Taxing unearned income is a terrible idea. It is also a slippery slope. Next they will say the moment you graduate as a Doctor your lifelong earnings will be X amount so pay 20% of it now.
I have to call out a little tendentiousness on your part. When it comes to taxes, you have to include capital gains, sales, state income, and property taxes. These are incredibly regressive taxes. The tax foundation back in 2017 showed that when you include this level of taxation, outside of the bottom 20% tax rates are generally flat at around 25-30% for each quintile, until you get to the top .1% where it drops to ~22%. Plus, all these caluclations, including the one you showed above, work on AGI. Higher income groups have more access to "loopholes" that will make their tax burden seem higher than it is. Wealth taxes are a pretty bad idea, and taxing unrealized capital gains is a foolish endeavour, but let's present the other side of the argument fairly. Quite frankly, I think the best argument they make is that the capital gains tax, which is far lower than earned income (including 0 in many states) doesn't make sense...you're privileging capital over labor.
Florida has a cap on how much the value of your house can rise year to year. Reassessments are after a number of years with appeal available. So its less volatile to predict and a part of the Florida black line , I'd assume , compared to the California line of government revenue.
Even California law, I worked very hard to build up assets, a lot of it outside of retirement Vehicles because I don't want to wait till I'm 65 to have access to my money. Because of California's insane tax law where treats my capital gains as income, I have no reason to stay here and I have to move because otherwise I'm paying ridiculous taxes for no reason. So now, I'm leaving California to avoid taxes and allow myself to retire earlier. Having a tax on capital gains means that you disoriented the upside downside potential of an investment. Since I'd have to be very wealthy in order to be able to justify an accountant that would be able to make my losses easier to manage, tax wise, it's better to just avoid it all. Hence why I'm moving to a state favorable to that. It's why I didn't even start a business in Cali. Taxes and regulations were insane, while in another place I can try my hand, with less consequences.
Correct me if I am wrong, but it is my understanding that the numbers of the household incomes are gross incomes obviously. if i understand the first given statistic correctly it is adjusted to inflation by referring to the CPI; however the CPI in my opinion is very flawed as it somehow includes shelter yet fails miserably to reflect shelter costs as the burden that they are on a household. It's hard to find reliable rental price development history, the numbers differ a lot. However, the lowest change nationwide being 100% increase in rental prices, inflation adjusted, the highest being about 8-fold over the past 40-50 years! (also inflation adjusted). While it's unsatisfying to have such huge gaps in the statistics, we can probabaly agree that prices for rent did increase on average likely at least somewhere around 4-6 times, inflation adjusted, when we look at representative examples from across the country. Property prices increased even more, I use San Diego as an example, simply for the fact that to my knowledge you are living in that fine and admittedly not cheap city in the US: "In 1977 La Jolla, the average price for a new home was $120,000,", another source states it is now more than 1,5 millions. In other words, if you had a middle income in the 70s, 2 years salary was a house in La Jolla. If you are in the same group today, a house in La Jolla is a 15 year salary! We dont have to have a lot of phantasy to realize, that a middle income did enable you to buy property in La Jolla 50 years ago- and absolutely doesnt today because you would be paying off that debt for at least 30 years even if you managed to save 50% of your (before tax) income. That shift is a huge burden on a household income and apparently not adequately reflected in the CPI, even when it's theoretically included. To make a more reliable point, the average rent in San Diego was about is at nearly 2K$ per month in 2021. The whole point being, all statistics included that can be hard to read, hard to examine if their methodology is correct, simply living has become more and more expensive and it is NOT reflected in the CPI. 35% of households in San Diego have a gross income of 35K or less. That is working poor and is a statisical fact. To sum up, I simply dont believe the statistics that you are basing your analysis on. When something is too good to be true, chances are, it isnt true. On another note, according to independent sources debt per capita in the US grew from about 5k$ in 1980 to about 80k $ in 2020.
If you want to target taxes at the rich, I think the best & fairest way would be to add significant excise taxes on things that only rich people buy like mega-mansions, huge yachts, expensive wine, etc. The IRS already collects excise taxes on a few things such as alcohol, so it wouldn't even be that difficult.
Not really. The blue collar workers who have great jobs with high pay that make/service yachts/mansions/wine will get crushed and then drive down the wages of others as they exit. The only solution is small government but neither side wants that.
@@Nuganics Billionaires buy this kind of goods because they are expensive, so making them more expensive we're making them more attractive, not less attractive
There is price elasticity. Demand will go down, those manufacturing plants will close, workers will get unemployed. Politicians dont want that. They prefer price inelastic goods like petroleum (automobile fuels), cigarettes and alcohols beverages,
@@francescoghizzo : Would be nice if true. In Australia we tried a luxury goods tax and the rich just purchased their yachts/mansions/wine overseas and the service of them when overseas also. In a global world these games don't work.
New Zealand already has a wealth tax for everyone who invests in shares that not either on the NZD or asx. They tax international shares at a fair dividend value of 5% even if there has been not dividend. I think it is a very unfair tax and is poorly understood by the the general public. It is targeting people’s pension funds (kiwi saver). People here really have to make 1-2% more return on an international investment just to pay for the extra tax.
That's pretty much standard for western countries. USA has a 30% withholding tax on dividends for foreign investors, unless your country has tax treaty with the us. In Finland, you are taxed for the enitre sale amount instead of just the profits if you exceed €1000 in profits.
@@R3tr0v1ru5 But Government institutions are important for public welfare. Otherwise big corporations will do everything for money (self-serving bias). Government and democracy is very important for justice.
That too. Also the carried interest loophole is the easiest way to tax and make tons of revenue. This billionaire tax is too complicated and doesn't make a lot of money anyways
@@abekawser4908 Wow, you've really fallen for Socialist propoganda. Individuals should be able to look after themselves and charity is there for those who need it. Government/politicians have their own self interest, it's not an altruistic system. Every human on earth is selfish and does everything in their own self interest (including the "poor", who vote for politicians to steal from others via taxation). Capitalism is free individuals making contracts with each other in which both parties benefit despite both parties being selfish.
Professor, please forward this lecture to Thomas Piketty. I’ve read both his books on Capital, his prescription is widely influential & yet, as I understand it, basically totally ignores many of the points you present here.
Not basically, Piketty completely ignores these points. The difference is, Piketty is making proposals based on his personal political leanings, Damodaran is analyzing the situation from a politically unbiased, rational point of view.
@@roberthammer2335damodaran use statistics and figures that are reputable and decent, and that both have underlying beliefs that direct their work into a certain political area.
Agree with all the points and overall conclusion; however, I would have loved to see a proposed solution as well to the growing wealth inequality vs. simply rejecting the current proposed solution.
The simple truth behind the growing wealth inequality is that the wealthy focus on building wealth. While working and middle-class people are focused on other things. Equality on this very issue is pointless. Do you tell the kids who are good and want to play basketball to not play basketball because the kids who are not interested in basketball are falling behind? This very issue would not even have been a thing if more people were focused on building wealth. Are we supposed to tax wealth and return this wealth to people who have no interest in building wealth? how is this fair?
@@mhmhmmhmhm5162 I don't think that metaphor works because no one is denied healthcare if they aren't good at basketball. It's a fundamental question of what do we as a society owe to each other. What's the minimum standard of living that we're ok with any one having. Also, I think it's disingenuous to imply that poor people aren't "focused on building wealth". They're focused on surviving. The single mother working 2 jobs to support her family isn't working any less hard than an investment banker or an entrepreneur of a growing company. Her efforts don't generate wealth and she has no time to divert effort because she's focused on day to day survival.
The solution is simple. Have 1 tax code instead of 2. There is one tax rate for income, and another for capital gains. If you have flat taxes, people act based on their own self interest, instead of gaming the tax code.
@@adrianobleton Middle class people were called out in the comment you replied to. Those aren't poor people. Equity ownership is more accessible than it has ever been at any point in American history, the tax code figuratively begs us to purchase and hold, and most households own none. Sure, there's a reason why legitimately poor people are excluded but what's with the people with disposable income? They're choosing to allocate their funds elsewhere and losing out to people that have made a different decision is a natural, expected, outcome.
@@mhmhmmhmhm5162 you want to know why middle income and low income people aren’t building wealth? Because every cent that they make is being squeezed out from under them, there is no universal health care so if you are out of a job and get into a medical emergency then your bankrupt, there is no affordable housing so if you lose your job you are going to get evicted, you want to buy things in bulk to be more efficient? Too bad, you only have $38 dollars in your bank account because your car broke down on your way to day care that you are forced to pay $30k a year for. The reason they are not building wealth is because the system is designed against them, not because they don’t want to.
Hello, thanks for your thorough video. I think you've pointed out a couple obstacles for implementing this law, but are far from demonstrating it to be "ineffective" or "potentially dangerous": 1. Micro-targeting: the possibility of tax evasion it is not an argument against taxes, i.e. not a negative consequence of the tax. Rather, it is a challenge in implementation, and one that world governments are keen to address (see the recently agreed global minimum corporate tax rate). 2. Based on capital gains: the new taxes are not replacing ones based on revenues, so additional volatility would not affect the tax income which already stands. Implying that governments would not be "prudent" enough to manage this volatility is not specific or supported by evidence, and anyway begs the question of how they can manage their current volatility. 3. Based on unrealized gains: the point of micro-targeting is that billionaires are able to pay the tax without liquidating all their relevant assets. With regard to unrealized losses, the IRS is not bound by "fairness", i.e. for the wash sale rule which only applies to capital losses, and not to gains. 4. Side effects: the point of taxing unrealized gains is exactly that these assets are usually not totally liquidated before death. Since you are worried about volatility, an annual tax on unrealized gains is still more predictable than simply hoping asset holders will realize all their gains or die. 5. Incremental wealth tax: this is an ideological objection separate from the actual effectiveness of the tax in collecting revenues. Nevertheless, perhaps it is poignant to put "bias" in the context of a society which , as you observed, has become massively unequal.
Im gonna make things real simple for your ass... 99% of countries who tried adopting a wealth tax have removed it. The wealth tax in Switzerland is so easy to avoid it's just a joke. Why do you think so many countries tried it and then removed it later on? it's simple, it puts their country at a significant competitive disadvantage. All you have to do is look to Norway. The owners of Salmar (the world's second-largest salmon farming company) have to pay out dividends. so their owner can pay his wealth tax. This significantly hinders Salmar to invest in new projects and opening new farms. There are hundreds of other examples of Norwegian companies being put at a competitive disadvantage.
