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Soak Wealth, Not Income?
Two big problems America faces are that there is not enough tax revenue, and income is skewed to the top 10%. These issues will define the 2012 election. Obama wants to lower the taxes that middle-income earners pay at the expense of those bastards who are in the lofty top 10% of income. Romney wants to lower taxes across the board, but his plan heavily favors the shit heels that are at the top of the pile. This chart compares the two candidate's proposals: .
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The Congressional Budget Office (CBO) wrote on this topic last week, presenting the following chart to describe what is happening:
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The CBO used the actual IRS tax data from 2009, so this info is an accurate description of who made what and what taxes were paid. The results confirm the problem. The top 20% of income earners make 51% of all income. This same group pays fully 68% of all Federal tax dollars. So who are these “fat cats” who are on top of the income pile and how much are they making? The results are surprising, the following shows the incomes for those in the top 20%:
So who are these "wealthy" people in America?
Nearly half of those “rich folks” are a husband and wife who each make $65,000 a year. I understand that there are plenty of folks who don’t earn this much, but if those same people think that the households that bring in $132k a year are “rich”, they are wrong.
The people in this group are not fat cats, they are not rich and they are not bastards. This is your Dr., Dentist, accountant, small business owner. This group is what fuels the economy. Take half their income away and you have a big fall.
If you’re wondering who fits into this income group (91st to 95th percentile) consider that every Senator and Congressman is in this bracket.
We get up to the stratosphere of income when household income averages $272,000 a year (96 -99%). The folks in this group have nothing to complain about; they are doing fine. But I ask the question, “Are they truly getting rich?”
Then you get to the top of the pile. The average salary for the top 1% is a whopping $1,220,000. So the reality is that the top 1% includes:
- Damn near every pro athlete.
- Any face that you see on the silver screen.
- The bozos you see on TV every day (including the “names” on CNBC).
- Paul Krugman (His book sales this year will make him a 1%er.)
- Mitt Romney. But we shouldn’t forget that Obama is also in the 1% group. In 2010 the Prez made nearly five times the average income of those top 1% earners.
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Now lets see who is paying federal income taxes. This chart from the CBO report includes transfers from the federal government: .
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- The negative tax rates for the bottom 40% (minus 9.3% for the lowest quintile, and minus 2.6% for the second lowest quintile) includes payments of Social Security, Medicare/Medicaid and other government transfers.
- The middle 20% has an average income of $64,000 but pays only an average of 1.3% in Federal taxes.
- Those who make $93.5k (the fourth highest quintile) are still only paying 4.6% of their income in federal taxes, on average.
- The highest 20% of income earners pay 13.4% of their income on average. The breakdown of tax rates among this group are:
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Many people are advocating raising taxes on people who are making the "big bucks". What would happen if there was a giant increase in taxes? Assume that those "fat cats" that earned more than $250k had to pay 50% in income taxes and the “super rich” (top 1%) had to pay 75% of their income in Federal taxes.
Would that solve the problem? The answer is yes and no.
If taxes had been 50% for the 96-99% group and 75% for the top 1% in 2009, it would have generated addition tax revenues of $770B. A very big chunk of change. Projected deficits as far as the eye can see are in excess of $1 Trillion. Raising taxes on the top 5% would eliminate three-quarters of the shortfall. This result would be close enough to a balanced approach to take most of the budget pressure off of the table.
If we truly sock it to those with high current incomes, we can solve one problem. But another one is created. If we raise income taxes to levels that now exist in France, the result will be that 5% of the working population will be paying 80% of all income taxes! A large percentage of American’s might like an outcome like this. A manageable deficit; paid for by soaking the rich. I’m sorry to tell them that it won’t work. A plan where 5% pay 80% is not going to work. A plan that sucked $3/4 of a trillion of income out of the economy would result in a near immediate depression.
I look at the information provided by the CBO and conclude that there is no way out of the revenue hole the country is in by raising income taxes. While tax increases are part of the fix, cutting expenses has to provide the heavy lifting. But that is a joke, as there are very few places to cut expenses without also cutting entitlements. So cutting expenses is another political dead end.
There is no combination of cutting expenses and raising income taxes that would actually be effective. There is an additional option.
The only alternative is a wealth tax. Anyone who has a net worth over $5m (or $20m, or chose a number) has to pay 1% (or 2%) of that amount, every year. It would be like a death tax, except you paid it while you were alive. Think - pre-paid estate taxes.
Warren Buffett is always complaining that he doesn’t pay enough in taxes. The guy has a net worth of about $40b. If there was a 2% wealth tax he would have to cough up an extra $800m a year. That would shut him up quick; it would also solve all the fiscal problems.
