I think it’s a common sentiment in our day and age that arguing on the internet – while incredibly fun – is quite pointless. The most one can achieve is to have more imaginary internet points than the person who intentionally started the argument so they could receive imaginary internet points. Alas, arguing on the internet remains as one of my prized pastimes regardless.
I recently came across an article in Forbes that I found so utterly idiotic that I needed to place my critique into a public forum. Now, my arguing isn’t just for fun – it’s educational!
So the article is about a policy suggested by the Harris presidential campaign platform called Unrealized Capital Gains Tax. Basically, Harris is proposing a 25% minimum tax on Americans with a total income of $100 million or more. This tax would apply not just to physical properties and financial assets, but also to unrealized capital gains, meaning unsold assets that appreciate in value over time. This is a radical change to the way that millionaires are taxed in the United States that aims to combat the federal deficit and reduce the predatory financial behavior of the 0.1%.
In my reading about the policy, I came across the article I want to critique, which is an opinion piece by someone against the tax. While I recognize my own bias in this scenario, being that I despise the existence of millionaires on a fundamental level, I still think the article is just poorly argued regardless of what side you’re on. So let’s get into it, shall we?
The article is written by Dave Birnbaum, who proclaims in his bio that he is “shaping the future with Bitcoin,” so you know we’re off to a good start. Birnbaum follows up with this amazing opening by starting the article with the sentence, “as someone who works in tech startups, I get to see firsthand how capital investment fuels innovation.”
This is perhaps the first tipoff that Birnbaum doesn’t see anything firsthand.
This is a sentence that might seem innocuous to someone indoctrinated by capitalist rhetoric, so I want to be clear: capitalism does not always breed innovation. Capitalism breeds innovation so long as it is profitable, and it is often not profitable. And, in most cases, innovation will only ever take the form of new methods of making money. I realize this is asserted, but I think that it’s self-evident that a profit-oriented company will only innovate so long as it can make money with it. There’s examples of this all over the place in the tech industry that Dave seems to love so much.
Apple keeps making new iPhones, but they’re pretty much identical to the last model. Cars are becoming more reliant on software and touchscreen interfaces, which might seem futuristic at first glance, but it’s actually just cheaper to manufacture than analog hardware. This change is proposed even though digital systems are often faultier and less reliable. Artificial intelligence is being put into every piece of software under the sun, but it’s completely useless 90% of the time and is only implemented so companies can lay off more of their employees.
So sure, maybe there’s some tech startups that have broken through the market with some new innovation, but they’re probably going to either be bought up by a giant conglomerate, or their idea will be stolen and made worse. When you crowd out the space for any other option, you don’t have to innovate.
We’re only one sentence into the article and Birnbaum’s already introduced a shaky argument without any evidence or examples to back it up. Birnbaum then continues to say that he’s open to any Harris supporters to give him “an economically literate, detailed rebuttal of the points below.” While I wouldn’t really consider myself a Harris supporter, I am a staunch supporter of taxing the rich, and people with bad arguments getting comeuppance, so I guess I’m the target audience for Dave.
Birnbaum splits this article into seven distinct-ish points, so I’m going to structure this article in seven sections, taking down each of these points. Before I start, I would like to elucidate the fact that Dave has no sources or citations for anything he says, but I will take him at his word for the most part. Conversely, I will try to put sources for my arguments and evidence at the bottom of this article because I guess a high-schooler has more journalistic integrity than Forbes Magazine.
“Slippery Slope”
The first argument is on the slippery slope of the policy. Birnbaum argues that, even though the tax would only apply to centi-millionaires, it will inevitably spread to the middle class and further because of federal greed. He cites the 1913 federal income tax that applied to only 4% of Americans upon introduction, and then over 70% forty years later, as evidence.
Immediately, alarm bells should be going off in your head when you hear the phrase “slippery slope.” This is one of the first logical fallacies any rational person learns. The reason it’s a fallacy is that it’s entirely hypothetical. You can say anything is a slippery slope (and people do) and be correct because all you’re saying is that something could happen. I could argue with just as much validity that a tax on the ultra rich not being implemented could lead to multi-million dollar companies amassing enough capital to have immense control over politics through lobbying and never having to pay another cent in taxes again. Except the difference there is that what I said actually happened, meaning it’s not a slippery slope fallacy.
But wait, Brinbaum does give an example! Granted, it’s from over a century ago, but maybe it’s related!
I’m sorry to break it to you, but this example sucks.
First of all, the income brackets that the tax covered never actually changed like Dave is trying to suggest. The reason why more people paid taxes in the 1950s is because the median household income was higher. Granted, rates of taxation did increase as well, but they have since declined, making more of a slippery hilled area rather than a slope. While I was unable to find data going back to the early 1900s (so I don’t know how Dave did), household median income has consistently increased, even when adjusted for inflation, for most of the country’s existence. So this slippery slope that Birnbaum suggested has not actually happened; people have simply gotten wealthier. But even if Birnbaum was correct and the government was maliciously lowering the barrier for entry into these tax brackets, that’s not exactly a bad thing. The taxes you pay go towards government programs in healthcare, social security, transportation development, and countless more valuable commodities. It’s not like the government is just taking your money and throwing it into a black hole – that’s what millionaires do.