It's the same case all over the world where every Government tries to shift the blame for its inefficiency and poor performance to some sacrificial lamb.
I think that the bill, if applied and passed as we know it now, is acting as a way for the government to get something out of the unrealized gains of securities before the billionaires die and their heirs receive a stepped-up basis (depending on how the stocks are held). While the idea of taxing movements in securities while not having the cash value of the security on hand seems to be a dangerous game, I think it is a fair way for the government to get some use out of the large amounts of money that the massively rich are sitting on, rather than investing into the economy in different ways. By taxing unrealized gains, the government can get something out of the extreme monetary gains that the billionaire's heirs will enjoy tax-free, rather than get rid of the stepped-up basis altogether for billionaires, which may cause a future tax windfall for their heirs upon sale.
Lol. It's notorious difficult to give up one's american citizenship, also you still have to pay taxes to the US for up to 5 years after your have given up your US citizenship.
The question should also be... why do they need so much money to run the government? Should we really be forced to fund wars that are idiotic (as nearly all of them are?). Also, how about the losses incurred from inflation... inflation that was caused by QE to bail out the financial system and big companies?
How do you do private business? After 100m valuation, why raise equity? I'd only raise debt. I'd never ipo, meaning if you wanted to invest in starlink, like I do now, you'll need a wealthy family member to front you 100k. How many people can do that? You further dynasty wealth. This is why we ask people to be very careful about taxes. They almost always do the opposite of what we want. Just like when we tried to provide incentives for killing rats, and instead people bred rats for the government payout.
That's the goal here, to harass the public company tech billionaires but not harm the hundreds of hidden billionaires with inherited wealth, that have not created value in decades and that dominate political families
Dr. Damodaran, at 3:30, do you think Central Banking QE's, fractionary reserve and in general expansive monetary policies, that neglect deflation and support constant inflation had something to do with that spread gap augmentation between lower and upper income ???
Excellent points why this form of a wealth tax is not beneficial- tax on unrealized gains is never going to happen in my opinion- that being said we need to find a more efficient way of taxing the super wealthy to help fund programs that will raise the standard of living for all of us
The fundamental philosophy of the billionaire tax appears to me to be about that ultra wealthy people shouldnt be able to accrue wealth from capital that should have been paid in tax in what is basically an interest free , collateral free loan from the government. The issue that arises is unrealised capital gains taxes would be chaotic by distorting the market , reducing liquidity ,punish "new money", lead to wasteful constant "appraisal" and extraordinary spending in financial policing and auditing. That being said there is more than one way to skin a cat issue
apparently UA-cam has reduced the amount i can write so here is the rest. If what we care about is preventing ultra wealthy individuals from using "government tax" interest free , we can simply charge them interest for unrealised capital gains. There could be a plethora of options in deciding how the amount due is calculated and taxpayers could be given various options to pay based on what assets they are taxed on such as debt , cash and equity. Lastly taxpayers could be given options when to pay. The benefit of this proposal is that it alleviates most problems caused by what our good senators are thinking whilst making billionaires pay for the capital which they keep.
BTW using the volatility of quarterly tax revenue to make your point about capital gains taxes includes other effects like the rules on estimated tax payments. California front loads their estimated tax payments which makes quarterly volatility higher. Using annual tax revenue figures might make more sense.
the reason for using increase in wealth as opposed to income is it accommodates for unrealized capital gains / asset appreciation as well as the eventual likelihood that a wealthy individual will never realize those capital gains in a taxable means. And instead punt it to inheritence or trusts. The reason for the existing system's focus on income is both political and practical - calculating the value of an asset without a buyer to set the price is at best imperfect. And a wealth tax hasnt passed the courts yet.
Thank you for deep analysis! But unpaid capital gain tax is in a way interest free loan - investors earn the return on the unpaid taxed part. Government needs to cover the timing problem with borrowing from market which is not interest free. As a result, there is net interest loss for the government. Furthermore, current system disturbs the market as it decreases the incentive to calibrate portfolio - GS calculated that investor need to gain additional 30% of return (costs + tax) to justify calibration of portfolio. As a result, market volatility is artificially low in normal times. In what I strongly agree is that taxing private companies (or non traded class of shares) would be insanely hard and rich will simply run to private corporation.
One point you are missing is when you say it is not interest free for the government is that your interest free loan has an expected appreciation rate that is higher than the government bond rate, so you actually produce more future taxes (at a rate higher than the govt bond interest rate) by not paying them now.
@@solidgod1093I agree that in the end at some point gov may receive more taxes given that investor can invest better than government. In a strange angle one can imagine it as if gov takes a cheap loan and passes it to investor to gain high return with profit share scheme. However it is deviaiton from core gov role: collect taxes, provide public goods and redistribute the wealth in more equal way. But this scheme makes the wealth gap even worse. Finally gov is not in control when the tax (interest free loan) is repaid - gov can be put in bad situation when it takes too much loan on its name and have either to send economy to recession or get into liquidity trap.
Clear presentation. He added to my understanding. Thanks professor. If we want to penalize a small group lets tax billionaires on what they donate to political movements and social action organizations that arguably want to overthrow society. Also, are 700 Americans really inhibiting the rest of us from raising our income ?
This seems to ignore something pretty important about the entire justification for an unrecognized cap gains tax. Taxing income alone with billionaires doesn't particularly work because a large amount of their assets will be head in some kind of asset and unlike the other 90% (not an exact stat but its a lot) of the country whose income is mostly coming from what they earn each year and not from what their assets earn. So we are in an environment where corporations are mostly paying their CEOs (I'm assuming most billionaires fall under this) in stocks specifically because they are not taxable. The argument about stock appreciation is important, but not the full picture. CEOs have the option to buy stocks (usually at a discount) and have that money appreciate over time. This is obviously not an option to the majority of Americans. This also looks a lot worse when you understand the current dividend culture that exists with lots of US stocks and buybacks as well. A lot of these arguments seem extremely bad faith. Such as the "would you not want more cap gains later" as the middle class is shrinking, income is stagnant, etc. Also you are a finance person. You understand time value of money well enough to know how dumb that sounds. Also, something blatantly missing here is a comparison of the squo tax to the proposed. California and Florida example don't really work because neither are only counting billionares and even there the argument is more "taxes won't be consistent each year" and to be frank I don't buy that based off seeing California and Florida alone. Basically it's kind of bad faith to bring up arguments against a proposed system without also addressing the issues of the squo. You can still come to the same conclusion about the proposed tax policies but if so you should be able to point to a better solution. This is just attacking a proposal from a different angles with no advocacy.
@@jurgenforster8314 so because someone is wealthy or successful that precludes them from equitable treatment and consideration under the law? How does that make sense?
Professor, I've long enjoyed your valuation talks, but to be honest I think you missed the mark with this video. I see limited downside for the average American based on the analysis you presented here. Worst case the program is not as effective as it promises to be, and stock prices fall, but the vast majority of Americans do not have significant wealth growth from investing. The movements of the stock market make little difference to the ~30% of Americans living paycheck to paycheck. You raise some good points around tax optimization strategies the 1% will employ, but I would view these as challenges for the legislation to overcome rather than show-stoppers. Your argument about billionaires using lobbyists to have a hand in writing this tax code to protect themselves is also startlingly defeatist. "It will never work so why bother trying to improve things" is a poor basis for progress. Another issue is your discussion about overall tax contribution, where you pointed out that billionaires contribute the most to overall tax revenue, a percentage that has increased since the 1980's. The growth in proportional contribution for the 1% has not been proportional to the growth in their proportional earnings, so your point here is a little misleading. Finally, the percentage of earnings paid by the poor to indirect taxes (health care being perhaps the largest example) is staggeringly greater than that paid by the 1%, something your analysis fails to take into consideration. Other nations (with better health care systems) include these costs as part of income taxes... the US does not, so a like for like comparison would be more representative.
The average American does get effected by it. 50% of the Americans have a stock portfolio. 1 in 4 Americans becomes a millionaire by retirement age. The movements of the stock market do make a big difference since that is what keeps a lot of companies afloat to provide those Americans living paycheck to paycheck with their paychecks. This kind of taxation has never even been proposed in the highest taxation bracket countries. The growth since the 90s has been due to the internet boom and globalization. Almost all the companies with massive market cap are global and their tax contribution is not attributed to a single country. All this kind of tax proposal does is make sure that companies remain private or become private and exclude the average american from participating in the shareholding.
These laws assume billionaires will stay citizens of the United States. I will revoke my citizenship when I have enough money and can live in another country, if the United States continues to fall apart. To be quite frank, only the poor are tied to the United States. I couldn't care less. It's just a place, I'm happy to leave if another place is better. And for many billionaires, that is CERTAINLY true that American citizenship won't be necessary seeing how easy it is to buy citizenship in other countries. For now, we can collect on billionaires, but if we try too hard and the country isn't actually a great place to live, why not leave? I'm positive I can find a country that let's me by citizenship for cheap and have more favorable tax laws. America doesn't even have that many exciting places to be wealthy anyway.
Ehh moving anywhere is hard….even if you’re rich you’re still tied to your family, friends, use to place you live, and language. Even if you move to other rich countries, other countries that rich people want to live in still have extremely higher tax law than US. Unless they’re moving into poorer countries, then they’d have to deal with issues such as safety, gov instability, environment issues, ect Saying you’d move just because of monetary value alone is quite a big assumption. Also Denmark has extremely high tax rates on the wealthy and they still stay for the reasons above
@@thienfoil old rich economies like Denmark do not produce new billionaires and companies. If you look at their rich lists, they are filled with legacy money from old school companies. Damodaran is right about this tax being a punitive measure against future entrepreneurs. Furthermore, rich folks in Europe choose to have residency in low tax counties while enjoying the free movement across the continent. So there are always ways around if you choose to look for and the some billionaires might have enough to look for it.
