Speaker 1: Bloomberg Audio Studios, podcasts, radio news, taxct ZAX.
Speaker 2: It's a call that's become increasingly popular from New York
Speaker 2: City to London.
Speaker 3: Tax direct.
Speaker 2: Taxes are due next Wednesday in the US, and while
Speaker 2: you put those finishing touches on your filing, many states
Speaker 2: are weighing what the future of taxes might look like
Speaker 2: for the country's wealthiest. California is weighing a ballot initiative
Speaker 2: to impose a one time well tax on residents worth
Speaker 2: one point one billion dollars or more. Massachusetts Senator Elizabeth
Speaker 2: Warren and Vermont Senator Bernie Sanders are pushing for new
Speaker 2: taxes on ultra millionaires and billionaires at the federal level,
Speaker 2: and New York City mayors or on Momdannie one on
Speaker 2: a promise to tax the wealthy two.
Speaker 4: And ultimately, the reason I want to increase these taxes
Speaker 4: on the top one percent the most profitable corporations is
Speaker 4: to increase quality of life for everyone.
Speaker 2: But the battle over whether and how to do this
Speaker 2: is pretty heated. Some of the people who'd be impacted
Speaker 2: argue that more taxes will stifle innovation, that they'll be
Speaker 2: forced to move.
Speaker 1: New Yorkers are going to flee. They're going to flee
Speaker 1: New York because of Zorod Mom Dannie.
Speaker 2: California is ultra rich, are threatening to leave the state
Speaker 2: over a proposed billionaire tax.
Speaker 1: This debate gets incredibly emotional, incredibly quickly.
Speaker 2: London based Bloomberg reporter Charlie Wells has been covering the
Speaker 2: worldwide movement to tax the rich from across the Atlantic,
Speaker 2: where European countries from the UK to France have been
Speaker 2: weighing similar proposals too.
Speaker 1: I always kind of think taxes are supposed to be boring, right,
Speaker 1: like it's just policy. But this speaks to how money
Speaker 1: really is a representation of power.
Speaker 2: So at a time when the US government has cut
Speaker 2: taxes on the nation's highest earners, it's the state of
Speaker 2: the push to do the opposite. And how have passed
Speaker 2: government's attempts to do this succeeded or failed. I'm Sarah Holder,
Speaker 2: and this is the big take from Bloomberg News Today.
Speaker 2: On the show, we unpacked the growing hotly debated push
Speaker 2: to tax the rich more, How could it work? Where
Speaker 2: has it happened before? And we take a closer look
Speaker 2: at New York City where Mayor Mom Dannie is fighting
Speaker 2: an uphill battle to tax the wealthy and pay for
Speaker 2: his campaign promises, Charlie, when we hear calls to tax
Speaker 2: the rich, there are a few ways we can interpret that. Right,
Speaker 2: Let's just start by defining those aren't the rich already taxed?
Speaker 1: If I were going to give people one takeaway in
Speaker 1: this whole debate about wealth taxes, about policy changes, it's
Speaker 1: to just remember that there are roughly three different ways
Speaker 1: that governments throughout time have taxed people. Right, So it's
Speaker 1: been on wealth, which is kind of what's in the news.
Speaker 1: It's been on income, and then it's been on consumption.
Speaker 2: Income taxes like the kind that come out of your paycheck,
Speaker 2: and consumption taxes like sales taxes, have their limitations. They
Speaker 2: collect levies on salaries, shopping or dining, but not on
Speaker 2: accumulated wealth like people's assets.
Speaker 1: What wealth tax advocates are saying is, hey, look, you know,
Speaker 1: income tax policy really isn't working. We need to tax
Speaker 1: the value of the assets that these people hold beyond income.
Speaker 2: Right, Wealthy people don't always make their money from traditional salaries.
Speaker 2: They may hold stocks, which can appreciate in value over time,
Speaker 2: or they may hold on to physical assets which are
Speaker 2: typically only taxed when they're sold, and.
Speaker 1: So valuing the properties, you know, maybe giving a break
Speaker 1: for a primary residence, looking at secondary, tertiary and beyond residences,
Speaker 1: looking at financial assets, looking at art, looking at wine collections,
Speaker 1: and then taxing that.
