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Can the US Actually Tax Billionaires? · Trumponomics

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
0:15
Speaker 2: As Stephanie Flanders, head of Government and Economics at Bloomberg,
0:18
Speaker 2: and this is Trumpernomics, the podcast that looks at everything
0:22
Speaker 2: in the economic world of Donald Trump. This week, we
0:26
Speaker 2: thought it made sense to talk about how the US
0:28
Speaker 2: tax system is struggling to tax gazillionaires and whether any
0:31
Speaker 2: of the bright ideas being floated for extracting more from
0:34
Speaker 2: the mega rich would actually work. It's not only the
0:38
Speaker 2: so called class warriors who are worrying about wealth taxes
0:41
Speaker 2: these days. The International Monetary Fund held a war gaming
0:45
Speaker 2: exercise a few months back with around fifty finance and
0:48
Speaker 2: technology experts. David Ramley wrote about it for Business Week.
0:52
Speaker 2: It included folks from Google, DeepMind, and the Rand Corporation,
0:56
Speaker 2: and the Federal Reserve, and they spent hours debating how
0:59
Speaker 2: AAR could upend the global economy in various ways. The
1:03
Speaker 2: AI doomsday scenario they were most concerned about, it turned out,
1:07
Speaker 2: was not killer robots, but a potentially civilization ending attack
1:12
Speaker 2: on the income tax base. The US government, like many
1:16
Speaker 2: relies on income taxes for much of its revenues, so
1:20
Speaker 2: if AI destroys well paying jobs, the theory goes, it
1:23
Speaker 2: could destroy a lot of those taxes. Now, there's plenty
1:27
Speaker 2: of companies and big investors who would be raking it
1:29
Speaker 2: in in that scenario. The trouble for the tax base
1:32
Speaker 2: is that most of that money would be in the
1:34
Speaker 2: form of capital gains on stocks and other assets, which
1:37
Speaker 2: tend to be very lightly taxed. In fact, in the US,
1:39
Speaker 2: they're often not taxed at all, and a number of
1:42
Speaker 2: Bloomberg stories this week have highlighted new and even more
1:45
Speaker 2: efficient ways that the super rich are finding to avoid
1:49
Speaker 2: capital gains, even as gasoline prizes jump again and the
1:52
Speaker 2: high cost of living stays as the number one issue
1:55
Speaker 2: for most voters. So no wonder that we're hearing more
1:59
Speaker 2: and more proposals from progressive politicians for wealth taxes, both
2:02
Speaker 2: in Europe and the US. In California at one time,
2:06
Speaker 2: billionaire five percent taxes on the ballot in the midterm
2:09
Speaker 2: elections in November. That's got a lot of attention. There
2:12
Speaker 2: are others. Could any of them get pasted? And even
2:15
Speaker 2: before we get to that, would any of them work?
2:18
Speaker 2: Johnny me to discuss this. We have in our DC
2:21
Speaker 2: studio Caitlin Riley, who covers Congress for us with a
2:24
Speaker 2: focus on tax and fiscal policy. And I should say,
2:27
Speaker 2: although she's sitting in a special sound booth in Capitol Hill,
2:30
Speaker 2: it is actually pretty noisy. Caitlin, thanks very much for
2:34
Speaker 2: joining us.
2:34
Speaker 1: Anyway, it is thank you for having.
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Speaker 2: Me, and I'm happy to say coming back this week
2:40
Speaker 2: is Jason Furman, Professor of economic policy at the Harvard
2:43
Speaker 2: Kennedy School and Harvard's Department of Economics, and he, of
2:46
Speaker 2: course was chair of President Obama's Council of Economic Advisors,
2:50
Speaker 2: writes and thinks about pretty much everything this podcast is
2:53
Speaker 2: interested in. Jason, thanks for coming back.
2:56
Speaker 3: Great to be back with you.
3:01
Speaker 2: Caitlyn, just give us a quick summary of how live
3:05
Speaker 2: this issue is of taxing the wealthy where you hang
3:08
Speaker 2: out on Capitol Hill.