“Valuation”
The basic crux of this argument is that since unrealized capital gains are by definition, unrealized, they have no set value. This would require the government to apply a value to them, and the government has an incentive to inflate the value to collect more revenue.
Now, I am by no means an economist – I’m a high-schooler, so I think it would be alarming if I was – but I’m pretty sure the value of everything is a social construct. Sure, I get that there’s a difference between a physical property and just stocks in a company, but the way the stock market functions is that there are tangible systems in place to evaluate the price of stocks. It’s what enables millionaires to buy up a bunch of stocks to artificially inflate the price and then hold on to them indefinitely. Maybe Tesla stock fluctuates in value, but it does have a definite value because when you liquidate it, you get a certain amount of money. I think it would make sense that the government would save themselves the legwork of creating an entire new branch of bureaucratics to evaluate unrealized capital and just stick to values assigned by the professionals within the stock market. Even if there was not a single check or balance in the government, it would still take a ridiculous amount of human resources to artificially evaluate stocks, to the extent that it wouldn’t necessarily be worthwhile any more.
There’s a consistent theme in Dave’s arguments of the government being inherently malicious, and trying to take your money. And I agree with him here somewhat – I am very distrustful of the government. But I also acknowledge that there’s enough checks and balances in the way of the government for them to do this, or they would already have done so. And furthermore, the periods where the US has been most economically successful are the periods where the rich were taxed the most and much of federal taxes went to socialist policies. The “Golden Age of American Capitalism” in the 50s-70s had some of the highest tax rates in American history. It’s only since then that taxes have been significantly lowered, particularly among the upper class. Contrary to what Birnbaum posits, the US government has been resistant to high taxation in modern history.
“Liquidity”
In this argument Birnbaum says that basically people will be forced to liquidate assets to avoid taxes, disrupting the market. He gives an example of a house gaining value and forcing the homeowner to sell it or take on debt.
I completely acknowledge that this policy would make a lot of millionaires liquidate their assets – that’s part of why I support it. The idea that a middle class homeowner would have to sell their home is frankly ridiculous. Even if the house was worth $1 million, the owner wouldn’t come close to being in the $100 million cutoff. If they were at that level of wealth, they’d be able to pay the tax – funny how that works.
“But that’s not all,” Dave says. What if Elon Musk sold a bunch of his Tesla stocks and the price went down!? First of all, Dave concedes in this argument that stocks have definite prices, undermining his previous argument. Secondly, if supply goes up and there’s more Tesla stock around that middle class Americans are able to buy now because buying higher amounts of shares is not as expensive, I think that’s a good thing. Maybe in the short term, some non-millionaires who have stocks in companies will lose the value of their stocks, but that’s just how the stock market works sometimes, and the price is likely to go up again as other people buy out those stocks.
“Asset Inflation”
The thesis of this argument is pretty simple: “The government is able to increase inflation by printing money, so they will increase inflation to artificially appreciate the value of assets and tax them.”
I don’t know about you, but I think the US government isn’t a fan of hyperinflation. Some inflation is generally considered good, but on the scale that BirnBaum suggests, it would be hyperinflation. Hyperinflation is bad for any country’s economy because it stifles growth. The last thing the US would do is artificially generate hyperinflation. Especially since the actual extra revenue they would collect in taxes would be worth less due to that very same inflation.
“Capital Flight”
In this point, Birnbaum explains how, when faced with higher taxes, the 0.1% will often leave a country and flee to locations with lower taxes. Dave argues that this damages the economy of a country and will have bad ramifications for the United States. He says that when France implemented a wealth tax in 1982, an estimated 42,000 millionaires left the country in the next two decades. Birnbaum also points out that the UK is as poor as Mississippi as an example of capital flight.
Alright, so first of all, Dave is completely correct that millionaires leave countries or use tax havens as a method to evade taxes. But our opinions differ on the idea of millionaires being good for a country. I see thousands of millionaires leaving a country as a good thing. They stifle economic equality and hoard wealth, not to mention their undermining of political institutions. I think it’s particularly telling that nowhere in his argument does Dave make a direct link to economic failure and the ultra-wealthy fleeing a country. He mentions France at the start and then gives no analysis of France’s economic circumstances after the evacuation of millionaires. He also brings up the UK, but fails to provide a single link between the country’s apparently low wealth and a lack of millionaires there. If anything, the presence of billionaires makes it worse. There are a number of Russian oligarchs with hundreds of millions of pounds of assets and property held in the UK, suggesting the opposite correlation. Dave’s just throwing out data and hoping you’ll connect the dots yourself without thinking about it for two seconds.
