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It is time we bring back the wealth tax.
And Gary Becker is a huge name in economics. But forget that, consider his arguments.
Current proposals for a wealth tax go beyond taxes on particular assets, like land or housing, and envisage a much broader tax that includes financial wealth, like stocks and bonds. I only say “broader” since a viable wealth tax would still exclude wealth in the form of human capital, the most important form of capital in modern economies, and the source of wage and salary incomes. Since the richest one percent of households on average get about half their incomes from wages and salaries (the remaining 99% get almost all their income from human capital), much of the true wealth of the rich would escape a wealth tax.
Another major problem with even a small tax rate on wealth is that it implies a very high tax rate on savings. Consider a constant 2 percent tax on wealth, and suppose that a household saves $10,000 out of its income to raise its future wealth. A one year 5% return on these savings would increase its before tax wealth next period by $10,500. Since a 2 % wealth tax on $10,500 would leave an after-tax value of just $10, 290, such a wealth tax would reduce the after-tax return form 5% to only 3%, a 40% reduction.
So what seems like a small tax on wealth of only 2% is the equivalent of an income tax on savings of 40%. Presumably, this would discourage savings and increase consumption, whereas sustained higher long-term growth in GDP requires greater, not lesser, savings. As I mentioned earlier, the discouragement to savings of an income (or wealth) tax is a major reason why consumption taxes are better.
Wealth taxes have several other serious problems in addition to their negative effects on savings. It is almost impossible to value accurately many sources of tangible wealth, such as the value of privately owned businesses, so that an actual wealth tax would be rather narrow. Moreover, forms of wealth that can be most easily valued because they have good asset markets, such as stocks and bonds, can be moved across countries, and hidden through complex arrangements of assets.
Therefore, I conclude that a general tax on wealth is undesirable because it is both inefficient and ineffective. A feasible wealth tax is dominated by consumption taxes, including even progressive consumption taxes, and by inclusive income taxes.
Originally posted by fulllotusqigong
O.K. so the poor people get a "tax credit" of 15% but their net income does not or barely covers their basic expenses.
But the very rich -- their huge income is not spent on goods and services - instead it's "invested" in speculation -- they don't SPEND it so it doesn't stimulate the economy -- it goes into financial products -- derivatives and gambling.
You are incorrectly claiming that stocks and bonds are equivalent to household goods and services. They're not.
I watched your video and am prepared to comment on it. The speaker never mentioned a wealth tax, he defended the progressive tax. But defended it against whom? I don't reject it, Republicans don't reject it, so what is the purpose of defending it if no one is attacking it.
A progressive tax on wealth has been known since the beginning of the Greek Empire!!!! 500 BCE. So what is happening now, is as you say, not sustainable -- there will have to be a wealth tax again or else the Empire of the U.S. will be destroyed.
The IRS is expected to take in over two trillion dollars this year. Nearly 40% of that total will go to military-related expenses — this according to a new report by the National Priorities Project. The research group estimates 27% of your federal taxes will be pay for current military spending, including the war in Iraq. An additional 9% will help pay off debt from past wars and military expenses. Another 3% covers benefits for veterans. While Pentagon spending is reaching the highest levels since World War II, some Americans are personally refusing to fund the military. Tax resisters across the country are planning to withhold part or all of their taxes to protest the war.