3:09
Speaker 1: Well, it's increasingly front of mind for Democrats. Democrats are
3:13
Speaker 1: not currently in power in either the House, the Senate,
3:16
Speaker 1: or of course the White House, and so right now
3:19
Speaker 1: these ideas are more theoretical, but they featured heavily in
3:24
Speaker 1: the twenty twenty presidential primary on the Democrat side, and
3:27
Speaker 1: we would expect them to feature heavily again as we
3:31
Speaker 1: look forward to twenty twenty eight. There are several competing
3:35
Speaker 1: sort of tax proposals on how to get at taxing
3:38
Speaker 1: the wealthy. Some of those are wealth taxes, some of
3:41
Speaker 1: those would use other types of tax to get at
3:43
Speaker 1: that wealth that's not collected as wages. But we would
3:47
Speaker 1: expect that Democrats will continue to have this debate kind
3:50
Speaker 1: of between the progressive and more moderate flakes of a
3:53
Speaker 1: party about how to tax the wealthy. A large part
3:57
Speaker 1: of that is because when you want to create ambitious
4:01
Speaker 1: new social programs, you have to figure out ways to
4:03
Speaker 1: pay for them, and we're already reaching dizzying levels of debt,
4:06
Speaker 1: so how to pay for a democratic agenda will be
4:11
Speaker 1: front of mind in the years ahead.
4:14
Speaker 2: I mentioned about the possible future erosion of the tax
4:17
Speaker 2: base due to AI and a reduction in the number
4:21
Speaker 2: of certain kind of jobs, but the tax base has
4:24
Speaker 2: already been somewhat eroded, right. There is also just a
4:27
Speaker 2: concern that the system is getting worse and worse at
4:30
Speaker 2: taxing some of the new money coming on stream.
4:33
Speaker 1: Exactly, the tax system in the US focuses heavily on wages,
4:37
Speaker 1: and that's really not the way that the wealthy collect
4:41
Speaker 1: and expand their wealth, and the tax hold has not
4:43
Speaker 1: been very good at getting at those types of holdings,
4:47
Speaker 1: and we've actually seen the taxes that do target wealth
4:52
Speaker 1: erode over time. The estate tax is a big piece
4:55
Speaker 1: of that. The corporate tax rate here is also lowered
4:58
Speaker 1: over time, and so we've the way that previous generations
5:03
Speaker 1: were able to impose heavier taxes on the wealthy eroad here.
5:08
Speaker 1: And there's some interesting research by French economists Emanuel Saiez
5:14
Speaker 1: and Gabrielle Zuckman who looked at the amount the very
5:18
Speaker 1: wealthy paid in tax going back to the nineteen fifties
5:23
Speaker 1: and recently for the first time you saw the top
5:26
Speaker 1: four hundred wealthiest households, according to their research, pay actually
5:30
Speaker 1: a lower effective tax rate than the bottom fifty percent
5:33
Speaker 1: of households in the US.
5:35
Speaker 2: Jason, first, I should ask whether you sort of buy
5:38
Speaker 2: into the idea that we've got less and less good
5:40
Speaker 2: at taxing wealth, or was it just that there's just
5:42
Speaker 2: a lot more of it about and there's more focus
5:44
Speaker 2: on it.
5:45
Speaker 3: So let's just state a few facts and then I'll
5:48
Speaker 3: get to your question. The first is that the tax code,
5:51
Speaker 3: if you look at slices up through the top one
5:54
Speaker 3: tenth of one percent, is actually progressive the top one
5:58
Speaker 3: tenth of one percent is paying higher taxes on average
6:01
Speaker 3: than people in the middle, who are paying higher taxes
6:03
Speaker 3: than people on the bottom. Now, I can't tell you
6:06
Speaker 3: as an economist is it progressive enough. As a person,
6:10
Speaker 3: I think it's not progressive enough, and I'd like to
6:12
Speaker 3: make it more progressive. The second question is how has
6:16
Speaker 3: it changed over time? It's become a bit less progressive.
6:19
Speaker 3: And the biggest action there has been lowering the corporate
6:22
Speaker 3: tax rate, which used to be thirty five percent and
6:25
Speaker 3: is now twenty one percent, and so that has reduced
6:28
Speaker 3: the taxation of capital income, which disproportionately goes to people
6:32
Speaker 3: at the top. But there's also been relative to twenty
6:36
Speaker 3: years ago or twenty five years ago, things like capital
6:39
Speaker 3: gains and dividend rates are lower than they used to be. Then, third,
6:44
Speaker 3: there is an issue of the progressivity within the top
6:47
Speaker 3: one tenth of one percent. You know, the top four
6:49
Speaker 3: hundred people that Caitlin mentioned. And in one sense, there's
6:54
Speaker 3: a lot of money that those people have relative to
6:57
Speaker 3: the fiscal system as a whole. It's just not quite
7:00
Speaker 3: as important as thinking about the top one tenth of
7:03
Speaker 3: one percent, or maybe even the top ten percent of Americans.