Speaker 2: The idea is to tax the value of these assets,
Speaker 2: because those assets, financial or otherwise are what can really
Speaker 2: help wealthy individuals get wealthier.
Speaker 1: These super wealthy people are basically able to say, you
Speaker 1: know what, I've got all these assets, I'm going to
Speaker 1: borrow against them for a really long time. So I'm
Speaker 1: not going to bring in a big income, and I'm
Speaker 1: going to borrow against these assets that i have, keep
Speaker 1: my tax right low, and then just pass those on
Speaker 1: to you know, my errors.
Speaker 2: For many generations, that's contributed to a wealth gap between
Speaker 2: the richest people and everyone else, a gap that in
Speaker 2: the US is only growing.
Speaker 1: So this group of economists at Berkeley took a look
Speaker 1: at the accumulative assets of the four hundred richest American
Speaker 1: households in the United States teteen eighty two. Those families
Speaker 1: are a cumula of assets made up two percent of GDP.
Speaker 1: Now it's twenty percent. So you see this you see
Speaker 1: this big increase, right, four hundred of the richest families.
Speaker 1: Those families, over that time, they've had an increase in
Speaker 1: wealth of about seven point five percent a year. You
Speaker 1: think about income growth for the average American one point
Speaker 1: five percent of a year. So that's a part of it, right,
Speaker 1: It's this kind of growth in inequality, right, a small
Speaker 1: number of people holding this big amount of assets.
Speaker 2: As inequality widens, there's been a debate over how and
Speaker 2: whether the government should be capturing more of that wealth
Speaker 2: through taxation.
Speaker 1: So this group of economists at Berkeley, the same group,
Speaker 1: they looked at effective tax rates, right, so the amount
Speaker 1: of tax that these really wealthy people pay. And what
Speaker 1: they found is that the effective tax of the top
Speaker 1: one hundred households in the United States was about twenty
Speaker 1: two percent on average. Compare that even to the top
Speaker 1: tax rate for people in the top income bracket. Right,
Speaker 1: So someone who might be making like five hundred thousand
Speaker 1: dollars a year, they're working at a bank, they're working
Speaker 1: incredibly hard, their tax rate is forty five percent, right,
Speaker 1: So these incredibly wealthy people twenty two percent. People who
Speaker 1: are working a lot, who are getting their money through
Speaker 1: income forty five percent, and then for the entire population
Speaker 1: on average, it's about thirty percent.
Speaker 2: It's a pretty stark divide, and that imbalance exists in
Speaker 2: other countries too, So increasingly around the world there's been
Speaker 2: momentum around designing tax policy to account not only for
Speaker 2: income but for assets. Norway, Switzerland, and Spain all levy
Speaker 2: taxes on citizens whose wealth is valued over a certain threshold.
Speaker 2: Some have done it for centuries. The Netherlands has its
Speaker 2: own levee that effectively works as a wealth tax. The
Speaker 2: US has never had a federal wealth tax, but at
Speaker 2: the local level, lawmakers across the country have been pushing
Speaker 2: for them, and so.
Speaker 1: There have been a number of proposals in Europe, in
Speaker 1: the United States, and number of states that say, hey, look,
Speaker 1: let's take the value of wealth tax that you know
Speaker 1: at a low percentage point, say two percent. You've had
Speaker 1: calls for a global tax. This is from Gabrielle Zuckman,
Speaker 1: the French economist, saying we need a global two percent
Speaker 1: tax on wealth, not just income. We also have a
Speaker 1: call in California that's been really getting a lot of attention,
Speaker 1: this ballot initiative for a one time five percent levy
Speaker 1: on assets of residents of California who have a net
Speaker 1: worth of one point one billion or more. So this
Speaker 1: push to look not just at income but to look
Speaker 1: at assets.
Speaker 2: What are the goals of lawmakers and advocates who back
Speaker 2: these kinds of taxes. Is it only about raising revenue?
Speaker 1: There are pressures that governments across the world face. Growth
Speaker 1: has slowed, interest rates are higher, we have populations living longer.
Speaker 1: There's a lot of pressure on government budgets. I would say,
Speaker 1: based on my reporting, that is the number one aim
Speaker 1: is to close gaps. There also is this issue of perception,
Speaker 1: and a lot of the policy experts I talked to
Speaker 1: said that if you have this wide spread sense of
Speaker 1: unfairness in a system, there is a need in some
Speaker 1: way to rectify it or at least make people feel
Speaker 1: like it's being addressed.
