It's Time To Tax Money Bins!
England is debating a wealth tax. America, as tax revenues crash and the need for government services explodes, needs to consider one, too.If you own a home, every year you must pay a wealth tax.
The majority of the wealth held by middle and working class Americans is in their homes. And every year, every homeowner must pay a tax on their wealth in the form of a state and local property tax.
Every year, all across America, average people dig deep to pay the one or two or three or 5% annual tax on the value of their home, money that helps support local schools and fire departments.
Over 65% of America's working people are homeowners, so that same percentage of average Americans pays an annual wealth tax. And the 35% of us who rent don't escape it: the property taxes simply get added to our rent. So, really, every working class American is paying an annual wealth tax.
So if average, working Americans pay an annual wealth tax on the property of their homes, why don't billionaires pay an annual wealth tax on the contents of their money bins?
The United Kingdom this week kicked off a major, multilevel conversation about the need for and appropriateness of a wealth tax on rich people. The government needs the money, and wealthy people have been accumulating piles of cash ever since the Reagan/Thatcher era in ways and at speeds we hadn't seen since the Roaring 20s.
America needs this conversation, too. Why is it that average working people every year must pay an annual tax on its value, when wealthier people whose savings are not in their home but in their stock portfolios or overseas bank accounts don't have to do the same?
It's a simple matter of fairness. America needs our rich people to pay a wealth tax just like the rest of us do every year, and given the crisis that Covid has thrown our local governments into because of low income tax collections, we need it now.
-Thom
Comments
Trump, the failed businessman and tax cheat who avoided paying taxes for eight years in the 80s and 90s, thinks that it's a winning talking point for Republicans when Democrats talk about raising taxes on the rich. As wrong as he is on virtually every issue, he does know his audience well -- Republicans always spin it falsely to mean that Democrats want to raise taxes on the middle class. He even lied like hell in a church (of course he did) in a recent speech to the enraptured faithful, his useful idiots:
"One of the things is the Democrats want to raise your taxes to a level that nobody can even believe. And it won’t be nearly enough to pay for what they want to do. You talk about bad healthcare; it’s just going to be a disaster. But they want to raise everybody’s taxes. I always thought it was supposed to be the other way, right? But let’s see how they do on November 3rd. I don’t think they’re going to do too well."
However, that standard billionaire lie only works with the Republican Party's mesmerized base, as the American people by vast majorities are much wiser than those who can be fooled all of the time:
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Most Americans Want the Rich to Pay Higher Taxes, According to Every Poll Everywhere
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Study: Majority of Americans Support Wealth Tax on Very Rich
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Most millionaires support a tax on wealth above $50 million, CNBC survey says
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Americans want the wealthy and corporations to pay more taxes, but are elected officials listening?
Wealth has been taxed in the past without weeping, wailing and gnashing of teeth
Where are they going to go? China?
Do it again now!
"We have nothing to fear but fear itself" (Roosevelt)
The challenge of implementing a fair "wealth" tax is how one defines wealth. Some wealth is earned by producing goods and providing services. Even more wealth is derived from legal privileges that create rent-seeking opportunities. The most appropriate source of public revenue was identified by the political economists going back to Richard Cantillon, Adam Smith and Anne Robert Turgot; namely, the rent of land. The economics are fairly straightforward. Every parcel or tract of land has some potential annual rental value based on advantages provided by nature (e.g., sub-surface minerals to be exploited, fertility, forests to be harvested, access to a natural harbor or navigible river, etc), or societally-created advantages (e.g., quality of infrastructure and other public amenities). These rental values are not individually-created. Justice requires that they be collected to pay for democratically agreed upon public goods and services (with the possibility of a distribution annually as a form of citizens dividend). There are other rents created by competition-limited licenses (e.g, liquor licenses and taxi medallions) and for assets with an inelastic supply (e.g., take-off and landing slots at airports). All of these and other sources of rents should be colllected as the basis for public finance.
What about taxing income? Most people earn income as wages by working. Those who have managed to accumulate or inherit large amounts of financial assets derive income from passive investment and speculation. In one of the great logical inconsistencies we tax earned wages higher than gains on the sale of financial assets. We call such gains "capital gains" and accept the idea that a low rate of taxation stimulates investment in the real economy. In reality actual capital goods (i.e., buildings, machinery, technologies) depreciate in value over time (even when well-maintained). Thus, gains on the sale of assets should be included with all other income and taxed progressively so that most tax revenue comes from income derived from rent-seeking, passive investment and speculation. So, here's what we need as an income tax: (1) Exempt all individual income up to the national median; (2) Eliminate all other deductions and exemptions: (3) Impose an increasing rate of taxation on higher ranges of income sufficient to raise enough revenue to balance the public budget.