Bill Gates would be forced to come up with an extra $1.2B. The Walton family would have to pony up $1.6B. And the good old Koch brothers would toss in a $1b.
If a 2% wealth tax was applied to everyone who had a net worth in excess of $5m it would add up to about $700B a year. That’s just about the right amount to get the budget to where it starts to make sense. This tax increase would not come out of current income, therefore the consequences to the economy would be muted versus a similar sized income tax increase.
Hopefully, I've convinced some readers that raising income taxes is a dead end. It may sound like a politically “smart” thing to say, but it doesn’t mean spit when shown in the light. Taxing income does not get the job done without too many adverse consequences. Only a wealth tax can make a dent.
I’m amazed that Team Obama has not proposed a tax on America’s wealthy. They must have concluded that there is no other option to balance the books. Maybe Buffett is blowing smoke in Obama’s ears. He should be. Buffett is going to get fleeced if something like this were to happen.
Note: I doubt we will hear talk of a wealth tax before the election. It would be very bad for Obama’s fund raising efforts if he brought it up. That does not mean he will not propose this if he is re-elected. I don’t see another away around the budget problems.
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Bill Gates and Warren B have plenty of income to pay that tax without liquidating assets. Yip Yip. They are exceptional. Lots of people with large amounts of assets don't, and thus will have to liquidate.
And you can bet your bottom dollar that the super rich will put a large fraction of their assets into tax exempt foundations unless you taxed those too. The only real way to boost tax revenue is a VAT, because a VAT will act as a partial "clawback" of entitlement benefits without doing so explicitly. The sheeple would not realize what was happening until the prices on everything go up by 30%, and by then it is too late.
it won't affect bill gates or the fortune 400 list, but it will affect hundreds of thousands of small business owners and millions of retirees
Yep.... there hundred of thousand of business worth over 5 million bucks and millions of retirees with over 5 million bucks....
Did you read the fine print???
Or do you feel that you have to parade your ignorance at every oppurtunity?
Really ridiculous considering the little fetish petzella is a tax form pushing accounting weasel and they're supposed to get continuing credits for staying informed about things just like this.
A pathetic lack of prefessional dedication on the part of a conservative, as usual (it's always someone else's fault, ever notice that?).
Bruce, the bottom line is that they ; 1 have already been taxed on that money already, and 2, it is not the governments money, it is theirs to do what they please with it. You have completely lost it in your last two posts. Yours, Maverick
When 51% of the people are paying zero or less in income tax you have a problem.
Democracy = 2 wolves and a lamb voting on 'What to have for dinner.'
The decision will be by a solid majority but hardly a moral result.
How many of the 51% that "aren't paying taxes" (like FICA and sales taxes are somehow paid by the toothfairy) are also among those showing up for work 52 weeks per year?
Maybe the lamb shouldn't assume it can take advantage of the hospitality of wolves indefinitely.
when a parasite pays sales taxes on things he buys with his ebt card, those taxes are being paid by taxpayers
after the wolves eat the sheep, they will turn on each other
we are nearing that point. instead of allowing the economy to grow, the government is promoting cannabilism
"Two big problems America faces are that there is not enough tax revenue".
There is plenty of tax revenue - the problem is that there is way too much government spending.
A wealth tax will not work. The advantage of the income tax is that you can keep going back to the well. The wealth tax is a one shot deal. A wealth tax even at 100% would not go far when the Federal Government is spending $10 billion a day - they would run through Warren Buffett's $50 billion in 5 days. The would run through the Forbes 400 in 6 months. Then there is nothing left. The government behaves the way most lottery winners behave. Spend as if you have an infinite supply of money. Don't even bother about doing a budget. Sooner or later they end up bankrupt.
The only way out is to grow the economy. However, the Obama Admininstarion is headed 180 degrees in the wrong direction.
They already do. With Property Taxes. They take a percentage of your value every year. Baltimore city takes 2.38 every year. I really do not know why they do not do the same with Stock holdings.
States can tax property and wealth. Most states tax real estate because it has the virtue that real estate cannot be moved to another state. Business property like plant and equipment is usually taxed as well. States can tax financial assets (and some do with "intangibles tax"), but financial assets are very mobile which defeats the point of the tax.
A Federal wealth tax is of dubious constitutionality. There have been court cases on such taxes during the Civil War. It is not clear that the Income Tax ammendment applies to taxes on wealth. All current Federal taxes are on income recieved, a sale, a manufacture, lacking health insurance, or a transfer to another person.