@@anoopkumarsharma I think the reason of so few billionaires in Nordic Europe countries is largely due to low corruption regarding supporting wealthiest class with still have great tax policies. Sure the companies are older, but technologically they’re not falling behind. Their roads, internet, healthcare infrastructures, public transportation are roads ahead of US. Their standard of living for most people is extremely higher than in the US. It is arguable that US production of billionaires is a good thing, that just further proves that government is giving more govern power to the richest class, even currently now… the individuals of America have very little say, most bills are pass through coporate interventions through their automatic unity and spending in politics. Even if we have greater economic gain, the question remains… does economic gain matters on if it benefits the richest people?
@@thienfoil I beg to differ. A) Norway is totally different class as their key to wealth is natural resource per capital. In fact it’s a oil economy altogether. B) Sweden which doesn’t have the oil wealth had so many issues due to high taxes that since 1990s they actually went towards lower taxes to stimulate the economy. Their flagship brand IKEA has actually nothing to do with Sweden anymore and all they did was to avoid taxes. You can search about these two thing online. I am not so sure about Finland but Denmark also benefits from natural resources per capital. On top of that we are a very heterogeneous society while Nordic countries are homogeneous with small populations. So yes they are less corrupt which helped them but I culturally we cannot emulate them. I would also argue that US which should be more equated with EU as a whole for comparison, actually have similar level of if not better income inequality and produced much better outcomes for all. It can be seen in one of the highest per capita income, median income, and median disposable income. All because we have little more free markets and less government interventions. Also, in EU countries especially Nordic ones, tax burden are much more higher for commoner. They are not exclusively targeting billionaires and wealth. But taxing a larger base. I can assure you, all these taxes will be thrown into garbage can in the US the moment regular folks had to pay Nordic level of taxes. Current tax policy is nothing but for a show, with not clear benefit. It is more feeling and jealousy driven then economic. Because we all know that how successful these taxes on super rich have been in the past. None! In any country!
@@anoopkumarsharma you just agreed with me just different wording, the fact remain the same… a large reasons why these countries remain high level of standard of living is by having extremely low level of corruption; oil is just one single component not the whole story. US also has a ton of natural resources as well and yet a middle class person lands in the hospital suddenly becomes homeless. There are plenty of countries with oil and still are extremely poor, US has extremely high level of economic activity and people are still quite poor regarding healthcare and housing. Saying these Nordic countries success solely on oil is an excuse for terrible policies in ours. There’s no reason why US could not have good health care system, good road system, good education system, good retirement system, good housing system. We literally can do anything we want, but it’s the matter of focus on richest people. Taxes allow us to reduce wealthiest class power in politics. Essentially the US is a socialist country but for the wealthy class Nordic countries have plenty of success regarding taxes, yes people generally do pay more taxes but so are their richest people. Saying “taxes the rich” have never worked is quite ridiculous, every tax system has flaws just one works better than others. Saying “it never work” is a hypobole of black and white thinking. The taxes are being paid is for the safety net, union protection, education, and road building. The only reason why our tax system is horrible is because the taxes are based on: tax cuts for wealthiest class, bailouts, military industrial complex rather than focusing on moving resources for public goods
@20:40 Government doing this for $200B over the next decade is a joke. At the rate government spends that $200B is meaningless. It won't even add up to 1% of government spending over that time period. They are, apparently, will to even push some job creators to leave the country in order to bring in that extra revenue that won't even move the needle.
Amazing video. I didn’t initially consider the 4th or 5th points in my opposition to the law, but those are some of the strongest points in opposition to it
The fundamental problem is the pace at which China is innovating. US is clearly lagging behind as it entered a period of prosperity where people are less productive & want easy money. US gdp is 21T, stock market> 41T whereas China GDP is 13T, stock market ~10T. Maybe rather than taxing the wealthiest to build infrastructure, govt must find a way that those people don't get wealthy in the 1st place. Maybe impose only ±10% share price change/day or ban options or ban banks from giving credit to invest in stocks or no credit based on owned stock value, etc. Or permanently ban the stock market 🙃
Imo the issue they’re trying to tax is the step up basis loophole; I think they’d be better off taxing that particular action or outlawing it altogether rather than taxing unrealized gains. Even if it only starts as applying to billionaires, like you said this could crater the stock market for the next decade and next thing you know, the government could try and apply this tax rule to households with much lower net worths, which would really cripple the economy.
It would be better for governments to use incentives that make the super wealthy spend more on meaningful initiatives that they care about. There is a huge amount of philanthropy because they make the decisions on where their money is spent, as opposed to, being told that they have to pay the same amount in higher taxation.
Wouldn’t it be easier to tax stocks like real estate. If you own over a million dollars you get taxed 1 or 2 percent of that. You wouldn’t have the volatility problem and you would collect way more in taxes from only the very wealthy.
Don't rich people pay for their stuff by loaning against their assets at super low rates? Why won't they be able to do the same with the tax? i.e. Elon Musk won't actually need to liquidate his TSLA, rather just loan against it to pay his taxes?
@@eliterun6214 True, however, isn't the whole point of them borrowing money is because their annual return is higher than the interest rate on the loan? If so, the maturity date doesn't really matter. Or am I missing something?
@@nothing-wp9ti Yes, Ofcourse, but they aren't going to get taxed on their NAV every year, right? Just on the annual change which should be a lot lower then what you wrote.
Great listen - we have very similar issues in Germany. However, the alternatives to taxing unrealized gains/wealths are not really obvious. What would you propose?
What about taxing a fix amount to ppl with wealth > xM? A rent for being billionaire :). I found the 5th point very compelling. On the other hand, the 4th point is rather weak as wealthy families do not need to liquidate assets to live / spend. Then there are no capital gains paid. Bringing ‘forward’ the tax would actually help collect at least some tax.
This tax proposal makes no sense but there is a case to make stocks more liquid and democratize shareholders. The ideal capitalistic stock market should tend towards fair evaluations, if a shareholder holds too much of any business this opens the market for manipulations things like Telsa or GME should not happen. As for retaining founder ceo power you can have shares with different voting power again I don't really know what could be change but something around that a large shareholder from a big market cap company should have a capped ownership or above it would be taxed or some form of incentive to have him sell.
This is extremely insightful! Point 5 appears to hinder the search for the American Dream while perpetuating the wealth inequality the tax promised to destroy. Is there any way that you think this inequality could be solved through taxation?
This bill may not be perfect, we can agree on that. But otherwise there's much to disagree on here... You say "people don't like to pay taxes" but that's a silly statement. People also "don't like" to pay for *anything* or to exercise or eat their veggies, etc. But when people see positive results from the gym, better health from the veggies, and evidence that their taxes are being used properly and that others are paying their fair share and not using their wealth to find weaknesses in our broken economic systems and exploit them, then we do like those things. I *like* to pay my taxes when I benefit from that payment just as I like to pay for an apple at the market when I benefit from its taste and nutrition. That doesn't mean I shouldn't be upset when there exists those that are essentially legally stealing apples when I pay for them, especially if the prices of apples go up for me while others are allowed to continue to steal them, effectively making me foot their bill. If one has millions or billions of dollars, they didn't earn that money the way the rest of us do, by working and contributing to society. They won the lottery of inheritance or just found weaknesses in our systems and exploited them and we just let them bleed it for their own avarice and have become complacent regarding what that is going to do to our collective future. People like Jeff Bezos shouldn't exist but our system created them. That disparity is only going to get worse if we don't do something about these billionaires yesterday. If you have a billion dollars, that means you can spend $50k, more than what I survive on every year, 20,000 times! I'm never going to feel sorry for or cry for the billionaires. Even if taxed aggressively, they never have to worry about working or where their next meal will come from. If you want to feel sorry for anyone, feel sorry for the poor that can't get out of poverty due to the way things are and how they're taxed. We can't all be rich, it's impossible, which is fine. But the way things are, we can't even all be *comfortable* and the billionaires *want* it that way and until we do something about it, they will continue to take advantage and abuse the rest of us.
Damn I'm all for taxing the rich but didn't think of the Dems proposal in this way (it really is a slippery slope) and they need to come up with smarter ways to get money out of ultra wealthy's pockets 2 questions though (and correct me if I'm wrong) 1. Don't property taxes in the US charge you as value of your house goes up, your taxes go up (effectively a tax on unrealized gains) 2. How inherited wealth is taxed which includes the “stepped up basis” tax code provision. As it stands, if a rich person sees their wealth go up by $1 billion in, for example, stock, when they sell that investment, they’ll be taxed on their $1 billion gain. But if they never sell and the investment gets passed to their heirs when they die, their heirs are taxed at the baseline of what it’s worth when they get it. If and when they sell, they’re only taxed on new gains.
TINA : there is no alternative hahahahahaha, because of so many loop holes , they have to find another way to find money to invest in humain and physical infrastructure ! Don’t be arrogante, you are better when are modest and humble !
As a person who lives in a country that had hyperinflation, I can tell that the wealthy will raise the prices of goods and services, transferring the burden to the poor...
NIFTY/BANKNIFTY Will the Fed cause a stock market crash next week? Federal Reserve Meeting on NOV 2-3, 72% chance of rate hike. Relentless FPI & FII selling, Many brokerages citing expensive valuations,disappointing earnings and guidance large giants. Global supply chain crisis pushed company input cost higher. Money talks but wealth whispers Happy diwali sir
@21:50 that's exactly the point. They never realize the gains. They borrow against their assets. Then never actually sell it. But the assets into trust, next generation inherits, and they get a set up. And now the new heirs can sell it and pay zero in taxes. Effectively having these assets never taxed.
It misses the point that the billionaires have stopped taking salaries and take stocks as their remuneration. This law, albeit poorly drafted, is to arrest that.
This is a poor understanding. Forget billionaires, almost anyone in tech and in the start up world is paid stock as part of compensation. And that is taxed as "salary" - either you sell part of the stock to pay the taxes or arrange cash; either way, you pay the "income tax".
Correct me if I am I simply dont believe the statistics that he is basing your analysis on. When something is too good to be true, chances are, it isnt true. On another note, according to independent sources debt per capita in the US grew from about 5k$ in 1980 to about 80k $ in 2020.
@@maxmeier532 you are exactly right. Public debt per capita has outpaced the gdp per capita. What does it tell you? For me it means that we have a spending problem not income.
