I Asked ChatGPT: Should Billionaires Pay More in Taxes?
Written by
Jordan Rosenfeld
Edited by
Levi Leidy
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With the astronomical earnings that billionaires make on their investments alone, it’s easy to imagine their tax bills are just as huge. And yet, it turns out that’s not really the case.
In fact, research published in 2021 by White House economists has shown that, at least as far back as 2018, the 400 wealthiest families in the U.S. paid an average 8.2% federal income tax rate, which is lower than many middle-income families.
GOBankingRates decided to see if ChatGPT could analyze the fairness of what billionaires pay in taxes as compared to the average American. We asked: “Should billionaires pay more in taxes?” Here’s what it said.
The Analysis
ChatGPT didn’t give a flat answer right away. First it pointed out how billionaires primarily accumulate their wealth, which is through “unrealized capital gains” which are not taxed until they’re realized, or sold, and this allows billionaires to pay a lower “effective tax rate than their rates otherwise suggest.”
To explain realized versus unrealized capital gains more specifically, ChatGPT broke it down like so: “You buy a stock for $100. Over time, its value rises to $150. That extra $50 is your unrealized gain. It remains ‘unrealized’ (and untaxed) until you actually sell the stock.”
So it’s only when billionaires sell an investment that they pay capital gains taxes, but they can meanwhile earn compound interest on their investments in amounts the average person could never dream of and not have to pay taxes on that.
ChatGPT shared that Elon Musk paid $455 million on $1.52 billion in income between 2014 and 2018, “but then legally avoided federal income tax in 2018,” because he could take advantage of complex tax strategies that allow the “ultra-wealthy” to avoid them. His personal tax information for any year beyond 2018 is not publicly available but his net worth has only grown.
In Favor of Raising Their Taxes
ChatGPT made some arguments in favor of raising billionaires’ taxes. For one thing, there’s major wealth inequality, with billionaires’ wealth having grown “massively” while the average American’s has “stagnated,” it wrote. Given that the minimum wage is still below $10 in many states, that’s a good point.
Additionally, from a public good standpoint, simply imposing a 2% annual wealth tax on billionaires could raise billions in global taxes that could fund numerous programs and initiatives from healthcare and education to climate initiatives and more.
And while many billionaires do, indeed, donate to charitable causes and even have foundations that do charitable work, it’s unlikely many of them will rush to find ways to give up their earnings.
Counterarguments
From the average American’s standpoint, taxing billionaires more seems like a good idea — after all, they have so much money they can spare it and still be billionaires. However, ChatGPT pointed out that wealth taxes tend to be unpopular and could “discourage investment.” They also require a congressional act to pass.
Not to mention, plenty of billionaires have offshore tax shelters and other “wealth defense tactics” that might still get around paying their share.
The Verdict
Yes, ChatGPT suggested that there’s plenty of justification for increasing taxes on billionaires, but it pointed out that “policymakers must balance fairness with economic impacts, enforceability and legal constraints.”
In the interim, ChatGPT suggested alternatives like minimum income taxes or raising capital gains/tax enforcement.
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