The so-called ‘Buffett tax’ on high incomes is fine as far as it goes. But it’s not enough either to reverse the growing wealth stratification in this country, nor to repair the budget deficit. So here’s a suggestion for another small piece of the puzzle: The United States needs a small, graduated, national wealth tax. Properly implemented, a gentle national wealth tax raises some money at minimal distortion to the economy. Experience abroad suggests that so long as the tax is not too large, fears of capital flight are much exaggerated.
Yes, what I’m suggesting here is that we follow the lead of socialist trailblazers like Switzerland.
There are a lot of arguments for a small and graduated wealth tax: it raises (some) money, it does so at cost to the people who can best afford it, it provides a (small) counterweight to the increasing wealth inequality we are experiencing, and empirical evidence suggests that it will not materially hurt incentives or the economy.
Indeed, the US has a long history of wealth taxes. We have the federal estate tax, but that tax is now limited to the very wealthy, and is also subject to serious gamesmanship by savvy estate planners.
At the local level there is the property tax. The difference between a general wealth tax and a property tax is that a more general wealth tax taxes intangible interests such as stocks and bonds (and perhaps also cash), thus partly redressing current discrimination against those, like farmers, who choose to invest in real estate rather than Wall Street. Yes, there are valuation issues with complex financial instruments. That’s why we have tax lawyers.
The US also has some experience with local wealth taxes. When I moved here, Florida had an intangibles tax that only affected people with substantial non-cash financial assets held outside of a retirement fund. Jeb Bush got rid of that, presumably on the theory that it was a tax only rich people paid and thus bad.
The strongest arguments against wealth taxes that I know of are (1) that they are a form of double taxation, (2) they distort incentives in favor of consumption and against capital accumulation; and (3) that they encourage capital flight.
I’m personally not at all convinced by either of the first two arguments. Evidence suggests the third is not an issue so long as the wealth tax level is reasonably low, although it also seems clear that there is some number beyond which capital flight might become an issue. Note in this context that many foreign countries have wealth taxes, including hyper-capitalist Switzerland. Spain recently reinstated its wealth tax in a bid to fight its budget deficit.
The double taxation argument is that wealth is saved income. As the income was subject to tax when earned or inherited, it is wrong to tax it on a continuing basis when held. The problems with this argument are manifold. I’d argue that rates on unearned income, for example, have been inequitably low. Most importantly, though, I’d argue that even if it is double taxation it is justified by three policy considerations: (1) owners of great wealth disproportionately benefit from the maintenance of law and social order, and can fairly be asked to pay for it on a continuing basis, (2) we tax consumption (e.g. sales taxes), which is already double taxation, and a regressive tax at that, so why not tax savings which while it may be a double tax is at least progressive, (3) it is very mildly redistributional in the manner least painful to society in that it affects those least likely to feel it.
Almost any tax can be seen as an economic distortion. The trick is to pick those with the least effects. A large wealth tax is distortive, just as a large marginal income tax rate or a large almost-anything-other-than-sin tax is distortive. But sometimes a tax can level the playing field. Given that we already tax consumption via various forms of sales taxes (although we also give a partial credit for them on federal income taxes, so this is complicated), it is conceivable that taxing non-consumption is less of a distortion than it might otherwise be, as at the margin this tax on savings will encourage consumption. I wouldn’t put much weight on that, though, as I imagine a tax small enough not to have much of a noticeable effect.
I am not a tax lawyer, so I don’t have a detailed proposal to hand. I’d suggest that the tax should start small but be progressive, and might start with wealth over, say, $100,000, and might exempt all but the very most bloated tax-exempt retirement plans or annuities (say, the first $1 million in assets at least, maybe even more) on the grounds that we want to encourage retirement savings. I think one might also exempt home equity at least up to the 75th percentile, and maybe more, on the grounds that this is an illiquid asset, also serves as retirement savings, and is already taxed locally albeit erratically. On the other hand, there does need to be a limit on these exclusions, as there is no reason to make giant multi-million dollar mansions into a tax dodge any more than there is to allow the multi-million dollar overstuffed corporate pension plan to be one. Even so, by the time you have carved out a big chunk of home equity and 401k plans, anyone with $100,000 or more in liquid savings is either among the wealthy or about to put a kid through college. Note further that even without the exclusions I suggest above, about two-thirds of US families have less than $100,000 in wealth even including their car and home equity, so a tax of this sort really will only hit a very small fraction of the population. If you want to add an exception for the small family farm, and we can agree on a definition of what that is, we can throw that in too.
