos to concur with them.
1. Taxing the super-rich won’t actually move the needle much when the federal government spends $4.7 trillion yearly.
2. Attempting to double the earnings that they pay from 35% to 70% is only going to push them to boost their spending on political alterations that cost a fraction of the proposed taxes they will pay if they do nothing.