Hello Carleas,
— But even if you aren’t convinced, it seems like a fair assumption that we should tax the wealthy more than the poor, given that we try to do so.
O- The ideal is to tax fairly. Taxating, even progressively INCOME, remains closer to the ideal as the field of taxation is equal. When you tax wealth you enter into another realm and it can get ugly. Not only that but it is an irrational process, as “wealth” is relative. A percentage of your income is not.
— I’d rather not try to defend that proposition here, though, so perhaps there is a better way to go about the discussion: given that a flat tax is the fairest way to tax, should the tax be calculated based on income or wealth? Both imply certain value judgements, and both affect different groups differently (e.g., the idle rich would prefer a tax on income, and the upwardly mobile poor would prefer a tax on wealth). I’d be curious to know your thoughts on that comparison.
O- The “idle” rich (already there seems to be a prejudice)…who are they? Are we talking about nobility in america? A person that has wealth, let’s say Romney, might not have to go to work. This does not mean that they have no income. They have investments that yield returns and these could be considered taxable “income” (as they are currently or with changes). Anything that increases your money is income. That is the most rational tax. It is the preferred tax, also, because it allows your country to keep it’s wealth. Wealth is the goal, not the redistribution of wealth through the hands of government.
Suppose you tax the wealth of the rich, as you guess, they won’t like it. There are ways in which that wealth can disappear from our shores or certainly from the taxman radar.
They can renounce their citizenship, count their loses, whatever they may be, and flee this sort of communism as they did in Cuba. Once the wealth acquired by the govt is redistributed, used up, who is the govt going to shake to pay it’s wages and plans? How do you invite capital to initiate ventures in your country if wealth is taxable?
Wealth can be “translated” into gifts. Will your tax code tax gifts, like gold and diamonds? Every year or at the time of purchase? Either way, while electronic transactions, such as income, can be traced by the taxman, diamonds can hide a huge amount of wealth and then all you have to do is “lose them”.
— I don’t mean to take any position about where wealth comes from. Certainly some people get wealthy based on hard work and brilliance. But certainly others inherit wealth, or inherit cultural capital that makes the road to wealth significantly easier. No matter, the government needs to take some money out of the stores of personal wealth in order to pay for common goods. How that happens involves a lot value judgements and a lot of practical considerations. I don’t see the utility for the discussion in questioning any exercise of government prerogative.
O- The issue is not the abolition of govt prerogative but the prevention of it’s degenation. Man is not born wealthy. If you inherit wealth then that means that either your father or grandfather or some other combination, going back X amount of generations, accomplished something significant either over time or in a flash. It should be the individual who earned it that makes the decision on whom to leave it to. Shall your taxman cease to honor a wealthy man’s will?
Secondly, wealth, without capacity simply leads to a shrinking return on wealth until it disappears. If you just live idly on inheritances, eventually you will eat your way through it. On the other hand capacity, even without wealth (but assistance) eventually translates to wealth. In other words: “Give a man a fish and he eats for a day. Give a man a fishing pole and teach him how to fish and he will eat for a lifetime.”
— I find the suggestion that government should offer targeted tax breaks to be at odds with your concerns about government prerogatives, Big Brother, and a ‘fair’ tax system of flat taxes. Minimizing government interference would mean minimizing the instances in which government effectively pays you to spend your money in certain ways. Targeted tax breaks are equivalent to government spending.
O- That is to suggest that govt owes me and what I don’t “give” is actually what I have been given. My wealth, my income is govt’s, and what I keep, through tax concesions, is actually a handout. I reject that and I don’t even see the need for producing an argument here because I cannot believe that a normal person would believe such a thing- that a dollar I don’t pay in taxes is a dollar I “earned” from the govt. NO. My income is what I have already earned through the hours I have put in at work. Govt can make an argument on why I should pitch in to pay for common goods, like roads, education, military, and I agree that we all should contribute. But what I keep is not what I earned from govt but what I already earned myself.
Now, what you might be saying is the argument that the Bush taxbreaks negated the normal “revenue” of the state, without reducing the cost of govt, thus making it another expenditure by govt. That is mismanagement of govt and not a necessity.
— Moreover, it does not seem that we should expect the wealthy to spend their money in way which will reduce ascription (which will benefit their children). That would be irrational.
