WEBVTT - Can the US Actually Tax Billionaires? 0:00:02.720 --> 0:00:07.400 Bloomberg Audio Studios, podcasts, radio news. 0:00:15.960 --> 0:00:18.680 As Stephanie Flanders, head of Government and Economics at Bloomberg, 0:00:18.840 --> 0:00:22.080 and this is Trumpernomics, the podcast that looks at everything 0:00:22.239 --> 0:00:26.040 in the economic world of Donald Trump. This week, we 0:00:26.079 --> 0:00:28.080 thought it made sense to talk about how the US 0:00:28.200 --> 0:00:31.680 tax system is struggling to tax gazillionaires and whether any 0:00:31.720 --> 0:00:34.800 of the bright ideas being floated for extracting more from 0:00:34.880 --> 0:00:38.080 the mega rich would actually work. It's not only the 0:00:38.080 --> 0:00:41.639 so called class warriors who are worrying about wealth taxes 0:00:41.680 --> 0:00:45.440 these days. The International Monetary Fund held a war gaming 0:00:45.479 --> 0:00:48.519 exercise a few months back with around fifty finance and 0:00:48.560 --> 0:00:51.880 technology experts. David Ramley wrote about it for Business Week. 0:00:52.400 --> 0:00:55.800 It included folks from Google, DeepMind, and the Rand Corporation, 0:00:56.040 --> 0:00:59.440 and the Federal Reserve, and they spent hours debating how 0:00:59.600 --> 0:01:03.480 AAR could upend the global economy in various ways. The 0:01:03.520 --> 0:01:07.760 AI doomsday scenario they were most concerned about, it turned out, 0:01:07.920 --> 0:01:12.520 was not killer robots, but a potentially civilization ending attack 0:01:12.920 --> 0:01:16.600 on the income tax base. The US government, like many 0:01:16.880 --> 0:01:20.080 relies on income taxes for much of its revenues, so 0:01:20.160 --> 0:01:23.640 if AI destroys well paying jobs, the theory goes, it 0:01:23.640 --> 0:01:27.399 could destroy a lot of those taxes. Now, there's plenty 0:01:27.440 --> 0:01:29.640 of companies and big investors who would be raking it 0:01:29.680 --> 0:01:32.000 in in that scenario. The trouble for the tax base 0:01:32.440 --> 0:01:34.280 is that most of that money would be in the 0:01:34.280 --> 0:01:37.559 form of capital gains on stocks and other assets, which 0:01:37.600 --> 0:01:39.920 tend to be very lightly taxed. In fact, in the US, 0:01:39.959 --> 0:01:42.600 they're often not taxed at all, and a number of 0:01:42.640 --> 0:01:45.839 Bloomberg stories this week have highlighted new and even more 0:01:45.840 --> 0:01:49.160 efficient ways that the super rich are finding to avoid 0:01:49.200 --> 0:01:52.480 capital gains, even as gasoline prizes jump again and the 0:01:52.520 --> 0:01:55.600 high cost of living stays as the number one issue 0:01:55.640 --> 0:01:59.120 for most voters. So no wonder that we're hearing more 0:01:59.120 --> 0:02:02.600 and more proposals from progressive politicians for wealth taxes, both 0:02:02.600 --> 0:02:06.080 in Europe and the US. In California at one time, 0:02:06.120 --> 0:02:09.120 billionaire five percent taxes on the ballot in the midterm 0:02:09.160 --> 0:02:12.320 elections in November. That's got a lot of attention. There 0:02:12.320 --> 0:02:15.640 are others. Could any of them get pasted? And even 0:02:15.680 --> 0:02:18.040 before we get to that, would any of them work? 0:02:18.639 --> 0:02:20.840 Johnny me to discuss this. We have in our DC 0:02:21.040 --> 0:02:24.679 studio Caitlin Riley, who covers Congress for us with a 0:02:24.720 --> 0:02:27.200 focus on tax and fiscal policy. And I should say, 0:02:27.520 --> 0:02:30.760 although she's sitting in a special sound booth in Capitol Hill, 0:02:30.800 --> 0:02:34.040 it is actually pretty noisy. Caitlin, thanks very much for 0:02:34.120 --> 0:02:34.520 joining us. 0:02:34.560 --> 0:02:36.680 Anyway, it is thank you for having. 