There is no question that the UN Security Council could impose any tax it liked if the 5 Permanent Members accept it, but giving the UN an independent source of revenue would be tantamount to abolishing US Sovereignty forever. It is a red line that must never be crossed.
Unless you live in CA and can get out from under taxes by merging with a company to acquite their property instead of buying it from them outright and causing valuation for tax purposes. There are thousands of commercial properties that are still taxed at Jarvis era rates because of these corporate shellgames.
Looks like a good place to repeat myself.
You want to fix this? Simple:
1.) Let GOLD trade free of taxation and derivatives. No more levered futures contracts. 1:1 allocated only. No tax on gold sale, capital gains or otherwise. Do it with silver too, while we're at it.
2.) Impose a national progressive real estate tax with a super high threshold, say $10,000,000. No federal taxation below that level. Amend The Constitution to allow the threshold to rise based on the true rate of inflation measured against gold, silver, energy and food. Amend The Constitution so that the states cannot tax real estate below a threshold of $5,000.000.
3.) Ban all other forms of taxation (including fees, tolls etc.) with a Constitutional amendment.
I would include an amendment that the Fed Gov't cannot own more than 15% of the country's land, and the states cannot own more than 15% of their respective state's land AS ASSESSED BY DOLLAR VALUE....
That fixes the problem for about 1000 years. Taxation is progressive, but only above a very high threshold, allowing those who want to live simply and self-sufficiently to do so if they wish. This forces the monied elite to deploy their capital towards CAPITALISM (seeking profit via production of goods and services), as opposed to their current method of seeking a return on their money, COLLECTING RENT.
-=-
"Labor, entrepreneurism, investment or rent.
The three former are through hard work and ingenuity, the latter is through government privilege."
Stolen from Death and Gravity From http://www.zerohedge.com/news/guest-post-why-left-misunderstands-income-...
Middle Class--Not the Rich or the Poor--Pay Majority of Federal Taxes, Says CBO DataWe should stop the Tax loopholes that allow Warren Buffoon to hide all his income for example in Bill Gates Tax Exempt Foundation and cut spending!
Jeez, Bruce, AGW and a wealth tax.... What next? Single payer health care??
Yes. Doctor Hillary will perform your hernia examination now. Please drop your drawers and cough ...
I have dealt with the Health Care system in four countries. I have a very good idea of what works and what doesn't... Ever bought HC insurance in the private market?
All you have is tired old jokes created by hacks in the employ of the insurance industry oligarchs...
as opposed to the hacks of the government bureaucracy oligarchs
The line clearly went way over your head....
How much are we going to spend training a special police force in Iraq? alrighty, then. When any candidate any where states "I'll do X or I'll resign within 3 days." let me know.
I like your posts in general, Bruce, but this one is just retarded.
DC has a spending problem, not a revenue problem. The only reason the banksters get so powerful is that the fucktards in DC need them to create debt so the politicians can buy votes.
Get control of all of the economy out of the fat, thieving fingers of DC and you'll find that the bankster problem also goes away.
If we repealed the 16th and 17th Amendments, added an Amendment to require a balanced budget, and did away with all of the agencies and departments created after 1789 we'd really not have a deficit or a spending problem OR a bankster problem.
I hear you. You should spend sometime reading the CBO reports.
I have. I have looked at the spending side. And yes you are correct. Too much is spent on dumb stuff.
But when you step back and look at it, you see that medicare, medicaid, CHIP and Social Security will soon be taking 100% of income from any reasonable tax base.
No military at all?
I don't like what the government does, but we would be in a hell of a mess if there were no Coast Guard, No Port Facilities, No airtraffic guys etc.
And how about education? We're dead in the water unless the current generation has a good education. I think government has a role to play here.
My point was not that the govenment should tax more. It should tax differently. If there must be a tax (I maintain there has to be) then it better to tax wealth than income. At a minimum, there should be some wealth tax. This would hold back some of the INCOME tax increase that are coming.
the federal government doesn't pay for education
if you think the income tax will be rolled back if/when a wealth tax is imposed, you're dumber than i thought
besides, who will be the ones assigning values to assets? how much is a privately held business worth? how much is a house worth? will IRS agents go into your safe to see how much jewelry you have? how much is that picasso painting worth?
will everyone now be forced to fill out a balance sheet along with their income tax returns?
You're right. How about we do something simple like repeal the tax-free status of their muni bond portfolios instead?
