Last week Jeff Bezos made an unexpected contribution to the debate about taxation in the United States, claiming that billionaires like himself pay a lot of tax and that it would be pointless to ask them to pay more.
This is SUCH an important comment. Every Democratic political candidate should make this and corruption the central issues in their campaigns.
The direct impacts of taxes also mask regressivity in taxes’ indirect impact that arises from market power. For example, Zhao et al (AJAE forthcoming, https://onlinelibrary.wiley.com/doi/abs/10.1111/ajae.70034?campaign=wolearlyview) show that grocery taxes enable retailers to extract additional funds from poorer consumers in the US. Windfall profits for a few on the backs of the working class. Yet too few recognize or publicly decry such things. Bravo, Gabriel, for your invaluable work!
The Big Beautiful Bill just made this worse in real time — $400,000 tax cut per year for the top 0.1%, paid for by cutting healthcare for 17 million people. The Gilded Age comparison feels understated now.
In addition, Bezo is just using aggregate numbers. If I pay a 25% total federal tax rate on $100,000 in taxable income, I pay a painful $25,000 to the federal government. California then adds another roughly 9%, or $9,000 in taxation. Relocating to a state with no income tax is difficult because employment is here, and even after retirement family ties are here. So a prosperous California family retains roughly$66,000 from $100,000 in taxable income. That's paid instead of buying a new car, saving for a kid's college etc. Now, if Bezos manipulated his income that year to show only $1,000,000,000, and paid only a 15% taxable rate from his estate in Florida where he moved to avoid funding the government of Washington where he prospered, then Bezos would pay $150,000,000 in taxes that year. Bezos would never miss that tax bill in a million years, in contrast to the middle class who bleed to pay their taxes. Yet, Bezos' low rate of taxation on minimized income would be 1500 times more than the total taxable income of the prosperous California family. In short, extreme disparities of wealth and income result in the richest Americans paying far more than other people even though they pay at far lower rates.
That's not a progressive tax system. That's due to extreme disparities of wealth and income.
Billionaires should be arrested, not taxed. The path to billions is strewn with broken laws. Assets should be seized, the money followed, the math done. The incriminating evidence is there.
One question that has nothing to do with plutocrats: When looking at transfer payments as negative taxes did you account for differences in longevity by income group? I know life expectancy for the bottom 20% is low. Could it be the poor subsidize the middle class' social security?
An important component of their wealth is from lower tax rates from capiral gains. The argument for that lower rate is that it provides investment capital to businesses. That is only true for the initial issuance of the stock by the company to raise money to purchase assets. All other trading of stocks in the short-term or long-term markets by investors doesn't generate a dime for the company. Therefore, only initial issues of company stock should qualify only once for capital gains tax rates. And company repurchased stock to award to employees should not qualify for lower tax rates regardless of how long it is held.
The tech/startup guys whose enormous wealth is mostly in the form of stock, like Bezos, can shield themselves from capital gains and income taxes almost entirely, indefinitely. The analysis above does not include unrealized capital gains, but its worth mentioning that this serves as an enormous tax shelter at staggering scale.
They rarely have to actually sell their stock, triggering taxes on the huge bulk of their wealth. Rather, they can take out huge loans to fund their spending, and take out bigger loans to pay them back.
It is unfortunate that an expert like the author would repeatedly make incorrect statements such as the headline and this one: “No matter how one looks at it, billionaires pay much less tax than the average American.”
The author is well aware of the difference between tax rates and taxes. A non-expert might make this sort of error unintentionally, but this is not an oversight.
Also, the table: I don’t think Warren Buffett pays a lot of corporate taxes. Why label things incorrectly?
I’m no historian so I’ll just jump right in with an assumption that we have two houses of worship. Whoops I meant houses of Congress. An upper chamber that can drop their waste on the lower chamber. It’s exhausting to think that the electoral college and the senate were created to make farmers forever more powerful than the weight they haul. And I don’t care if it was an agrarian nation. It still helps the dumbest states with the worst educational systems and the lowest populations to claim they’re against welfare. and rely on mostly blue states to pay their debt. On and on. Get a leader who can do something instead of moaning.