@@joeywheeler759 nothing gonna change their spending and if we start from there, then take from the wealthy first. Very ez to say cut wasteful spending but that's not gonna happen
@@zo9fg It's also very ez to say "take from the rich" as if that will magically solve inequality. But it seems more to me like its out of resentment rather than any practicality. Why exactly do you think there are a lot of people who are opposed to this mentality of taking from the rich? Don't you think that they might be affected?
@@joeywheeler759 yes it does solve inequality when u dumb down the top earners. Because if enough ppl are affected, then any politicians will be voted out. 1 person 1 vote, regardless of wealth. Fanning fears about slippery slope is fear mongering at its best, orchestrated by ppl at the top to manipulate sheeps
@@zo9fg I'm really trying to understand your point here. You're the one that seems to fear monger by saying that the rich are out to get you. You also admitted earlier that this won't make the government efficient by fixing their spending. But somehow you expect democracy to work flawlessly and weed out any crooked politicians?
The problem is the views... this video was visualized by 15k people I guess. the twitter post "tax the billionaires" is seen by 50 million... they are not financially educated and regardless of the great explanation... the concept of Unrealized gain as tax is total bull... How do you convince the average anybody with less than 400 dollars on his account to understand how impossible is for this to be applied... Ah... USA always amazes me...
Dear Prof, I liked your exposition, but you missed a vital point. This is something Thomas Sowell has been pointing for years. The constituents of the broad groups like "middle class" or "rich" keep changing over the years. These are not static groups. So even if the middle class has declined in weath-percentage, there is significant churn within this group. The top of the middle class moves into the lower-tiers of the richer class and vice versa. When you broad-brush categories we lose out on a lot of realities. Please watch/read Thomas Sowell on this who has dealt with this issue far more eloquently than my limited description here. Thank you.
Looks like your concern can be addressed by adding 1 more measurement: percentage of population for each class, and yes, your description of class migration fits the data. However, a quick glance at the population percentage shift tells that middle class is getting smaller, the upper and lower class are getting bigger. It seems like the well-off are doing better at the expense of the growing number of the unfortunate
I almost agree on everything you said professor. But I think the 50% get mainly taxed with inflation, so it's really hard to tell how much they really "pay" in taxes.
Inflation helps anyone with debt (especially fixed-rate debt like typical mortgages), and poor people don't have any savings for inflation to eat at, so I don't think that inflation is terribly favorable for the wealthy over the poor. It's more a tax on risk-aversion, but that spans income levels.
@@FireEverLiving that's a good point, but there income is taxed by inflation tho, and they don't benefit from asset price inflation at all. I think there needs to be research done to really assess how much inflation hurts or benefits the poor. But your right it also benefits them in some points, didn't think about that to much
@@jankagerhuber8056 For sure, it affects everyone, it's just that the distribution of who it affects isn't so clear. On the other side of the coin from the factors I mentioned, lower-income people spend a much larger percentage of their wealth and income each year, so they feel it much more when prices go up. I'd prefer that inflation be near 0%, and for taxation to be done directly than through the money-printing backdoor... The asset price inflation we've seen is I think caused primarily by low interest rates. In the 70s' inflation, most assets did terribly in real terms, and you'd be better off relying on a wage which would increase than in almost any investment. In the 2010s, there was significant asset price inflation from low interest rates, but without much CPI inflation.
You should know, saying anything not against billionaires is not popular right now(sorry for the poor sentence construction in advance to English nerds). We are currently in a hate billionaires, hate wealthy, economy is rigged, etc. Worldview where both parties believe the "global elite" control everything. Thank God they don't agree on what to do about these global elite though. The tax ideas have been idiotic. Taxing unrealized gains? How idiotic are you? We could literally gamestop style invest a stock of a person we don't like. Scale their unrealized gain massively, then sell it back down right after end of year, forcing huge tax bills. Even worse. If every billionaire has to pay unrealized tax gains on a great year of stock performance, we can get huge downward pressure on markets, just because they need to raise capital for taxes. Finally, if you literally just reach billionaire status (and issue for few people), you'll need to raise capital from your, most likely still young company, to pay taxes, which means you'll have distressed selling that only someone richer than you can accommodate further solidifying the current status quo. Finally, we have more efficient ways of doing this.... A flat revenue tax on all businesses, and a removal of other taxes would keep tax compliance down to just companies which there are far fewer than than citizens. It makes no sense for each of us to file individually when our company we work for can just pay a tax that covers that same portion anyway, and remove useless hours we all spend on taxes down to far fewer people, freeing up economic activity.
What would be the best way to address the fact that the ultra-wealthy never have to realize their capital gain and can just use lines of credit against their growing assets for liquidity?
@@eliterun6214 But can they leverage others assets to pay back the original loans? All the while the original assets have likely appreciated in value more than the interest owed so once they are clear from the first loan they can be borrowed against for even more? Rinse and repeat until you die and everything goes in a thrust and never sees tax. Surely with the resources these people have this could be done successfully?
@@eliterun6214 No, they don't. Credit agreements will stipulate how/when banks can reduce or close the margin account but they literally can, and typically do, sit there in perpetuity.
I know it's contradictory for the popular view. But I feel it's a great initiative to cover the gap between rich and poor. Otherwise as far as I see there will only be rich people who will get their jobs done by robots. There will be no employment. The income inequality will only be increasing here. So this is really a great initiative.
I have utmost respect for the professor and have learned so much from his free videos, not just me million other like me have benefited. Thank you for that, professor. Firstly, Billionaires pay for their houses and other luxuries through the money borrowed at ultra low interests from special banks - on their assets. This cannot be taxed as per the current tax laws. A common person cannot put his worth in assets like stocks or bonds and borrow against it at such low interests. It’s not just possible. Go look at margin rate from Interactive brokers. Secondly, professor is actually making an argument for taxes on majority of the population and not the billionaires, but at the same time says that billionaires tax contribution has increased two fold. Which one is it? How is worlds wealth is concentrated in few individuals but somehow taxing them won’t generate enough revenues? This entire video smells of unfortunate confirmation bias. People commenting here in favor of the argument made in video should look at their financials and how hard it is getting to meet ends during this pandemic. Instead, they are actually acting as lawyers for ultra ultra rich. Manufacturing consent is what is happening here imho. Please don’t take this video at its face value, ask tough questions. Hopefully he will answer in next video.
Market cap is not real money. It is only paper money. If stock market crashes 50%, they lost half of their imaginary money. You can't tax people on imaginary money, ie unrealized gains.
Theyre talking about taxing unrealized captial gains only on people that have over 100M net worth. I think it effects 1000 people. The reasoning , is because they're able to get low interest rate loans from the bank against those assets. The get to write off the interest. Pay a low-rate to borrow, still keep all their wealth and live off the loan while paying no taxes. I don't agree with it and it may be way to difficult to monitor that and everything but thats the reason behind it
"Congratulations, you pretzeled yourself."
Mr. Damodaran, you should sell a t-shirt with that on it. :)
he might not ...but I will :) great idea :P
This bill is actually brain dead. It's insane.
Was it insane to give the wealthy $2 TRILLION?
maybe its not "muh occams razor" incompetence, but something else ... ?
@@kokokyoushi government didn't give them 2trillion
@@charan775 Yeah, it DID. Do your homework.
@@kokokyoushi please do yours. it never did.
Taxing unearned income is a terrible idea. It is also a slippery slope. Next they will say the moment you graduate as a Doctor your lifelong earnings will be X amount so pay 20% of it now.
you are missing the point and per usual are drawing an apocalyptic scenario based on simply fear mongering.
Wow super excited how #Doctorojie herbs cure my herpes simplex
Ironically that almost happens already, just with massive amounts of loans
Thats not how it works, introducing a law isn't a 'slippery slope' for a different law.
@@tobene regarding taxation it usually is
I have to call out a little tendentiousness on your part. When it comes to taxes, you have to include capital gains, sales, state income, and property taxes. These are incredibly regressive taxes. The tax foundation back in 2017 showed that when you include this level of taxation, outside of the bottom 20% tax rates are generally flat at around 25-30% for each quintile, until you get to the top .1% where it drops to ~22%. Plus, all these caluclations, including the one you showed above, work on AGI. Higher income groups have more access to "loopholes" that will make their tax burden seem higher than it is.
Wealth taxes are a pretty bad idea, and taxing unrealized capital gains is a foolish endeavour, but let's present the other side of the argument fairly. Quite frankly, I think the best argument they make is that the capital gains tax, which is far lower than earned income (including 0 in many states) doesn't make sense...you're privileging capital over labor.
Florida has a cap on how much the value of your house can rise year to year. Reassessments are after a number of years with appeal available.
So its less volatile to predict and a part of the Florida black line , I'd assume , compared to the California line of government revenue.
I thought usually gains from home sales weren't even included as cap gains unless it is above a $500,000 exemption to something similar?
Yeah, taxing unrealized gains seems unwise. However, I think I would support eliminating the step-up in basis at death.
Even California law, I worked very hard to build up assets, a lot of it outside of retirement Vehicles because I don't want to wait till I'm 65 to have access to my money. Because of California's insane tax law where treats my capital gains as income, I have no reason to stay here and I have to move because otherwise I'm paying ridiculous taxes for no reason. So now, I'm leaving California to avoid taxes and allow myself to retire earlier. Having a tax on capital gains means that you disoriented the upside downside potential of an investment. Since I'd have to be very wealthy in order to be able to justify an accountant that would be able to make my losses easier to manage, tax wise, it's better to just avoid it all. Hence why I'm moving to a state favorable to that. It's why I didn't even start a business in Cali. Taxes and regulations were insane, while in another place I can try my hand, with less consequences.
Correct me if I am wrong, but it is my understanding that the numbers of the household incomes are gross incomes obviously.
if i understand the first given statistic correctly it is adjusted to inflation by referring to the CPI; however the CPI in my opinion
is very flawed as it somehow includes shelter yet fails miserably to reflect shelter costs as the burden that they are on a household.
It's hard to find reliable rental price development history, the numbers differ a lot. However, the lowest change nationwide being 100% increase
in rental prices, inflation adjusted, the highest being about 8-fold over the past 40-50 years! (also inflation adjusted).
While it's unsatisfying to have such huge gaps in the statistics, we can probabaly agree that prices for rent did increase on average
likely at least somewhere around 4-6 times, inflation adjusted, when we look at representative examples from across the country.
