Bill Gates is concerned about the high budget deficits being run by the U.S., and said if taxes are ultimately increased to make up the shortfall, then it’s appropriate for wealthy people to pay much higher taxes.
“We only collect about 20 percent of GDP and we spend like 24 percent of GDP. So you can’t let that deficit grow faster than the economy,” the world’s second-richest man said during an interview on CNN’s “Fareed Zakaria GPS” broadcast on Sunday. The U.S. national debt climbed past $22 trillion in the past week.
Proposals have circulated recently for the richest Americans to again face a top marginal tax rate of 70 percent, as they did during much of the 1970s before it was lowered by President Ronald Reagan, and for other wealth-focused measures to be taken to address rising income inequality in the U.S.
Freshman Democratic Representative Alexandria Ocasio-Cortez of New York has suggested “tax rates as high as 60 or 70 percent” on “the tippy tops -- on your 10th million dollar.”
But Gates said that approach didn’t work well in practice.
Progressive Taxes
“Even when that rate was high, the actual collection because of ways people could defer wasn’t -- never got above 40 percent, actually,” the Microsoft Corp. co-founder said.
“If you go about doing this additional collection, of course you want to be progressive, you want the portion that comes from the top 1 percent or top 20 percent to be much higher,” he said. “The big fortunes, if your goal is to go after those, you have to take the capital gains tax, which is far lower at like 20 percent, and increase that.”
Taxing capital gains income and ordinary income at the same rates would get rid of a lot of complexity, said the philanthropist, who has a net worth of $97.2 billion, according to the Bloomberg Billionaires Index. Hedge funds tend to try to shift their tax liabilities over to the capital gains column.
“And so, you would simplify that,” Gates said.