incomebywealth
New member
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- Feb 23, 2020
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Hi everyone, I want to acknowledge that I'm new here. I joined because I can't seem to find any information or debate on this idea anywhere (I'd be very appreciative if you know otherwise) and I'm super curious about it. It seems to overcome some of the downsides of more emotionally-driven approaches yet still to preserve their well-meaning motivations:
The idea is to base the annual tax rate on wealth (or, to be more precise, wealth plus current income), but to tax only income. This approach seems to incorporate the yearning for fairness behind wealth taxes while avoiding their potentially damaging effects on the economy. The best way to explain its appeal is through a few considerations:
-Currently, if you have zero net worth but you have a sudden windfall thanks to a great idea and make $1 million in one year, you will currently suffer a similar tax rate as someone who has a net worth of $10 million and also makes $1 million in the same year. For the sake of example, let's say both end up with $650k after taxes. This situation seems to me utterly contradictory to the principle of social mobility that we hold dear. It basically means that the rich stay rich while the poor have to make a *massive* amount to enter a higher social class. However, if we tax income based on wealth, then the less wealthy earner can walk away with (say) $900k while the wealthier one ends up with (say) $550k. This outcome seems fair: the poorer person is now close to a millionaire, while the decamillionaire has around $10.5m instead of just $10 (minus annual expenses of course, but those will be low for someone who previously had a net worth of zero).
-The "rich" are no longer considered middle class or working class people with windfalls. That is, we make cultural inroads against the unfortunate current conflation between income and wealth by making their distinction explicit.
-A billionaire will end up with very high income tax, but their wealth will not be touched at all, so they stay wealthy and do not see wealth decline.
-We end up collecting more overall, which can benefit the middle and lower classes generally, but social mobility *increases* rather than decreases.
-Getting more rich is easier when your net worth is low but harder when it's high.
Has this idea been discussed anywhere? I'm interested in pros and cons, and why it is not more widespread.
The idea is to base the annual tax rate on wealth (or, to be more precise, wealth plus current income), but to tax only income. This approach seems to incorporate the yearning for fairness behind wealth taxes while avoiding their potentially damaging effects on the economy. The best way to explain its appeal is through a few considerations:
-Currently, if you have zero net worth but you have a sudden windfall thanks to a great idea and make $1 million in one year, you will currently suffer a similar tax rate as someone who has a net worth of $10 million and also makes $1 million in the same year. For the sake of example, let's say both end up with $650k after taxes. This situation seems to me utterly contradictory to the principle of social mobility that we hold dear. It basically means that the rich stay rich while the poor have to make a *massive* amount to enter a higher social class. However, if we tax income based on wealth, then the less wealthy earner can walk away with (say) $900k while the wealthier one ends up with (say) $550k. This outcome seems fair: the poorer person is now close to a millionaire, while the decamillionaire has around $10.5m instead of just $10 (minus annual expenses of course, but those will be low for someone who previously had a net worth of zero).
-The "rich" are no longer considered middle class or working class people with windfalls. That is, we make cultural inroads against the unfortunate current conflation between income and wealth by making their distinction explicit.
-A billionaire will end up with very high income tax, but their wealth will not be touched at all, so they stay wealthy and do not see wealth decline.
-We end up collecting more overall, which can benefit the middle and lower classes generally, but social mobility *increases* rather than decreases.
-Getting more rich is easier when your net worth is low but harder when it's high.
Has this idea been discussed anywhere? I'm interested in pros and cons, and why it is not more widespread.