A wealth tax gentle enough not to be an economic distortion will probably need to max out, even at the very dizzyingly highest levels of wealth, at under 0.5% — say maybe 0.3% at the top. So it isn’t going to fix the deficit, or the Gini Coefficient, on its own. But every little bit helps.
There are no free lunches.
Your analysis suffers from the “wealth is cash stuffed in a mattress” fallacy. If Americans actually stuffed wealth into their mattresses as cash than perhaps your policy proposal would be justified. But in a capitalist society, wealth takes the form of productive capital investments. To the economically and financially unsophisticated, this is often overlooked because it most often occurs on an agency basis (e.g. a mutual fund, UL insurance policy, bonds, etc.). “But, you have all that wealth just sitting there in your 401k not helping anyone!” shouts the socialist, completely ignorant, oblivious, and unconcerned with exactly what the money in a 401k “does.” It does not sit there. The investor has merely hired a better educated and experienced agent to decide how to put the capital to productive use. The agent may in turn employ agents, and so on, but eventually widgets gets made. Productive capital investments are actually how things get made, services rendered, and workers employed. The mattress fallacy.
An example result, as employment is currently a critical issue, is if you shrink the capital market, as you propose, you’ll find yourself paying out the tax proceeds as unemployment benefits from the capital that would have gone to workers’ salaries. Of course, subtract the inherent inefficiencies of government, and you’ll succeed only in lowering GDP and widening the wealth gap.
This happens even if you are right about minimal impacts on incentives. It’s the “mattress fallacy” that prevents you from seeing this. Your proposal is a jobs killer. No free lunches.
Straw man. I nowhere make the arguments you are attacking.
You propose a wealth tax which is synonymous with “productive capital tax.” If you disagree with the synonym then you suffer from the mattress fallacy. You want to extract productive capital from the system, and put it to some other use. Unless you are certain that the other use is more socially beneficial than the original use of the capital, leave it alone.
There are no perpetual motion machines, no free lunches.
And an income tax could be called “a productive labor tax”. The point is not to find a tax with no conceivable harmful effects, as that can almost never be done (sin taxes excepted), and I didn’t argue this was one. The claim here is that this is a tax with a relatively low harmful effect that also serves the goal of equity.
Almost all taxes carry some risk of harm (distortion) to the economy at large, and in almost all cases that tends to increase as the rate of that tax increases. “The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing” as Jean Baptiste Colbert said. If wealth taxes on intangible assets are currently zero, that suggests the existence of an opportunity for a relatively non-distortive tax as compared to, say, increasing the sales tax.
I am not claiming NO harmful effect. I am claiming that the stories of doom and gloom that are commonly raised against taxes in general and this sort of tax in particular are not applicable. Thus, pointing out that there is a chance of SOME deadweight loss to this tax is not a valid counter-argument as it refutes an argument I am not making. Instead, one would have to show, say, that the harmful effect was likely to be greater than a tax producing equivalent revenue from a different source. The money has to come from somewhere as, I hear it said, there are no free lunches.
“The claim here is that this is a tax with a relatively low harmful effect that also serves the goal of equity. ”
You are thinking in circles and can’t see it. What is your definition of equity? Your plan will not make the poor richer.
“There are no free lunches”
No one is suggesting that the lunch was free in the first place. It might have been sponsored by a fellow capitalist who didn’t feel the pinch of losing .3% of their vast wealth. Unless they were notified by one of their tax lawyers that they paid for some starving bastard to eat. Oh, the outrage.
“owners of great wealth disproportionately benefit from the maintenance of law and social order, and can fairly be asked to pay for it on a continuing basis,”
I can’t quite articulate it, but I sense something ironic about you making this statement, and then refusing yourself to donate to NPR.
“owners of great wealth disproportionately benefit from the maintenance of law and social order, and can fairly be asked to pay for it on a continuing basis,”
That is one GREAT statement! I can’t even figure out what it MEANS. Does it imply that to make things fair, we need to lessen the law and order as applied to rich folks? Maybe ignore Miranda warnings and charge-time limits if you earn more than $250K? Maybe we make the firemen count to 200 before we let them turn the hoses on? That WOULD be more fair and all… Maybe make the vaults less secure on rich people’s banks?
If one wants to wonder who benefits from social order, one might start by wondering who lives among those most likely to cause social disorder, and thus is benefiting most from being protected from a breakdown in it. (it ain’t the rich folks in the Hamptons)
I’d have more sympathy for Warren Buffets whining that he doesn’t pay enough taxes if his company wasn’t also involved in a fight with the IRS over refusing to PAY over $1B in taxes.