Speaker 2: Charlie says part of the reason some US states are
Speaker 2: so motivated to increase taxes on rich Americans is to
Speaker 2: offset recent federal tax cuts benefiting higher income earners that
Speaker 2: were extended and expanded last year. But actually implementing a
Speaker 2: wealth tax is easier said than done. France actually used
Speaker 2: to have a wealth tax in the nineteen nineties, so
Speaker 2: did about a dozen other countries. Over time, many of
Speaker 2: them were phased out because.
Speaker 1: They just didn't bring in the sort of revenue that
Speaker 1: advocates hoped. And you know, one business school professor told me, basically,
Speaker 1: you know what, both sides here tend to overestimate the
Speaker 1: efficacy or the danger of wealth tax. You know, they
Speaker 1: never bring in a huge amount of revenue. The percentage
Speaker 1: that they take is usually you know, between one percent
Speaker 1: to about three percent. There's sort of a substitute for
Speaker 1: other taxes that maybe some of these countries don't have.
Speaker 2: There are also challenges when it comes to calculating them.
Speaker 1: There are administrative issues, right, so if you think about
Speaker 1: what a wealth tax is, you're tallying up the value
Speaker 1: of all the stuff that someone owns every year and
Speaker 1: then figuring out how much you're going to tax on that.
Speaker 1: Like that is a really big administrative challenge. And so
Speaker 1: it can sound really simple to say, oh, okay, all
Speaker 1: we got to do is two percent wealth tax around
Speaker 1: the world done. Making that happen is hard, it's expensive.
Speaker 2: But the other big problem is rich people tend to
Speaker 2: hate them.
Speaker 1: One of the most experienced tax advisors, I spoke with
Speaker 1: who helps wealthy people with their tax planning. What she
Speaker 1: said to me was which people have a lot of
Speaker 1: resources to lobby against the sort of thing.
Speaker 2: That's what happened in the UK.
Speaker 1: Britain is a really interesting case because it's sort of
Speaker 1: between Europe and the United States. So like the United States,
Speaker 1: it has never had a full on wealth tax, but
Speaker 1: it faces similar pressures that a lot of advanced economies have,
Speaker 1: that issue of slowing growth, that issue of a consumer understrain,
Speaker 1: that issue of inequality. And over the past you know,
Speaker 1: two years roughly since the Labor government has come into power,
Speaker 1: there has been pressure on the government in the United Kingdom,
Speaker 1: at least in the Labor Party from the left flank
Speaker 1: of that party, to bring in something like a wealth tax,
Speaker 1: and that kind of mirrored some policy discussions that we
Speaker 1: were also seeing in France. But in both countries these policies,
Speaker 1: at least right now, from the parties in power, have
Speaker 1: not come into place, and I think that's because there
Speaker 1: was a lot of debate. There were a lot of
Speaker 1: threats from incredibly wealthy people to leave, and I think
Speaker 1: the threat of departures has been very, very real and
Speaker 1: very very live in the UK, as you saw a
Speaker 1: lot of wealthy people either go to lower tax jurisdictions
Speaker 1: or threatened to go, And I think that really scared the.
Speaker 2: Government, Charlie. How often do people actually leave? What is
Speaker 2: the data say about how these measures have played out
Speaker 2: over time.
Speaker 1: A lot of these policies have not really been in
Speaker 1: place for really long enough to see what would actually happen.
Speaker 1: And I think that's in a lot of ways why
Speaker 1: a wealth tax in the modern era is such an experiment.
Speaker 1: And so there's some numbers coming out of Massachusetts where
Speaker 1: you didn't have a wealth tax, but you saw this
Speaker 1: four percent surcharge on people from twenty twenty three who
Speaker 1: had an income of over a million dollars, and what
Speaker 1: you saw was a big amount of you know, assets leaving,
Speaker 1: but also a big amount of revenue coming in. Residents
Speaker 1: exiting Massachusetts took a net four point two billion dollars
Speaker 1: in adjusted gross and come with them in twenty twenty three.
