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Mon Nov 19, 2012, 11:44 AM

NY Times Op-Ed: Tax Wealth, Not Income

Last edited Mon Nov 19, 2012, 01:38 PM - Edit history (1)

To Reduce Inequality, Tax Wealth, Not Income

DANIEL ALTMAN

WHETHER you’re in the 99 percent, the 47 percent or the 1 percent, inequality in America may threaten your future. Often decried for moral or social reasons, inequality imperils the economy, too.....

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...... income data may not reveal the true economic power of people who are retired, or who receive their pay in securities like stocks and options or use complex strategies to avoid taxes.

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...... From the late 1970s through the early 1990s, the Census Bureau recorded Gini coefficients for income in the low 40s...........Since then, it has risen steadily, to about 80 as of 2010.

In 1992, the top tenth of the population controlled 20 times the wealth controlled by the bottom half. By 2010, it was 65 times. Our graduated income-tax system redistributes a small amount of money every year but does little to slow the polarization of wealth.

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American household wealth totaled more than $58 trillion in 2010. A flat wealth tax of just 1.5 percent on financial assets and other wealth like housing, cars and business ownership would have been more than enough to replace all the revenue of the income, estate and gift taxes, which amounted to about $833 billion after refunds. Brackets of, say, zero percent up to $500,000 in wealth, 1 percent for wealth between $500,000 and $1 million, and 2 percent for wealth above $1 million would probably have done the trick as well.

These tax rates would garner a small portion of the extra wealth America’s richest families could expect to accrue simply by investing what they already had. The rates would also be enough to slow — if not reverse — the increase in inequality. To see how the wealth tax would work, consider a family with $500,000 in wealth and $200,000 in annual income. Right now, they might pay $50,000 in federal income tax. With the wealth tax brackets described above, they would pay nothing. On the other hand, a family with $4 million in wealth and $200,000 in annual income would owe $65,000. Most families that depend on their wealth for their income would pay more, and most that depend on their earnings would pay less.

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http://www.nytimes.com/2012/11/19/opinion/to-reduce-inequality-tax-wealth-not-income.html?adxnnl=1&ref=opinion&adxnnlx=1353342642-XiogZ8kHUv6PAUI8oF47TA&pagewanted=all&_r=0

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Reply NY Times Op-Ed: Tax Wealth, Not Income (Original post)
amborin Nov 2012 OP
socialist_n_TN Nov 2012 #1
ProgressiveProfessor Nov 2012 #3
reusrename Nov 2012 #7
ProgressiveProfessor Nov 2012 #12
reusrename Nov 2012 #17
closeupready Nov 2012 #8
SharonAnn Nov 2012 #15
reusrename Nov 2012 #19
athena Nov 2012 #2
DirkGently Nov 2012 #4
reusrename Nov 2012 #10
ProgressiveProfessor Nov 2012 #13
JustAnotherGen Nov 2012 #5
Retrograde Nov 2012 #6
leftstreet Nov 2012 #9
mainer Nov 2012 #11
librechik Nov 2012 #14
brokechris Nov 2012 #25
librechik Nov 2012 #34
gravity Nov 2012 #16
ProSense Nov 2012 #18
Comrade_McKenzie Nov 2012 #22
brokechris Nov 2012 #23
amborin Nov 2012 #37
WinkyDink Nov 2012 #29
brokechris Nov 2012 #30
freshwest Nov 2012 #35
PlasticFern Nov 2012 #20
hrmjustin Nov 2012 #38
Comrade_McKenzie Nov 2012 #21
brokechris Nov 2012 #24
WinkyDink Nov 2012 #28
brokechris Nov 2012 #31
freshwest Nov 2012 #36
MrYikes Nov 2012 #26
WinkyDink Nov 2012 #27
Warren DeMontague Nov 2012 #32
ProSense Nov 2012 #33
reformist2 Nov 2012 #39

Response to amborin (Original post)

Mon Nov 19, 2012, 11:47 AM

1. Yep. I've said this for a while........

nm

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Response to socialist_n_TN (Reply #1)

Mon Nov 19, 2012, 01:34 PM

3. As Greece how well that works

It is so easy to hide wealth and move it out of the jurisdiction, that this is doomed to fail.

Examples:
You own gold. No one know how much you have, or when you bought it. How will the tax man know? Its not traceable.

I own stock through a dummy corp in the Bahamas. They do not report to the IRS. I can own, buy, or sell that stock without a US record.



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Response to ProgressiveProfessor (Reply #3)

Mon Nov 19, 2012, 02:41 PM

7. Simple, you make people report their own wealth.

 



Anything they fail to report gets taxed at confiscatory rates. Also, there would be penalties if they try to transfer something without paying the tax.