Actually, one way to interpret it is as a threat of class warfare. He seems to say the police only exist to prevent the poor from rioting and killing all the rich.
Get ready for more of such threats from the left this election cycle, Obama has already put his class warfare rhetoric in high gear.
He seems to say the police only exist to….what? He is saying that law and order benefits the rich more and they ought to pay more for this. I’m not sure what got you talking about class warfare. Perhaps it was the .3% wealth tax he was talking about which, by definition, would make you a sensationalist. .3%, why that’s ABSURD!?
The line you quoted about law and order gave me an image of Al Capone in his plush prison apartment or Martha Stewart spending 6 months in a comfy apartment for white collar crimes. I suggest you read the paragraph, breathe, read it again and remind yourself that not everything Ayn Rand ever said was true.
Independently, we can provide for ourselves with great labor by ourselves. Utilizing the many utilities and inventions of others we live more comfortably and productively. It is right that each of us reimburse for services in proportion to the amount of services received. This wealth tax is a tax on the many resources of our world which made wealth possible. Almost like a “consumer tax” if you will. Those who consumed resources to gain wealth pay this tax. This tax can be fair and provide for our infrastructure which makes it a productive tax.
“Those who consumed resources to gain wealth pay this tax.”
They already paid for the resources as the price they paid for the capital.
One criteria (not the only one) for tax system design is to help the market reflect the true costs of things (e.g. incorporate externalities). That suggests that we look at each activity of government and think about how it would best be funded. When I once did this and came to the military, wealth taxes seemed like the natural thing. Our war machine (euphemistically called the defense department) primarily exists to protect the interests of wealth and property, so why not fund it from wealth taxes?
This would of course be an anathema to Republicans, the devotees of borrow-and-spend. If they had to pay a wealth tax for war making, it would be quite a conflict, but I am sure war making would be reduced.
“One criteria (not the only one) for tax system design is to help the market reflect the true costs of things (e.g. incorporate externalities).”
Bingo. Froomkin assumes all capitalists are equally free riding on unfunded communal expenses, which is utter socialist nonsense propaganda. If clean air is an underpriced externality (aka tragedy of the commons) then tax a coal fired plant, but leave the solar capitalist alone. If illegal immigration is an unfunded externality, then tax the company that uses illegals and not the company that hires Americans.
These are all basic economic concepts taught at the 101 level at colleges with unbiased professors.
There are many public goods. Order and security are among the big ones. How should we conceptualize who benefits from these? One could say, everyone benefits equally. One could also say, like Anatole France, “The law, in its majestic equality, forbids the rich and the poor alike to sleep under bridges, to beg in the streets, and to steal bread.”
It seems reasonable to me to suggest that as people have more stuff to protect, they get more benefit from the watchman state, and that they might be asked to pay for it.
Separately, I happen to think there is a declining marginal utility to wealth, and that — to the limited extent interpersonal utility comparisons are meaningful — taxing those with more of it hurts them less than taxing those with less of it.
Conversely, if I am wrong about that, and that there is (after some point) an increasing marginal utility to wealth in that it translates to power, that is all the more reason for a wealth tax. But that likely would require a very different tax from the very very modest one I am suggesting here.
“Separately, I happen to think there is a declining marginal utility to wealth, and that — to the limited extent interpersonal utility comparisons are meaningful — taxing those with more of it hurts them less than taxing those with less of it.”
You are seemingly forever trapped in the mattress fallacy. Take a very simple example. I have $100K sitting in the bank. I was going to build a low income apartment building at the cost of $10K per unit, and I was going to rent them out. You want to tax my wealth 10%. You do so, and as a result (because you froze incentives) I go ahead but can only pay my builder to build 9 apartments on the same piece of land. So there is less supply of low income apartments, raising rents. (And in reality, I would just pass along your 10% tax to the renters, as would every other landlord).
So really, you would take the tax from me, pass it to my low income renters, who pay it right back to me. Of course, the government bureaucrats have to get paid, resulting in net social loss.
The other problem with “I happen to think there is a declining marginal utility to wealth” is that there is, naturally, a correlation between a willingness to take risk and wealth. If I only have $10,000 to my name I’m not going to invest in your search engine company, Mr. Google circa 1998. But if I have $10,000,000, I might peel off a $1,000,000 for you to start up. In other words, wealth provides a measure of security that enables risk taking and capital investments that otherwise wouldn’t take place if wealth was equalized…you would create a tragedy of the commons where nobody individually would take the risk of investing in Google (assume for this example that Google is a good thing).