7:06
Speaker 3: And then the very last things is what is your goal?
7:09
Speaker 3: Is your goal to raise revenue while causing the least
7:11
Speaker 3: pain or is it to discourage some type of activity
7:16
Speaker 3: you think is bad. When we do payroll taxes, we're
7:19
Speaker 3: mostly trying to raise revenue and we don't want to
7:21
Speaker 3: harm anyone. When we do tobacco taxes, we want less smoking.
7:25
Speaker 3: The goal is to actually change behavior. When you're taxing corporations,
7:29
Speaker 3: when you're taxing the wealthy, what are you trying to
7:32
Speaker 3: do raise revenue with minimal pain or changed behavior? And
7:36
Speaker 3: that's a real threshold question that's debated.
7:39
Speaker 2: Caitlyn has already pointed out that without any kind of
7:41
Speaker 2: Democrat control in Congress litt alone the White House, they're
7:45
Speaker 2: unlikely to be passed. But you know, you have Bernie
7:47
Speaker 2: Sanders and Representative Rocana. They propose a five percent annual
7:51
Speaker 2: wealth tax on billionaires, the California initiative, which is on
7:55
Speaker 2: the ballot. There's a bunch of them, but the main
7:57
Speaker 2: one is a five percent tax, one off time, supposedly
8:01
Speaker 2: on net worth over one billion, I mean, measured by
8:06
Speaker 2: your tests. Do either of those make sense? Do either
8:11
Speaker 2: of those sound like they're just raising money or are
8:13
Speaker 2: they trying to get rid of billionaires.
8:15
Speaker 3: I am quite skeptical of both of those proposals. So,
8:19
Speaker 3: first of all, one it depends on this fork. In
8:22
Speaker 3: my view, Jeff Bezos has made the world a better
8:25
Speaker 3: place by bringing down prices, expanding variety, even giving access
8:30
Speaker 3: to small businesses to ways to sell things they didn't
8:33
Speaker 3: used to. I also think Jeff Bezos wouldn't miss the
8:35
Speaker 3: money if you raise his taxes. So I very much
8:37
Speaker 3: support raising taxes on Jeff Bezos, but I'd like to
8:40
Speaker 3: do it in a way that doesn't change Amazon that much.
8:43
Speaker 3: I think Rocanna and Bernie Sanders don't mind if you
8:47
Speaker 3: got less of the type of economic activity that Jeff
8:50
Speaker 3: Bezos engaged in. They think it probably didn't, unbalance, make
8:54
Speaker 3: the world a better place. So we're coming from it
8:56
Speaker 3: from somewhat different places, which gives you different answers. The
9:00
Speaker 3: second thing is, for the two taxes that you just
9:03
Speaker 3: gave as examples, the answers are somewhat different at the
9:06
Speaker 3: level of California, and I would also say, by the way,
9:08
Speaker 3: the same thing at the level of France. It's just
9:10
Speaker 3: a lot easier for people to move and so you
9:13
Speaker 3: may not succeed in either goal. You may not raise
9:16
Speaker 3: revenue if you drive people out of the state and
9:18
Speaker 3: lose their jobs and their income taxes and the like.
9:21
Speaker 3: And you may not even have fewer billionaires, like fewer
9:23
Speaker 3: billionaires in California, but you'll have more in Texas. And
9:26
Speaker 3: if you care about the United States as a whole,
9:28
Speaker 3: I don't think you'd count that as any sort of victory.
9:32
Speaker 3: So the smaller the unit that's trying to do it,
9:36
Speaker 3: the harder it is to do this. Then nationally, there's
9:40
Speaker 3: another issue you run into, which is the US Constitution
9:44
Speaker 3: says you can't have direct taxes unless they're apportioned exactly
9:50
Speaker 3: to the population in the state. There's then an amendment
9:53
Speaker 3: that says that as an exception for income taxes, there's
9:55
Speaker 3: no exception for wealth taxes. Most constitutional scholars would agree
10:00
Speaker 3: that the current Supreme Court would rule wealth taxes unconstitutional.
