The Triumph of Injustice
The first rule of economics: Never trust a progressive economist.
Saez is discredited based on his book(s) fallacies, and he normally plays this populist by distorting facts.
Here's some of the basics:
- What happens is that if you create a company, and you own a piece of it (because you founded Apple/Google/etc).... and that company grows, that company pays taxes on the property, profits, employees (payroll), and other things -- and the owner is paying not only the corporate taxes (while he owns the stock), but also any income (at the max rate) he takes out of the company. That's not under-payment, that's over-payment and double payment of taxe, most of the time. Flim-flammers ignore the corporate taxes to pretend the owner is under-paying. But that's like claiming property owners are under-paying property taxes, because they get to write some of those taxes off of their income taxes (because they're already paid somewhere else).
- When they sell the stock, which isn't every year, but rarely, what happens? The flim-flammers claim that he's only paying 20% on capital gains (+income), while some others may have a max theoretical rate of 24% over $85K up to 37% for earnings over $500K. Those rich bastards are paying less?
Or are they?
Max vs. Effective rate
Here's the facts: While the max rate seems lower, it usually isn't. (There's max rate and effective rate).
The way the schedules work if you're married and filing jointly, you pay 10% on the first $19,750, then 12% up to $80,250, then 22% up to $171,050... and so on, up to 37% on money over $622K.
So if you made a $100K and had a 22% max tax rate, you would pay $22K in taxes. But your actual tax bill is only $13,592.50 (13.6%). Why? That's the sum of the smaller amounts, and you only pay 22% on the difference between $80K and 100K (plus all the lower rates). Again, your max tax rate is 22%, but your effective tax rate is 13% -- which is a lot less than 20% cap gains tax for Berkeley professors. That's ignoring that the capital gains were already taxed every year because of corporate taxes, so they paid money on it on top, just in prior years.
The same thing if the couple made $250K, they'd pay $49,986.50. So while their max tax rate is 24% (higher than the 20% capital gains), the facts are their actual rate is 19.9% and is still lower effective rate than the super rich. So Saez lies.
Write offs / deductions
But we're just getting started. That doesn't account for write-offs and deductions which are only afforded on the lower earners (and have a far bigger impact). They can deduct home interest, other taxes, and so on -- which lowers their effective tax rates substantially. The rich? Most of those don't apply, and even the few that do, have a much smaller material impact on the total tax bill. So again, the effective tax rate is much lower for the lower quintiles than the top ones or than capital gains.
Another big savings are benefits. Both in the way the tax code is written, and in government benefits.
On the tax code, your work pays for most/part of your healthcare -- that's income you should have made, but didn't. If you accounted for the cost of that benefit as income, your effective rate would be even lower -- but it just never shows up. And that benefit is worth more to the bottom end, than the top end. (Healthcare is similar in price whether you're rich or poor, so it benefits the poorer person more than the richer person, as a percentage).
Another one is 401K or Pension: the poorer person gets to donate to those and take that money out of their reported income: further lowering their effective tax (and thus effective tax rate). The rich don't get the same percentage deduction or tricks.
Virtually every benefit a company gives, means more on the low end (as a percentage of salary and tax rate).
Then we get into government benefits. If you were poor and got food stamps, schools, school lunches, rent subsidies, housing subsidies, transportation (roads/busses/etc) -- that doesn't count as income, even though they are benefits paid by the rich, and given to the less well off -- and not accounted for. They have value, and if you calculated that value and added them to "income" of the taxpayer, their effective incomes of the poor would be higher, and their effective tax rates would be lower than they appear to the gullible. It's estimated that below $50K the effective tax rate is actually zero (or negative tax rates), because of those government benefits. But they have little material impact to the rich.
So Saez and Zucman are either fools, liars or both. There's no way that the rich pay less in amount OR rate than the poor or middle. At best, the idiots don't know the basics of economics and the tax codes, at worst they are assholes/liars intentionally deceiving the gullible to foment class envy to sell books.
There are some very tiny windows/conditions where they can get a slightly better rate than those making over $622K, having it all as income (no benefits, business deductions, stock/pensions/etc), but that's very, very few people. And do you really care that a handful of people making $1M a year might have a microcopically higher rate than Tim Cook, on a year that Tim sold a bunch of stock, and only if you ignore that the company had to pay corporate taxes (holding his growth down) every year while holding that stock?
What's the idiots cure? To punish people for investing in businesses (holding/selling stock). And that means punishing people who have 401K's or Pensions. Which would hurt the rich very little. (They can get around it, or absorb those costs). While the poor/middle would bear the brunt of that: so the little guy gets screwed. The progressive solution to someone else getting ahead, is to shoot them and you in the face, to teach them a lesson. And the rich are wearing wealth-protecting head armor, and you aren't.
Remember, the last rule of economics: Never trust a progressive economist.