Molly Mitchell Moore
Appearances
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Why is it so hard to tax billionaires? (Part 1)
Yeah. So it's pretty simple initially. And as those tax rates go up, the incentive to make it more complicated also goes up. And that begins happening in the 1920s.
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Why is it so hard to tax billionaires? (Part 1)
We see a sort of conservative move in the 1920s. Three Republicans in a row, three different Republicans in a row, are elected in 1920, 1924, and then in 1928. They all have the same treasury secretary, Andrew Mellon.
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Why is it so hard to tax billionaires? (Part 1)
Andrew Mellon is pretty interested in reducing the progressivity of the tax code, but he understood that, like, taxing the rich has always been popular, right? If you look through American history, the sort of cry of taxing the rich is always one of the popular things.
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Why is it so hard to tax billionaires? (Part 1)
And so Mellon knows that he can't get rid of the progressive tax code, but what he can do is make it less progressive, sort of sneakily, right, by introducing all of these kind of write-offs, what we might think of as tax shelters, and allow people with that kind of income, income from investments, income from businesses, to shield some of that income from the tax code.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, right. So you preserve the appearance of a progressive tax code, but you're actually making it less progressive by giving people a lot of ways to hide some of their income.
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Why is it so hard to tax billionaires? (Part 1)
The Revenue Act of 1942 makes U.S. income tax into a mass tax rather than a class tax by lowering the threshold at which income first starts to be taxed. So the number of taxpayers, right, income taxpayers, goes from about, I want to say, 3.5 million Americans in 1939 to about 42 million Americans in 1945.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, right. So they feel pretty good, which is the sort of extraordinary part. And one of the things that's really sort of fascinating is to look at, well, I mean, how do you sell this income tax that, you know, people don't like paying taxes necessarily, right?
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Why is it so hard to tax billionaires? (Part 1)
But our tax system still relies on volunteerism. You know, maybe you'll get audited, maybe the IRS will come after you, but you're basically sort of paying your taxes voluntarily. more or less voluntarily.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, right, and it wouldn't have been necessarily a huge check, but it would have been the first time that they did it, so they had to be taught to do it. And one of the things the Treasury Department then does is it works with, I mean, influencers is the wrong word to use for the 1940s, but it's basically that. They work with pop cultural figures.
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Why is it so hard to tax billionaires? (Part 1)
They commission a song called I Paid My Income Tax Today.
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Why is it so hard to tax billionaires? (Part 1)
Which was then distributed to, you know, almost a thousand radio stations across the country. It was recorded by Gene Autry. But it is, right, the lyrics are something like, I paid my income tax today.
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Why is it so hard to tax billionaires? (Part 1)
And it's very much sort of geared towards what the song calls Mr. Small Fry. This idea that everybody has an obligation to pay their taxes. The slogan that the Treasury Department decided to use to sell the income tax was taxes to beat the axis, right? So it's very much linked to this effort to win the war. They even go so far as to commission two films from Walt Disney starring Donald Duck.
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Why is it so hard to tax billionaires? (Part 1)
And so again, right, there are these two problems that the government feels like it has to solve. One, people don't know how to pay their taxes. And two, you've got to convince them that they should pay their taxes because it is sort of part of being an American citizen, as part of being a good American citizen.
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Why is it so hard to tax billionaires? (Part 1)
So after the war, the tax system itself more or less stays in place. There are reductions in the rates right throughout, both at the top and at the bottom. But the basic shape remains the same. It's then codified in 1954. And that World War II tax system is basically the basis of the tax system that we're still using today.
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Why is it so hard to tax billionaires? (Part 1)
And that is correlated with probably not the cause of the kind of financialization of the U.S. economy that begins in the 1980s and then accelerates through the 90s and into the 21st century. And a tax code that is designed to tax regular income is not as well equipped to tax these new forms of wealth.
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Why is it so hard to tax billionaires? (Part 1)
Basically, people are and the wealthy are making money not by making things, but by making sort of paper investments, right? I see. So most of the money, right, is not in building new factories, is not in coming up necessarily even with new technologies, but in the financial markets, in buying and selling bits and pieces of other companies.