Property prices increased even more, I use San Diego as an example, simply for the fact that to my knowledge you are living
in that fine and admittedly not cheap city in the US: "In 1977 La Jolla, the average price for a new home was $120,000,", another source
states it is now more than 1,5 millions. In other words, if you had a middle income in the 70s, 2 years salary was a house in La Jolla.
If you are in the same group today, a house in La Jolla is a 15 year salary!
We dont have to have a lot of phantasy to realize, that a middle income did enable you to buy property in La Jolla 50 years ago- and
absolutely doesnt today because you would be paying off that debt for at least 30 years even if you managed to save 50%
of your (before tax) income.
That shift is a huge burden on a household income and apparently not adequately reflected in the CPI, even when it's theoretically included.
To make a more reliable point, the average rent in San Diego was about is at nearly 2K$ per month in 2021.
The whole point being, all statistics included that can be hard to read, hard to examine if their methodology is correct,
simply living has become more and more expensive and it is NOT reflected in the CPI.
35% of households in San Diego have a gross income of 35K or less. That is working poor and is a statisical fact.
To sum up,
I simply dont believe the statistics that you are basing your analysis on. When something is too good to be true, chances are, it isnt true.
On another note, according to independent sources debt per capita in the US grew from about 5k$ in 1980 to about 80k $ in 2020.
Also: Bye bye! Tataa! more space for people who can afford Cali.
Wow super excited how #Doctorojie herbs cure my herpes simplex
@@maxmeier532 Tesla Motors.
You nailed it . Thank you for educating people and put facts in-front of them.
If you want to target taxes at the rich, I think the best & fairest way would be to add significant excise taxes on things that only rich people buy like mega-mansions, huge yachts, expensive wine, etc. The IRS already collects excise taxes on a few things such as alcohol, so it wouldn't even be that difficult.
Not really. The blue collar workers who have great jobs with high pay that make/service yachts/mansions/wine will get crushed and then drive down the wages of others as they exit. The only solution is small government but neither side wants that.
@@Nuganics Billionaires buy this kind of goods because they are expensive, so making them more expensive we're making them more attractive, not less attractive
There is price elasticity. Demand will go down, those manufacturing plants will close, workers will get unemployed. Politicians dont want that. They prefer price inelastic goods like petroleum (automobile fuels), cigarettes and alcohols beverages,
@@francescoghizzo : Would be nice if true. In Australia we tried a luxury goods tax and the rich just purchased their yachts/mansions/wine overseas and the service of them when overseas also. In a global world these games don't work.
@@tindrums : great to see you understand economics :) Wish all voters had this understanding.
New Zealand already has a wealth tax for everyone who invests in shares that not either on the NZD or asx. They tax international shares at a fair dividend value of 5% even if there has been not dividend. I think it is a very unfair tax and is poorly understood by the the general public. It is targeting people’s pension funds (kiwi saver). People here really have to make 1-2% more return on an international investment just to pay for the extra tax.
They really want people to remain poor, huh?
Woah is this true?
That's pretty much standard for western countries. USA has a 30% withholding tax on dividends for foreign investors, unless your country has tax treaty with the us. In Finland, you are taxed for the enitre sale amount instead of just the profits if you exceed €1000 in profits.
@@seawolf7610 False. Finnish capital gains tax taxes profits, not your original capital input. Read the tax code again.
Government should focus more on efficiency of government offices so that government can give better service with less money.
You've got to be joking. Government isn't supposed to be efficient and never will be. This is why I want as little government as possible.
@@R3tr0v1ru5 But Government institutions are important for public welfare. Otherwise big corporations will do everything for money (self-serving bias). Government and democracy is very important for justice.
That too. Also the carried interest loophole is the easiest way to tax and make tons of revenue. This billionaire tax is too complicated and doesn't make a lot of money anyways
@@abekawser4908 Wow, you've really fallen for Socialist propoganda. Individuals should be able to look after themselves and charity is there for those who need it. Government/politicians have their own self interest, it's not an altruistic system. Every human on earth is selfish and does everything in their own self interest (including the "poor", who vote for politicians to steal from others via taxation). Capitalism is free individuals making contracts with each other in which both parties benefit despite both parties being selfish.
Exactly democracy just doesn’t work
Professor, please forward this lecture to Thomas Piketty. I’ve read both his books on Capital, his prescription is widely influential & yet, as I understand it, basically totally ignores many of the points you present here.
Not basically, Piketty completely ignores these points. The difference is, Piketty is making proposals based on his personal political leanings, Damodaran is analyzing the situation from a politically unbiased, rational point of view.
Aswarh is not at the same level as Piketty but it could be interesting to have a debate between the 2 !
@@kikolatulipe You can't debate facts.
@@roberthammer2335damodaran use statistics and figures that are reputable and decent, and that both have underlying beliefs that direct their work into a certain political area.
@@kikolatulipe true, Picketty's level is a few dimensions lower
Agree with all the points and overall conclusion; however, I would have loved to see a proposed solution as well to the growing wealth inequality vs. simply rejecting the current proposed solution.
The simple truth behind the growing wealth inequality is that the wealthy focus on building wealth. While working and middle-class people are focused on other things. Equality on this very issue is pointless. Do you tell the kids who are good and want to play basketball to not play basketball because the kids who are not interested in basketball are falling behind? This very issue would not even have been a thing if more people were focused on building wealth. Are we supposed to tax wealth and return this wealth to people who have no interest in building wealth? how is this fair?
@@mhmhmmhmhm5162 I don't think that metaphor works because no one is denied healthcare if they aren't good at basketball.
It's a fundamental question of what do we as a society owe to each other. What's the minimum standard of living that we're ok with any one having.
Also, I think it's disingenuous to imply that poor people aren't "focused on building wealth". They're focused on surviving. The single mother working 2 jobs to support her family isn't working any less hard than an investment banker or an entrepreneur of a growing company. Her efforts don't generate wealth and she has no time to divert effort because she's focused on day to day survival.
The solution is simple. Have 1 tax code instead of 2. There is one tax rate for income, and another for capital gains. If you have flat taxes, people act based on their own self interest, instead of gaming the tax code.
@@adrianobleton Middle class people were called out in the comment you replied to. Those aren't poor people. Equity ownership is more accessible than it has ever been at any point in American history, the tax code figuratively begs us to purchase and hold, and most households own none. Sure, there's a reason why legitimately poor people are excluded but what's with the people with disposable income? They're choosing to allocate their funds elsewhere and losing out to people that have made a different decision is a natural, expected, outcome.
@@mhmhmmhmhm5162 you want to know why middle income and low income people aren’t building wealth? Because every cent that they make is being squeezed out from under them, there is no universal health care so if you are out of a job and get into a medical emergency then your bankrupt, there is no affordable housing so if you lose your job you are going to get evicted, you want to buy things in bulk to be more efficient? Too bad, you only have $38 dollars in your bank account because your car broke down on your way to day care that you are forced to pay $30k a year for. The reason they are not building wealth is because the system is designed against them, not because they don’t want to.
Hello, thanks for your thorough video. I think you've pointed out a couple obstacles for implementing this law, but are far from demonstrating it to be "ineffective" or "potentially dangerous":
1. Micro-targeting: the possibility of tax evasion it is not an argument against taxes, i.e. not a negative consequence of the tax. Rather, it is a challenge in implementation, and one that world governments are keen to address (see the recently agreed global minimum corporate tax rate).
2. Based on capital gains: the new taxes are not replacing ones based on revenues, so additional volatility would not affect the tax income which already stands. Implying that governments would not be "prudent" enough to manage this volatility is not specific or supported by evidence, and anyway begs the question of how they can manage their current volatility.
3. Based on unrealized gains: the point of micro-targeting is that billionaires are able to pay the tax without liquidating all their relevant assets. With regard to unrealized losses, the IRS is not bound by "fairness", i.e. for the wash sale rule which only applies to capital losses, and not to gains.
4. Side effects: the point of taxing unrealized gains is exactly that these assets are usually not totally liquidated before death. Since you are worried about volatility, an annual tax on unrealized gains is still more predictable than simply hoping asset holders will realize all their gains or die.
5. Incremental wealth tax: this is an ideological objection separate from the actual effectiveness of the tax in collecting revenues. Nevertheless, perhaps it is poignant to put "bias" in the context of a society which , as you observed, has become massively unequal.
Im gonna make things real simple for your ass...
99% of countries who tried adopting a wealth tax have removed it. The wealth tax in Switzerland is so easy to avoid it's just a joke. Why do you think so many countries tried it and then removed it later on? it's simple, it puts their country at a significant competitive disadvantage. All you have to do is look to Norway. The owners of Salmar (the world's second-largest salmon farming company) have to pay out dividends. so their owner can pay his wealth tax. This significantly hinders Salmar to invest in new projects and opening new farms. There are hundreds of other examples of Norwegian companies being put at a competitive disadvantage.
It's the same case all over the world where every Government tries to shift the blame for its inefficiency and poor performance to some sacrificial lamb.
Yep bro, hardwork will turn you into a billionaire and capitalism is not causing climate. Yah earth is also flat
I think that the bill, if applied and passed as we know it now, is acting as a way for the government to get something out of the unrealized gains of securities before the billionaires die and their heirs receive a stepped-up basis (depending on how the stocks are held). While the idea of taxing movements in securities while not having the cash value of the security on hand seems to be a dangerous game, I think it is a fair way for the government to get some use out of the large amounts of money that the massively rich are sitting on, rather than investing into the economy in different ways. By taxing unrealized gains, the government can get something out of the extreme monetary gains that the billionaire's heirs will enjoy tax-free, rather than get rid of the stepped-up basis altogether for billionaires, which may cause a future tax windfall for their heirs upon sale.
If the money is making capital gains, it IS invested in the economy
Banks could be a beneficiary as the rich borrow against their assets to pay the taxes.
Bank owners should also pay so I don't think any one other than the government will be a beneficiary
What this encourages is for everyone who gets anywhere close to being a billionaire to leave the US before they have to deal with this.
Lol. It's notorious difficult to give up one's american citizenship, also you still have to pay taxes to the US for up to 5 years after your have given up your US citizenship.
Wow super excited how #Doctorojie herbs cure my herpes simplex
@@MuantanamoMobile 5 yrs paying tax is better than paying forever.