Speaker 1: But then again, you can make another story here when
Speaker 1: you look at the Massachusetts government brought in more than
Speaker 1: six billion dollars in revenue from this policy, and so
Speaker 1: it's easy to kind of slice and dice I think
Speaker 1: another thing is people are always coming and going right.
Speaker 1: Wealthy people are very mobile. There's also a lot of entries.
Speaker 1: There's a lot of re entries. It's really easy to
Speaker 1: hear one number and think that the sky is falling,
Speaker 1: but look at the other numbers, right, and I think
Speaker 1: we need that data over time. We don't have it yet.
Speaker 2: After the break, we zoom in on one of the
Speaker 2: closest watched battles over a plan to raise taxes on
Speaker 2: high earners playing out in the richest city in the country.
Speaker 4: I think we need to increase taxes on the top
Speaker 4: one percent by two percent. Why we need to raise
Speaker 4: the state's top corporate tax right to match that out
Speaker 4: of New Jersey, and in doing so, this would raise.
Speaker 2: Nine New York City mayors or on. Mamdani was elected
Speaker 2: on a progressive platform that he pledged to pay for
Speaker 2: with higher taxes on higher earners and big corporations. But
Speaker 2: instead of pushing a wealth tax proposal like in Spain
Speaker 2: or California, trying to levy taxes on the wealth that
Speaker 2: lives in yachts or fine wine, Mam Donnie is focusing
Speaker 2: on boosting taxes on wealthier New Yorker's income. The plan
Speaker 2: has a lot of people riled up.
Speaker 5: I would hazard a guess that part of the reason
Speaker 5: this is getting so much attention is because of the
Speaker 5: mayor himself.
Speaker 2: Bloomberg reporter Laura Namias covers New York state and city politics.
Speaker 5: He attracts incredible amount of attention, both good and bad,
Speaker 5: and so this idea is drawing even more criticism than
Speaker 5: it usually has.
Speaker 2: Mam Donnie has proposed raising corporate taxes and increasing the
Speaker 2: tax rate on New Yorkers who make over a million
Speaker 2: dollars a year, And since he can't raise in or
Speaker 2: corporate taxes himself at the city level, he needs the
Speaker 2: state to act. That's proving difficult.
Speaker 5: Previous millionaire tax income hikes have been proposed in response
Speaker 5: to economic downturns or like huge economic problems after the
Speaker 5: Great Recession amid the COVID pandemic. Those were the times
Speaker 5: when there was the most political support in Albany for
Speaker 5: raising the taxes. And we're not technically in a downturn,
Speaker 5: So there's some concern about using this lever at a
Speaker 5: moment when it's not like of maximum importance, or is
Speaker 5: this the pull lever in case of emergency or should
Speaker 5: we just pull it whenever we feel like it.
Speaker 2: Mam Donnie is facing pushback from Albany right now, where
Speaker 2: New York Governor Kathy Hokeel has resisted boosting the tax
Speaker 2: rate at all. The back and forth is an example
Speaker 2: of the political challenges that proposals to fund progressive measures
Speaker 2: with taxes on the wealthy can face.
Speaker 5: Mayor Mom Donnie was elected on this platform of providing
Speaker 5: a couple of really bold campaign promises that were pretty expansive.
Speaker 5: Now he has said that he would take whatever money
Speaker 5: he could get to fund the programs. But after his
Speaker 5: election and this year, he announced that the city was
Speaker 5: facing a massive budget deficit, so he is agitating heavily
Speaker 5: for tax increases at the state level.
Speaker 2: Mam Donnie has also offered a counter proposal, something he
Speaker 2: does have control over as mayor, raising property taxes across
Speaker 2: the board.
Speaker 4: Faced with no other choice, the city would have to
Speaker 4: exercise the only revenue lever fully within our own control.
Speaker 4: We would have to raise property.
Speaker 2: Taxes that would require city council approval. So far, Mamdannie's
Speaker 2: hardball at both the city and state level has hit
Speaker 2: political roadblocks. Hokl has continued to reiterate that she doesn't
Speaker 2: want to increase income taxes. Here she is speaking at
Speaker 2: a Politico summit in March.
Speaker 3: What I want to make sure we are smart about
Speaker 3: is having a system in place where it's not just
Speaker 3: taxing for the sake of taxing, and being conscious of
Speaker 3: the facts that I need people who are high net
Speaker 3: worth to support the generous social programs that we want
Speaker 3: to have in our state.