0:02:36.440 --> 0:02:40.359 Me, and I'm happy to say coming back this week 0:02:40.560 --> 0:02:43.400 is Jason Furman, Professor of economic policy at the Harvard 0:02:43.440 --> 0:02:46.320 Kennedy School and Harvard's Department of Economics, and he, of 0:02:46.360 --> 0:02:50.359 course was chair of President Obama's Council of Economic Advisors, 0:02:50.720 --> 0:02:53.840 writes and thinks about pretty much everything this podcast is 0:02:53.880 --> 0:02:55.799 interested in. Jason, thanks for coming back. 0:02:56.160 --> 0:02:57.040 Great to be back with you. 0:03:01.760 --> 0:03:05.120 Caitlyn, just give us a quick summary of how live 0:03:05.440 --> 0:03:08.560 this issue is of taxing the wealthy where you hang 0:03:08.600 --> 0:03:09.880 out on Capitol Hill. 0:03:09.840 --> 0:03:13.520 Well, it's increasingly front of mind for Democrats. Democrats are 0:03:13.560 --> 0:03:16.520 not currently in power in either the House, the Senate, 0:03:16.639 --> 0:03:19.040 or of course the White House, and so right now 0:03:19.080 --> 0:03:24.040 these ideas are more theoretical, but they featured heavily in 0:03:24.120 --> 0:03:27.880 the twenty twenty presidential primary on the Democrat side, and 0:03:27.919 --> 0:03:31.840 we would expect them to feature heavily again as we 0:03:31.880 --> 0:03:35.360 look forward to twenty twenty eight. There are several competing 0:03:35.520 --> 0:03:38.480 sort of tax proposals on how to get at taxing 0:03:38.520 --> 0:03:41.360 the wealthy. Some of those are wealth taxes, some of 0:03:41.400 --> 0:03:43.880 those would use other types of tax to get at 0:03:43.880 --> 0:03:47.600 that wealth that's not collected as wages. But we would 0:03:47.600 --> 0:03:50.880 expect that Democrats will continue to have this debate kind 0:03:50.920 --> 0:03:53.400 of between the progressive and more moderate flakes of a 0:03:53.440 --> 0:03:57.160 party about how to tax the wealthy. A large part 0:03:57.160 --> 0:04:01.080 of that is because when you want to create ambitious 0:04:01.080 --> 0:04:03.160 new social programs, you have to figure out ways to 0:04:03.200 --> 0:04:06.720 pay for them, and we're already reaching dizzying levels of debt, 0:04:06.840 --> 0:04:11.480 so how to pay for a democratic agenda will be 0:04:11.720 --> 0:04:13.720 front of mind in the years ahead. 0:04:14.160 --> 0:04:17.000 I mentioned about the possible future erosion of the tax 0:04:17.080 --> 0:04:21.040 base due to AI and a reduction in the number 0:04:21.040 --> 0:04:24.400 of certain kind of jobs, but the tax base has 0:04:24.440 --> 0:04:27.040 already been somewhat eroded, right. There is also just a 0:04:27.080 --> 0:04:30.280 concern that the system is getting worse and worse at 0:04:30.320 --> 0:04:32.719 taxing some of the new money coming on stream. 0:04:33.480 --> 0:04:37.680 Exactly, the tax system in the US focuses heavily on wages, 0:04:37.720 --> 0:04:40.960 and that's really not the way that the wealthy collect 0:04:41.040 --> 0:04:43.479 and expand their wealth, and the tax hold has not 0:04:43.560 --> 0:04:47.560 been very good at getting at those types of holdings, 0:04:47.600 --> 0:04:51.800 and we've actually seen the taxes that do target wealth 0:04:52.000 --> 0:04:55.400 erode over time. The estate tax is a big piece 0:04:55.440 --> 0:04:58.160 of that. The corporate tax rate here is also lowered 0:04:58.160 --> 0:05:03.400 over time, and so we've the way that previous generations 0:05:03.520 --> 0:05:08.760 were able to impose heavier taxes on the wealthy eroad here. 0:05:08.920 --> 0:05:14.080 And there's some interesting research by French economists Emanuel Saiez 0:05:14.279 --> 0:05:18.960 and Gabrielle Zuckman who looked at the amount the very 0:05:18.960 --> 0:05:22.560 wealthy paid in tax going back to the nineteen fifties 0:05:23.120 --> 0:05:26.000 and recently for the first time you saw the top 0:05:26.040 --> 0:05:30.040 four hundred wealthiest households, according to their research, pay actually 0:05:30.120 --> 0:05:33.240 a lower effective tax rate than the bottom fifty percent 0:05:33.279 --> 0:05:34.840 of households in the US. 0:05:35.800 --> 0:05:38.360 Jason, first, I should ask whether you sort of buy 0:05:38.400 --> 0:05:40.800 into the idea that we've got less and less good 0:05:40.839 --> 0:05:42.479 at taxing wealth, or was it just that there's just 0:05:42.520 --> 0:05:44.440 a lot more of it about and