10:05
Speaker 3: So at the national level, I think it's just a
10:07
Speaker 3: waste of time to be talking about it, even if
10:09
Speaker 3: you think it's a good idea, because courts wouldn't allow it.
10:13
Speaker 2: Caitlin, is that right that people recognize that there's this
10:16
Speaker 2: pretty solid constitutional case against these things. Regardless of whether
10:20
Speaker 2: that makes sense that you can't have direct wealth taxes.
10:23
Speaker 1: Well, I think supporters of the wealth taxes would probably
10:26
Speaker 1: argue that it's an open question. But yes, it's true
10:30
Speaker 1: there is this like very large, looming constitutional question, and
10:34
Speaker 1: with the current makeup of the Supreme Court, it's difficult
10:37
Speaker 1: to see them siding on the side of a wealth tax.
10:41
Speaker 1: So there is this potential, very hard stop at the
10:45
Speaker 1: end of this debate.
10:48
Speaker 2: Caitlin, I remember finding surprising when I first went to
10:52
Speaker 2: work in the US million years ago was the step
10:56
Speaker 2: up in basis rule that resets the cost basis for assets.
11:00
Speaker 2: If you get extremely wealthy in your lifetime, maybe you
11:02
Speaker 2: are Jeff Bezos. You don't realize those capital gains. They're
11:06
Speaker 2: just sitting there as part of your and your assets
11:10
Speaker 2: and your wealth. You pass it on to your children
11:12
Speaker 2: and it's considered you sort of starting the clock again,
11:15
Speaker 2: and those all of those gains during your lifetime are
11:17
Speaker 2: not ever taxed on capital gains.
11:20
Speaker 1: I think that's definitely part of the conversation. And then
11:23
Speaker 1: another piece of this is not only do those assets
11:27
Speaker 1: value reset at the point of death, but for the
11:30
Speaker 1: lifetime of the person who holds that wealth, they're often
11:33
Speaker 1: able to borrow against it and able to kind of
11:36
Speaker 1: like access liquidity without actually selling those assets. And so
11:41
Speaker 1: for that reason, those loans are becoming one of the
11:45
Speaker 1: focuses of a potential place where you could tax adjusting
11:50
Speaker 1: stepped up basis is another piece of it, taxing unrealized
11:54
Speaker 1: gains as a proposal Senator Wyden has put forward. He's
11:57
Speaker 1: the top Democrat on the Finance in the Senate, which
12:01
Speaker 1: has jurisdiction over tax policy. So yeah, there are a
12:05
Speaker 1: number of other ideas floating around that would allow you
12:08
Speaker 1: to effectively target taxes at the very wealthy.
12:13
Speaker 2: Jason, I think it's one of those things that just
12:15
Speaker 2: strikes people as an extraordinary benefit. If you're rich enough
12:19
Speaker 2: that you just never need to realize these gains, you
12:22
Speaker 2: then get to just pass them on in tact to
12:25
Speaker 2: your heirs, who, given the way our state tax works,
12:28
Speaker 2: potentially don't pay any further tax on them. Is that
12:32
Speaker 2: the easiest thing that you could tackle within the constitution.
12:35
Speaker 3: Yeah, absolutely, that's the way I think we should approach it,
12:37
Speaker 3: and it broadly two things. One is, without even getting fancy,
12:42
Speaker 3: you could have higher tax rates. You could raise the
12:45
Speaker 3: top tax rate, which is thirty seven percent, by several
12:49
Speaker 3: percentage points without creating very much of a problem at all.
12:52
Speaker 3: You could raise the tax rate on capital gains to
12:54
Speaker 3: twenty eight percent, you could raise the corporate rate, and
12:57
Speaker 3: those are just one line changes in the tax code,
13:00
Speaker 3: no constitutional debate whatsoever, and it would work just fine.
13:05
Speaker 3: Second is the type of structural issues that Caitlin was
13:08
Speaker 3: bringing up, and they largely get at The capital gains
13:13
Speaker 3: rate applies in theory, but in fact, if you hold things,
13:15
Speaker 3: you don't pay it, and there's different ways of getting
13:17
Speaker 3: at it. One is if you eventually have to pay it,
13:20
Speaker 3: then holding it is an advantage, but the advantage is timing.