Gabriel is deranged. What’s the point of redistribution if you are going to keep the concentration machines like MNCs, state lotteries, casinos, institutional investors. The whole point is to concentrate capital. It literally makes no sense.
He is cool with Royal families and even Monarchies as long as there is a wealth tax, that will fix the problem. He is like an American who complains about gun violence deaths but does not want to take away the guns. He just wants to redistribute some of the bullets.
Uncle Sam has a lock on SS assets and should pay a small premium interest rate for this privilege to SS. I wonder what would have happened if SS had gotten a 10 % higher return than the market for being a loyal buyer. Example SS with a 5%USA bond would get an extra 0.5 % or a total of 5.5 %. Over decades this would have made a difference on the SS balance sheet and perhaps on government fiscal / budget policy.
Terrific analysis. But there is still another way one might view the unfair nature of our tax system and it has to do with the relationship between taxes and debts. For various, mostly cultural reasons, debt in our society takes on the meaning of an almost sacred obligation. A remarkably small number of people are ever delinquent on a debt payment — about 3% average on all debts. And far fewer actually ever default. Taxes, on the other hand, are viewed, not only as a burden by most people, but by most something to be avoided. Prestige even attaches to people who are adept at avoiding taxes — witness Donald Trump’s response to Hillary Clinton’s accusation that he paid no tax. “I’m smart,” he said. But here’s the real issue. Debt involves interest, and, arguably, interest is simply a tax on money. And the bottom 90% pay far more in interest than the top 10 or 1%. Furthermore, while taxes ideally are investments in the commons for the benefit of all, interest is paid overwhelmingly to the rich, the top 1% holding over 30% of interest-bearing assets. It’s hardly fair.
Thanks for your tireless work on this on both sides of the Atlantic.
This is SUCH an important comment. Every Democratic political candidate should make this and corruption the central issues in their campaigns.
The direct impacts of taxes also mask regressivity in taxes’ indirect impact that arises from market power. For example, Zhao et al (AJAE forthcoming, https://onlinelibrary.wiley.com/doi/abs/10.1111/ajae.70034?campaign=wolearlyview) show that grocery taxes enable retailers to extract additional funds from poorer consumers in the US. Windfall profits for a few on the backs of the working class. Yet too few recognize or publicly decry such things. Bravo, Gabriel, for your invaluable work!
The Big Beautiful Bill just made this worse in real time — $400,000 tax cut per year for the top 0.1%, paid for by cutting healthcare for 17 million people. The Gilded Age comparison feels understated now.
In addition, Bezo is just using aggregate numbers. If I pay a 25% total federal tax rate on $100,000 in taxable income, I pay a painful $25,000 to the federal government. California then adds another roughly 9%, or $9,000 in taxation. Relocating to a state with no income tax is difficult because employment is here, and even after retirement family ties are here. So a prosperous California family retains roughly$66,000 from $100,000 in taxable income. That's paid instead of buying a new car, saving for a kid's college etc. Now, if Bezos manipulated his income that year to show only $1,000,000,000, and paid only a 15% taxable rate from his estate in Florida where he moved to avoid funding the government of Washington where he prospered, then Bezos would pay $150,000,000 in taxes that year. Bezos would never miss that tax bill in a million years, in contrast to the middle class who bleed to pay their taxes. Yet, Bezos' low rate of taxation on minimized income would be 1500 times more than the total taxable income of the prosperous California family. In short, extreme disparities of wealth and income result in the richest Americans paying far more than other people even though they pay at far lower rates.
That's not a progressive tax system. That's due to extreme disparities of wealth and income.
Billionaires should be arrested, not taxed. The path to billions is strewn with broken laws. Assets should be seized, the money followed, the math done. The incriminating evidence is there.
https://brutusmac.substack.com/p/a-wealth-tax-on-billionaires-is-not?r=6aexdu&utm_campaign=post-expanded-share&utm_medium=web
What an education! And thanks for the links.