Añd they will tell you can't do business in the US then, to be fair everyone should pay same tax rate. Charity is a big scam too.
You're still subject to US tax law if you live abroad... not very smart are we?
"Congratulations, you pretzeled yourself." I'm dead lmao
The question should also be... why do they need so much money to run the government? Should we really be forced to fund wars that are idiotic (as nearly all of them are?).
Also, how about the losses incurred from inflation... inflation that was caused by QE to bail out the financial system and big companies?
How do you do private business? After 100m valuation, why raise equity? I'd only raise debt. I'd never ipo, meaning if you wanted to invest in starlink, like I do now, you'll need a wealthy family member to front you 100k. How many people can do that? You further dynasty wealth. This is why we ask people to be very careful about taxes. They almost always do the opposite of what we want. Just like when we tried to provide incentives for killing rats, and instead people bred rats for the government payout.
That's the goal here, to harass the public company tech billionaires but not harm the hundreds of hidden billionaires with inherited wealth, that have not created value in decades and that dominate political families
@@AKumar-co7oe Thanks, very good point.
who puts together these tax proposals? Like specifically
Dr. Damodaran, at 3:30, do you think Central Banking QE's, fractionary reserve and in general expansive monetary policies, that neglect deflation and support constant inflation had something to do with that spread gap augmentation between lower and upper income ???
Excellent points why this form of a wealth tax is not beneficial- tax on unrealized gains is never going to happen in my opinion- that being said we need to find a more efficient way of taxing the super wealthy to help fund programs that will raise the standard of living for all of us
I sell all my stuff for below rate prices to a foreign company that I own...
Foreign Company with 0 taxes on capital gains.
Exactly.
There will always be loop holes.
The fundamental philosophy of the billionaire tax appears to me to be about that ultra wealthy people shouldnt be able to accrue wealth from capital that should have been paid in tax in what is basically an interest free , collateral free loan from the government.
The issue that arises is unrealised capital gains taxes would be chaotic by distorting the market , reducing liquidity ,punish "new money", lead to wasteful constant "appraisal" and extraordinary spending in financial policing and auditing.
That being said there is more than one way to skin a cat
issue
apparently UA-cam has reduced the amount i can write so here is the rest.
If what we care about is preventing ultra wealthy individuals from using "government tax" interest free , we can simply charge them interest for unrealised capital gains. There could be a plethora of options in deciding how the amount due is calculated and taxpayers could be given various options to pay based on what assets they are taxed on such as debt , cash and equity. Lastly taxpayers could be given options when to pay. The benefit of this proposal is that it alleviates most problems caused by what our good senators are thinking whilst making billionaires pay for the capital which they keep.
BTW using the volatility of quarterly tax revenue to make your point about capital gains taxes includes other effects like the rules on estimated tax payments. California front loads their estimated tax payments which makes quarterly volatility higher. Using annual tax revenue figures might make more sense.
the reason for using increase in wealth as opposed to income is it accommodates for unrealized capital gains / asset appreciation as well as the eventual likelihood that a wealthy individual will never realize those capital gains in a taxable means. And instead punt it to inheritence or trusts.
The reason for the existing system's focus on income is both political and practical - calculating the value of an asset without a buyer to set the price is at best imperfect. And a wealth tax hasnt passed the courts yet.
THANK YOU UA-cam ALGORITHM. this was a great listen. Well Said Sir.
Whatever law they bring in, the wealthy will find some or other way to never give away their money😂😂
And why should they💁🏼♂️💁🏼♂️😏😏
Thank you for deep analysis! But unpaid capital gain tax is in a way interest free loan - investors earn the return on the unpaid taxed part. Government needs to cover the timing problem with borrowing from market which is not interest free. As a result, there is net interest loss for the government. Furthermore, current system disturbs the market as it decreases the incentive to calibrate portfolio - GS calculated that investor need to gain additional 30% of return (costs + tax) to justify calibration of portfolio. As a result, market volatility is artificially low in normal times. In what I strongly agree is that taxing private companies (or non traded class of shares) would be insanely hard and rich will simply run to private corporation.
One point you are missing is when you say it is not interest free for the government is that your interest free loan has an expected appreciation rate that is higher than the government bond rate, so you actually produce more future taxes (at a rate higher than the govt bond interest rate) by not paying them now.
@@solidgod1093I agree that in the end at some point gov may receive more taxes given that investor can invest better than government. In a strange angle one can imagine it as if gov takes a cheap loan and passes it to investor to gain high return with profit share scheme. However it is deviaiton from core gov role: collect taxes, provide public goods and redistribute the wealth in more equal way. But this scheme makes the wealth gap even worse. Finally gov is not in control when the tax (interest free loan) is repaid - gov can be put in bad situation when it takes too much loan on its name and have either to send economy to recession or get into liquidity trap.
Clear presentation. He added to my understanding. Thanks professor.
If we want to penalize a small group lets tax billionaires on what they donate to political movements and social action organizations that arguably want to overthrow society.
Also, are 700 Americans really inhibiting the rest of us from raising our income ?
This seems to ignore something pretty important about the entire justification for an unrecognized cap gains tax. Taxing income alone with billionaires doesn't particularly work because a large amount of their assets will be head in some kind of asset and unlike the other 90% (not an exact stat but its a lot) of the country whose income is mostly coming from what they earn each year and not from what their assets earn.
So we are in an environment where corporations are mostly paying their CEOs (I'm assuming most billionaires fall under this) in stocks specifically because they are not taxable. The argument about stock appreciation is important, but not the full picture. CEOs have the option to buy stocks (usually at a discount) and have that money appreciate over time. This is obviously not an option to the majority of Americans. This also looks a lot worse when you understand the current dividend culture that exists with lots of US stocks and buybacks as well.
A lot of these arguments seem extremely bad faith. Such as the "would you not want more cap gains later" as the middle class is shrinking, income is stagnant, etc. Also you are a finance person. You understand time value of money well enough to know how dumb that sounds.
Also, something blatantly missing here is a comparison of the squo tax to the proposed. California and Florida example don't really work because neither are only counting billionares and even there the argument is more "taxes won't be consistent each year" and to be frank I don't buy that based off seeing California and Florida alone.
Basically it's kind of bad faith to bring up arguments against a proposed system without also addressing the issues of the squo. You can still come to the same conclusion about the proposed tax policies but if so you should be able to point to a better solution. This is just attacking a proposal from a different angles with no advocacy.
suppressing one group in order to boost another instead of simply providing better tools and resources to those that need it - what could go wrong
Exactly. Favoritism and artificial subsidies. Goes against all of the “privilege” which they are so quick to complain about.
(suppressing) billionaires ? How does that make sense. It would be suppressing a billionaire to make them a millionaire?
@@jurgenforster8314 so because someone is wealthy or successful that precludes them from equitable treatment and consideration under the law? How does that make sense?
Voice of reason is so rare to hear these days!
Professor, I've long enjoyed your valuation talks, but to be honest I think you missed the mark with this video. I see limited downside for the average American based on the analysis you presented here. Worst case the program is not as effective as it promises to be, and stock prices fall, but the vast majority of Americans do not have significant wealth growth from investing.
The movements of the stock market make little difference to the ~30% of Americans living paycheck to paycheck. You raise some good points around tax optimization strategies the 1% will employ, but I would view these as challenges for the legislation to overcome rather than show-stoppers.
Your argument about billionaires using lobbyists to have a hand in writing this tax code to protect themselves is also startlingly defeatist. "It will never work so why bother trying to improve things" is a poor basis for progress.
Another issue is your discussion about overall tax contribution, where you pointed out that billionaires contribute the most to overall tax revenue, a percentage that has increased since the 1980's. The growth in proportional contribution for the 1% has not been proportional to the growth in their proportional earnings, so your point here is a little misleading.
Finally, the percentage of earnings paid by the poor to indirect taxes (health care being perhaps the largest example) is staggeringly greater than that paid by the 1%, something your analysis fails to take into consideration. Other nations (with better health care systems) include these costs as part of income taxes... the US does not, so a like for like comparison would be more representative.
The average American does get effected by it.
50% of the Americans have a stock portfolio.
1 in 4 Americans becomes a millionaire by retirement age.
The movements of the stock market do make a big difference since that is what keeps a lot of companies afloat to provide those Americans living paycheck to paycheck with their paychecks.
This kind of taxation has never even been proposed in the highest taxation bracket countries.
The growth since the 90s has been due to the internet boom and globalization. Almost all the companies with massive market cap are global and their tax contribution is not attributed to a single country.
All this kind of tax proposal does is make sure that companies remain private or become private and exclude the average american from participating in the shareholding.
These laws assume billionaires will stay citizens of the United States. I will revoke my citizenship when I have enough money and can live in another country, if the United States continues to fall apart. To be quite frank, only the poor are tied to the United States. I couldn't care less. It's just a place, I'm happy to leave if another place is better. And for many billionaires, that is CERTAINLY true that American citizenship won't be necessary seeing how easy it is to buy citizenship in other countries. For now, we can collect on billionaires, but if we try too hard and the country isn't actually a great place to live, why not leave? I'm positive I can find a country that let's me by citizenship for cheap and have more favorable tax laws. America doesn't even have that many exciting places to be wealthy anyway.
Ehh moving anywhere is hard….even if you’re rich you’re still tied to your family, friends, use to place you live, and language. Even if you move to other rich countries, other countries that rich people want to live in still have extremely higher tax law than US. Unless they’re moving into poorer countries, then they’d have to deal with issues such as safety, gov instability, environment issues, ect
Saying you’d move just because of monetary value alone is quite a big assumption. Also Denmark has extremely high tax rates on the wealthy and they still stay for the reasons above
@@thienfoil old rich economies like Denmark do not produce new billionaires and companies. If you look at their rich lists, they are filled with legacy money from old school companies. Damodaran is right about this tax being a punitive measure against future entrepreneurs.
Furthermore, rich folks in Europe choose to have residency in low tax counties while enjoying the free movement across the continent. So there are always ways around if you choose to look for and the some billionaires might have enough to look for it.