The traditional means to resolving tragedies of the commons is to have the government tax an invest in them. That is incredibly stupid. See Solyndra.
Please keep in mind that 1) in this situation, raising taxes on the wealthy, at least in the way that Bill Clinton did it, will not depress the economy and in fact did not depress the economy because “if you build it, he will come”: where there is demand, there is supply.
2) current evidence of this is the fact that many corporations right now are hoarding capital instead of hiring because the demand is not there. If you don’t believe me, take advantage of our free flow of information and research some corporate balance sheets.
3) in the situation of the generous, wealthy apartment owner who helps 10 families, I doubt this generous individual would look at a .3% tax (which probably had to be pointed out by his tax lawyers, being so small) and say, you know what, I’m doing 9 units this year. Because the strange thing about being someone like Warren Buffet is that you will never see most of your money. Cue Michael’s correct assumption about marginal utility to wealth. Recent studies show individuals making $75,000/yr have reached the peak of potential happiness related to their wealth.
Your statement about $75,000 is absurd. Either these “studies” are of the usual semi-made-up kind, or you earn $20,000 and have absolutely no idea what $75,000 buys you as far as “lifestyle.”
Yes, you can live fine on $75K (and a whole lot less), but there is a whole lot of fairly basic enjoyments in a good life that you simply can’t afford, and a lot of quite possible events which will really strain you. The number is a whole lot higher than $75K, unless you want to live with fairly little, like a middle class European.
The number is a whole lot higher than $75K, unless you want to live with fairly little, like a middle class European.
The median household income in the USA is about $50K.
Michael: the issue is not what the median household income is, the issue is whether $75k is enough to “reached the peak of potential happiness related to [] wealth.” $50k for an entire household, while common in the US, is not likely to generate a great deal of potential happiness related to wealth. Don’t you think?
I would prefer instead an excess value tax on housing. This would be easier to administer I suspect and lavish housing is not investment in a productive resource as are stock investments. People with two or three or four 20-40 million dollar homes or more would be the right targets I would think. Quite unnecessary assets. This would of course hit people living in large cities most and if this raised the costs of living there, so be it. It could start with houses valued at 5 million or more and be progressive.
“lavish housing is not investment in a productive resource as are stock investments.”
This is (somewhat) reasonable so long as you only tax the equity in the property. The property owner should have the right to finance the equity and put it towards some other productive use. Generally speaking, mortgage rates are so low that properties should be fully leveraged with the equity invested elsewhere (arbitrage).
At the moment we have a highly distorted home lending market (banks acting irrationally due to fear), so in fairness to property owners the tax should be adjusted to reflect the availability of equity financing, at least until the lending markets return to sanity.
But I would also point out, this all according to Froomkin’s thought experiment that incentives are not affected.
If you tax property, you reduce the return on investment in property, it lowers its value, and lowers its ability to serve as collateral to finance other capital investments, so you still end up shrinking the capital markets.
No free lunches.
I’m not sure that costs rise and investments flee in response to taxes the way that some economists believe. After all, where else is there to go? Most developed countries have higher taxes than America, anyway. This situation relies too much on the response of individuals, which can range from no response to capital flight. I believe the value tax on housing would be a good start for this reason. The worst that can happen is prices rise and so do tax revenues.
This isn’t a tax, it is a service fee. Most people who have assets have either government protected and registered real estate or other tangible property, government protected and registered intellectual property, whole or partial ownership of government chartered collectives, government enforced instruments of debt or government issued cash. Most wealthy people, even more than poorer people, rely on the government to protect their wealth by means of armies, police forces, fire departments, court systems, legal systems and so on. The more wealth they have, the more of these government services they are using. They should be charged accordingly.
(Yes, I know the libertarians argue that individuals should be able to opt out, but I seriously doubt that those who do so will not go whining to the government when someone robs them, defrauds them or destroys their property. They just can’t help it.)
P.S. Jewish Marksman should explain why decreasing the size of our massively inefficient financial markets would be a bad thing. The government has overly coddled and subsidized this sector. It’s time for a bit of laissez faire here.