Scrap the business profits tax in favor of a graduated tax on gross business revenue, exempting, for example, all business revenue up to some amount, eliminating all other deductions, and imposing an increasing rate of taxation on higher ranges of revenue. The one possible deducation would be a tax credit for every person employed full time and covered for medical insurance and a defined benefit pension.
There are more ideas to consider, but these are what I believe are the most important to achieve a far more just distribution of income and wealth.
Excellent! Please advise the incoming Biden administration.
Speaking of taxes... wouldn't a tax on securities trades bring in a whole bundle of loot?
I would think that kind of tax would tap into the largest category of "money" in the world, dozens or hundreds of trillions of dollars are held by speculators. A tax on buying and selling securities might be able to fund the entire U.S. budget, or health care for all, or free schools...
Stan
Not only do the wealthy not pay as much in tax. The IRS does not even audit them because the returns are too complicated. Corporations are not audited either. It is simple, you hire a tax attorney or consultant for 100000 and he saves you a million.
Thom, You need to research on why property taxes exist and what they actually cover. You also mistakenly assume that the uber rich live in or own only one residence, pay no sales taxes, donate no money, own one vehicle, or employ any outside contractors and services to manage their lavish lifestyle.
The only idea posted here that makes any sense is a Wall Street transaction tax which could and should be used to pay down our national debt with no other option for it to be allocated elsewhere. Politicians see a new revenue stream and they cannot control themselves. That transaction tax could be a fraction of a penny per share on each share traded and it would bring in billions of needed revenue.
The idea that makes sense that has never been posted here is a hard look at the reduction in the size of our overall Government and its many redundant departments.
Hope this isn't being designed against all homeowners, as I've paid off my modest home, live on "Social Security", and get by. Don't need nor can afford more taxes. On homes for the rich, yes? They use All Americans money to flout themselves as better than anyone else and support abuses against everyone. A Flat Tax for those making above say, $500,000 a year, to help other buy modest homes, would certainly help millions in this country.
lYes, the Rich have successfully, cut the legs off the IRS, and their buddies in Congress have manipulated IRS regulations to give them to ability to pay,very low, or no taxes. This has to change. I support what the Pres. Eisenhower admin did, 94% tax on the rich, our economy bloomed and created the middle class.
People with property already pay property tax. This is aimed at people who hold their wealth in other forms who don't currently pay tax on it.
I would be content if we ALL paid the same percentage in federal taxes based on TOTAL income. Period., full stop...
vetinla: I agree if we all have the same total income.
A 10% tax rate on an annual $13,000 total income will bring the person below the poverty line. On $130,000,000 it is simply tickling the person. The former income needs much less police protection than the latter. In the next generation the offsprings following the inhertance laws of taday, who will have had a significantly different starting line, will get a different financial boost. Run this algorithm for a couple of generations and social coherence is likely to deteriorate.
Andrew Youngs' proposal of UBI (aka freedom dividend), an idea much older than Andrew, which has been applied selectively in Alaska for the last few decades, is a right step for fixing the problem at the low end: what is our acceptable minimum standard of living for each and everyone fellow citizen under current technological advances? At the other end the question is: what is the tax rate for our fellow citizens whose annual income has exceeded expectations given our current technological advances? The obvious answer is the excess income (not the total) should be taxed at a rate below 100%. For example 94%.Tax rate for the part of the total income which is the UBI should be zero 0%. For the next brackets it should be what IRS thinks are reasonable tax rates and should becthe same for all independent of total income. Pissible exceptons should be well justified by court decisions.
Edward Dodson: Kudos.
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Well, though I agree a wealth tax is needed - in fact, there should be an earnings cap, but that's another story - property taxes are not an apt analog. Property tax is a means of charging for shared services people are entitled to, regardless of whether they use them. The value of the property taxed is a convenient, if imprecise, measure of the value of services they receive. Where I live, we pay property tax to four distinct jurisdictions: Village, Town, County and School District. The first three are divvied up among things like water, sewer, garbage, police, fire, etc.