Forum Post: TAX Wealth; not income
Posted 13 years ago on Oct. 9, 2011, 11:12 a.m. EST by closetSocialist
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One coherent demand we could make is to impose tax on net wealth, not income. This ultimately is the most fair way of taxation and the most efficient. The tax code should also say that, if you don't report and pay tax on any property you own, then you lose title to the property and forfeit it.
The 1% can't hide from such a tax, and that's why even Warren Buffet is not proposing it.
Imagine 0% corporate income tax. Every company that ever left our country for lower corporate tax rates would hurry back as soon as possible. Tons of other corporations would bring their jobs to the US to get away from corporate tax rates elsewhere. Obviously, we'd need to replace the revenues lost from this. Some sort of net worth tax may be feasible.
BigJ, you are correct. One benefit of the wealth tax is also that those who are just trying to establish themselves in life, e.g. recent graduates, would not pay very much of the wealth tax, especially since we are talking about a "net wealth" and their student loans will offset any tax liability for a while. It wouldn't be until such a person is more securely established in life that he or she would begin to contribute to the tax base.
I believe that a person's wealth, as opposed to his income in a year, is a vastly better measurement of his or her control of the world's resources. A recent graduate with $50k student debt making $45k stands in very different position in the world compared to a person whose parents whose wealth will enable such a person to take a $45k a year "hobby job."
In addition, income tax is gamed all the time. That's why the 1% has an army of accountants and tax lawyers. Wealth tax cannot really be gambled--either you pay a fraction of your wealth, or you lose title to whatever wealth you don't pay tax on (100%). This is an easy choice for a rational person.
Take a moment now to calculate your own net worth, and take 3 percent of that. Compare that to what you're currently paying in income tax and FICA. Surprised? I was. The proposed 2011 federal budget was $3.83 trillion and ran a deficit of $1.27 trillion. The national debt is $15.1 trillion. According to economist John Rutledge, our nation is worth $188 trillion. Three percent of that would erase the deficit and pay off the national debt in a few years. After that we can lower the tax rate.
Actually the wealth tax is one system that nobody can game. Either you pay tax on your wealth, in which case you pay a fraction of the value of the wealth, or you lose title to the wealth and forfeit 100% of it. Rational actors would most certainly choose to pay the tax rather than lose title to the property.
The loss of job aspect is also considered. During the years of your gainful employment, there is no tax on your income; the tax is only on the accumulation of wealth. A recent college graduate with $50,000 student loan, for example, would not have to pay any tax until she accumulate enough wealth to offset the entire debt liability. Thus over the years there should be a large savings of untaxed income in preparation for a rainy day.
Of course, if you never accumulated enough wealth to offset your $50k student loan, then no tax is ever assessed on you.
So you lose your job and the government takes your house. You retire and the taxes erode your nest egg. Put a license plate on everything. Sales taxes disproportionately hurt the poor. We already have property taxes and look at what they did to the elderly in California.
Let's not create a new system for the corporations to game some more. Lets get the corporate money out of government and put the will of the people back into the government. Lets keep or eyes on the target - a target that the 99% can agree on - a target that the 99% will vote for - make your representatives know that we are voting for campaign reform and fair and accountable lobbying.
Hey! You're on to something. If you want revenge on the rich you'll never get it by taxing income. The rich don't have incomes. They have money and they spend it. Period. When you tax income you are taxing people who actually work for a living.
A Flat Tax rate with no loopholes is the only fair tax. Everyone pays the same percent regardless of income. Then if someone gets 1000X of someone else, they pay 1000X more. And those at true poverty levels will get more out than they pay in.
A side effect is that everyone, regardless of income level will be contributing in a real way.
Nice side effects of no loopholes: -offshoring of $$$ in foreign banks will likely stop, since that is a major tax shelter. If the money is earned here, it is taxed here, regardless of where the firm is headquartered. -reduced complexity of tax codes, reduced expense for the IRS, and no more "April 15th" deadline. The tax can be levied immediately.
I have not done the calculation but I don't think 10% is necessary to support the current government budget. It would probably be a smaller percentage on individuals' and entities' net wealth (asset - debt).
It is a fairer system because the tax ultimately impact a person's control over the world's resources, as approximated by the amount of wealth he/she holds.
Take a moment now to calculate your own net worth, and take 3 percent of that. Compare that to what you're currently paying in income tax and FICA. Surprised? I was. The proposed 2011 federal budget was $3.83 trillion and ran a deficit of $1.27 trillion. The national debt is $15.1 trillion. According to economist John Rutledge, our nation is worth $188 trillion. Three percent of that would erase the deficit and pay off the national debt in a few years. After that we can lower the tax rate.
Tax wealth? How would that be fair from an objective perspective. Would you early take the entire assets of a billionaire? If someone had 1billion would you take them 10 percent yearly?