Kaleberg-you suffer from the mattress fallacy as badly as Froomkin. You insist that nobody else but the capital owner benefits from his wealth, as if he has stuffed it into a mattress, or as if captial ownership is in and of itself a form of consumption which provides pleasure. You apparently love government. Aside from taxes, how do you think government projects get financed? Evil capitalists pull the wealth from under their mattresses and loan it to municipalities to build roads and bridges. Why do people become unemployed? Among other reasons, the cost of capital, which is subject to the laws of supply and demand like anything else.
“P.S. Jewish Marksman should explain why decreasing the size of our massively inefficient financial markets would be a bad thing.”
I don’t understand the question, because your use of the term “size” is ambiguous. Perhaps it would help if you gave me an inkling of your economics education so I can tailor my answer to your level of understanding.
“The government has overly coddled and subsidized this sector. It’s time for a bit of laissez faire here.”
That I agree with 100%. The government should regulate the markets, not guarantee them. Just make sure everyone plays “fair”, some will win, some will lose, and everyone will be wealthier.
Kaleberg, I encourage you to ignore the Jewish Marksman who clearly intends on destroying intelligent discourse at all cost. Let’s just agree that all of us suffer from chronic mattress fallacy and leave it at that.
Matt J
Economics is a science. History is filled with your kind who judge economic policy through intuition and gut feel. Your kind spread misery and poverty.
But you are correct, there is no discourse here.
“The United States needs a small, graduated, national wealth tax. Properly implemented, a gentle national wealth tax raises some money at minimal distortion to the economy. Experience abroad suggests that so long as the tax is not too large, fears of capital flight are much exaggerated. ”
Senior:
You are completely correct. We tried this years ago and it has been a smashing success. My country has the highest per capita number of doctors and universal social services for everyone. Incidentally, it has also resulted in the emigration of numerous mobsters, criminals and capitalist pig business owners. My Brother and I would be more than happy to implement a similar system in your country.
– Uncle Fidel
“Separately, I happen to think there is a declining marginal utility to wealth, and that — to the limited extent interpersonal utility comparisons are meaningful — taxing those with more of it hurts them less than taxing those with less of it.”
Kind thanks and congratulations on your thoughtful post. I’m delighted to see someone else attempting to examine our tax revenue challenges from a fresh perspective. I have similarly been puzzling over the challenge and have likewise come to the opinion that a) fundamental improvement of our policies will require structural change and b) returning to the long term historic norm and incorporating tax assessments based upon wealth is a logical alternative. But the perspective and rationale I have developed make me believe the gentle incremental approach you’ve advocated fails to address the most compelling arguments in favor of such an assessment.
A fundamental precept of capitalist theory is that productive deployment of capital is the driver of economic growth, and building upon that precept the consensus of economic teaching today assumes that tax policies must affirmatively encourage savings and investment. That is the justification economists (and politicians) use to justify offering preferential tax rates to investment income. By nature, most economists are pragmatists. So, with few exceptions, operating in the belief that a “rising tide lifts all boats”, they are ready and willing to accept inequality (even deep and increasing wealth concentration) as the Darwinian cost of a “greater good”. They are largely unmoved by fairness arguments.
I understand their logic. So if preferential tax policies aimed at subsidizing capital actually were stimulating productive investment, economic growth and job creation, then I could perhaps also be pragmatic about some level of resulting inequity.
But I believe our tax and monetary policies are stimulating speculative trading and valuation bubbles – thereby destabilizing our economy. I do not challenge the core theory that productive investment is a driver of economic growth and prosperity. But I dispute the idea that speculation on valuation inflation constitutes productive deployment of capital. Our tax and monetary policies have made tax avoidance and valuation manipulation far more profitable than productive enterprise. It is on that basis that I believe we need to fundamentally reexamine the structure and incentives embedded in our treatment of investment income.
Look carefully at how our tax policies treat alternative capital allocations. We a) penalize productive investments with our highest tax rates, (equaling and arguably exceeding earned income tax rates via the “double taxation of dividends and capital gains distributions), b) offer speculative trading activities substantially reduced tax rates, and c) subsidize illiquid and wholly unproductive capital allocations with perpetual tax deferrals. Perpetual deferral of unrealized gains is a strong and compelling obstacle to the rapid and fluid reallocation of capital to more productive uses – thus opposing a key tenet of capitalist theory.
Too much of what we call investing, and incent and subsidize with preferential tax treatment, is simply gambling. I’m largely libertarian in my views, so I don’t want to preclude people from gambling. But I certainly think we ought to stop subsidizing it with preferential tax treatment.
