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Gates says he is concerned about the high budget deficits being run by the U.S., and if taxes are increased to make up the shortfall then it’s appropriate for wealthy people to pay more.
“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.
Proposals have circulated recently for the richest Americans to again face a top marginal tax rate of 70 percent, but Gates said in the past that approach didn’t work well in practice.
“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.
In a recent interview on a podcast with the Verge, Gates said, “You do start to create tax dodging and disincentives, and an incentive to have the income show up in other countries and things.”
“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 on CNN. “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, because whenever those rates vary, you want to make one look like the other,” said the philanthropist.
Hedge funds tend to try to shift their tax liabilities over to the capital gains column. “And so, you would simplify that,” Gates said.