Mr Gates, who had previously supported a tax on the rich, also changed his tune, pointing out that a “tax on the rich” would undermine social incentives and counterproductive economic development. Lately, America’s super-rich have been sitting on needle felt. Their wealth is likely to shrink sharply and their place on the world’s billionaire rich list is at stake. To their alarm, the democratic presidential candidate, Elizabeth Warren, has proposed a tax on the rich.
Under Warren’s proposal, families with assets of more than $50 million would be taxed 2 percent a year, while families with more than $1 billion would have to pay 3 percent tax. Not long ago, Warren added a wealth tax, proposing a tax on the super-rich from 3 percent to 6 percent.
Microsoft founder Bill Gates said Warren’s “wealth tax” had gone too far and was shocked by the proposal.
“I’ve paid more than $10 billion in taxes, more than anyone pays, but I’d be happy to do it if I had to pay $20 billion in taxes.” But when you say I should pay $100 billion in taxes, I’ll start doing arithmetic and see how much more i have left. Bill Gates said.
For Bill Gates, low-income Americans may not pay for it. For the first time in 2018, 400 of the wealthiest Americans paid less in total tax rates than any other income group, according to new data.
Warren’s “tax on the rich” is like a trigger, reigniting a debate about the fairness of the U.S. tax system.
America’s tax on the rich is getting lower and lower.
Ten years ago, Warren Buffett issued a statement saying he paid a lower tax rate than his secretary.
This stems from the federal government’s tax rate on investment income, which is lower than the wage income tax on many Americans. Currently, the top statutory tax rate for investment income in the United States is only 23.8%, and the top statutory tax rate for wage income is 43.4%.
Billionaires like Warren Buffett pay lower taxes than millions of Americans, as much of Buffett’s income comes from investment. Ironically, all this happened when the income gap between the rich and the average American was greater than ever.
The U.S. income gap widened further in 2018, with the Gini coefficient at a 50-year high, according to the Census Bureau.
In the three decades from the late 1970s to 2016, the richest 1 percent of America tripled from 7 percent to 20 percent, according to estimates by economists Emmanuel Seth and Gabriel Zuckerman of the University of California, Berkeley. The share of wealth has fallen from 35 per cent to 25 per cent.
A recent Study by the Federal Reserve also showed that the wealth of the richest 1 per cent of the US has grown by $21 trillion over the past 30 years, while the wealth of the bottom 50 per cent of the US wealth pyramid has fallen by $900bn.
Analysts say the U.S. government’s tax cuts have lowered the tax rate for the top earners, widening the gap between rich and poor in the U.S.
In the 1950s and 1960s, it was a different story. When the economy boomed, the wealthiest Americans paid the top 91 percent income tax. Today, the top tax rate is only 43.4 per cent.
The reason why the U.S. tax rate is getting lower is that its tax system has fundamentally reduced progress.
It is reported that the United States federal income tax is designed to be progressive tax – the tax rate as income increases, which helps to narrow the income gap. Over the past few decades, the system has been severely eroded, with many multi-millionaires and billionaires paying lower tax rates than the average American family.
Seth and Zuckerman describe the history of American taxes as a struggle between those who want to tax the rich and those who want to protect the rich. Proponents of high-tax rates had the upper hand in the mid-20th century, but much of the second half of the 20th century was a victory for the low-tax side.
When Warren proposed a tax on the rich, she had the support of many low-income voters.
In Warren’s calculator, Bezos, the world’s richest man, will pay $6,697 million next year and Facebook CEO Mark Zuckerberg will pay $4.249 billion. Bill Gates’ assets would pay $6.379 billion at $107 billion.
Senator Bernie Sanders of Vermont has even made more radical claims. He plans to increase taxes by 1 percent for people with more than $32 million in assets, then gradually progressively, and 8 percent on people with more than $10 billion in assets.
If Sanders’s tax policies were adopted in 1982, Amazon CEO Bezos would have a fortune of only $52.2 billion, not the current $160 billion net worth. Mr Buffett will have only $11.1bn in assets, and his current assets are $88.3bn.
The struggles of the super-rich
America’s rich can no longer stand idly by, with many outspokenly criticizing Warren’s tax policies.
Mr Gates, who had previously supported a tax on the rich, also changed his tune, pointing out that a “tax on the rich” would undermine social incentives and counterproductive economic development.
Charles Schwab, founder, chairman and CEO of Jiaxin Financial, the largest online brokerage in the United States, said Warren’s proposed “wealth tax” would deprive the rich of the incentive to create wealth. “I started from scratch because there was enough incentive to create what we created,” he said in a television interview. ”
Wall Street bosses have collectively blasted Warren’s “wealth tax” plan, with Us hedge fund magnate and billionaire Leon Cooperman saying publicly: “If Elizabeth Warren were elected president, the market would fall by 25 per cent.” ”
Warren, however, believes the policy will affect only about 75,000 U.S. households, but could raise as much as $2.75 trillion over a decade, which could fund social benefits and infrastructure.
There are also some super-rich who support a “tax on the rich”.
In June 2019, 18 super-rich people, including Disney heir Abigail Disney, issued a joint letter calling on candidates from both parties in the 2020 presidential election to support a modest “rich man tax” on one in a thousand Americans.
George Zimmer, a member of the American Patriotic Millionaires Association, said in an article: “I have seen how our system has perpetuated serious inequality, but now I am proud to be a ‘traitor of our class’.” ”
George Zimmer points out that the United States needs to reformulate a fair, progressive tax code. In this tax code, the richest pay for infrastructure, clean energy, public transportation, early childhood education, and so on.
Larry Summers, an economist at Harvard University, argues that the operability of the wealth tax is questionable. The super-rich can easily transfer and hide their wealth by other means, making the wealth tax significantly less effective than originally predicted.
But Seth and Zuckerman insist that the super-rich’s assets are mainly in the form of real estate and stocks, so it’s not as easy to hide as you might think. They also called for the creation of a public protection agency to help the IRS crack down on tax evasion.
“The wealth tax could lead to some money flowing from the open market to much more difficult investment channels, ” says Wojciech Kopzok, an economics professor at Columbia University. They are easy to value on the open market, but this may encourage the rich to invest at higher risk and with higher expected returns. “