“‘Capital Punishment’”
This argument says that it’s principally wrong to punish people for accumulating capital, and the behavior it incentivizes is anti-investment. Birnbaum evokes the Ancient Roman quote “bread and circuses,” saying that people will spend more and more money on hedonistic pursuits, neglecting their civil service.
Hey, Dave. Yeah, I’m talking directly to you now, not the reader.
THAT’S NOT WHAT BREAD AND CIRCUSES MEANS.
When the poet Juvenal said the quote, what he was referencing was the generation of public approval and goodwill from constituents by distracting them rather than actual good policy. ”Bread and circuses” refers to the only things the government needs to keep people satiated and happy.
Okay, terrible quote analysis aside, this argument is also just bad. As I’ve said time and time again, the accumulation and hoarding of capital is bad for the growth of an economy – especially the middle and lower class – while reinvesting money into the economy and spending it is generally good. I hate to sound like a broken record, but in the 1950s-1970s, which are generally agreed to be the most economically successful years in the United States, Paul Getty, the richest person alive at the time, had $32.1 billion in modern currency at his richest. Compare that to Elon Musk at $228 billion today. The 0.1% had substantially less wealth than now during the years of greatest economic growth in the US, so something tells me such drastic wealth inequality maybe isn’t instrumental to a healthy economy.
“Unspoken Motivation”
Alright, we’re at the final argument now. Dave estimates that this tax would yield about $25 billion in revenue yearly for the government, which does not meet the estimated $2 trillion annual deficit. He then extrapolates that this must mean there’s an ulterior motive for the government to implement this tax. The motive? Dave says it’s “to foment hostility among taxpayers and turn them against each other for political gain.” He says it casts the blame for the economic hardships of the middle class onto the poor, so-often marginalized 0.1%. (Okay, maybe I paraphrased that bit slightly).
This argument’s a doozy, so let’s break it down to two levels. The first being the idea of “$25 billion ≠ $2 trillion, so the government must be evil.” By the amazing logic that Dave is using here, any method of collecting revenue that the government does that does not generate $2 trillion yearly must be done for an ulterior motive. I think Dave just doesn’t understand how addition works. Sure, $25 billion is not close to $2 trillion at all, but you’ve got to start somewhere. The government makes up for its deficit with a variety of programs. It’s not going to solve it with just one.
The second level of this argument is this ulterior motive that Birnbaum gives us. Setting aside the fact that I agree with the fact that much of the middle class’ struggles and income inequality in general is the fault of the uber-wealthy, I think there’s a much simpler motive for the government to implement this tax: billionaires accumulating and then hoarding capital harms the economy of a country and the government doesn’t want that. This whole idea of stoking a class struggle is ridiculous when the majority of prominent politicians are very wealthy themselves.
Conclusion
So that’s all of Dave Birnbaum’s arguments, each just as faulty and terrible as the last. I hope this was as fun for you as it was for me. I also hope it was enlightening and shows some of the tactics that people who are bad at arguing use.
Sources Used:
Birnbaum, Dave. “Unrealized Capital Gains Tax Is ‘Capital Punishment.’” Forbes, Forbes Magazine, 16 Sept. 2024, www.forbes.com/sites/davidbirnbaum/2024/08/30/unrealized-gains-tax-is-capital-punishment/.
“List of Economic Expansions in the United States.” Wikipedia, Wikimedia Foundation, 3 Oct. 2024, en.wikipedia.org/wiki/List_of_economic_expansions_in_the_United_States.
“A Timeline of the Richest Person on the Planet since 1900.” Madison Trust Company, 26 Feb. 2024, www.madisontrust.com/information-center/visualizations/a-timeline-of-the-richest-person-on-the-planet-since-1900/.
“From Trump to Johnson, Nationalists Are on the Rise – Backed by Billionaire Oligarchs | George Monbiot.” The Guardian, Guardian News and Media, 26 July 2019, www.theguardian.com/commentisfree/2019/jul/26/trump-johnson-nationalists-billionaire-oligarchs.
“Why Is Inflation Bad? 3 Effects of Inflation.” Forbes, Forbes Magazine, 24 June 2024, www.forbes.com/advisor/personal-finance/why-is-inflation-bad/.
staff, Published By : BER. “Back When America Was Socialist.” Berkeley Economic Review, 30 Oct. 2020, econreview.studentorg.berkeley.edu/back-when-america-was-socialist/.
Bureau, US Census. “Historical Income Tables: Households.” Census.Gov, 30 Aug. 2024, www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html.
“The Economic Consequences of Major Tax Cuts for the Rich.” ePrints, International Inequalities Institute, Dec. 2020, eprints.lse.ac.uk/107919/1/Hope_economic_consequences_of_major_tax_cuts_published.pdf.
Swann, Steve, et al. “Sanctioned Russian Oligarchs Linked to £800m Worth of UK Property.” BBC News, BBC, 16 Apr. 2022, www.bbc.com/news/world-europe-61080536.