there's more focus 0:05:44.440 --> 0:05:44.720 on it. 0:05:45.360 --> 0:05:48.280 So let's just state a few facts and then I'll 0:05:48.279 --> 0:05:51.560 get to your question. The first is that the tax code, 0:05:51.920 --> 0:05:54.599 if you look at slices up through the top one 0:05:54.680 --> 0:05:58.120 tenth of one percent, is actually progressive the top one 0:05:58.160 --> 0:06:01.120 tenth of one percent is paying higher taxes on average 0:06:01.120 --> 0:06:03.719 than people in the middle, who are paying higher taxes 0:06:03.839 --> 0:06:06.520 than people on the bottom. Now, I can't tell you 0:06:06.560 --> 0:06:10.320 as an economist is it progressive enough. As a person, 0:06:10.440 --> 0:06:12.400 I think it's not progressive enough, and I'd like to 0:06:12.440 --> 0:06:16.000 make it more progressive. The second question is how has 0:06:16.040 --> 0:06:19.320 it changed over time? It's become a bit less progressive. 0:06:19.400 --> 0:06:22.760 And the biggest action there has been lowering the corporate 0:06:22.800 --> 0:06:25.520 tax rate, which used to be thirty five percent and 0:06:25.640 --> 0:06:28.200 is now twenty one percent, and so that has reduced 0:06:28.560 --> 0:06:32.120 the taxation of capital income, which disproportionately goes to people 0:06:32.560 --> 0:06:36.760 at the top. But there's also been relative to twenty 0:06:36.839 --> 0:06:39.760 years ago or twenty five years ago, things like capital 0:06:39.760 --> 0:06:44.279 gains and dividend rates are lower than they used to be. Then, third, 0:06:44.360 --> 0:06:47.280 there is an issue of the progressivity within the top 0:06:47.320 --> 0:06:49.800 one tenth of one percent. You know, the top four 0:06:49.880 --> 0:06:54.400 hundred people that Caitlin mentioned. And in one sense, there's 0:06:54.400 --> 0:06:57.240 a lot of money that those people have relative to 0:06:57.279 --> 0:07:00.840 the fiscal system as a whole. It's just not quite 0:07:00.880 --> 0:07:03.200 as important as thinking about the top one tenth of 0:07:03.200 --> 0:07:06.520 one percent, or maybe even the top ten percent of Americans. 0:07:06.560 --> 0:07:08.919 And then the very last things is what is your goal? 0:07:09.240 --> 0:07:11.880 Is your goal to raise revenue while causing the least 0:07:11.920 --> 0:07:16.040 pain or is it to discourage some type of activity 0:07:16.080 --> 0:07:19.360 you think is bad. When we do payroll taxes, we're 0:07:19.360 --> 0:07:21.240 mostly trying to raise revenue and we don't want to 0:07:21.240 --> 0:07:25.040 harm anyone. When we do tobacco taxes, we want less smoking. 0:07:25.120 --> 0:07:29.600 The goal is to actually change behavior. When you're taxing corporations, 0:07:29.600 --> 0:07:32.480 when you're taxing the wealthy, what are you trying to 0:07:32.520 --> 0:07:36.840 do raise revenue with minimal pain or changed behavior? And 0:07:36.840 --> 0:07:38.840 that's a real threshold question that's debated. 0:07:39.320 --> 0:07:41.680 Caitlyn has already pointed out that without any kind of 0:07:41.680 --> 0:07:44.920 Democrat control in Congress litt alone the White House, they're 0:07:45.000 --> 0:07:47.120 unlikely to be passed. But you know, you have Bernie 0:07:47.160 --> 0:07:51.560 Sanders and Representative Rocana. They propose a five percent annual 0:07:51.600 --> 0:07:55.680 wealth tax on billionaires, the California initiative, which is on 0:07:55.720 --> 0:07:57.240 the ballot. There's a bunch of them, but the main 0:07:57.280 --> 0:08:01.000 one is a five percent tax, one off time, supposedly 0:08:01.560 --> 0:08:06.240 on net worth over one billion, I mean, measured by 0:08:06.320 --> 0:08:11.080 your tests. Do either of those make sense? Do either 0:08:11.120 --> 0:08:13.040 of those sound like they're just raising money or are 0:08:13.080 --> 0:08:14.800 they trying to get rid of billionaires. 