If we lowered taxes on the rich, they’d stop conspiring against the U.S. government?
:dubious:
Context. The article was about leaving money overseas for tax avoidance. Money overseas for investment purposes (or because the person in question works overseas, or a host of other non-tax related reasons) obviously aren’t part of what’s being discussed.
Here (pdf) is the report, if anyone’s interested.
I’m not qualified to evaluate his estimates, but the fact that his conclusion is so much higher than other estimates out there suggests to me that at least some of his assumptions are outliers.
If I’m reading it right, the report estimates that a lot of this money came from the rich in developing countries, putting their money out of reach of regimes where tax enforcement may vary somewhat capriciously from weak to confiscatory.
The thing is, this is also the argument against the idea that there is a ton of money being hidden overseas, at least by the rich in western countries. The report estimates that most of this money is parked at short-term CD rates as a flight to safety, forgoing a higher return in exchange for stability and anonymity. That may make sense as a bolthole for rich people in a country where they might wake up one morning to find that their personal tax rate is 100%, but for investors from OECD countries, it seems harder to justify missing out on more productive investments just to evade paying a portion of that higher return in taxes.
PS: I speak as a fairly well-off business owner myself.
The whole “every dollar I earn is mine” mantra doesn’t take into account that you are making business in a country built by others. Despite the right-wing talking point, the rich DO benefit from a country that is paid for with tax money.
I make good money but I’m not going to pretend like I didn’t benefit from the shoulders of giants. Same in Germany, and so on. Had I tried to start my company being born in a poor country, this would never work.
The wealthy already enjoyed a large tax advantage over the years and have had very low effective tax rates. Much wealth is from capital gains, which is taxed at a very low rate.
This dodges the point: Demand is low. Taxes are already at historic lows. And yet employment and investment is low.
There’s no evidence to suggest that lowering taxes would actually help here. It’s not going to stimulate demand, which is a big problem right now. Companies were in lean cost-cutting mode when the recession hit, resulting in all those layoffs. They had to make their surviving workforce do more with less (many out of fear of losing their jobs). That cost-cutting meant taking advantage of pre-existing capital that was initially scaled for a larger force. The end result (predictably) is exactly what we see, especially with lower taxes: Huge profits.
Giving them tax breaks doesn’t have any logical pathway to a massive turnaround in the economy, especially when they’re already sitting on huge piles of cash. That extra difference isn’t suddenly going to make them hire people in a frenzy. The problem is not best solved with supply-side voodoo.
I don’t see it that way.
The government invents the money. They print it on their printing presses. Through its operations, a safe trade market exists wherein you can sell your goods and services. One of the rules of the table, to step up and play in that market, is that they get to cut themselves in for a share. Reciprocally, they’re supposed to spend what they take on our collective behalf.
Do they take too much? Do they do a truly awful job of spending it wisely, leaving most of us with the impression we’d be better off keeping it to ourselves and doing without what they offer back as collective public-good services and products? Well, yeah. But I don’t question their right to tax us. It IS their table.
You’re pretending as though the economy is a controlled experiment where we can just change the tax rate and observe science taking place. This is not the case.
Then perhaps you shouldn’t have claimed that it was about tax evasion. They’re not the same thing.
How do you tell the difference? Is there a questionnaire, asking if you’re opening the account for investment, tax avoidance, tax evasion or money laundering?
A good point, but I might argue that it’s also just part of diversification strategy. Sometimes it’s a good idea to have some money in safer, stabler investments, especially if you can shelter them from taxes. I’ve got plenty of wealthy friends who do this. There is also the chance that taxes might increase later (albeit not to 100% or anything like that).
If my average was anywhere near correct, it implies that the rich have an average of $3 million in such accounts, which is a completely reasonable chunk of an otherwise huge portfolio being parked in something low-return.
Never said it was. But the presence of other variables doesn’t mean that we shouldn’t be able to demonstrate if a correlation with one variable exists. Thus far, there is no evidence whatsoever that lower tax rates begets lower unemployment rates.
Hmmm. Those seem to be very hand-selected dates, skipping over 60 years of data for your “experiments.”
Let’s examine the experimental hypotheses further. Note, by the way, that you are presenting data in current dollars, rather than in constant dollars, which inflates the increase in numbers of returns over a fixed dollar amount over time. I’m sure you were aware of that, of course.
So, our hypothesis is that lowering the top marginal tax rate increases high income tax returns, right? So, in 1989, the top marginal tax rate was 28%, which was increased to 31% in 1990 and to a socialistic 39.6% in 1993. We should expect the numbers of returns over 200K to plummet, right? In 1989, there were 786,063 returns over 200K. In 1993, there were 993,326 returns over 200K. In 2000, there were 2,771,577 returns over 200K! I’m using current dollars, to match the data you provided before.
So, it looks like if we had concluded that reducing the top marginal tax rate was causal in the increase in top income returns, we would look pretty stupid, since increasing the top marginal tax rate was associated with dramatic increases in the number of high income returns too.
Data from here: Redirect Notice
Just more evidence on the pile.
