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New Idea? Tax Income Based on Wealth

Lutherf said:
Taxes really are too complex. The best option really would be to eliminate all taxes and all forms of income. If we simply make all food, housing and medical care a human right to be provided by government then we wouldn't need to worry about any of this stuff. Doing things that way would have the added advantage of insuring that nobody took advantage of anyone else. The Soviets had a system that worked that way in a lot of respects and their people loved it!
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Hey Lutherf you're tax guy right? Let me ask you what you think of removing EVERY tax, fee, what have you, at ALL levels of government and replaced it with one transaction tax rated initially at 1.5% collected by the local government and split equally amongst all levels of government. The transaction tax would tax any money being moved from one entity or individual to another. There would be no exceptions to the tax, everyone would have to pay if they have a transaction. Both sides pay the tax. No other fees or taxes could be imposed and the tax rate cannot be raised except in case of declared war with a declared definite ending date for reversion of the increased rate.
 
In my opinion, any transaction and sale within the United States and thru the United States should be considered taxable income or a taxable sale as is relevant.

Apple claiming it's corporate office is on a small island that literally NO ONE is even on is truly absurd.
 
PirateMk1 said:
Hey Lutherf you're tax guy right? Let me ask you what you think of removing EVERY tax, fee, what have you, at ALL levels of government and replaced it with one transaction tax rated initially at 1.5% collected by the local government and split equally amongst all levels of government. The transaction tax would tax any money being moved from one entity or individual to another. There would be no exceptions to the tax, everyone would have to pay if they have a transaction. Both sides pay the tax. No other fees or taxes could be imposed and the tax rate cannot be raised except in case of declared war with a declared definite ending date for reversion of the increased rate.
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It would never fly. There would be carve outs starting at day one just like the "Fair Tax".

Bottom line, everyone has different needs and different circumstances. What works for one totally sucks for another and that's just the way life is. From a practical standpoint, with a plan like you suggest it simply wouldn't be enforceable. Even if we got rid of cash and put the onus for collecting this transaction tax on the banks there would still be barter issues. Let's say, for example, that I owned an office building worth a million bucks but was planning to retire and you own 40 acres with a house I like. We'd just swap and nobody would collect anything. I'm quite sure that half my business would be done in trade and thus go untaxed. The more that happened the more the government would want to raise rates and the more stuff would get handled on the QT.
 
OrphanSlug said:
All of these threads completely miss the point.

We can argue all day long over how income should be taxed by bracket, or above a cap, or new progressive rates by bracket, or something along the lines of what the OP is trying to pimp. But until we deal with all the tax code gifts handed out as a means to reduce one's liability it is all a waste of time.

We have a massive tax code, just changing the basis here and there does very little when looking at tax rate vs. effective tax liability.
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I was talking high level.
 
Lutherf said:
It would never fly. There would be carve outs starting at day one just like the "Fair Tax".

Bottom line, everyone has different needs and different circumstances. What works for one totally sucks for another and that's just the way life is. From a practical standpoint, with a plan like you suggest it simply wouldn't be enforceable. Even if we got rid of cash and put the onus for collecting this transaction tax on the banks there would still be barter issues. Let's say, for example, that I owned an office building worth a million bucks but was planning to retire and you own 40 acres with a house I like. We'd just swap and nobody would collect anything. I'm quite sure that half my business would be done in trade and thus go untaxed. The more that happened the more the government would want to raise rates and the more stuff would get handled on the QT.
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First the question I asked proposed the tax rate be locked, which is an attempt to limit the ability of congress asshats to raise rates. So presuming that gambit succeeds how would you see that changing things? At 1.5% and NO other taxes, why would people be inclined to avoid it? Would it not be more expensive to barter not mention very inconvenient. How would one enforce a barter trade in court if it were to go south?

To your property example, lets say that the building in your example is worth 1 million like you said but the forty acres is worth only 250k.

At what tax rate would people be disinclined to avoid the proposed transaction tax that would still fund the government adequately.
 
PirateMk1 said:
First the question I asked proposed the tax rate be locked, which is an attempt to limit the ability of congress asshats to raise rates. So presuming that gambit succeeds how would you see that changing things? At 1.5% and NO other taxes, why would people be inclined to avoid it? Would it not be more expensive to barter not mention very inconvenient. How would one enforce a barter trade in court if it were to go south?

To your property example, lets say that the building in your example is worth 1 million like you said but the forty acres is worth only 250k.

At what tax rate would people be disinclined to avoid the proposed transaction tax that would still fund the government adequately.
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People drive a quarter mile to go to a gas station that sells for 5 cents less a gallon than the place by them. They'll avoid ANY tax. It would also be impossible to enforce as long as cash is allowed as a means of exchange which means eliminating cash and LOTS of people would **** themselves over that. Furthermore, locking it in at 1.5% is a pipe dream. As soon as government decides they need more money the tax will go up.

If you REALLY want to control taxes then primary taxation needs to happen at the state level. If California wants to spend a trillion dollars on social welfare programs then they need to tax their people appropriately...if the people allow it. Taxation at the federal level should ONLY servee to coverr those few specifically enumerated powers we granted the federal government.
 
incomebywealth said:
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.
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Not a "new Idea" just a bad one.
 