0:08:15.160 --> 0:08:19.280 I am quite skeptical of both of those proposals. So, 0:08:19.320 --> 0:08:22.480 first of all, one it depends on this fork. In 0:08:22.520 --> 0:08:25.240 my view, Jeff Bezos has made the world a better 0:08:25.280 --> 0:08:30.120 place by bringing down prices, expanding variety, even giving access 0:08:30.160 --> 0:08:33.080 to small businesses to ways to sell things they didn't 0:08:33.160 --> 0:08:35.840 used to. I also think Jeff Bezos wouldn't miss the 0:08:35.840 --> 0:08:37.839 money if you raise his taxes. So I very much 0:08:37.880 --> 0:08:40.880 support raising taxes on Jeff Bezos, but I'd like to 0:08:40.880 --> 0:08:43.559 do it in a way that doesn't change Amazon that much. 0:08:43.960 --> 0:08:47.520 I think Rocanna and Bernie Sanders don't mind if you 0:08:47.640 --> 0:08:50.280 got less of the type of economic activity that Jeff 0:08:50.280 --> 0:08:53.960 Bezos engaged in. They think it probably didn't, unbalance, make 0:08:54.000 --> 0:08:56.400 the world a better place. So we're coming from it 0:08:56.440 --> 0:09:00.640 from somewhat different places, which gives you different answers. The 0:09:00.679 --> 0:09:02.880 second thing is, for the two taxes that you just 0:09:03.320 --> 0:09:06.199 gave as examples, the answers are somewhat different at the 0:09:06.320 --> 0:09:08.559 level of California, and I would also say, by the way, 0:09:08.559 --> 0:09:10.720 the same thing at the level of France. It's just 0:09:10.760 --> 0:09:13.720 a lot easier for people to move and so you 0:09:13.760 --> 0:09:16.040 may not succeed in either goal. You may not raise 0:09:16.080 --> 0:09:18.480 revenue if you drive people out of the state and 0:09:18.520 --> 0:09:20.960 lose their jobs and their income taxes and the like. 0:09:21.480 --> 0:09:23.840 And you may not even have fewer billionaires, like fewer 0:09:23.920 --> 0:09:26.800 billionaires in California, but you'll have more in Texas. And 0:09:26.960 --> 0:09:28.640 if you care about the United States as a whole, 0:09:28.679 --> 0:09:32.600 I don't think you'd count that as any sort of victory. 0:09:32.679 --> 0:09:36.040 So the smaller the unit that's trying to do it, 0:09:36.080 --> 0:09:40.360 the harder it is to do this. Then nationally, there's 0:09:40.400 --> 0:09:43.560 another issue you run into, which is the US Constitution 0:09:44.440 --> 0:09:50.079 says you can't have direct taxes unless they're apportioned exactly 0:09:50.120 --> 0:09:53.240 to the population in the state. There's then an amendment 0:09:53.280 --> 0:09:55.760 that says that as an exception for income taxes, there's 0:09:55.800 --> 0:10:00.160 no exception for wealth taxes. Most constitutional scholars would agree 0:10:00.160 --> 0:10:05.040 that the current Supreme Court would rule wealth taxes unconstitutional. 0:10:05.080 --> 0:10:07.120 So at the national level, I think it's just a 0:10:07.160 --> 0:10:09.480 waste of time to be talking about it, even if 0:10:09.480 --> 0:10:12.720 you think it's a good idea, because courts wouldn't allow it. 0:10:13.520 --> 0:10:16.320 Caitlin, is that right that people recognize that there's this 0:10:16.840 --> 0:10:20.280 pretty solid constitutional case against these things. Regardless of whether 0:10:20.520 --> 0:10:23.440 that makes sense that you can't have direct wealth taxes. 0:10:23.920 --> 0:10:26.840 Well, I think supporters of the wealth taxes would probably 0:10:26.960 --> 0:10:30.320 argue that it's an open question. But yes, it's true 0:10:30.360 --> 0:10:34.200 there is this like very large, looming constitutional question, and 0:10:34.320 --> 0:10:37.600 with the current makeup of the Supreme Court, it's difficult 0:10:37.640 --> 0:10:41.480 to see them siding on the side of a wealth tax. 0:10:41.520 --> 0:10:45.400 So there is this potential, very hard stop at the 0:10:45.520 --> 0:10:46.360 end of this debate. 0:10:48.960 --> 0:10:52.800 Caitlin, I remember finding surprising when I first went to 0:10:52.840 --> 0:10:55.959 work in the US million years ago was the step 0:10:56.040 --> 0:10:59.679 up in basis rule that resets the cost basis for assets. 