Speaker 5: She's facing a re election fight in November in a
Speaker 5: state that is not as blue as New York City is.
Speaker 5: Without her approval, it's very unlikely that a tax increase
Speaker 5: could go through. I mean, New York State has raised
Speaker 5: income taxes repeatedly. It's not a totally out there idea
Speaker 5: at all, and it pulls incredibly well. There's more than
Speaker 5: a simple majority support for raising income taxes on millionaires.
Speaker 5: And that's not like a new phenomenon either. For years
Speaker 5: and years, I think that that has been the case.
Speaker 5: People support the idea of taxing the rich. It's just
Speaker 5: that there are a lot of taxes already.
Speaker 2: I mean, from Mamdani's perspective, why focus on increasing income
Speaker 2: tax We've seen other proposals that are focused on taxing wealth.
Speaker 5: I think he's not opposed to wealth taxes. It's just
Speaker 5: incredibly difficult to do in practice, and income taxes work
Speaker 5: in New York. It yields a tremendous amount of revenue.
Speaker 5: It's easier to catch. The state Tax Department is like
Speaker 5: notorious or lauded depending on where you're coming from for
Speaker 5: their ability to track people and track their residency and
Speaker 5: make sure that people are paying. But a wealth tax
Speaker 5: is just very difficult to do on a state level. Well.
Speaker 2: One of the concerns that often comes up around these
Speaker 2: local or state level wealth tax proposals is that businesses
Speaker 2: or wealthy individuals will just leave rather than pay, which
Speaker 2: could lead to further economic strains. How is that dynamic
Speaker 2: potentially different in a city like New York, which has
Speaker 2: all of these other reasons that people move here and
Speaker 2: want to stay.
Speaker 5: Actually shows that it's inconclusive. The last time that New
Speaker 5: York raised taxes on millionaires, it did not appear to
Speaker 5: lead to an exodus of rich people out of the state.
Speaker 5: The kind of people who can afford to live anywhere,
Speaker 5: It doesn't They're not that sensitive to changes in income taxes.
Speaker 5: The data suggests more that people are leaving from more
Speaker 5: middle income brackets than from the very top, and that
Speaker 5: that is potentially likely because of housing prices, which is
Speaker 5: just another one of these cost pressures that people face.
Speaker 5: But what some detractors would say, and groups like the
Speaker 5: Citizen Budget Commission, which is sort of this non partisan
Speaker 5: budget watchdog that also opposes increasing income taxes, they would
Speaker 5: say that New York's share of the number of millionaires
Speaker 5: in the country has shrunk compared to other states. New
Speaker 5: York State is so reliant on the income taxes from
Speaker 5: incredibly wealthy people that if a few people leave who
Speaker 5: are extraordinarily wealthy, that could have an impact on the
Speaker 5: state's bottom line, and they use that revenue to fund
Speaker 5: things that are just sort of baseline expenses like medicaid
Speaker 5: and school funding.
Speaker 2: New York City has a deadline of June thirtieth to
Speaker 2: adopt a balanced budget. New York State's deadline was April first.
Speaker 2: They've blown past that, but the budget is expected to
Speaker 2: be done in the coming weeks, and regardless of where
Speaker 2: they land on Mamdani's hoped for tax changes and how
Speaker 2: other proposals across the country shakeout, Bloomberg's Charlie Wells reminds
Speaker 2: us that in the US and in the UK, even
Speaker 2: the concept of income taxes for anyone was an experiment
Speaker 2: once upon a time.
Speaker 1: There's incredible debate on whether or not it was even
Speaker 1: appropriate to tax income. There were a lot of concerns
Speaker 1: that the government asking people how much money they made
Speaker 1: was this huge invasion of privacy. There were kind of
Speaker 1: national debates about this. So this incredible kind of push
Speaker 1: pull something that now feels very normal, It feels very
Speaker 1: not controversial. There's a world where the changes that we're
Speaker 1: seeing in the economy, the changes that we're seeing and
Speaker 1: tax policy kind of have that kind of influence on
Speaker 1: a wealth tax.
Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.
Speaker 2: To get more from The Big Take and unlimited access
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Speaker 2: Thanks for listening. We'll be back tomorrow.