13:24
Speaker 3: It's not the advantage of you're never ever going to
13:27
Speaker 3: pay it. That actually has one nice side effect, which
13:30
Speaker 3: is right now, sometimes people get locked into assets with
13:33
Speaker 3: capital gains. For a capitalist system, you'd like whoever is
13:37
Speaker 3: the most productive owner of an asset to own it.
13:40
Speaker 3: If it costs money for the productive owner of the
13:42
Speaker 3: asset to sell it and someone else to buy it,
13:44
Speaker 3: they may not do it. They may get locked in.
13:47
Speaker 3: Capital may be in the wrong hand. So one thing
13:49
Speaker 3: I like about things that reduce this and taxing gains
13:53
Speaker 3: is their accrued the widened proposal that Caitlin cited, or
13:57
Speaker 3: taxing them at death, or reducing the ability to borrow
14:01
Speaker 3: against them. All of these are different ways of not
14:05
Speaker 3: just fixing the existing system, but actually getting rid of
14:08
Speaker 3: an economic distortion.
14:10
Speaker 2: I guess the reason why the debate is not on
14:12
Speaker 2: raising the basic or the highest rate of income tax
14:16
Speaker 2: is that that isn't capturing this kind of wealth that
14:20
Speaker 2: we're talking about. If you start taxing unrealized gains, I mean,
14:24
Speaker 2: aren't they just enormous logistical and technical issues with that.
14:28
Speaker 2: You're taxing people on things that they haven't actually received
14:31
Speaker 2: as income. Presumably you're addressing the constitutional question by saying
14:34
Speaker 2: they've effectively received that income.
14:37
Speaker 3: Yeah. The Biden administration had what I thought was actually
14:40
Speaker 3: a pretty thoughtful proposal on this, because there's two issues
14:43
Speaker 3: you need to grapple with. One is if you tax
14:46
Speaker 3: someone on gains when the market runs up twenty percent
14:49
Speaker 3: and then it goes down twenty percent, do you send
14:51
Speaker 3: them a check? So what they did was basically averaged
14:54
Speaker 3: it over five years and had you pay out an installment,
14:57
Speaker 3: and then if the market fell, it just canceled your
14:59
Speaker 3: future installment, so they handled the refund issue. The second
15:03
Speaker 3: is how do you value privately held assets, And they
15:07
Speaker 3: basically assumed they had a certain rate of return and
15:10
Speaker 3: then when if or when you eventually selld them, you
15:13
Speaker 3: reconciled with the assumption that was built into it against
15:17
Speaker 3: what had actually happened. I think that was probably a
15:21
Speaker 3: workable system. Is also the case that it was exceedingly
15:24
Speaker 3: unpopular in certain quarters, and we've seen it actually around
15:28
Speaker 3: the world in different countries, I believe Belgium and Italy,
15:31
Speaker 3: but don't fact check me, because there's a little bit
15:33
Speaker 3: of a distant memory. Have tried at various times to
15:36
Speaker 3: disconnect capital gains payments from when you actually get the cash,
15:40
Speaker 3: and those didn't last very long or maybe even were
15:43
Speaker 3: canceled before they went into effect. So if you just
15:46
Speaker 3: tax them at death, you get sort of eighty five
15:50
Speaker 3: percent of the way to the benefits of taxing them
15:53
Speaker 3: each year as they accrue, with maybe twenty percent of
15:56
Speaker 3: the political pain. So that probably is the more proof.
16:00
Speaker 3: But I am tempted by be as of the cruise.
16:04
Speaker 2: But Caitlin, I mean Jason mentions the unpopularity and actually
16:08
Speaker 2: Ben Steven made this point on the podcast the other day.
16:10
Speaker 2: Until quite recently, billionaires were not particularly unpopular in the US,
16:14
Speaker 2: and then I think partly because they've been so much
16:16
Speaker 2: more in your face in recent years and you have
16:19
Speaker 2: the likes of Elon Musk and the numbers just becoming
16:21
Speaker 2: dizzyingly high, that seems to have tilted a bit. But
16:25
Speaker 2: it is still incredibly unpopular to really tax wealth at
16:29
Speaker 2: death or tax inheritance at all. I mean, in fact,
16:32
Speaker 2: in the Big Beautiful Bill, the estate tax exemption was
16:37
Speaker 2: raised to fifteen million dollars per person, and that doesn't
16:40
Speaker 2: seem to have been a particularly unpopular bit of the bill.