0:11:00.000 --> 0:11:02.560 If you get extremely wealthy in your lifetime, maybe you 0:11:02.559 --> 0:11:06.720 are Jeff Bezos. You don't realize those capital gains. They're 0:11:06.760 --> 0:11:10.280 just sitting there as part of your and your assets 0:11:10.280 --> 0:11:12.679 and your wealth. You pass it on to your children 0:11:12.760 --> 0:11:15.000 and it's considered you sort of starting the clock again, 0:11:15.240 --> 0:11:17.960 and those all of those gains during your lifetime are 0:11:17.960 --> 0:11:20.280 not ever taxed on capital gains. 0:11:20.520 --> 0:11:23.679 I think that's definitely part of the conversation. And then 0:11:23.720 --> 0:11:27.160 another piece of this is not only do those assets 0:11:27.360 --> 0:11:30.400 value reset at the point of death, but for the 0:11:30.520 --> 0:11:33.680 lifetime of the person who holds that wealth, they're often 0:11:33.760 --> 0:11:36.800 able to borrow against it and able to kind of 0:11:36.880 --> 0:11:41.240 like access liquidity without actually selling those assets. And so 0:11:41.760 --> 0:11:45.680 for that reason, those loans are becoming one of the 0:11:45.720 --> 0:11:50.199 focuses of a potential place where you could tax adjusting 0:11:50.240 --> 0:11:54.080 stepped up basis is another piece of it, taxing unrealized 0:11:54.240 --> 0:11:57.880 gains as a proposal Senator Wyden has put forward. He's 0:11:57.920 --> 0:12:01.240 the top Democrat on the Finance in the Senate, which 0:12:01.240 --> 0:12:05.079 has jurisdiction over tax policy. So yeah, there are a 0:12:05.160 --> 0:12:08.839 number of other ideas floating around that would allow you 0:12:08.920 --> 0:12:12.760 to effectively target taxes at the very wealthy. 0:12:13.440 --> 0:12:15.600 Jason, I think it's one of those things that just 0:12:15.640 --> 0:12:19.680 strikes people as an extraordinary benefit. If you're rich enough 0:12:19.720 --> 0:12:22.520 that you just never need to realize these gains, you 0:12:22.600 --> 0:12:25.040 then get to just pass them on in tact to 0:12:25.160 --> 0:12:28.720 your heirs, who, given the way our state tax works, 0:12:28.800 --> 0:12:32.040 potentially don't pay any further tax on them. Is that 0:12:32.080 --> 0:12:34.680 the easiest thing that you could tackle within the constitution. 0:12:35.240 --> 0:12:37.920 Yeah, absolutely, that's the way I think we should approach it, 0:12:37.960 --> 0:12:42.440 and it broadly two things. One is, without even getting fancy, 0:12:42.640 --> 0:12:45.280 you could have higher tax rates. You could raise the 0:12:45.440 --> 0:12:48.960 top tax rate, which is thirty seven percent, by several 0:12:49.000 --> 0:12:51.920 percentage points without creating very much of a problem at all. 0:12:52.440 --> 0:12:54.800 You could raise the tax rate on capital gains to 0:12:54.920 --> 0:12:57.560 twenty eight percent, you could raise the corporate rate, and 0:12:57.600 --> 0:13:00.520 those are just one line changes in the tax code, 0:13:00.640 --> 0:13:04.559 no constitutional debate whatsoever, and it would work just fine. 0:13:05.160 --> 0:13:08.200 Second is the type of structural issues that Caitlin was 0:13:08.240 --> 0:13:13.040 bringing up, and they largely get at The capital gains 0:13:13.080 --> 0:13:15.600 rate applies in theory, but in fact, if you hold things, 0:13:15.600 --> 0:13:17.960 you don't pay it, and there's different ways of getting 0:13:17.960 --> 0:13:20.439 at it. One is if you eventually have to pay it, 0:13:20.920 --> 0:13:24.160 then holding it is an advantage, but the advantage is timing. 0:13:24.200 --> 0:13:27.040 It's not the advantage of you're never ever going to 0:13:27.080 --> 0:13:30.600 pay it. That actually has one nice side effect, which 0:13:30.679 --> 0:13:33.160 is right now, sometimes people get locked into assets with 0:13:33.200 --> 0:13:37.040 capital gains. For a capitalist system, you'd like whoever is 0:13:37.080 --> 0:13:39.640 the most productive owner of an asset to own it. 0:13:40.200 --> 0:13:42.760 If it costs money for the productive owner of the 0:13:42.760 --> 0:13:44.800 asset to sell it and someone else to buy it, 0:13:44.840 --> 0:13:46.800 they may not do it. They may get locked in. 0:13:47.360 --> 0:13:49.760 Capital may be in the wrong hand. So one thing 0:13:49.800 --> 0:13:53.280 I like about things that reduce this and taxing gains 0:13:53.360 --> 0:13:57.000 is their accrued the widened proposal that Caitlin cited, or 0:13:57.640 --> 0:14:01.720 taxing them at death, or reducing the ability to borrow 0:14:01.760 --> 0:14:05.040 against them. All of these are different ways of not 0:14:05.120 --> 0:14:08.120 just fixing the existing system, but actually getting rid of 0:14:08.120 --> 0:14:09.280 an economic distortion. 