what would happen if governments made billionaires actually pay the appropriate amount of tax based on their income?
In: Economics
An important question is how income or someone’s worth is defined. Most billionaires don’t have a big vault with billions in cash in it.
The government can decide how to calculate how much money one should contribute as taxes. It’s a political choice how the calculation will work. Do people who invest a lot need to be taxed? People who own a lot of property? People who have a high wage? Does everyone have to pay the same amount, or are we going to give a reduction to people with lower incomes…
Once they work out which calculation they will apply, the ball goes back to the other camp. All the tax specialists, like lawyers, accountants, individual people will start looking for loopholes. People are greedy, in the sense that they try to keep and make as much money as they can. So they will naturally try to find ways to pay as little taxes as possible.
Most people will stay within the law, and just find ways to avoid taxes. Some do it illegally and evade taxes. There are legal constructions that pool all the money and assets someone has in a virtual legal entity, and just give a small monthly payout to the real person. There are cases where objectively rich people still can apply for all kinds of grants because, on paper, they have a low income.
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