from the world's big
Would a wealth tax in America work? Yes, argues Berkeley economist Gabriel Zucman.
According to recent papers by Zucman, and his colleague Emmanuel Saez, one should be implemented.
- French economist, Gabriel Zucman, argues that a wealth tax needs to be implemented to level the economic playing field.
- Zucman helped both Bernie Sanders and Elizabeth Warren draft their wealth tax proposals.
- Zucman was also part of the discovered American billionaires now pay a lower tax rate than the middle class.
Though the last Democratic debate did not yield any revelations, the aftermath has been a focus on America's financial state, with discussions of a wealth tax (championed by Sen. Elizabeth Warren and Sen. Bernie Sanders) and universal basic income (championed by Andrew Yang) receiving the lion's share of attention.
Cue a handful of CEOs writing op-eds claiming that a wealth tax would never work.
Yet, we all know something is amiss. Pretending that billionaire tax cuts is the best path ahead for society is farcical. Between 1982 and 2018, the amount of U.S. wealth held by the richest 400 Americans grew by roughly $3 trillion. It's data provided by University of California, Berkeley, economists Emmanuel Saez and Gabriel Zucman — both of whom also vetted Warren's and Sanders's wealth tax plans.
In a paper published in September, the two economists revealed another facet of American tax reality that has since made headlines everywhere: for the first time in history, American billionaires pay a lower tax rate than the middle class. A large part of the problem is that while the lower classes are bombarded with sales and payroll taxes, the wealthiest pay no tax on the money they hold in bank accounts and investment funds.
One of the economist behind the Warren wealth tax explains the policy
For example, Warren Buffet famously repeats that he should be taxed more. As Zucman points out, Forbes estimates Buffet to be worth $60 billion. Yet he only claims $10 million in capital gains to the IRS. Buffet might claim to want more taxation, but according to Zucman his tax rate is functionally zero.
"Raising the rate on the $10 million that was accessible to the I.R.S. made no statistical difference at all. The issue was the $59,990,000,000 that they could not touch."
As Saez and Zucman point out in a recent NY Times article, each of the richest 400 Americans hold the same wealth as 1,308,440 fellow citizens. Since 1962, the tax rate of the bottom 50 percent of American workers has risen from 22.5 percent to 24.2 percent. Meanwhile, the rate for the top .01 percent has dropped from 53.6 percent to 29.4 percent. Even more stunningly is the rate of those 400 richest: from 54.4 percent to just 23 percent.
Meanwhile, the Trump reelection campaign has raised over $300 million for the next election.
Cutting taxes is not the work of Trump alone, though he is certainly enabling the process. Obama slashed corporate taxes, as did Bush before him. As Saez and Zucman write in the Times piece, this is not the way things must be, but a concerted effort to keep wealth concentrated:
"Tax avoidance, international tax competition and the race to the bottom that rage today are not laws of nature. They are policy choices, decisions we've collectively made — perhaps not consciously or explicitly, certainly not choices that were debated transparently and democratically — but choices nonetheless. And other, better choices are possible."
U.S. Senator Bernie Sanders is introduced by U.S. Senator Elizabeth Warren during a rally at the Orpheum Theatre in Boston on Mar. 31, 2017.
Photo by Barry Chin/The Boston Globe via Getty Images
In America, the average family income is $61,732. While not a luxurious life, families at that income bracket get by — often with debt and, sadly, losing more of the societal benefits once afforded to the middle class. Billionaires would still be able to live extraordinary lives with a higher tax percentage, lifestyles that few in this nation will ever attain. The only group that would argue the fact would be billionaires (and those enabling them for their own small slice).
Getting there will be another story. While Sanders is keen on arguing for the Northern European societies, Zucman has stated that Europe's wealth taxes are irrelevant to the United States: it is easy to move around the European continent to find more favorable tax laws, while those nations set the tax wealth bar too low, sometimes as low as $1 million.