0:14:10.080 --> 0:14:12.320 I guess the reason why the debate is not on 0:14:12.720 --> 0:14:16.200 raising the basic or the highest rate of income tax 0:14:16.920 --> 0:14:20.280 is that that isn't capturing this kind of wealth that 0:14:20.640 --> 0:14:24.600 we're talking about. If you start taxing unrealized gains, I mean, 0:14:24.640 --> 0:14:28.600 aren't they just enormous logistical and technical issues with that. 0:14:28.640 --> 0:14:31.480 You're taxing people on things that they haven't actually received 0:14:31.560 --> 0:14:34.920 as income. Presumably you're addressing the constitutional question by saying 0:14:34.960 --> 0:14:36.840 they've effectively received that income. 0:14:37.360 --> 0:14:40.320 Yeah. The Biden administration had what I thought was actually 0:14:40.320 --> 0:14:43.680 a pretty thoughtful proposal on this, because there's two issues 0:14:43.720 --> 0:14:46.360 you need to grapple with. One is if you tax 0:14:46.400 --> 0:14:48.960 someone on gains when the market runs up twenty percent 0:14:49.360 --> 0:14:51.240 and then it goes down twenty percent, do you send 0:14:51.280 --> 0:14:54.040 them a check? So what they did was basically averaged 0:14:54.080 --> 0:14:57.040 it over five years and had you pay out an installment, 0:14:57.560 --> 0:14:59.680 and then if the market fell, it just canceled your 0:14:59.680 --> 0:15:03.320 future installment, so they handled the refund issue. The second 0:15:03.440 --> 0:15:07.560 is how do you value privately held assets, And they 0:15:07.600 --> 0:15:10.680 basically assumed they had a certain rate of return and 0:15:10.720 --> 0:15:13.640 then when if or when you eventually selld them, you 0:15:13.800 --> 0:15:17.840 reconciled with the assumption that was built into it against 0:15:17.960 --> 0:15:21.080 what had actually happened. I think that was probably a 0:15:21.080 --> 0:15:24.800 workable system. Is also the case that it was exceedingly 0:15:24.960 --> 0:15:28.560 unpopular in certain quarters, and we've seen it actually around 0:15:28.600 --> 0:15:31.400 the world in different countries, I believe Belgium and Italy, 0:15:31.480 --> 0:15:33.040 but don't fact check me, because there's a little bit 0:15:33.080 --> 0:15:36.160 of a distant memory. Have tried at various times to 0:15:36.280 --> 0:15:40.600 disconnect capital gains payments from when you actually get the cash, 0:15:40.680 --> 0:15:43.560 and those didn't last very long or maybe even were 0:15:43.600 --> 0:15:46.800 canceled before they went into effect. So if you just 0:15:46.880 --> 0:15:50.400 tax them at death, you get sort of eighty five 0:15:50.480 --> 0:15:53.360 percent of the way to the benefits of taxing them 0:15:53.360 --> 0:15:56.600 each year as they accrue, with maybe twenty percent of 0:15:56.640 --> 0:15:59.960 the political pain. So that probably is the more proof. 0:16:00.680 --> 0:16:04.280 But I am tempted by be as of the cruise. 0:16:04.400 --> 0:16:08.160 But Caitlin, I mean Jason mentions the unpopularity and actually 0:16:08.160 --> 0:16:10.680 Ben Steven made this point on the podcast the other day. 0:16:10.960 --> 0:16:14.320 Until quite recently, billionaires were not particularly unpopular in the US, 0:16:14.440 --> 0:16:16.560 and then I think partly because they've been so much 0:16:16.600 --> 0:16:19.120 more in your face in recent years and you have 0:16:19.200 --> 0:16:21.680 the likes of Elon Musk and the numbers just becoming 0:16:21.840 --> 0:16:25.720 dizzyingly high, that seems to have tilted a bit. But 0:16:25.800 --> 0:16:29.800 it is still incredibly unpopular to really