Sure, there will be tax cheats, there always are. Also, if it's a flat tax that is across the board, then there will probably be less participation in illegal schemes than there are now. Especially if it's a 1.5% tax.

As for the gold stashed under your mattress, at some huge level of wealth, say several billion, you will have to hire and train your own army to protect it. Much cheaper to pay taxes.

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Response to reusrename (Reply #7)

Mon Nov 19, 2012, 04:00 PM

12. With what means of traceability or discovery?

There is also a huge question of actual vs appraised value.

A much simpler version of the tax system would be much easier and more honest in the long run

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Response to ProgressiveProfessor (Reply #12)

Mon Nov 19, 2012, 08:21 PM

17. Good thinking.

 

If you think about it a little bit, a person who owns a dog has more of a legal obligation to protect society from that dog than a billionaire does to protect society from his billions. We know the billions are inherently more dangerous than a dog, but we don't treat it that way. We need leash laws and poop laws for wealth. Personal responsibility and all that. Basically, you register your wealth like you would your dog.

I hadn't thought about the second question before. At first blush there seem to be advantages to using actual value. I know it gets trickey, but so is rent control. This definitely needs more discussion.

I work in aviation, and I think most people view the FAA as a beaurocratic nightmare. I think it's a remarkable system. The natural tension between profits and safety cannot be greater than it is in this industry, yet flying remains safe and reasonably affordable. It would be great to have something similar for the financial sector.

The aviation industry operates on an honor system. Pilots, mechanics, instructors, inspectors, basically everybody, certifies their own work. If the financial industry had a similar system in place it solve most of our problems.

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Response to ProgressiveProfessor (Reply #3)

Mon Nov 19, 2012, 02:43 PM

8. Would you commit perjury to hide your assets?

Would most people?

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Response to socialist_n_TN (Reply #1)

Mon Nov 19, 2012, 04:10 PM

15. Yet this can be a problem esp. for elderly who own their house or farm yet have

very little income.

It's best if taxes are spread through::
1. Income
2. Wealth(property)
3. Consumption

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Response to SharonAnn (Reply #15)

Mon Nov 19, 2012, 08:33 PM

19. I don't see the problem.

 

These folks are still infinitely better off than folks who do not own a house or a farm.

Should they pay less than the folks who are paying rent? This is just a question about fairness, that's all. Taxes are hard on everybody, no matter what scheme is used.

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Response to amborin (Original post)

Mon Nov 19, 2012, 12:33 PM

2. This is an op-ed, not an editorial.

When the NYT publishes an editorial, that's a big deal because the view expressed represents the view of the NYT editorial board. An op-ed piece, on the other hand, represents only the view of the writer.

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Response to amborin (Original post)

Mon Nov 19, 2012, 01:37 PM

4. Interesting. Game would change from disguising income to hiding wealth.

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Response to DirkGently (Reply #4)

Mon Nov 19, 2012, 02:44 PM

10. It just seems that way at first.

 

Once a certain level of wealth is reached, it would be much cheaper to pay the tax and have the government protecting it than it would be to try and hide it and defend it on your own.

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Response to DirkGently (Reply #4)

Mon Nov 19, 2012, 04:01 PM

13. It is much easier for the common people to hide wealth.

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Response to amborin (Original post)

Mon Nov 19, 2012, 01:40 PM

5. Is the idea for the wealth to never grow beyond a certain amount?

What if the majority of the wealth is in tax deferred accounts? Such as IRA's, Annuities, and 401K's? In some cases, you might have to cash something in early, thus incurring additional taxes. Or - would there be a deduction for those who say - cash in a 25K IRA to pay the additional taxes? I.E. - we won't tax you the early withdrawal penalty since it was considered 'wealth' and not income?

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Response to amborin (Original post)

Mon Nov 19, 2012, 01:50 PM

6. Let's see

I save up the down payment for house, scrimp to pay the mortgage, spent money to repair and maintain it, and when I reach retirement age I get hit up with taxes again because it appreciated after all those years? And does this "wealth" include retirement savings (for most people, job-provided pensions are a thing of the past) that's supposed to cover all of one's needs for 20 or more years?

There are already provisions for taxing this "wealth" - property taxes, inheritance taxes. The problem is the very wealthy - Romney, for example - can afford accountants and lawyers who can find loopholes for them to exploit.

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Response to amborin (Original post)

Mon Nov 19, 2012, 02:44 PM

9. End the massive accumulation of wealth, period n/t

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Response to amborin (Original post)

Mon Nov 19, 2012, 03:02 PM

11. It discriminates against savers, rewards the spendthrifts

Those who carefully save through the years for retirement would be hit with the tax. Those who spend it all and never save would avoid any taxes. And how do you define wealth? A million dollars? Two? Would retirees be hit with unaffordable taxes because the equity in their homes has increased over the decades?