Warren's plan doesn't kick in until $50 million while Sanders's starts at $32 million. They both actually fall on 2 percent at $50 million, Sanders just begins his a bit sooner with a 1 percent wealth tax. As Saez and Zucman argue, globalization is no excuse: nations can hold corporations — and therefore, the CEOs of those companies — accountable for the percentage of earned income in their country.
If Apple or Nestle earn 20 percent of their profits in the United States, they can be held accountable for paying a higher rate on that fifth of their yearly revenue. The same can be applied to assets of the wealthiest, not only their claimed annual earnings or capital gains.
Regardless of precedent, Zucman pushes back on the notion that Americans only care about efficiency and not equality:
"These things change a lot, and it's a very naive and historically wrong view. France used to be very unequal for a long time. It cares about equality, but the U.S. used to care even more and used to be even more equal than France."
To care, we have to pick out signal from noise. In a response to criticisms that his plans go "too far," in June, Zucman, along with Saez, responded, "They start from the premise that the rich cannot be taxed, to arrive at the conclusion that a tax on the rich would not collect much." Specifics might be argued over for some time to come, but the notion that collecting more taxes from the 1 percent would not help society is pure noise.
Collectively, we need to tune into the signal that noise is hiding.
Ready to see the future? Nanotronics CEO Matthew Putman talks innovation and the solutions that are right under our noses.
Innovation in manufacturing has crawled since the 1950s. That's about to speed up.
The Fermi paradox asks us where all the aliens are if the cosmos should be filled with them. The Dark Forest theory says we should pray we never find them.
The Milky Way galaxy has 200 billion stars and perhaps 100 billion planets. If even a small fraction of those planets harbored life, and even if only a pathetic scattering of those planets had lifeforms which became intelligent, our galaxy would be teeming with alien civilizations, some of whom would be either looking for us or discoverable for at least a little while.
President Vladimir Putin announces approval of Russia's coronavirus vaccine but scientists warn it may be unsafe.
A new coronavirus vaccine on display at the Nikolai Gamaleya National Center of Epidemiology and Microbiology in Moscow, Russia.
Credit: Alexander Zemlianichenko Jr/ Russian Direct Investment Fund via AP
Medical workers draw blood from volunteers participating in a trial of a coronavirus vaccine at the Budenko Main Military Hospital outside Moscow, Russia.
Credit: Russian Defense Ministry Press Service via AP
A report from the New York Times raises questions over how the teletherapy startup Talkspace handles user data.
- In the report, several former employees said that "individual users' anonymized conversations were routinely reviewed and mined for insights."
- Talkspace denied using user data for marketing purposes, though it acknowledged that it looks at client transcripts to improve its services.
- It's still unclear whether teletherapy is as effective as traditional therapy.
Talkspace.com<p>Former employees also questioned the legitimacy of certain interventions by the company into client-therapist interactions. For example, after one therapist sent a client a link to an online anxiety worksheet, a company representative instructed her to try to keep clients inside the app.</p><p style="margin-left: 20px;">"I was like, 'How do you know I did that?'" Karissa Brennan, a therapist who worked with Talkspace from 2015 to 2017, told the Times. "They said it was private, but it wasn't."</p><p>Other former employees said the company would pay special attention to its "enterprise partner" clients, who worked at companies like Google. One therapist said Talkspace contacted her for taking too long to respond to Google clients.</p><p>Talkspace responded to the Times with a Medium <a href="https://medium.com/@founders_22883/talkspace-founders-respond-to-a-new-york-times-article-78d6f5c45c59" target="_blank">post</a>, which claimed the Times report contained false and "uninformed assertions."</p><p style="margin-left: 20px;">"Talkspace is a HIPAA/HITECH and SOC2 approved platform, audited annually by external vendors, and has deployed additional technologies to keep its data safe, exceeding all existing regulatory requirements," the post states.</p>