One question that has nothing to do with plutocrats: When looking at transfer payments as negative taxes did you account for differences in longevity by income group? I know life expectancy for the bottom 20% is low. Could it be the poor subsidize the middle class' social security?
We agree! And we've written and analyzed a bill for the USA to support this concept.
Let's make it real.
https://admindirectgov.substack.com/p/a-zucman-inspired-billionaire-tax?r=7vo8e8&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true
An important component of their wealth is from lower tax rates from capiral gains. The argument for that lower rate is that it provides investment capital to businesses. That is only true for the initial issuance of the stock by the company to raise money to purchase assets. All other trading of stocks in the short-term or long-term markets by investors doesn't generate a dime for the company. Therefore, only initial issues of company stock should qualify only once for capital gains tax rates. And company repurchased stock to award to employees should not qualify for lower tax rates regardless of how long it is held.
Started with Reagan. Everything bad in this country did
Tax loopholes created by lawyers
The tech/startup guys whose enormous wealth is mostly in the form of stock, like Bezos, can shield themselves from capital gains and income taxes almost entirely, indefinitely. The analysis above does not include unrealized capital gains, but its worth mentioning that this serves as an enormous tax shelter at staggering scale.
They rarely have to actually sell their stock, triggering taxes on the huge bulk of their wealth. Rather, they can take out huge loans to fund their spending, and take out bigger loans to pay them back.
The tax code is swiss cheese and it is on purpose
It is unfortunate that an expert like the author would repeatedly make incorrect statements such as the headline and this one: “No matter how one looks at it, billionaires pay much less tax than the average American.”
The author is well aware of the difference between tax rates and taxes. A non-expert might make this sort of error unintentionally, but this is not an oversight.
Also, the table: I don’t think Warren Buffett pays a lot of corporate taxes. Why label things incorrectly?
I’m no historian so I’ll just jump right in with an assumption that we have two houses of worship. Whoops I meant houses of Congress. An upper chamber that can drop their waste on the lower chamber. It’s exhausting to think that the electoral college and the senate were created to make farmers forever more powerful than the weight they haul. And I don’t care if it was an agrarian nation. It still helps the dumbest states with the worst educational systems and the lowest populations to claim they’re against welfare. and rely on mostly blue states to pay their debt. On and on. Get a leader who can do something instead of moaning.
Gabriel is deranged. What’s the point of redistribution if you are going to keep the concentration machines like MNCs, state lotteries, casinos, institutional investors. The whole point is to concentrate capital. It literally makes no sense.
He is cool with Royal families and even Monarchies as long as there is a wealth tax, that will fix the problem. He is like an American who complains about gun violence deaths but does not want to take away the guns. He just wants to redistribute some of the bullets.
Uncle Sam has a lock on SS assets and should pay a small premium interest rate for this privilege to SS. I wonder what would have happened if SS had gotten a 10 % higher return than the market for being a loyal buyer. Example SS with a 5%USA bond would get an extra 0.5 % or a total of 5.5 %. Over decades this would have made a difference on the SS balance sheet and perhaps on government fiscal / budget policy.
Terrific analysis. But there is still another way one might view the unfair nature of our tax system and it has to do with the relationship between taxes and debts. For various, mostly cultural reasons, debt in our society takes on the meaning of an almost sacred obligation. A remarkably small number of people are ever delinquent on a debt payment — about 3% average on all debts. And far fewer actually ever default. Taxes, on the other hand, are viewed, not only as a burden by most people, but by most something to be avoided. Prestige even attaches to people who are adept at avoiding taxes — witness Donald Trump’s response to Hillary Clinton’s accusation that he paid no tax. “I’m smart,” he said. But here’s the real issue. Debt involves interest, and, arguably, interest is simply a tax on money. And the bottom 90% pay far more in interest than the top 10 or 1%. Furthermore, while taxes ideally are investments in the commons for the benefit of all, interest is paid overwhelmingly to the rich, the top 1% holding over 30% of interest-bearing assets. It’s hardly fair.