Not to mention that businesses and people who do not park money overseas put it in treasury bills, at very low interest rates. (1.4%? :eek:) If there were all these great investment opportunities out there, some of this money would be flowing towards it. Remember when our deficit was supposed to make the interest rates skyrocket? Whatever happened to that?
If my financial adviser said anything half so clueless as what is commonly said by conservatives around here, I’d be moving my money so fast it would get speed-burns.
But if your economic model predicts an outcome, and the opposite consistently happens, then it is time to get a new model. Unless one is the moral equivalent of an economic creationist, who believes with true faith, and never lets the evidence get in the way.
Lucky for you that you work in a job where you don’t have to have any contact with the evil government who steals your money, isn’t it?
If possibly high return investments are going begging now, why do you think freeing up money would make anyone invest in marginal ones? You don’t measure return in absolute dollars, obviously, but in RoI. And there is obviously a good deal of uncertainty in what the return rate will actually be versus predictions, and incremental changes are going to be lost in this level of uncertainty. If an investment turns from good to bad based on the relatively small increase in the tax rate we’re talking about, I’d say it was a very bad investment to begin with, and it losing should be a signal for the people asking for this money to go back and figure out something more rewarding. Which is often good for the economy.
Obviously no one in the US is talking about 75% marginal tax rates. When we do you can bring up their horror. (Don’t hold your breath.) As for France, cutting top rates might free up money for investment, but it might also cause hunger and rioting, it might cause their infrastructure to rot, it might destroy their health care system, it might raise their borrowing rate, etc., etc. Tax money is not thrown into a pit - you drive on it every day.
Are the rich hiding $21 trillion?
Yes. Last time I checked, it was in a cardboard box in the attic behind the Xmas ornaments and Mrs. J.'s old winter wear. We get 10% as an annual storage fee.
Bwa-ha-ha!!!
Absolutely right.
It just doesn’t make any sense when using the right-wing argument… it’s like someone trying to say, “This investment opportunity offers me a 15% return but, my God, I’m not going to do it because the profit could be higher with a lower tax rate!” or as Warren Buffett jokingly said when commenting on the same issue, “It’s 4 PM and I’ve paid too much tax today. I’m going home.” (I probably got the quote wrong here but it’s something like this)
If these investment opportunities existed, I’m pretty sure you’d have an influx of people taking advantage of it.
I’ve brought this argument up before and it sometimes gets met with, “No, it’s not about RoI because it’s about risk. Obama’s regulations have created too much uncertainty in the marketplace,” which is also equally absurd. If there is apparently some 15% return opportunity out there but so much risk you’re not going to bother, how is that extra tax boost somehow going to wipe out all that variance/risk? It doesn’t make any mathematical sense whatsoever.
The entire thing is so much easier explained by just acknowledging the notion that the marketplace/investment sucks because of demand weakness. It’s consistent, makes sense, etc, but instead some people like to take a result and then make up a narrative to suit it, even if that narrative is inconsistent and doesn’t really make sense.
The point is that there is $21 trillion dollars in tax havens around the world and that reducing the tax rates on rich people would mean they would change their behavior and take their money out of the tax havens. The effects of a tax cut on the rich on unemployment is much messier, there are all kinds of confounding variables such as regulations, business climate, technological improvements, monetary policy, etc.
However, the effects of tax rates on rich people hiding their money is much simpler. The evidence shows that if you cut rates significantly you get much less tax avoidance.
You need to look at your evidence more closely because it is making my point. In 1980 .056 percent of returns reported income more than $200k. By 1988 that number had almost quadrupled in eight years to .215 percent of returns. Then tax rates were increased and it takes eight years for the percentage of returns reporting $200K in income to get back to the 1988 level. You may remember 1997 as the year the top capital gains taxes were cut from 28% to 20%. After this tax cut the number of people reporting over $200K a year continued to surge to .373% by 2000. So according to your data the percentage of tax payers in the top brackets increases after tax cuts and decreases after tax hikes. I will leave it to others to point out who looks stupid making conclusions that are not based on data.
So we are being blackmailed by the rich using their tax havens and holding the health of the economy hostage, and if only we reduced taxes to a reasonable amount they’ll bring their money home? And you think its a good idea to go along with this extortion? Why wouldn’t they do the same thing with the new lower rate, and just keep repeating, until the tax rate is zero?
Why let the rich write their own tax rate under threat of them ‘taking their ball and going home’ essentially?
Do you get the mob off of your ass with the same techniques? Like, if we just pay them this protection money this one time, then they’ll leave us alone forever? Why would they not keep saying the same thing no matter how low their tax rate goes? I mean that’s essentially what’s been going on for decades. Cry about how onerous the rates are constantly until they are lowered, and then start crying again about how onerous they still are. Lather rinse repeat. Are we this naive?
What is the number that will make these people happy and never complain about their tax rate again. Lets have that discussion, instead of the constant “THE TAXES … ARE TOO DAMN HIGH” discussions no matter how historically low the rates actually are. What do they actually want aside from just LOWER!!! What’s the actual rate that they ideally want? Zero?
Obviously if someone thinks an investment is great they are still going to invest regardless of tax rates and if they think it is awful they will not invest regardless of tax rates. However, the existence of inframarginal cases is not the point, the point is there are always marginal cases and each change in tax rate affects the marginal cases.