Last edited by ttwtt78640; 06-11-12 at 08:16 AM.
“The reasonable man adapts himself to the world: the unreasonable one persists to adapt the world to himself.
Therefore all progress depends on the unreasonable man.” ― George Bernard Shaw, Man and Superman
The precedent that would be established would be damaging. The precedent would signal that published U.S. tax rates are not credible. In other words, if one paid one's taxes according to the law, that would no longer mean that one would face no additional tax liability for that tax year. Instead, one could be subjected to additional tax liability on a retroactive basis. A wealth or accumulated assets tax is a retroactive tax on past income (the after-tax share).
Suddenly, there would be much greater uncertainty about the U.S. tax code. The message would be that U.S. taxes are higher than what the law suggests. Worse, both the true tax rate and the timing of the tax would be unknown. That degree of uncertainty would, in the long-run, have an adverse impact on savings and investment. The nation's better short-term position (reduced debt) would amount to a Pyrrhic victory.
The long-term cost of foregone growth would be higher. A hollowing of the nation's capital base could reduce the innovation and productivity that are key to long-term robust growth. Even after 30 years, the nation's GDP could be nearly 15% smaller than it would otherwise be were a 0.5% shaved off the growth rate. A smaller economy would mean less tax revenue than would otherwise be the case.
That those who advocated such a tax would assert that it was "one-time" would matter little. The precedent would exist that in the face of future fiscal challenges, the nation could resort to another "one-time" tax.
In the end, I don't believe a wealth tax should be a substitute for the structural reforms (tax changes, discretionary spending reforms, and mandatory spending reforms) that will be needed to put the nation on a fiscally sustainable course for the long-term.
Last edited by donsutherland1; 06-11-12 at 08:52 AM.