Some forms of wealth can't be eaten or spent. A retiree can be home wealthy but cash poor.

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Response to amborin (Original post)

Mon Nov 19, 2012, 04:03 PM

14. we'll have to kill them first

in order to pry the reins of the runaway horse out of their dead fingers.

Because they won't negotiate. Or lift a finger. Or make the smallest sacrifice to help.

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Response to librechik (Reply #14)

Tue Nov 20, 2012, 04:26 AM

25. holy carp! nt

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Response to brokechris (Reply #25)

Tue Nov 20, 2012, 10:03 AM

34. and we can't kill them either, obviously. That's why it's such a thorny problem.

and welcome to DU!

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Response to amborin (Original post)

Mon Nov 19, 2012, 04:20 PM

16. How do you calculate wealth?

Something like stocks is easy to do, but lots of wealth can't easily be converted into a cash value.

If you are a musician with rights to your own work, there is no way for the IRS to determine its worth. Is it zero dollars because it costs nothing to produce or is it worth millions because of the money it could generate each year.

It is much easier to tax the profits generated from the wealth which is complicated enough in itself. If you want to raise more tax revenue then raise the marginal rates on higher incomes. Keep it simple stupid.

Wealth taxes will have its own series of loopholes that will be even worst.

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Response to amborin (Original post)

Mon Nov 19, 2012, 08:29 PM

18. Tax both.

Anyone who excludes taxing income is simply obfuscating. Why are people always trying to protect high-income earners? When the rich hide their wealth, what happens to the revenue stream?

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Response to ProSense (Reply #18)

Tue Nov 20, 2012, 04:13 AM

22. Make all bank records accessible by the IRS...

 

Large transfers overseas can be flagged and a tax automatically withdrawn by computer.

The privacy nuts will go crazy about it for awhile, but if the IRS wants to see how much I spent for breakfast... that's perfectly fine with me.

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Response to Comrade_McKenzie (Reply #22)

Tue Nov 20, 2012, 04:23 AM

23. wow! all I can say is that I am FAR to the left of you

in the areas of personal privacy.

Don't let class envy get the better of you. We don't want to lose our freedoms--we never seem to get them back.

See the patriot act.

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Response to brokechris (Reply #23)

Tue Nov 20, 2012, 11:40 AM

37. aren't bank transfers over a certain amount, maybe $1K, already flagged? by homeland security? eom

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Response to Comrade_McKenzie (Reply #22)

Tue Nov 20, 2012, 05:09 AM

29. "Privacy nuts"?? Wow---your board name really IS apt.

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Response to WinkyDink (Reply #29)

Tue Nov 20, 2012, 05:15 AM

30. I'm not sure I get it

my name is broke (because I am out of work and on the verge of bankruptcy) and Chris (because that is my name). My screen name has nothing to do with privacy. OOOPS sorry--you were addressing the previous poster. My eyesight. Apologies.

But yes--I believe in protecting people's freedoms. That is actually one of the reasons that I consider myself a progressive.

But I will say that some of this sounds less like Democratic thoughts and more like totalitarianism. Spying on people's bank accounts? Even killing people (an earlier poster)? I am not down with this.

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Response to Comrade_McKenzie (Reply #22)

Tue Nov 20, 2012, 11:36 AM

35. AFAIK, that's already the case. Bank accounts have required your 'SS# or Tax ID#' for years.

Last edited Tue Nov 20, 2012, 12:22 PM - Edit history (1)

It's possible that the two computer data bases have been having some rather lively conversations already. Just sayin'

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Response to amborin (Original post)

Tue Nov 20, 2012, 03:44 AM

20. This would be un-Constitutional

There's an apportionment clause in The Constitution when it comes to the federal government's power to tax. It's because of that there was an amendment needed to directly tax income. There were attempt(s) before 1913 to tax income that were always shot down in court until that amendment.

So, to implement such a tax, we'd need a Constitutional amendment. I wouldn't hold your breathe on that.

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Response to PlasticFern (Reply #20)

Tue Nov 20, 2012, 12:36 PM

38. Welcome to DU!

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Response to amborin (Original post)

Tue Nov 20, 2012, 04:10 AM

21. Most people I know have no saved wealth... the entire paycheck goes to bills...

 

I'm OK with taxing wealth. It's hoarding.

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Response to Comrade_McKenzie (Reply #21)

Tue Nov 20, 2012, 04:25 AM

24. yet some people have scrimped and saved

and worked very very hard to accumulate something so they can be comfortable in their old age. My own parents (in their 60s) have paid their house off through blood, sweat, tears and a lot of self denial.

