(Yes, I know I said I was going to back off on blogging but some things just demand commentary.)
In August I wrote about a simple way to meet Warren Buffett's request for an bigger tax bill. What I proposed, elimination of deductions, exclusions, exemptions, and credits combined with lower marginal rates, would have tripled Buffett's tax bill but still would have caused him no pain. In today's Wall Street Journal, Ronald McKinnon makes The Conservative Case for a Wealth Tax, a change that would get Mr. Buffett's undivided attention and send his accountants and financial planners scrambling in a search for pain remedies.
What McKinnon proposes is a 3% tax on wealth above $3M. Now here is something we can all get on board with, at least all of us with less than $3M. In the case of Warren Buffett, it would have meant a tax of $1.5B last year on his $50B of total assets instead of the $6.9M he claimed, in his Charlie Rose interview, to have paid. I know Mr Buffett wants to pay more, but I bet he wasn't thinking of anything like 200 times as much. Still, I think McKinnon has a good idea if combined with much lower marginal income tax rates and elimination of other wealth (property) taxes. Taking three percent of a rich person's wealth makes a lot more sense to me than taking a third of a working person's income.
Of course what I expect is that somebody in Washington will think that this is not an either-or situation and that doing both would be a really good idea.
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A couple of regular readers of Permanentfixes challenged me on this posting, expressing dismay that I would come out in favor of a new wealth tax.
ReplyDeleteWell it was a little tongue in cheek poking fun at Warren Buffett's willingness to pay a little more income tax while most people have no understanding how inconsequential that would be to him. And a little frustration with President Obama's rants about "millionaires and billionaires and corporate jet owners" which, in his mind, includes anybody with an income over $200,000 a year whether they have any assets or not. It's that problem I have posted on a few times of confusing income and wealth, two entirely different things.
I do believe it is unjust for hard working professionals with incomes of $200k to $300k to have to cough up a third of their incomes when they really have no net assets at all. And of course there is that estate tax which is a wealth tax and which would have to die in case of the kind of wealth tax McKinnon talks about. And I figure we really don't own our retirement accounts because we have never received and paid taxes on that money so those are just promises and would not be subject to wealth tax. And we should resent property taxes on our homes which mean we never really own them. Of course any wealth tax should exclude personal property and pretty much anything, the value of which is just somebody's opinion or which can be easily lost or stolen. Jewelry and paintings for example.
So, nothing is simple, and property tax can be more invasive, but income is property and I really don't see any difference in principle between confiscation of income and confiscation of property. We have gotten used to the income tax and lots of folks have figured out ways to get around it, Buffet just not paying himself any income for example, but I it is very intrusive and offensive. If it were replaced with a wealth tax, a whole new industry would grow up around figuring out ways to avoid it and helping wealthier people do so. Probably a lot of money would be changing hands. (Note I didn't say "earned.")
But, don't worry about a wealth tax because most members of congress are pretty well off and I'm thinking there is zero chance of such a thing being considered.
And, as I have also argued previously, a much better system than either income, wealth, or estate taxes would be a flat consumption tax which would let us keep all our personal data private and would collect tax from even illegally gotten gains of drug dealers, etc., when they spend the money.
Several good letters in today's WSJ (http://online.wsj.com/article/SB10001424052970204257504577153053519314534.html?mod=ITP_opinion_1) both and for and against and listing considerations for McKinnon's wealth tax proposal.
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