tax wealth at 0:16:29.840 --> 0:16:32.640 death or tax inheritance at all. I mean, in fact, 0:16:32.640 --> 0:16:36.960 in the Big Beautiful Bill, the estate tax exemption was 0:16:37.480 --> 0:16:40.680 raised to fifteen million dollars per person, and that doesn't 0:16:40.680 --> 0:16:43.840 seem to have been a particularly unpopular bit of the bill. 0:16:43.840 --> 0:16:46.760 That's correct. I will say, when you poll people and 0:16:46.840 --> 0:16:49.960 ask them generally about tax fairness and do you feel 0:16:49.960 --> 0:16:52.200 that your tax fairly do you fear that feel that 0:16:52.240 --> 0:16:56.440 the very wealthier being taxed fairly, Americans do tend to 0:16:56.920 --> 0:17:01.400 support increasing taxes on the way. Many of them also 0:17:01.440 --> 0:17:04.760 feel like they're unfairly taxed. So there is a little 0:17:04.800 --> 0:17:08.800 bit of taxes for you but not for me mentality. 0:17:09.119 --> 0:17:13.840 But it does get more tricky when you dial into 0:17:14.000 --> 0:17:17.720 kind of the nitty gritty of specific tax policy, and 0:17:17.760 --> 0:17:20.960 I think the popularity would also probably depend heavily on 0:17:22.320 --> 0:17:25.720 where these taxes were targeted and what sort of income 0:17:26.359 --> 0:17:28.560 thresholds were placed onto them. 0:17:29.000 --> 0:17:30.800 But Jason, certainly, and this is true in the UK 0:17:30.880 --> 0:17:34.080 as well. I mean, in Harrish's text is just remarkably unpopular, 0:17:34.160 --> 0:17:37.639 even among people who realistically have no chance of ever 0:17:38.440 --> 0:17:40.280 having thes need to pay it. 0:17:40.440 --> 0:17:43.359 Yeah. I mean, I've been working on this topic in 0:17:43.359 --> 0:17:46.399 public policy for thirty years now, and I don't have 0:17:46.440 --> 0:17:51.120 a good answer for you. You know, I remember once President Clinton, 0:17:51.160 --> 0:17:53.080 I think he was at a fundraiser, maybe it was 0:17:53.160 --> 0:17:56.960 in Idaho or something like that, and the person traveling 0:17:56.960 --> 0:18:00.879 with him called in to find out the estate tax 0:18:00.920 --> 0:18:03.080 and said, he's hearing a lot of complaints about the 0:18:03.200 --> 0:18:06.000 estate tax here in Idaho, and what can I tell them? 0:18:06.000 --> 0:18:08.520 And we sent back the fact that last year, six 0:18:08.560 --> 0:18:11.639 people paid the estate tax in Idaho, to which the 0:18:11.640 --> 0:18:15.040 person responded, yes, but the children of all six of 0:18:15.080 --> 0:18:17.119 them are currently sitting at the table with them at 0:18:17.119 --> 0:18:17.880 this fundraiser. 0:18:18.560 --> 0:18:22.040 Well, that tells you something about probably political influence of 0:18:22.119 --> 0:18:22.640 those who. 0:18:22.760 --> 0:18:26.600 Right right right, And to beiclely, there's another story that 0:18:26.680 --> 0:18:28.760 is too good to check, so it is in my memory. 0:18:28.800 --> 0:18:31.000 I am sure it has grown in my memory over time, 0:18:31.359 --> 0:18:33.760 but it captures the spirit of it, so that's part 0:18:33.800 --> 0:18:36.240 of what's going on. But yeah, no, I mean I 0:18:36.280 --> 0:18:38.320 remember there used to be farmers that would roll up 0:18:38.320 --> 0:18:41.280 on Capitol Hill with their tractors and you'd go through 0:18:41.320 --> 0:18:43.920 and say, the estate tax has all these different special 0:18:44.000 --> 0:18:47.480 rules for farmers that make it really really low paid 0:18:47.520 --> 0:18:49.639 out over a really long time, and they'd be like, oh, 0:18:49.680 --> 0:18:51.720 this person had to sell their family farm, and that 0:18:51.760 --> 0:18:55.800 was basically mathematically impossible because the way in which it 0:18:55.840 --> 0:18:58.040 paid out over time was such that the income would 0:18:58.040 --> 0:19:00.879 always be way more than sufficient. So I don't know. 0:19:00.920 --> 0:19:03.000 I have a hard time with what I see is 0:19:03.040 --> 0:19:05.600 the irrationality of it. Now. To be clear, if you 0:19:05.640 --> 0:19:07.240 want to make an argument and I have friends that 0:19:07.280 --> 0:19:10.399 make this argument on the conservative side that somebody worked 0:19:10.440 --> 0:19:12.800 hard and they saved a lot and they deserve the 0:19:12.840 --> 0:19:16.840 money and it's unfair, that's not exactly my moral perspective. 