@@anoopkumarsharma I think the reason of so few billionaires in Nordic Europe countries is largely due to low corruption regarding supporting wealthiest class with still have great tax policies. Sure the companies are older, but technologically they’re not falling behind. Their roads, internet, healthcare infrastructures, public transportation are roads ahead of US. Their standard of living for most people is extremely higher than in the US. It is arguable that US production of billionaires is a good thing, that just further proves that government is giving more govern power to the richest class, even currently now… the individuals of America have very little say, most bills are pass through coporate interventions through their automatic unity and spending in politics. Even if we have greater economic gain, the question remains… does economic gain matters on if it benefits the richest people?
@@thienfoil I beg to differ. A) Norway is totally different class as their key to wealth is natural resource per capital. In fact it’s a oil economy altogether. B) Sweden which doesn’t have the oil wealth had so many issues due to high taxes that since 1990s they actually went towards lower taxes to stimulate the economy. Their flagship brand IKEA has actually nothing to do with Sweden anymore and all they did was to avoid taxes. You can search about these two thing online. I am not so sure about Finland but Denmark also benefits from natural resources per capital.
On top of that we are a very heterogeneous society while Nordic countries are homogeneous with small populations. So yes they are less corrupt which helped them but I culturally we cannot emulate them.
I would also argue that US which should be more equated with EU as a whole for comparison, actually have similar level of if not better income inequality and produced much better outcomes for all. It can be seen in one of the highest per capita income, median income, and median disposable income. All because we have little more free markets and less government interventions.
Also, in EU countries especially Nordic ones, tax burden are much more higher for commoner. They are not exclusively targeting billionaires and wealth. But taxing a larger base. I can assure you, all these taxes will be thrown into garbage can in the US the moment regular folks had to pay Nordic level of taxes.
Current tax policy is nothing but for a show, with not clear benefit. It is more feeling and jealousy driven then economic. Because we all know that how successful these taxes on super rich have been in the past. None! In any country!
@@anoopkumarsharma you just agreed with me just different wording, the fact remain the same… a large reasons why these countries remain high level of standard of living is by having extremely low level of corruption; oil is just one single component not the whole story. US also has a ton of natural resources as well and yet a middle class person lands in the hospital suddenly becomes homeless. There are plenty of countries with oil and still are extremely poor, US has extremely high level of economic activity and people are still quite poor regarding healthcare and housing. Saying these Nordic countries success solely on oil is an excuse for terrible policies in ours. There’s no reason why US could not have good health care system, good road system, good education system, good retirement system, good housing system. We literally can do anything we want, but it’s the matter of focus on richest people. Taxes allow us to reduce wealthiest class power in politics. Essentially the US is a socialist country but for the wealthy class
Nordic countries have plenty of success regarding taxes, yes people generally do pay more taxes but so are their richest people. Saying “taxes the rich” have never worked is quite ridiculous, every tax system has flaws just one works better than others. Saying “it never work” is a hypobole of black and white thinking. The taxes are being paid is for the safety net, union protection, education, and road building. The only reason why our tax system is horrible is because the taxes are based on: tax cuts for wealthiest class, bailouts, military industrial complex rather than focusing on moving resources for public goods
In Germany, unrealized gains on ETFs are also taxed, to provide equality between accumulating and distributing ETFs. It's annoying nonetheless.
Past rates on the top were higher because there were all kinds of deductions that have since been taken away as tax law has changed. No one paid 90%.
Ireland and Denmark tax residents holding mutual funds for unrealized capital gain. ETFs also count. But single stocks are not subjected to these tax.
@20:40
Government doing this for $200B over the next decade is a joke. At the rate government spends that $200B is meaningless.
It won't even add up to 1% of government spending over that time period.
They are, apparently, will to even push some job creators to leave the country in order to bring in that extra revenue that won't even move the needle.
Amazing video. I didn’t initially consider the 4th or 5th points in my opposition to the law, but those are some of the strongest points in opposition to it
The fundamental problem is the pace at which China is innovating. US is clearly lagging behind as it entered a period of prosperity where people are less productive & want easy money. US gdp is 21T, stock market> 41T whereas China GDP is 13T, stock market ~10T.
Maybe rather than taxing the wealthiest to build infrastructure, govt must find a way that those people don't get wealthy in the 1st place. Maybe impose only ±10% share price change/day or ban options or ban banks from giving credit to invest in stocks or no credit based on owned stock value, etc.
Or permanently ban the stock market 🙃
Translation : I envy the rich. I want the govt to destroy them on my behalf.
@@bryanstark1930 Haha, nice one!
Imo the issue they’re trying to tax is the step up basis loophole; I think they’d be better off taxing that particular action or outlawing it altogether rather than taxing unrealized gains. Even if it only starts as applying to billionaires, like you said this could crater the stock market for the next decade and next thing you know, the government could try and apply this tax rule to households with much lower net worths, which would really cripple the economy.
This is the implementation of the stupid MMT economy.
These congressmen and women are not fit to create laws for our country. Every day I lose more faith in our government.
It would be better for governments to use incentives that make the super wealthy spend more on meaningful initiatives that they care about. There is a huge amount of philanthropy because they make the decisions on where their money is spent, as opposed to, being told that they have to pay the same amount in higher taxation.
Wouldn’t it be easier to tax stocks like real estate. If you own over a million dollars you get taxed 1 or 2 percent of that. You wouldn’t have the volatility problem and you would collect way more in taxes from only the very wealthy.
Don't rich people pay for their stuff by loaning against their assets at super low rates? Why won't they be able to do the same with the tax? i.e. Elon Musk won't actually need to liquidate his TSLA, rather just loan against it to pay his taxes?
all loans have maturity -- forced liquidity still exists, it just might be pushed later.
Rich people can't get loans for 25% of the value of their stocks because it's too risky. The loans are only for small portions of the assets.
@@eliterun6214 True, however, isn't the whole point of them borrowing money is because their annual return is higher than the interest rate on the loan? If so, the maturity date doesn't really matter. Or am I missing something?
@@nothing-wp9ti Yes, Ofcourse, but they aren't going to get taxed on their NAV every year, right? Just on the annual change which should be a lot lower then what you wrote.
Great listen - we have very similar issues in Germany. However, the alternatives to taxing unrealized gains/wealths are not really obvious. What would you propose?
Limiting the government.
What about taxing a fix amount to ppl with wealth > xM? A rent for being billionaire :).
I found the 5th point very compelling. On the other hand, the 4th point is rather weak as wealthy families do not need to liquidate assets to live / spend. Then there are no capital gains paid. Bringing ‘forward’ the tax would actually help collect at least some tax.
This tax proposal makes no sense but there is a case to make stocks more liquid and democratize shareholders. The ideal capitalistic stock market should tend towards fair evaluations, if a shareholder holds too much of any business this opens the market for manipulations things like Telsa or GME should not happen.
As for retaining founder ceo power you can have shares with different voting power again I don't really know what could be change but something around that a large shareholder from a big market cap company should have a capped ownership or above it would be taxed or some form of incentive to have him sell.
This is extremely insightful! Point 5 appears to hinder the search for the American Dream while perpetuating the wealth inequality the tax promised to destroy.
Is there any way that you think this inequality could be solved through taxation?
This bill may not be perfect, we can agree on that. But otherwise there's much to disagree on here... You say "people don't like to pay taxes" but that's a silly statement. People also "don't like" to pay for *anything* or to exercise or eat their veggies, etc. But when people see positive results from the gym, better health from the veggies, and evidence that their taxes are being used properly and that others are paying their fair share and not using their wealth to find weaknesses in our broken economic systems and exploit them, then we do like those things.
I *like* to pay my taxes when I benefit from that payment just as I like to pay for an apple at the market when I benefit from its taste and nutrition. That doesn't mean I shouldn't be upset when there exists those that are essentially legally stealing apples when I pay for them, especially if the prices of apples go up for me while others are allowed to continue to steal them, effectively making me foot their bill.
If one has millions or billions of dollars, they didn't earn that money the way the rest of us do, by working and contributing to society. They won the lottery of inheritance or just found weaknesses in our systems and exploited them and we just let them bleed it for their own avarice and have become complacent regarding what that is going to do to our collective future. People like Jeff Bezos shouldn't exist but our system created them. That disparity is only going to get worse if we don't do something about these billionaires yesterday.
If you have a billion dollars, that means you can spend $50k, more than what I survive on every year, 20,000 times! I'm never going to feel sorry for or cry for the billionaires. Even if taxed aggressively, they never have to worry about working or where their next meal will come from. If you want to feel sorry for anyone, feel sorry for the poor that can't get out of poverty due to the way things are and how they're taxed.
We can't all be rich, it's impossible, which is fine. But the way things are, we can't even all be *comfortable* and the billionaires *want* it that way and until we do something about it, they will continue to take advantage and abuse the rest of us.
You can't tax people on profits that does not exist, stupid.
The impact of an entrepreneur tax? Ask John Galt. Thanks for the truth, Professor.
"when was the last time you've seen prudence in governance.." . Great work, Sir ! Keep it comming. with Love, from India.
Damn I'm all for taxing the rich but didn't think of the Dems proposal in this way (it really is a slippery slope) and they need to come up with smarter ways to get money out of ultra wealthy's pockets
2 questions though (and correct me if I'm wrong)
1. Don't property taxes in the US charge you as value of your house goes up, your taxes go up (effectively a tax on unrealized gains)
2. How inherited wealth is taxed which includes the “stepped up basis” tax code provision. As it stands, if a rich person sees their wealth go up by $1 billion in, for example, stock, when they sell that investment, they’ll be taxed on their $1 billion gain. But if they never sell and the investment gets passed to their heirs when they die, their heirs are taxed at the baseline of what it’s worth when they get it. If and when they sell, they’re only taxed on new gains.
TINA : there is no alternative hahahahahaha, because of so many loop holes , they have to find another way to find money to invest in humain and physical infrastructure ! Don’t be arrogante, you are better when are modest and humble !
when you can't prove him wrong...... just throw a tantrum : )
Good video but I wish you would've provided a suggestion that may be effective (even if you inherently disagree with their intentions).
Reducing the bloated government budget.
What is your opinion about property tax? It exists and has all the same problems as the proposed wealth tax.
Couldn't the government just print and spend the money without raising revenues, then allow the resultant inflation to serve as a de facto wealth tax?
As a person who lives in a country that had hyperinflation, I can tell that the wealthy will raise the prices of goods and services, transferring the burden to the poor...
