Why tax the rich
WhY tax the rich ? Polls show that most voters of all political stripes agree that the rich should pay more taxes. Will these changes happen now, after being talked about for years? (Image: Yuri Keegstra/Flickr)
Why should the rich be taxed at this time?
What does it mean to “tax the rich”? That’s the first question you need to answer before you do anything else. Taxing the rich can mean at least three things: taxing people with high incomes, taxing capital income since most of the super-hanges happen now, after being talked about for years? (Image: Yuri Keegstra/Flickr) Why tax the rich come back to life at this time? What does it mean to “tax the rich”? That’s the first question you need to answer before you do anything else. Taxing the rich may mean taxing capital income, wealth, or high-income earners.
Wealth taxes were Bernie Sanders and Elizabeth Warren’s latest suggestions.
These three taxes differ economically in fairness and tax revenue.
For all three types of taxation, an evaluation needs to take into account not only how well the tax works but also whether it can be used in real life. At the moment, we tax income from work and income from capital, but we don’t directly tax wealth in the U.S. Instead, we have a limited estate tax, which is a type of wealth tax.
If the government wants to tax the total amount of wealth
it needs to use a good way to measure wealth. At the moment, the U.S. government does not keep track of people’s wealth. To put a wealth tax in place, the government would have to collect a lot of information about how much money its people have. This would be great for researchers like me who want to know how the wealth of American households is spread out. For example, Norway has a tax on wealth, and the data from it has led to a lot of research. But it won’t be easy to figure out how much wealth there is in the United States.
If America were to tax the rich in some way, what do you think would make the most sense?
There is a lively debate among economists about this. People like Thomas Piketty, who is kind of a leftist hero, and Emmanuel Saez of Berkeley, as far as I can tell, are directly for a wealth tax. In a recent Brookings paper, they explained their plan, and Wojciech Kopczuk gave his thoughts on this plan. I have no problem with the idea that you want to raise more tax money from the wealthiest people in order to pay for much-needed infrastructure investment, which has been too low in this country for a long time. My question is whether the wealth tax is the best way to do this.
I think it would be hard to put into action. You need a good way to measure wealth. A lot of the wealth we’re talking about is in the form of private business wealth, which doesn’t have an easy-to-find market value that could be used as the basis for a wealth tax. If you then put a wealth tax on this type of wealth, the owners of these businesses might do a lot of different things to make it worth less than it really is.
Another problem is that if one country taxes wealth by itself.
It could cause wealth to move to other countries that don’t tax wealth or that tax it less. If I managed Luxembourg, Switzerland, or another small country with open borders to international capital flows, I would be quite worried about this issue since it may be easy to shift wealth, especially financial or corporate wealth, across borders.
I’m not sure how high the U.S. wealth tax would have to be for successful businesses to migrate to Mexico to escape it.
I don’t think the wealth tax is the ideal way to raise taxes or redistribute wealth because it’s hard to determine how much wealth someone has, people may relocate their wealth elsewhere, or economic activities can diminish the value of the types of wealth to be taxed.
Why doesn’t this topic ever progress, no matter what the public or politicians say?
Major changes to taxes happen very rarely. If you think about big tax changes that have been made, there were the Reagan tax reforms about 35 years ago and the Bush tax reforms that were partially undone during the Obama administration. Overall, big tax reforms don’t happen very often because people who benefit from the status quo will try to stop efforts to do something different. This seems to work best for tax changes that affect people with the most money or income.
Fixing the income tax law we now have would be less disruptive in my opinion.
Creating the infrastructure to measure things we don’t measure takes time if you want a wealth tax. At that point, people with a lot of money would know what was coming and have enough time to prepare, perhaps by moving their money out of the country.
I would use the income tax system to tax the wealthiest more.
Two crucial points.
First, address tax loopholes to bring the top income distribution tax rate closer to the law.
Second, elevate capital and labor income top marginal tax rates to fund infrastructure construction.
Income tax reforms will, of course, also change how people act.
If the top marginal tax rate goes up, people might work less and invest less in their businesses because they will get to keep less of their profits. All of that is possible. The question is how strong that response will be, and I think that depends on the group of people. How about LeBron James? If we taxed his income at a higher rate, say 50%, would he stop playing basketball as hard? Would he care less about winning? I don’t think that’s always the case. But if you think about a private business, like a law firm or a medical practice, would they take on more clients if they knew that the extra income from those clients would be taxed at a higher rate? I’m not sure what that means.
This idea would adjust the tax rate within the current tax system, making it easier to implement.
The IRS would still collect taxpayer data.
Based on how private sector workers react to marginal tax rate changes, this might raise a lot of tax revenue without hurting the economy.
I would do so, and I and Fabian Kindermann proposed for that tax reform in an American Economic Journal: Macroeconomics study.
What is the most important thing people should know about this subject?
People have talked about taxing the rich more for at least the last 15 years, but not much has changed. I suggest starting with the income tax code instead of the most ambitious plans. I’m doubtful, but I think Washington will enact a massive infrastructure spending plan that’s long overdue but won’t figure out how to pay for it. . The government’s debt, already high as a percentage of GDP, will skyrocket.
In this case, I’m very worried about justice between generations. I feel like the whole debate is about the conflict between the rich and the poor right now. In a world with declining population growth and productivity growth, what about future generations who will have to pay a lot? People will have to pay a large amount of taxes in the future. This is what I would worry about.
I would like to see intergenerational redistribution and justice talked about much more openly in this context instead of just focusing on inequality between the generations that are alive now. What about people in the future?
Early money chats with your parents will assist you pay the bills or pay off their debts.
Instead of reading financial statements, you can dive in with this information. .
Why tax the rich? Polls show that most voters of all political stripes agree that the rich should pay more taxes.