0:19:16.880 --> 0:19:19.120 But I don't think that's a crazy perspective. But if 0:19:19.119 --> 0:19:23.600 your perspective is this is destroying small businesses, destroying family farms, 0:19:24.000 --> 0:19:25.480 that's just not factually true. 0:19:25.600 --> 0:19:28.440 I mean, when you talk about things that are moral principles, 0:19:28.520 --> 0:19:31.560 versus just kind of practical principles. You mentioned it for California, 0:19:31.960 --> 0:19:34.920 but you seem to be suggesting, Jason, in the US, 0:19:35.440 --> 0:19:38.879 this question of not being able to tax wealth because 0:19:38.880 --> 0:19:42.320 this is so it's mobile capital and people can go. 0:19:42.440 --> 0:19:44.480 And you may be right on this, you implicitly seem 0:19:44.520 --> 0:19:46.800 to be suggesting, you know, if you're in a European country, 0:19:46.880 --> 0:19:49.800 it's very easy for people to leave a European country, 0:19:50.200 --> 0:19:53.080 but in the US, it's going to be harder for 0:19:53.160 --> 0:19:56.119 people to avoid the US tax jurisdiction altogether. Do you 0:19:56.160 --> 0:19:57.080 think that's true. 0:19:57.720 --> 0:20:01.440 Yeah, yes, I was trying to say that, and I agree, 0:20:01.440 --> 0:20:03.399 and I agree with myself on that point. But just 0:20:03.440 --> 0:20:06.120 to be clear, it's not like zero in the United 0:20:06.160 --> 0:20:09.960 States one hundred in Europe. It's a continuum, and it's 0:20:09.960 --> 0:20:11.879 not like if you raise the tax rate to ninety 0:20:11.920 --> 0:20:14.240 percent in the United States, you wouldn't get people more 0:20:14.280 --> 0:20:16.360 people leaving the United States. You would and I wouldn't 0:20:16.359 --> 0:20:18.760 do it. But within the range of the types of 0:20:18.840 --> 0:20:22.360 tax changes that are under consideration that we're talking about, 0:20:22.880 --> 0:20:25.199 the moving out of the United States to me, seems 0:20:25.240 --> 0:20:29.440 like a relatively small consideration. The moving out of California 0:20:29.600 --> 0:20:34.080 and moving out of France is a medium size consideration. 0:20:34.680 --> 0:20:36.880 Just to kind of bring this to close, we've highlighted 0:20:36.880 --> 0:20:41.000 there's obviously leftwood shift, at least in parts of the 0:20:41.000 --> 0:20:44.320 Democratic Party, and that's producing some of these proposals from 0:20:44.440 --> 0:20:47.159 the side of the party that potentially would say, you know, 0:20:47.200 --> 0:20:49.960 we shouldn't have any billionaires. But I highlighted at the 0:20:49.960 --> 0:20:53.159 start that there's also this whole other reason why we 0:20:53.240 --> 0:20:55.439 want to get better at taxing wealth is that the 0:20:55.480 --> 0:21:01.840 income tax base could be eroded quite significantly by AI. Jason, 0:21:01.880 --> 0:21:04.360 I mean, we've debated this in the past, how dramatic 0:21:04.359 --> 0:21:06.800 the change might be from AI. But do you think 0:21:07.080 --> 0:21:11.800 that that could make these questions more current and the 0:21:11.880 --> 0:21:15.680 kind of analysis that you've shared about the best ways 0:21:15.720 --> 0:21:18.240 of doing this will become a much more live issue 0:21:18.240 --> 0:21:19.399 for policymakers. 0:21:19.800 --> 0:21:21.960 I think there's a decent a chance it will become 0:21:21.960 --> 0:21:24.199 a much more live issue. But it would be a 0:21:24.320 --> 0:21:27.359 shame if we thought it was the only issue. So 0:21:27.520 --> 0:21:30.320 first of all, in terms of AI, yes, we don't 0:21:30.320 --> 0:21:33.320 know productivity, we don't know the impact on jobs, et cetera. 0:21:33.920 --> 0:21:36.560 One of the more robust predictions though, is that it 0:21:36.600 --> 0:21:39.879 will lower the labor share and raise the capital share 0:21:40.240 --> 0:21:43.320