Wouldnt this affect the rich and the poor equivalently?
The SALT tax repeal would be the even more criminal thing to do
NIFTY/BANKNIFTY
Will the Fed cause a stock market crash next week?
Federal Reserve Meeting on NOV 2-3, 72% chance of rate hike.
Relentless FPI & FII selling, Many brokerages citing expensive valuations,disappointing earnings and guidance large giants. Global supply chain crisis pushed company input cost higher.
Money talks but wealth whispers
Happy diwali sir
@21:50 that's exactly the point. They never realize the gains. They borrow against their assets. Then never actually sell it. But the assets into trust, next generation inherits, and they get a set up. And now the new heirs can sell it and pay zero in taxes. Effectively having these assets never taxed.
who will kill a golden goose = an idiot or government.
Thanks for these insights prof.
great points! love your lectures!
Thank you Prof!
« People have agenda »… what is yours Mr Asawath !
It misses the point that the billionaires have stopped taking salaries and take stocks as their remuneration. This law, albeit poorly drafted, is to arrest that.
This is a poor understanding. Forget billionaires, almost anyone in tech and in the start up world is paid stock as part of compensation. And that is taxed as "salary" - either you sell part of the stock to pay the taxes or arrange cash; either way, you pay the "income tax".
thank Professor, emmm China has it's way and this US way. very interesting 👌
Correct me if I am
I simply dont believe the statistics that he is basing your analysis on. When something is too good to be true, chances are, it isnt true.
On another note, according to independent sources debt per capita in the US grew from about 5k$ in 1980 to about 80k $ in 2020.
Wow super excited how #Doctorojie herbs cure my herpes simplex
@@maxmeier532 you are exactly right. Public debt per capita has outpaced the gdp per capita. What does it tell you? For me it means that we have a spending problem not income.
Thank you! Brilliant!
How to reduce income inequality at the same time increasing productivity??
This will reduce the ownership of the founders
rather than criticise, what's the best way to tax billionaires?
Have a government that's efficient with their money. Instead of wasting it.
@@joeywheeler759 nothing gonna change their spending and if we start from there, then take from the wealthy first. Very ez to say cut wasteful spending but that's not gonna happen
@@zo9fg It's also very ez to say "take from the rich" as if that will magically solve inequality. But it seems more to me like its out of resentment rather than any practicality. Why exactly do you think there are a lot of people who are opposed to this mentality of taking from the rich? Don't you think that they might be affected?
@@joeywheeler759 yes it does solve inequality when u dumb down the top earners. Because if enough ppl are affected, then any politicians will be voted out. 1 person 1 vote, regardless of wealth. Fanning fears about slippery slope is fear mongering at its best, orchestrated by ppl at the top to manipulate sheeps
@@zo9fg I'm really trying to understand your point here. You're the one that seems to fear monger by saying that the rich are out to get you. You also admitted earlier that this won't make the government efficient by fixing their spending. But somehow you expect democracy to work flawlessly and weed out any crooked politicians?
The problem is the views... this video was visualized by 15k people I guess.
the twitter post "tax the billionaires" is seen by 50 million...
they are not financially educated and regardless of the great explanation... the concept of Unrealized gain as tax is total bull...
How do you convince the average anybody with less than 400 dollars on his account to understand how impossible is for this to be applied...
Ah... USA always amazes me...
Peasants with pitchforks
This is what you get when everyone gets to vote. Only net taxpayers should have the right to vote.
@@monsterboomer8051 still didn't narrow enough, I am sure doesn't pass this law...
I believe Technocracy is the only real way.
Dear Prof,
I liked your exposition, but you missed a vital point. This is something Thomas Sowell has been pointing for years. The constituents of the broad groups like "middle class" or "rich" keep changing over the years. These are not static groups. So even if the middle class has declined in weath-percentage, there is significant churn within this group. The top of the middle class moves into the lower-tiers of the richer class and vice versa. When you broad-brush categories we lose out on a lot of realities. Please watch/read Thomas Sowell on this who has dealt with this issue far more eloquently than my limited description here. Thank you.
Looks like your concern can be addressed by adding 1 more measurement: percentage of population for each class, and yes, your description of class migration fits the data.
However, a quick glance at the population percentage shift tells that middle class is getting smaller, the upper and lower class are getting bigger. It seems like the well-off are doing better at the expense of the growing number of the unfortunate
@@rizkymumtaza Unless we know the churn within the group talking about groups makes less sense.
True, I was also thinking the same thing
This proposal is so obviously idiotic I don't know how anyone can actually suggest it.
Would you do a breakdown on more current income inequality? I only ask bc the figures used are from 3 years ago and a lot changed.
The taxation system for a modern time should be the banking transaction tax.... 😆😆
Professor what do you think about a value added tax (VAT)?
Do the lectures of professor are also available on audio platforms?
I almost agree on everything you said professor. But I think the 50% get mainly taxed with inflation, so it's really hard to tell how much they really "pay" in taxes.
Inflation helps anyone with debt (especially fixed-rate debt like typical mortgages), and poor people don't have any savings for inflation to eat at, so I don't think that inflation is terribly favorable for the wealthy over the poor. It's more a tax on risk-aversion, but that spans income levels.
@@FireEverLiving that's a good point, but there income is taxed by inflation tho, and they don't benefit from asset price inflation at all. I think there needs to be research done to really assess how much inflation hurts or benefits the poor. But your right it also benefits them in some points, didn't think about that to much
@@jankagerhuber8056 For sure, it affects everyone, it's just that the distribution of who it affects isn't so clear. On the other side of the coin from the factors I mentioned, lower-income people spend a much larger percentage of their wealth and income each year, so they feel it much more when prices go up. I'd prefer that inflation be near 0%, and for taxation to be done directly than through the money-printing backdoor...
The asset price inflation we've seen is I think caused primarily by low interest rates. In the 70s' inflation, most assets did terribly in real terms, and you'd be better off relying on a wage which would increase than in almost any investment. In the 2010s, there was significant asset price inflation from low interest rates, but without much CPI inflation.
You should know, saying anything not against billionaires is not popular right now(sorry for the poor sentence construction in advance to English nerds). We are currently in a hate billionaires, hate wealthy, economy is rigged, etc. Worldview where both parties believe the "global elite" control everything. Thank God they don't agree on what to do about these global elite though. The tax ideas have been idiotic. Taxing unrealized gains? How idiotic are you? We could literally gamestop style invest a stock of a person we don't like. Scale their unrealized gain massively, then sell it back down right after end of year, forcing huge tax bills. Even worse. If every billionaire has to pay unrealized tax gains on a great year of stock performance, we can get huge downward pressure on markets, just because they need to raise capital for taxes. Finally, if you literally just reach billionaire status (and issue for few people), you'll need to raise capital from your, most likely still young company, to pay taxes, which means you'll have distressed selling that only someone richer than you can accommodate further solidifying the current status quo. Finally, we have more efficient ways of doing this.... A flat revenue tax on all businesses, and a removal of other taxes would keep tax compliance down to just companies which there are far fewer than than citizens. It makes no sense for each of us to file individually when our company we work for can just pay a tax that covers that same portion anyway, and remove useless hours we all spend on taxes down to far fewer people, freeing up economic activity.
What would be the best way to address the fact that the ultra-wealthy never have to realize their capital gain and can just use lines of credit against their growing assets for liquidity?
they have to pay back those loans + lines of credit. Those notes have maturity dates, they don't get to sit there in perpetuity
@@eliterun6214 But can they leverage others assets to pay back the original loans? All the while the original assets have likely appreciated in value more than the interest owed so once they are clear from the first loan they can be borrowed against for even more? Rinse and repeat until you die and everything goes in a thrust and never sees tax.
Surely with the resources these people have this could be done successfully?
@@eliterun6214 No, they don't. Credit agreements will stipulate how/when banks can reduce or close the margin account but they literally can, and typically do, sit there in perpetuity.
Great take professor ...
I really don't think this will come to actual practice
Loading up on sunset companies for that sweet sweet tax refund.
The pathway to hell is paved with good intentions
More people need to watch this, I feel like nobody has a clue when it comes to taxes in this country
increasing tax is the politest way to common prosperity?
Thanks professor!
I know it's contradictory for the popular view. But I feel it's a great initiative to cover the gap between rich and poor. Otherwise as far as I see there will only be rich people who will get their jobs done by robots. There will be no employment. The income inequality will only be increasing here. So this is really a great initiative.
Another banger
I subscribed right after the sausage joke
They know not what they do
Agree
Prudent government - an oxymoron 😂😂
How about taxing the personal loans taken against the assets.
I have utmost respect for the professor and have learned so much from his free videos, not just me million other like me have benefited. Thank you for that, professor.
Firstly, Billionaires pay for their houses and other luxuries through the money borrowed at ultra low interests from special banks - on their assets. This cannot be taxed as per the current tax laws. A common person cannot put his worth in assets like stocks or bonds and borrow against it at such low interests. It’s not just possible. Go look at margin rate from Interactive brokers.
Secondly, professor is actually making an argument for taxes on majority of the population and not the billionaires, but at the same time says that billionaires tax contribution has increased two fold. Which one is it? How is worlds wealth is concentrated in few individuals but somehow taxing them won’t generate enough revenues?
This entire video smells of unfortunate confirmation bias. People commenting here in favor of the argument made in video should look at their financials and how hard it is getting to meet ends during this pandemic. Instead, they are actually acting as lawyers for ultra ultra rich.
Manufacturing consent is what is happening here imho.
Please don’t take this video at its face value, ask tough questions. Hopefully he will answer in next video.
Market cap is not real money. It is only paper money. If stock market crashes 50%, they lost half of their imaginary money. You can't tax people on imaginary money, ie unrealized gains.
Brilliant!
amazing! plz do more lectures on things like medicare for all, paid leave, universal pre-k and other progressive agenda and how we pay for it!!
Theyre talking about taxing unrealized captial gains only on people that have over 100M net worth. I think it effects 1000 people.
The reasoning , is because they're able to get low interest rate loans from the bank against those assets.
The get to write off the interest. Pay a low-rate to borrow, still keep all their wealth and live off the loan while paying no taxes.
I don't agree with it and it may be way to difficult to monitor that and everything but thats the reason behind it