Drawdown said:
Wealth taxes destroy wealth moreso than generate revenue.
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that's why wealth vandals love it. They are hateful that others have more wealth and want to destroy what others have. I know at least a dozen people who have near 100 Million in wealth yet their income is 2-4 million a year. They pay 400-800k in taxes. Warren would want them to pay more in taxes than the income they get each year so as to eat away at their wealth. Its disgusting
 
Lutherf said:
People drive a quarter mile to go to a gas station that sells for 5 cents less a gallon than the place by them. They'll avoid ANY tax. It would also be impossible to enforce as long as cash is allowed as a means of exchange which means eliminating cash and LOTS of people would **** themselves over that. Furthermore, locking it in at 1.5% is a pipe dream. As soon as government decides they need more money the tax will go up.

If you REALLY want to control taxes then primary taxation needs to happen at the state level. If California wants to spend a trillion dollars on social welfare programs then they need to tax their people appropriately...if the people allow it. Taxation at the federal level should ONLY servee to coverr those few specifically enumerated powers we granted the federal government.
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I think we both know that's not going to happen anytime soon like my idea.

I like you critiquing my idea. It helps to refine it. Thanks much.

Back to your supposition people will avoid ANY tax. For some people that is absolutely true, no matter the tax or amount, however there is a point that most people will pay the tax because it is simpler and cheaper. Handling cash is not cheap especially dealing with large volumes of it. Barter and direct exchange is cumbersome and somewhat inexact. Then there are risk factors involved in both barter and cash. So the question is 1.5% too much or too little? I would like to work on the supposition the proposal will inevitably pass for now and just look at the mechanics and how to adjust or how the proposal would fail in practice. The other presumption is the rate is locked by amendment. A final presumption would be that the tax would be collected locally to be distributed to the state who then distributes to the feds. The idea is not for perfection but for capturing as efficiently as possible as practicable and minimize the efforts required comply as well as a minimal tax bite that is for the most part applied fairly equally to everyone, and that motivates government to promote policies that promote a robust economy.
 
incomebywealth said:
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.
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I got an idea, how about the 44% a more majority who pay NADA in A Fed income tax pay at least one dollar?

Just 1$!!!!!
 
captaintrips said:
I'm not wealthy & not a big fan of some wealthy people - the arrogance that many of them harbor towards the less wealthy, irritates me, but I'm no worse off than they, they'll die and be nothing as will I ; )

But taxes based on wealth, really are nothing more than an envy tax. Which you might think I'd be in favor of given my low opinion of certain rich people ....

It's unnecessary & generally a bad idea I think. As has been pointed out already, there are many ways to hide money, rich people do it.

Wealthy people already pay the most in taxes as things are today anyways. By what justification will we tell them they have to pay even MORE ?

We have enough taxes and fees and taxes and fees... even for poor people, tax tax tax, there's a fee for that, there's a fee for this, you have to pay a fee to do that and you have to pay a fee to go there on & on and on.

Let's not give bureaucrats any more ideas about neat ways to separate us from our money.

No thanks.
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Thanks to everyone for your feedback on my original post.

This quote from captaintrips seems to capture to a large extent the theme of a lot of the reaction my post generated, so I want to use it as a focus in my own reaction to your feedback.

I should have anticipated the strong defensive tendency against the potential for old partisan approaches dressed in new clothing. A lot of people seemed to interpret my idea as yet another grab on "the rich."

However, please take a second look. What I'm suggesting is nothing of the sort and I think you might find it interesting if you relax the assumption that something with the word "wealth" is inevitably an attack on the rich.

In fact, one of the main motivations of this idea is to restore some fairness to our treatment of "the rich," at least insofar as we equate "rich" with income.

That is, what the idea actually highlights is how disingenuous our use of the word "rich" is when we talk about taxes. When are we going to acknowledge the dramatic distinction between someone who earns a lot and someone who owns a lot? These are utterly conflated with the use of the word "rich" even though they are entirely different situations.

In my proposal, the person who earns a lot, whom everyone describes as "the rich" when discussing taxes, will get relief. That is the opposite of envy. That is trying to help people with high income to rise higher.

When we tax income based on wealth, someone with modest wealth will receive modest taxes even with high income. That means the high earner is going to be taxed less! This isn't just about people with windfalls, it's about giving people just starting out in building their wealth a leg up.

So I think you are misunderstanding. Or, in some cases, people don't seem comfortable with this distinction, which is itself interesting. People seem to want to lump current billionaires with high earners just starting to build up their wealth. Maybe prying these two types of "rich" apart exposes some uncomfortable realities that both parties are afraid to discuss? The vast majority of high earners are not actually "wealthy" in part because their high incomes are being taxed like crazy, keeping the truly wealthy nicely insulated from even these so-called "rich."

If you're not already wealthy, don't you want to see your taxes go down when you start making a lot of money thanks to your hard work and success?
 
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