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Tax Reform My Way – Soak The Super-Rich – They Are Already Soaking Us
Our tax system is a complicated morass of different approaches to raising revenue (and rewarding some). We tax income (but mostly salary – capital is taxed at a much lower rate). We tax consumption (sales or VAT taxes) but mostly on goods (not services) and with (in Kansas) more exemptions than one can count. We tax wealth but only in the form of real property. Capital accumulation by other means is not taxed at all once accumulated.
The tax reforms we hear about are almost all directed at the income tax. Admittedly, that system is unfair in the extreme. It is however, the only tax that by its progressivity seeks to indirectly tax the accumulation of wealth through salary. While such reform is needed, we need to guard against a system that in the end reduces the tax on the wealthiest by increasing it on the middle class.
I propose a mildly progressive tax on accumulated wealth. Accumulated wealth would include stocks, bonds, commodities, personal property, vacation homes and the like. I would apply the tax to the net value. I would exempt the first $2 million. For every $1 million in increased net worth above that my tax would increase on the margin by 2.5% until it took 30% of what is there.
Sounds draconian? Well, nobody would ever be reduced below a net worth of $2 million (and that would be inflation adjusted). The impact on the really rich would initially be dramatic but would decline as the residual net value declined. My tax would not discourage investment as it applies to the net, which means it only applies if you make a lot of money from the investment.
My tax would certainly reach a lot of money currently not taxed in any manner and used primarily to foster government borrowing. It would clearly reduce the need for this given the potential additional revenue raised. It would almost certainly reduce the indefensible mal-distribution of wealth in this country. It would fall heaviest (and almost exclusively) on the top 1% who hold approximately 35% of all our wealth. I estimate the tax would bring in almost $1 trillion a years for at least a decade.
Implementation would not be that difficult. Investment houses already track most stocks bonds and commodities and report the portion in tax preferred accounts to the IRS today. Expanding that reporting would not be hard or particularly expensive. Tracking personal property, second homes and the like would be more problematic but not an insurmountable challenge. In short, implementation would be no more difficult than that required to track salary.
Is this legal? Well, if we can tax salary at one progressive level, capital at another, real property at another, then I cannot see any real legal impediment to taxing accumulated wealth.
Now, as is apparent from my blogs, I am not a large government fan. In my tax system, the income tax (after rational simplification) would be reduced significantly on the middle so that the whole system could be revenue neutral (or whatever we wanted).
From the left, is this not a more equitable way to raise revenue? From the right - well you will hate the idea The one thing I will bet my bottom dollar on is that you will not see such a proposal from either of the two entrenched political parties. They benefit from the “investment” made by the super-rich in the party coffers each election cycle. Elites look after themselves.
So, what do you all think?