16:43
Speaker 1: That's correct. I will say, when you poll people and
16:46
Speaker 1: ask them generally about tax fairness and do you feel
16:49
Speaker 1: that your tax fairly do you fear that feel that
16:52
Speaker 1: the very wealthier being taxed fairly, Americans do tend to
16:56
Speaker 1: support increasing taxes on the way. Many of them also
17:01
Speaker 1: feel like they're unfairly taxed. So there is a little
17:04
Speaker 1: bit of taxes for you but not for me mentality.
17:09
Speaker 1: But it does get more tricky when you dial into
17:14
Speaker 1: kind of the nitty gritty of specific tax policy, and
17:17
Speaker 1: I think the popularity would also probably depend heavily on
17:22
Speaker 1: where these taxes were targeted and what sort of income
17:26
Speaker 1: thresholds were placed onto them.
17:29
Speaker 2: But Jason, certainly, and this is true in the UK
17:30
Speaker 2: as well. I mean, in Harrish's text is just remarkably unpopular,
17:34
Speaker 2: even among people who realistically have no chance of ever
17:38
Speaker 2: having thes need to pay it.
17:40
Speaker 3: Yeah. I mean, I've been working on this topic in
17:43
Speaker 3: public policy for thirty years now, and I don't have
17:46
Speaker 3: a good answer for you. You know, I remember once President Clinton,
17:51
Speaker 3: I think he was at a fundraiser, maybe it was
17:53
Speaker 3: in Idaho or something like that, and the person traveling
17:56
Speaker 3: with him called in to find out the estate tax
18:00
Speaker 3: and said, he's hearing a lot of complaints about the
18:03
Speaker 3: estate tax here in Idaho, and what can I tell them?
18:06
Speaker 3: And we sent back the fact that last year, six
18:08
Speaker 3: people paid the estate tax in Idaho, to which the
18:11
Speaker 3: person responded, yes, but the children of all six of
18:15
Speaker 3: them are currently sitting at the table with them at
18:17
Speaker 3: this fundraiser.
18:18
Speaker 2: Well, that tells you something about probably political influence of
18:22
Speaker 2: those who.
18:22
Speaker 3: Right right right, And to beiclely, there's another story that
18:26
Speaker 3: is too good to check, so it is in my memory.
18:28
Speaker 3: I am sure it has grown in my memory over time,
18:31
Speaker 3: but it captures the spirit of it, so that's part
18:33
Speaker 3: of what's going on. But yeah, no, I mean I
18:36
Speaker 3: remember there used to be farmers that would roll up
18:38
Speaker 3: on Capitol Hill with their tractors and you'd go through
18:41
Speaker 3: and say, the estate tax has all these different special
18:44
Speaker 3: rules for farmers that make it really really low paid
18:47
Speaker 3: out over a really long time, and they'd be like, oh,
18:49
Speaker 3: this person had to sell their family farm, and that
18:51
Speaker 3: was basically mathematically impossible because the way in which it
18:55
Speaker 3: paid out over time was such that the income would
18:58
Speaker 3: always be way more than sufficient. So I don't know.
19:00
Speaker 3: I have a hard time with what I see is
19:03
Speaker 3: the irrationality of it. Now. To be clear, if you
19:05
Speaker 3: want to make an argument and I have friends that
19:07
Speaker 3: make this argument on the conservative side that somebody worked
19:10
Speaker 3: hard and they saved a lot and they deserve the
19:12
Speaker 3: money and it's unfair, that's not exactly my moral perspective.
19:16
Speaker 3: But I don't think that's a crazy perspective. But if
19:19
Speaker 3: your perspective is this is destroying small businesses, destroying family farms,
19:24
Speaker 3: that's just not factually true.
19:25
Speaker 2: I mean, when you talk about things that are moral principles,
19:28
Speaker 2: versus just kind of practical principles. You mentioned it for California,
19:31
Speaker 2: but you seem to be suggesting, Jason, in the US,
19:35
Speaker 2: this question of not being able to tax wealth because
19:38
Speaker 2: this is so it's mobile capital and people can go.
19:42
Speaker 2: And you may be right on this, you implicitly seem
19:44
Speaker 2: to be suggesting, you know, if you're in a European country,
19:46
Speaker 2: it's very easy for people to leave a European country,
19:50
Speaker 2: but in the US, it's going to be harder for
19:53
Speaker 2: people to avoid the US tax jurisdiction altogether. Do you
19:56
Speaker 2: think that's true.
