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Originally Posted by New Era
Yes. But it seems what's lost is how effective tax rates work? Because that's the problem with the imposition of a wealth tax. People see the marginal rate and think that's what people pay rather than understanding the effective rate and the impact of tax loopholes. Look at StrangeBrew for example. Maybe we're looking at this from two different angles. Explain to me what you're trying to get at. Tax law is very confusing in the US because it varies so much from state-to-state and even down to the municipal level. Here's an interesting article on the impact of the tax rates being discussed for the top 1% in each state. Where you live makes a massive difference. |
The initial question was about the wealth tax that Warren and Bernie proposed. A wealth tax taxes people assets vs the income tax that we are all used to that taxes income. Here's a good article about what it is and why it basically failed in Europe.
https://www.npr.org/sections/money/2...pe-kill-theirs
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It's a cousin of the property tax, but it encompasses all forms of wealth: cash, stocks, jewelry, thoroughbred horses, jets, everything. Warren calls the policy her "Ultra-Millionaire Tax." It would impose a 2% federal tax on every dollar of a person's net worth over $50 million and an additional 1% tax on every dollar in net worth over $1 billion. Economists estimate it would hit the 75,000 richest households and raise $2.75 trillion over ten years.
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So, at first it sounds good. The problem is that there are a lot of problems with implementing it as other countries have found out:
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Normally progressives like to point to Europe for policy success. Not this time. The experiment with the wealth tax in Europe was a failure in many countries. France's wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems. Only last year, French president Emmanuel Macron killed it.
In 1990, twelve countries in Europe had a wealth tax. Today, there are only three: Norway, Spain, and Switzerland. According to reports by the OECD and others, there were some clear themes with the policy: it was expensive to administer, it was hard on people with lots of assets but little cash, it distorted saving and investment decisions, it pushed the rich and their money out of the taxing countries—and, perhaps worst of all, it didn't raise much revenue.
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There are arguments that the US wouldn't have this problem for reasons like it is harder to leave, that the IRS taxes world income for US citizens forever and they could put a big penalty on people expatriating for that reason. But there are still many of the other issues including that it may not be constitutional. It also becomes a polarizing political issue because taking money that people already have is a pretty big shift in paradigm.
What you are referring to with the high tax brackets is taxing people who are earning lots of money which is very different than taxing what people already have.
Back to the 90% marginal rate question. Here are what the brackets looked like in 1954 for example:
https://www.tax-brackets.org/federaltaxtable/1955
Here is income distribution in 1954
https://www.census.gov/library/publi...o/p60-020.html
The top 1% was anyone making over $15,000.
A family making $20,000 that year would be definitely be in the top 1%.
Going back to the tax bracket table above, if they didn't have any deductions,
They'd pay 20% on their first $4,000, 22% on the next $4,000... and so on and hit with 38% rate on their last $2000. I'm not going to do that math, but the average federal rate they'd pay would be in the 30% range.
From the article further up in the thread, only the top 0.02% would even have income that hit that 81% bracket, and probably only a handful reached the 91%, and they likely didn't pay that rate on much of their income.
A super high tax bracket doesn't really mean anything if no one is actually hitting. 1%ers definitely weren't. 0.001 %ers probably had a small portion of their income hit with it, if anyone did.