My father was disabled at a young age, with a disease that was extremely painful--he worked every day for 47 years in spite of constant agony--never taking a sick day. His Dr's were astonished that he managed it.

So the little bit that they have accumulated for their old age---THAT is hoarding?

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Response to brokechris (Reply #24)

Tue Nov 20, 2012, 05:08 AM

28. My 88-yr-old mother, as well. Lives really frugally, so she can have some U.S. bonds.

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Response to WinkyDink (Reply #28)

Tue Nov 20, 2012, 05:18 AM

31. and I believe older people like your mother

who have worked hard should benefit from their years of sacrifice.

I don't care about inheriting anything--I will be happy if my folks use every penny of THEIR relatively meager means to take care of their needs in their old age. Frankly--it is a relief to know that at least they are stable--because I am not right now and wouldn't be able to help them much financially if they were in trouble.

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Response to Comrade_McKenzie (Reply #21)

Tue Nov 20, 2012, 11:40 AM

36. The virtual elimination of the inheritance tax, something the Founders approved of, destroys that.

After years of brainwashing the public by calling it the 'death tax' with images of people losing the farm, etc., and the increasing aversion to taxes, period, any of these changes will be a hard sell.

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Response to amborin (Original post)

Tue Nov 20, 2012, 04:52 AM

26. I am more comfortable with just income and estate taxes.

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Response to amborin (Original post)

Tue Nov 20, 2012, 05:06 AM

27. Well, there are a whole slew of retireees like me---from public education---who think this is a bad

idea.

But hey---at these no-interest rates, I'd put my $$ under my proverbial mattress.

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Response to amborin (Original post)

Tue Nov 20, 2012, 05:40 AM

32. I do find it fascinating that now that the top marginal rate is likely to go back to 39%

all sorts of people are desperately pulling all sorts of creative "alternatives" out of their rears.

Robert Samuelson's idea of a "good deal" on taxes sounds oddly like something coming from someone who thinks Romney won the race:

http://www.washingtonpost.com/opinions/robert-samuelson-the-fiscal-cliff-deal-we-need/2012/11/18/3870f9c6-3014-11e2-9f50-0308e1e75445_story.html

Republicans accept immediate higher taxes on the “wealthy” — couples with more than $250,000 of income and singles with more than $200,000. Obama won the election, and that’s his minimum demand. However, it doesn’t require permanently increasing today’s top 35 percent tax rate to 39.6 percent. Instead, Obama accepts a one-year surtax or limit on deductions. During that time, Congress and the administration pledge to pursue a tax overhaul that would cut the top individual and corporate income tax rates to 30 percent.




Yes, how reasonable, Bob- let the top rate go back to pre-Bush levels for one whole year (!!!) after which, of course, we HAVE to find a way to get the rates for the poor oppressed top bracket (the so-called "wealthy" harumph harumph because no one can afford that 2nd house in the Hamptons on a measly impoverished 250K a yr harumph harumph) back down lower than they already are- say, 30%, slobber slobber drool drool.



How about this: We have an income tax in place. Large transfers of money (as opposed to assets) are ALREADY reported to the IRS. Raising the top marginal rate is a fairly simple matter, and wouldn't require any fancy new reporting or ideas.

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Response to Warren DeMontague (Reply #32)

Tue Nov 20, 2012, 07:09 AM

33. No shit!

"I do find it fascinating that now that the top marginal rate is likely to go back to 39% all sorts of people are desperately pulling all sorts of creative "alternatives" out of their rears."

And people are eating it up. Consider this from the OP:

To see how the wealth tax would work, consider a family with $500,000 in wealth and $200,000 in annual income. Right now, they might pay $50,000 in federal income tax. With the wealth tax brackets described above, they would pay nothing.

First of all, a family with $200,000 is not affected by raising the top rate on income in excess of $250,000.

Secondly, who the hell thinks it's a good idea for anyone earning $200,000 to pay zero taxes...no taxes at all, not even on their wealth of $500,000?

Sound like a plan to shrink the government.

On the other hand, a family with $4 million in wealth and $200,000 in annual income would owe $65,000. Most families that depend on their wealth for their income would pay more, and most that depend on their earnings would pay less.


See the slight of hand? What does a family with $4 million in income and $4 million in wealth pay? Answer: $65,000, equivalent to 1.6 percent of their income. The family with $200,000 income pays the equivalent of 33 percent of their income.

Yeah, let's replace the income tax with the most regressive tax ever. Friggin absurd!

Evidently, anyone selling a bullshit idea can find a lot of gullible people.

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Response to amborin (Original post)

Wed Nov 28, 2012, 05:05 PM

39. This ought to be the primary method for collecting taxes.

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