O- That should be their prerogative, not the state’s.
— And blanket tax breaks for anything that can be described as “philanthropic” will probably result in a lot of ballets and art museums getting funded, the proceeds and benefits from which will never flow to the urban poor.
O- So will your govt fund ballets and art museums or will it burn books instead? It worries me that you consider such things superfluous. Museums and ballets create revenue, create jobs, reduce the urban poor. Best thing that can happen to run-down part of town where the urban poor struggle is the opening of anything that will bring in tourists and afficionados to it’s streets. Over time the value of their property increases, investment moves in creating jobs.
— If wealthy people want to give money, they still can. Indeed, they’re encouraged to by a wealth tax, since doing so will reduce their liability. But for the same reason that we don’t let people decide where their taxes will be spent, it is ineffective to substitute philanthropic giving for tax-funded programs.
O- One, what would be the point? If govt taxes wealth there would be no guilt left associated with wealth, a sense of responsibility, which would be assumed by the taxman. Secondly, if I give charity simply to reduce my taxable wealth-print then it ceases to be charity and becomes naked-self-interest. Is that something we want? Third, I don’t know about you, but here in Florida, Miami-Dade county we vote on how our tax-payer money is used. I am not saying that we vote on every possible use of the state’s budget, but that doesn’t mean that we have no say on how it is used at all. It is not an absolute. It is representative govt, ideally for the people and by the people.
— Wealth is difficult to define, but I think you understate the extent to which income is similarly slippery. First, if the value of the dollar tanks, the real value of income also tanks, while the value of things like a house or a stock might rise to compensate, maintaining the same real value.
O- The value of a currency like the dollar is quite stable if for no other reason than the size of our economy. During the crisis the value of the dollar dropped against the euro and other currencies but while for most income remained the same amount, they were able to pay for services and food normally. Houses however lost sometimes 100K in value. It didn’t enhance wealth but decreased it radically. When jobs were lost the negative value on the houses did not help their owners, thus foreclosures or short sales ensued, flooding even more the housing market and taking more “wealth” out of “wealthy” people. People moved to other states, income while reduced, still existed, but real state wealth was lost.
— Furthermore, stocks, insurance policies, and other perks from jobs have to be tallied among income. The use of a company car or a company-owned condo must be included in income; indeed, virtually anything that needs to be appraised as personal wealth can also be earned as part of a benefits package, and in both cases they would need to be taxed.
O- No they don’t. Why should they be? I see no argument. Offering stocks and other perks may be seen as necessities taken by an employer to attract or retain the best and brightest. The company car, the company apartment are the company’s, not the employee, so why would you tax for what they do not own?
— As to how the tax base changes during a crash, could you say more about why a wealth tax has worse effects? The tax base made up of the working class dropped substantially during the crash, as the unemployment rate increased, and many of those who kept their jobs had their salaries cut. Moreover, since negative returns on investment are written off, the wealthy’s liability similarly decreased. My guess is that the real effect of the crisis would be roughly the same, regardless the tax system.
O- Perhaps. Wealth and jobs decreased, but I think that the loss of 100K in house value over that time would have reduced the govt revenue more because it will take much longer (according to some projections) to regain that loss than for most to regain their income. Unemployment is back under control and yet the housing market, while recovering has not regained the wealth that could then be taxable. In other words, an income taxation would have recovered by now while a wealth taxation syst would be dealing with write offs from banks and from the former homeowners for years to come.
— This is true, but as I argued above, the world is moving away from cash, so hiding cash under ones mattress is getting very difficult. Moreover, making declarations of wealth binding in court would make stashing any sizable amount of wealth undesirable: it couldn’t be used as collateral on a loan
O- If you have cash, to the point that you are considered wealthy, then why you need a loan for? If govt ask where you got the money, you can say that it was a gift from your family.
— it couldn’t be reported if stolen
O- Neither if “stolen” (taxed) by the taxman.
— and most of all it would sit in squallor while the market rose.
O- Or crashed…
— Over the long term, cash is a losing investment
O- Not as much as wealth…
— and that is likely to remain true with a wealth tax (especially if I am right that returns on investment would increase proportionally in response to the change).
O- Doubt it. Why would they increase? Why wouldn’t they instead decrease?