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ProPublica Invents A Meaningless Tax Rate



Isn’t this quite lovely from ProPublica.

America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people. Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.

To capture the financial reality of the richest Americans, ProPublica undertook an analysis that has never been done before. We compared how much in taxes the 25 richest Americans paid each year to how much Forbes estimated their wealth grew in that same time period.

We’re going to call this their true tax rate.

Tax avoidance strategy? This phrase now extends to not selling something so not having a capital gain that pays capital gains tax? Or even, the tax system taxes events and if there isn’t an event then there isn’t a tax. So comparing capital gains that aren’t cashed in to the income which is is a bit odd.

But, no doubt the claim will be, people should be paying tax on their total income. The tax system should not have such holes!

Cool. OK, so, what’s the tax rate on ProPublica’s income last year? Hmm? Nothing? Because it’s a tax free organisation?

How excellent, so we’ve just agreed that there are some incomes and some situations that should not be taxed. Entirely righteously too. One of those happens to be capital gains that aren’t crystallised.

Why is this so? Well, think of Bezos and his Amazon stock. He’s got about 12% of the company or so at present. He did start it, it’s seems fair enough that he should have some of it. Now we say we’re going to tax him on the gross gain in the value of that stock every year. Even if he doesn’t sell any. Which means, obviously, that he’s got to sell some each year in order to pay that tax bill. No one at all would be able to pay the tax on $100 billion of value creation from income now, would they?

At which point he’d have already sold most of his stock. We’d actually be saying that no one would be able to grow a company which they held a substantial stake in. Because each year we’d be forcing them to sell to pay their tax bill. Congratulations in destroying the incentives for company founders there. The future will be so happy about our having done so.

And there is that one other little point. How are we going to be sending folks their checks for the refunds due on unrealised capital losses?



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VERB (transitive)
1. to delete or erase; blot out; obliterate
2. to wipe out or destroy

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