19:57
Speaker 3: Yeah, yes, I was trying to say that, and I agree,
20:01
Speaker 3: and I agree with myself on that point. But just
20:03
Speaker 3: to be clear, it's not like zero in the United
20:06
Speaker 3: States one hundred in Europe. It's a continuum, and it's
20:09
Speaker 3: not like if you raise the tax rate to ninety
20:11
Speaker 3: percent in the United States, you wouldn't get people more
20:14
Speaker 3: people leaving the United States. You would and I wouldn't
20:16
Speaker 3: do it. But within the range of the types of
20:18
Speaker 3: tax changes that are under consideration that we're talking about,
20:22
Speaker 3: the moving out of the United States to me, seems
20:25
Speaker 3: like a relatively small consideration. The moving out of California
20:29
Speaker 3: and moving out of France is a medium size consideration.
20:34
Speaker 2: Just to kind of bring this to close, we've highlighted
20:36
Speaker 2: there's obviously leftwood shift, at least in parts of the
20:41
Speaker 2: Democratic Party, and that's producing some of these proposals from
20:44
Speaker 2: the side of the party that potentially would say, you know,
20:47
Speaker 2: we shouldn't have any billionaires. But I highlighted at the
20:49
Speaker 2: start that there's also this whole other reason why we
20:53
Speaker 2: want to get better at taxing wealth is that the
20:55
Speaker 2: income tax base could be eroded quite significantly by AI. Jason,
21:01
Speaker 2: I mean, we've debated this in the past, how dramatic
21:04
Speaker 2: the change might be from AI. But do you think
21:07
Speaker 2: that that could make these questions more current and the
21:11
Speaker 2: kind of analysis that you've shared about the best ways
21:15
Speaker 2: of doing this will become a much more live issue
21:18
Speaker 2: for policymakers.
21:19
Speaker 3: I think there's a decent a chance it will become
21:21
Speaker 3: a much more live issue. But it would be a
21:24
Speaker 3: shame if we thought it was the only issue. So
21:27
Speaker 3: first of all, in terms of AI, yes, we don't
21:30
Speaker 3: know productivity, we don't know the impact on jobs, et cetera.
21:33
Speaker 3: One of the more robust predictions though, is that it
21:36
Speaker 3: will lower the labor share and raise the capital share
21:40
Speaker 3: over time. I'm not sure about that, but I'd bet
21:43
Speaker 3: on that a little bit more heavily than i'd bet
21:45
Speaker 3: on the job loss, and I wouldn't bet zero, you know,
21:48
Speaker 3: bet entirely against the job loss. So so that is
21:51
Speaker 3: in the sense that I agree with you that this
21:53
Speaker 3: is going to become a more important issue. It is
21:57
Speaker 3: the case though the labor share right now is seventy percent,
22:00
Speaker 3: I'd be shocked if in a decade it was below
22:02
Speaker 3: fifty percent. Maybe thirty years from now it'll be thirty percent.
22:06
Speaker 3: In all of those how you tax income is still
22:08
Speaker 3: going to matter, And so yes, we should figure out
22:11
Speaker 3: how to tax the capital side, which right now is
22:13
Speaker 3: thirty percent of income, probably rising, and the holes in
22:17
Speaker 3: the way we tax it, as Caitlin and you and
22:19
Speaker 3: I have been talking about, have been growing. So absolutely
22:23
Speaker 3: do that. But I don't think we should forget the
22:26
Speaker 3: old fashioned income side, which is still the majority and
22:30
Speaker 3: likely to be for some time, and there's more room
22:32
Speaker 3: there as well.
22:33
Speaker 2: Okay, well, so we don't have to worry about Maybe
22:35
Speaker 2: we should just go back to worrying about killer robots.
22:38
Speaker 2: Jason Furman and Caitlin Riley. Thank you so much, thank you,
22:42
Speaker 2: thank you, thank thanks for listening to Trumpnomics from Bloomberg.
22:57
Speaker 2: It was hosted by me Stephan Flanders and I was
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Speaker 2: justjoined by Bloomberg reporter Caitlin Riley and the Harvard economist
23:03
Speaker 2: Jason Furman. Trumponomics was produced this week by Moses and
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