Why (and how) to tax the super-rich

[dtotire]

Why (and how) to tax the super-rich


Extreme wealth concentration threatens democracy, and the U.S. is reaching that point.




By Bruce Ackerman and Anne Alstott

September 20, 2011



President Obama is right to insist on the "Buffett rule": Millionaires should not be paying income tax at a rate lower than their secretaries'. But correcting this inequity is only a small step toward fairness.

The more serious inequality problem facing the United States involves overall wealth, not just income. While the top 1% of Americans earned 21% of the nation's income, they owned a staggering 35% of the wealth in 2006-07, the most recent year for which statistics are available. We should be taxing that wealth directly, and not merely focusing on million-dollar incomes.

We propose a 2% annual wealth tax on households owning more than $7.2 million in net assets. Such a tax would target the 0.5% of Americans at the top of the pyramid, and would yield at least $70 billion a year. This calculation is based on Federal Reserve data that we have updated to take into account the recession's impact on housing and stock prices to 2009. Because we have used very conservative assumptions, the revenue yield could well be higher.

Obama's operational proposal for a "Buffett tax" is vague, so it's hard to predict how much it would raise. But our initiative would generate at least half the $1.5 trillion in deficit reduction that Congress' super-committee is aiming to achieve over the next decade. And the burden would fall on the Americans who have suffered least from the economic downturn.



http://www.latimes.com/news/opinion/commentary/la-oe-ackerman-wealth-tax-20110920,0,7752814.story

[ProgressiveProfessor]

1. Academic puff piece and impractical

The constitutional bar is higher than they portray. Also documenting ownership is far from trivial. Other nations have no reason to play along, unlike foreign banks that wanted to do business in the US. Income is fair game and achievable. Wealth not so much.

[w0nderer]

2. k&r n/t

[Ruby the Liberal]

3. The income tax proposal is bullshit.

Less than 150,000 people in the US make an 'income' of over $1mm a year per how this plan is laid out.

Any investment sold after 1 year and 1 day is considered Long Term Capital Gains, and is only taxed to a max of 15% - so those don't count (talking to you John Paulson, Paris Hilton, etc...)

Rather than single out 150,000 people while letting the real wealth horders slide, institute a transaction tax on trades. Keep the 15% cap gains tax if it must stay, but tax the buying/selling activities. This will raise the money where is is needed (and not currently tapped) - hedge funds and high frequency trading (HFT) outlets.

Problem solved.

[ladjf]

4. The kernel of your idea is on the right track. Don't allow your

detracters to beat you down. Keep working on it and continue to elicit constructive ideas from others.

While to many, it seems impossible that any means of moving the concentration of wealth away from the super rich, but, the inevibility of the economic collapse if the solution isn't found is a powerful incentive to get something done about this and the sooner the better.

My opinion is that the ecomony is in a mess because so much wealth has accumulated in the hands of the top few percent group, there isn't enough wealth left in circulation to be able to support any viable economy.

[Overseas]

5. K&R for discussions of more ways to get the top 1% to pay their fair share.

[lumberjack_jeff]

6. Directly taxing wealth is problematic for a number of legal and practical reasons.

Income is doable.

Instead of taxing the wealth, tax the interest and dividends that the wealth throws off at 40% or so.

[dkf]

7. This is like doing an estate tax return every year.

Well if we are into punishing the rich with sheer inconvenience this would be good.

[David Sky]

8. Taxing based upon net worth, (wealth) is a bit impractical, because it's

difficult to assess the wealth of even the few (150,000) of the most wealthy in the US, (even more difficult in many other nations, with less computerized revenue collection systems and more banking privacy protections for the wealthy).

That said, there's also the issue of "fairness" for those unfortunate super-rich people who made foolish decisions with their wealth that year and actually LOST net worth, (real negative incomes from their investments, yeah, I know, "poor rich folks!"...we all cry a tear!)

Until the Second World War, our nation didn't really have a massive national debt problem. After WW II, Americans had no problem continuing upon with a taxation system that required much more from the few high earners, and relatively little percentages in all taxation from the middle class. And, I'm talking ALL taxation upon middle class workers. There were fewer states with sales taxes, and sales taxes in those states that had them were at 2-3% on a limited number of goods and even fewr services, (car repairs, monopolistic phone service, gasoline, etc.)

This system gradually shifted between 1945 to 2003 or so, with the tax percentages on the big earners going down, and the taxes assessed upon the working middle class creeping or even LEAPING up. Real Estate Taxes, state income taxes, state sales taxes, all up, all more pervasive, all with fewer exempted, all forms of taxes increased upon the middle-class while federal income taxes upon the high-earners went down, and the pain felt by the high-earners with the other state and local taxes was minimal, compared to the drop in their federal income that was taken in taxes. A drop of 20% of the top bracker upon a million dollar earned income was about $100,000 LESS and the relatively "incidental" sales and real estate taxes of those same earners had increased by maybe $30,000...net benefit to high-earners.

Taxing those with wealth is a great idea, but many of them gained that wealth by inheritance, by luck, by pluck, by cheating others, by just plain being in the right place at the right time, selling their house or stock at the top of the market, collecting antiques, whatever.

Don't get me wrong, I think the rich need to pay more for their last 10 years of prosperity, while the working and others lost ground.

What I would propose is some sort of a 10-year review of income and current wealth...(for those in the USA, anyway where every income has been reported, )... where we actually look at what those with wealth have earned in the last 10 years, since Bush added 6-7 to the national debt and brought the world to near calamitous economic ruin. Let's smoke out the speculators, the hedge fund traders, the bankers, the lawyers, the insurance giants, etc. Let's make them pay! I'm not asking them to give up their lifestyle, they can keep 50% of what they made in those 10 years. Let's just go after the few thousand that put us into this mess and make sure they get to feel some ALMOST pain! This might include T.Boone Pickens, or anyone else who speculated on oil, Warren Buffet, who runs a predatory anti-competitive railroad empire, and every one else who scoffed themselves up a few tens of millions without the benefit of giving back to our nation anything of real value. This would exempt movie stars, sports athletes, etc, who actually have a skill we are willing to pay for. But the scum and the opportunists, (those most connected to the Republican and Tea Party), will have to pay for the mess they got us in!

[Major Nikon]

9. I'd be happy with a fair tax on income

By fair, I mean progressive, and not the GOPhers' definition of fair. The more you make, the higher your tax rate is. This would apply to all taxes in ALL forms whether federal or local.

Furthermore, I'm for fair distribution of government resources.