Nailing $2 million dollars of potentially productive capital on my wall in the form of a Picasso may well be a choice I choose to make, but I can’t justify it as an efficient deployment of capital generating much societal benefit – and I therefore don’t believe that tax policies should be providing me a financial incentive to do so.
As I see it, the most compelling argument in favor of assessing a portion of the cost of government upon accumulated net assets, is that it would withdraw the subsidies that now obstruct the free and fluid flow of capital to higher and better uses, incent holders of capital to more pro-actively seek out more productive investments, and thereby stimulate economic growth and job creation.
With that as rationale, my proposal is far more aggressive than yours. In brief, I propose that corporate income taxes, personal investment income taxes, estate and inheritance taxes and gift taxes should all be repealed and replaced with an annual 2% tax on net assets (subject to a reasonable minimum threshold). Simultaneously, we should flatten and reduce taxes on earned income to a maximum of 25%, inclusive of all employment taxes (employee and employer). At these levels, the intention is that the effective tax rate upon labor and income potential be approximately equal. Assuming a long term target return on capital of 8%, a 2% annual tax is the equivalent of a 25% income tax rate.
You have quite accurately cited one of the key benefits which the wealthy currently receive that should stand as a compelling argument favoring their increased tax contribution; the wealthy benefit from the rule of law and the protections it provides in proportion to their accumulated wealth and assets. I perceive another equally compelling argument. Today holders of financial wealth bear a large hidden “tax” against their wealth in the form of inflation. But inflation does not flow through the public coffers to support the operations of government. A two percent annual asset assessment, imposed in conjunction with spending reforms and monetary discipline could both balance the budget and stabilize the currency.
If you, or any of your readers are interested in seeing more, I urge you to take a look at the online essay
Could Higher Taxes Stimulate More Productive Investments and Growth? posted at http://www.2pctsolution.com/?p=578
Here’s the most comprehensive proposal I’ve seen for tax reform: http://fairsharetaxes.org
THE FAIR SHARE TAX REFORM 3% – 20% – 2%
1. Federal Income Tax:
All household income & compensation is taxed at a 20% rate;
except the following which are taxed at a 3% rate:
– Income under a realistic poverty line (eg $30,000 for a family of three)
– Expenses & compensation for medical expenses exceeding 6% of income
– Income placed into or spent from tax-free education-retirement accounts
– No other adjustments, deductions, or exemptions!
Effective rates (family of three): 3% on $20,000; 10% on $65,000; 15% on $140,000; 20% on $20,000,000+. Totals 63% of federal revenue.
2. Federal Net-Worth Tax:
All household net worth (accumulated wealth), except the first ~$800,000 (for a typical family; essentially median home price and tax-free account value) is taxed at a 2% rate.
This tax is paid once a year and replaces current property, capital gains, and estate taxes. Net-worth is the best measure of how much a household has profited from the economic infrastructure governments (all taxpayers) have paid for.
Effective rates (% of net worth – typical family): 0.4% on $1million; 1.0% on $1.6mill.; 2.0% on $40mill.+Totals 25% of federal revenue.
3.Federal War Tax: Everyone contributes to any war effort: A 6% surcharge increases a federal tax bill of $10,000 to $10,600 during any year the nation is at war and two years thereafter.
4. Eliminate all these taxes:
– Social Security (“Payroll”) Taxes – Social Security & Medicare funded from general revenue instead
– Estate Taxes & Capital Gain Taxes – Replaced by more efficient and fair Net-worth Tax
– State Income Taxes in their current form – Replaced by more efficient and fair surcharge – See #5 below
– Property (real estate) taxes – Replaced by Net-worth Tax and more efficient and fair surcharge – See #5
– Sales taxes, tolls, lotteries, etc. – Replaced by more efficient and fair surcharge – See #5
– Corporate Taxes – Instead profits are largely distributed to corporate owners and taxed as income.
5.All State and Municipal Governments eliminate all their current taxes and instead set and collect a surcharge on a household’s combined Federal Income and Net-worth Tax. The average surcharge for state and local government would at first total about 50% of a household’s federal tax bill, but decline over the years.
6. Excise Taxes only on products that have a cost to society that is not reflected in their price … e.g. cigarettes, gasoline. Partly prebated for the very poor. Totals only about 8% of federal revenue.
This plan cuts thousands off of Working-poor and Middle-class Total Taxes each year, has everyone pay taxes proportion to the extent they’ve profited from the American system and the services governments provide, ends the economic distortions that lead to repeated recessions, and (with 2 for 1 sensible spending cuts) balances the federal budget in 10 years and retires the national debt in 30 years.