Pluralistic: Of course we can tax billionaires (15 Oct 2024)


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Uncle Sam as an old-fashioned cop with a gleaming IRS badge on his chest. He stands in a circle of wildly gesticulating, furious, old-fashioned rich guys. The background is a dark green, extremely magnified portrait of Benjamin Franklin from the middle of a US $100 bill.

Of course we can tax billionaires (permalink)

Billionaires are pretty confident that they can't be taxed – not just that they shouldn't be taxed, but rather, that it is technically impossible to tax the ultra-rich. They're not shy about explaining why, either – and neither is their army of lickspittles.

If it's impossible to tax billionaires, then anyone who demands that we tax billionaires is being childish. If taxing billionaires is impossible, then being mad that we're not taxing billionaires is like being mad at gravity.

Boy is this old trick getting old. It was already pretty thin when Margaret Thatcher rolled it out, insisting that "there is no alternative" to her program of letting the rich get richer and the poor go hungry. Dressing up a demand ("stop trying to think of alternatives") as a scientific truth ("there is no alternative") sets up a world where your opponents are Doing Ideology, while you're doing science.

Billionaires basically don't pay tax – that's a big part of how they got to be billionaires:

https://www.propublica.org/series/the-secret-irs-files

By cheating on their taxes, they get to keep – and invest – more money than less-rich people (who get to keep more money than regular people and poor people, obvs). They get so much money that they can "invest" it in corrupting the political process, for example, by flushing vast sums of dark money into elections to unseat politicians who care about finance crime and replace them with crytpo-friendly lawmakers who'll turn a blind eye to billionaires' scams:

https://www.newyorker.com/magazine/2024/10/14/silicon-valley-the-new-lobbying-monster

Once someone gets rich enough, they acquire impunity. They become too big to fail. They become too big to jail. They become too big to care. They buy presidents. They become president.

A decade ago, Thomas Piketty published his landmark Capital in the 21st Century, tracing three centuries of global capital flows and showing how extreme inequality creates political instability, leading to bloody revolutions and world wars that level the playing field by destroying most of the world's capital in an orgy of violence, with massive collateral damage:

https://memex.craphound.com/2014/06/24/thomas-pikettys-capital-in-the-21st-century/

Piketty argued that unless we taxed the rich, we would attain the same political instability that provoked the World Wars, but in a nuclear-tipped world that was poised on the brink of ecological collapse. He even laid out a program for this taxation, one that took account of all the things rich people would do to try to hide their assets.

Today, the destruction that Piketty prophesied is on our doorstep, and all over the world, political will is gathering to do something about our billionaire problem. The debate rages from France to a dozen-plus US states that are planning wealth taxes on the ultra-rich.

Wherever that debate takes hold, billionaires and their proxies pop up to tell us that we're Doing Ideology, that there is no alternative, and that it is literally impossible to tax the ultra-rich.

In a new blog post, Piketty deftly demolishes this argument, showing how thin the arguments for the impossibility of a billionaire tax really is:

https://www.lemonde.fr/blog/piketty/2024/10/15/how-to-tax-billionaires/

First, there's the argument that the ultra-rich are actually quite poor. Elon Musk and Mark Zuckerberg don't have a lot of money, they have a lot of stock, which they can't sell. Why can't they sell their stock? You'll hear a lot of complicated arguments about illiquidity and the effect on the share-price of a large sell-off, but they all boil down to this: if we make billionaires sell a bunch of their stock, they will be poorer.

No duh.

Piketty has an answer to the liquidity crisis of our poormouthing billionaires:

If finding a buyer is challenging, the government could accept these shares as payment for taxes. If necessary, it could then sell these shares through various methods, such as offering employees to purchase them, which would increase their stake in the company.

Though Piketty doesn't say so, billionaires are not actually poor. They have fucktons of cash, which they acquire through something called "buy, borrow, die," which allows them to create intergenerational dynastic wealth for their failsons:

https://finance.yahoo.com/news/buy-borrow-die-rich-avoid-140004536.html

Billionaires know they're not poor. They even admit it, when they say, "Okay, but the other reason it's impossible to tax us is that we're richer and therefore more powerful than the governments that want to try it."

Piketty points out the shell-game at the core of this argument: the free movement of money that allows for tax-dodging was created by governments. They made these laws, so they can change them. Governments that can't exercise their sovereign power to tax the wealthy end up taxing the poor, eroding their legitimacy and hence their power. Taxing the rich – a wildly popular move – will make governments more powerful, not less.

Big countries like the US (and federations like the EU) have a lot of power. The US ended Swiss banking secrecy and manages to tax Americans living abroad. There's no reason that France couldn't pass a wealth-tax that applies to people based on their historical residency: a 51 year old French billionaire who decamps to Switzerland to duck a wealth tax after 50 years in France could be held liable for 50/51 of the wealth tax.

The final argument Piketty takes up is the old saw that taxing the rich is illegal, or, if it were made legal, would be unconstitutional. As Piketty says, rich people have taken this position every single time they faced meaningful tax enforcement, and they have repeatedly lost this fight. France has repeatedly levied wealth taxes, as long ago as 1789 and as recently as 1945.

Taxing the ultra-rich isn't like the secret of embalming Pharaohs – it's not a lost art from a fallen civilization. The US top rate of tax in 1944 was 97%. The postwar top rate from 1945-63 was 94%, and it was 70% from 1965-80. This was the period of the largest expansion of the US economy in the nation's history. These are the "good old days" Republicans say they want to return to.

The super-rich keep getting richer. In France, the 500 richest families were worth a combined €200b in 2010. Today, it's €1.2 trillion. No wonder a global wealth tax is at the top of the agenda for next month's G20 Summit in Rio.

Here in the US – where money can easily move across state lines and where multiple states are racing each other to the bottom to be the best onshore/offshore tax- and financial secrecy haven – state-level millionaire taxes are kicking ass.

Massachusetts's 2024 millionaire tax has raised more than $1.8b, exceeding all expectations (it was originally benchmarked at $1b), by taxing annual income in excess of $1m at an additional 4%:

https://www.boston.com/news/business/2024/05/21/heres-how-much-the-new-massachusetts-millionaires-tax-has-raised-this-year/

This is exactly the kind of tax that billionaires say is impossible. It's so easy to turn ordinary income into sheltered income – realizing it as a capital gain, say – so raising taxes on income will do nothing. Who are you gonna believe, billionaires or the 1.8 billion dead presidents lying around the Massachusetts Department of Revenue?

But say you are worried that taxing ordinary income is a nonstarter because of preferential capital gains treatment. No worry, Washington State has you covered. Its 7% surcharge on capital gains in excess of $250,000 also exceeded all expectations, bringing in $600m more than expected in its first year – a year when the stock market fell by 25%:

https://pluralistic.net/2023/06/03/when-the-tide-goes-out/#passive-income

Okay, but what if all those billionaires flee your state? Good riddance, and don't let the door hit you on the way out. All we need is an exit tax, like the one in California, which levies a one-time 0.4% tax on net worth over $30m for any individual who leaves the state.

Billionaires are why we can't have nice things – a sensible climate policy, workers' rights, a functional Supreme Court and legislatures that answer to the people, rather than deep-pocketed donors.

The source of billionaires' power isn't mysterious: it's their money. Take away the money, take away the power. With more than a dozen states considering wealth taxes, we're finally in a race to the top, to see which state can attack the corrosive power of extreme wealth most aggressively.

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