In Europe, the UK, and the US, the natural response to “economy isn’t productive enough to support the government that we want/deserve” is “tax the rich”. Does a climate change alarmist like Bill Gates actually need four business jets or could he get by with three? If the answer is “the Gulfstream G650 and two more jets should be enough” then it is natural to conclude that Mr. Gates isn’t paying his fair share to support our collective spending dreams.
(How big are our dreams? Singapore’s government spends about 19 percent of GDP (Heritage). The U.S. government spends over 41 percent (Heritage; though since “private” health care is essentially part of the government I think the real number is over 50 percent).)
“Donors Quietly Push Harris to Drop Tax on Ultrawealthy” (New York Times, August 29, 2024) is a look inside the process of investing in political donations to make sure that the tax burden from expanded government falls on someone else.
Ms. Harris’s campaign last week said she supported the tax increases included in President Biden’s latest White House budget proposal. One of those plans would require Americans worth at least $100 million to pay taxes on investment gains even if they have not sold the stocks, bonds or other assets that have appreciated.
Under the plan, those Americans would owe a 25 percent tax on a combination of their regular income, like wages, and so-called unrealized gains. The so-called billionaire minimum income tax could create hefty tax bills for wealthy individuals who derive much of their wealth from the stocks and other assets they own.
The proposal has hit a nerve with some of the donors who have flocked to supporting Ms. Harris after Mr. Biden dropped out of the presidential race, according to seven people familiar with the conversations.
Still, some donors close to Ms. Harris do not believe she is that committed to the idea. “In my interactions with them, the key is she focuses on her values and is not an ideologue about any particular program,” Mark Cuban, a billionaire and the former principal owner of the Dallas Mavericks basketball team, said in an interview. “From what I’ve been told, everything is on the table, nothing’s been decided yet.”
It looks like the donors will get tax treatment that isn’t available to others:
The pushback comes amid growing optimism among lobbyists and donors that Ms. Harris is adopting a friendlier approach to business concerns than Mr. Biden. Some have said privately that they feel that Ms. Harris’s policy positions are less set in stone than Mr. Biden’s were, allowing for outside pressure to be more effective.
In her speech at the Democratic National Convention last week, Ms. Harris said she would create an “opportunity economy” and provide support to entrepreneurs and “founders,” a word in a carefully constructed speech that some attendees saw as targeted toward assuaging wealthy business leaders in Silicon Valley.
So the people who control what opinions can be widely shared, e.g., via social media, are on track to get a deal that won’t be available to non-donors.
The VCs for Kamala group — which includes Reid Hoffman, a founder of LinkedIn; Vinod Khosla of Khosla Ventures; Ron Conway, a well-known investor; and the billionaire Chris Sacca — surveyed its members about various public policy issues. Roughly 75 percent of respondents agreed with the statement “taxing unrealized capital gains will stifle innovation,” according to a document viewed by The New York Times. The survey otherwise showed support for Ms. Harris’s agenda.
The ambitious tax proposal would face an uphill climb on Capitol Hill, where Republicans and some Democrats are skeptical of changing how capital gains are taxed. That dynamic has helped ease some of the concerns on Wall Street about the idea, said Charles Myers, a fund-raiser for Ms. Harris and the chairman and founder of Signum Global Advisors.
“In my world, yes, I do hear about it and there is concern,” he said. “I think almost every person who would raise it as a concern understands that it would never pass Congress even if it’s a Democratic sweep.”
Part of the idea seems to be is that Kamala Harris can tell peasant voters that government will expand to meet all of their needs, paid for by these new taxes on the rich, and then Congress will instead raise taxes on the upper-income peasants. The article quotes one Democrat who says that’s the explicit plan:
Jeffrey A. Sonnenfeld, who studies corporate leadership at the Yale School of Management, said he had raised issues about taxing unrealized capital gains with members of Ms. Harris’s campaign team. He said the campaign did not want to publicly distance itself from the idea. “They don’t want to antagonize the populist support they need to get through the elections and make a big issue of it,” he said.
“Forget Stocks Or Bonds, Invest In A Lobbyist” (state-sponsored NPR, 2012):
In a recent study, researchers Raquel Alexander and Susan Scholz calculated the total amount the corporations saved from the lower tax rate. They compared the taxes saved to the amount the firms spent lobbying for the law. Their research showed the return on lobbying for those multinational corporations was 22,000 percent. That means for every dollar spent on lobbying, the companies got $220 in tax benefits.
If Kamala Harris is elected and the promised new/higher taxes on the rich aren’t implemented as promised and/or have carve-outs craft just for venture capitalists and they companies they fund, I wonder what the ROI on these Silicon Valley billionaires’ donations will turn out to be.
Related:
- “Unite calls for 1% wealth tax on super-rich to fund UK public sector pay rises” (Guardian, August 24, 2024), which shows the broad cross-cultural appeal that the idea has, despite its complete unworkability in the UK, which lacks a US-style exit tax and doesn’t tax UK citizens who move abroad (a US citizen, by contrast, is taxed even if he/she/ze/they hasn’t lived in the US for decades). Thus, any UK billionaire who wants to escape UK taxation can simply move to a tax-free or low-tax country, such as Monaco, Italy, or Switzerland. See, for example, Jim Ratcliffe: “In May 2018, Ratcliffe was the richest person in the UK, with a net worth of £21.05 billion. … In September 2020, Ratcliffe officially changed his tax residence from Hampshire to Monaco, a move that it is estimated will save him £4 billion in tax.”