"I don't like what the government does, but we would be in a hell of a mess if there were no Coast Guard, No Port Facilities, No airtraffic guys etc." Quote from "OSI"
ZH variation of "pay more taxes or we fire all the policemen and firemen". Drive south from San Clemente, CA and look at the fucktards in the green uniforms stopping traffic at San Onofre checkpoint - they even look stoopid... Never see them at HD or Lowe's chasing the gazillion illegals milling around- oh wait, must not upset Hispanic vote, so no asking for papers, except grandma smith at the checkpoint. ... This country is d00med. Those jackasses get govt pensions - they find an illegal weapon once in a while or some pot; then The Sphinx ships 100 times that amount of firepower to Mexican drug cartels. .... keep loading up the out years and raise the dicount rate, plus leave 1/2 the expenses out and you have the USA. People need to be allowed to fail, just like businesses.
Dupe - apologies.
let's add a requirement that everyone, regardles of quartile, pay something into federal taxes....
jb
A global standard of a government debt repayment tax is one other answer. Punishments for non-compliance could easily be taken on tariffs on taxes on exports from the non-compliant country.
A reasonable time scale to reduce sovereign debt to a level of, say 30% of GDP would be ten years, fifteen years if you want a worse solution, but a solution nonetheless.
How would it work? Automatic caps on deficits with shutdowns of all spending including welfare, health, military and subsidies (net of the debt reduction tax but including it in government spending figures).
This would concentrate the minds of politicians promising welfare to gain office and reverse the inexorable trend to welfare democracy we are seeing.
Politicians would look after people first and get them back to self-sufficiency and contributing taxes, rather than paying negative or zero taxes.
Government is not about the redistribution of wealth, that is socialism. It is about the improvement of living standards and the lowering of the retirment age to (hopefully) 45. We already all could retire are 45 and enjoy living, were it not for crony capitalism and corrupt socialist policies.
Bruce, Bruce, Bruce ....
What a dyed-in-the-wool liberal you are ...
...always about needing MORE taxes ... never able to see a way to SPEND LESS.
The Democrats took over in 2006, saw GWB had depressed the gas pedal (defecit spending) some (wars, Medicaid part D and No Child Left Behind) and decided to nail that sucker to the floor forever more.
What makes you're proposal even more ill considered - there has never been a point in time where increased taxes reduced defecit spending (save your breath, you mobys & trolls, the Clinton "surpluses were accounting tricks).
The track record is clear. Increasing the tax rates, gives the political scum all the encouragement they need to SPEND MORE.
Unlike you, most of us know the path forward on taxes is on the backs of the 'middle class' which for the sake of argument, let's extend up to Married Couples with a combined income of $ 150,000/year.
I've said it before in response to your MORE TAXES nonsense.
HELL NO !!!!
It is time to take a CHAIN SAW to government and solve the spending problem. Here are some new numbers for people to work with:
Some things get lost in the back and forth that we can literally no longer afford to lose sight of ... the favorite SPENDERS theme is about how important it is to protect government jobs like ... Police, Firefighters and Teachers
... and if anyone CUTS SPENDING it will endanger ... Police, Firefighters and Teachers
HMMmmmmmmmm, it MUST BE that everyone working for the government is part of that special group of ...Police, Firefighters and Teachers
Firefighters, police officers and teachers are exactly what percentage of ALL public employees ...???
http://www.bls.gov/ooh/Protective-Service/Firefighters.htm BLS 2010- Firefighters - 310,400 http://www.bls.gov/ooh/protective-service/police-and-detectives.htm BLS 2010 - Police and Detectives - 794,300http://www.bls.gov/ooh/office-and-administrative-support/police-fire-and-ambulance-dispatchers.htm BLS 2010 Police, Fire and Ambulance Dispatchers - 100,100
http://www.bls.gov/ooh/education-training-and-library/ BLS 2010- All Applicable Teaching Classifications Thru High School - 6,509,800
Total Employment for the Three Critical Services - 7,714,600
Total Government Employees Across All Levels ~ 23,000,000
Firefighters, police officers and teachers are roughly 1 out of every 3 government positions ...
... OK, Let's say those ~ 8,000,000 jobs are sacrosanct (the extra 300,000 is just an allowance for an easy round number)
Now about those other 15,000,000 government employees ...
How about we start by getting rid of 1 out of every 3 of them???
barliman
'... there is not enough tax revenue ...'
From a gov-lover perspective, there's NEVER enough.
But just as one brute simple example, the U.S. spends 5% of GDP on a global military empire, when it could defend its borders with 1% GDP.
That's 4% of GDP saved right there, before even getting started on other large-scale waste, fraud and insanity.
Transcend your brainwashing, Bruce K ... think outside the debilitating Depublicrat sandbox.
You can include cops, firefighters and teachers.
The first can fuck themselves because of the "Thin Blue Line". Fuck 'em. I have personally seen cops abuse the shit out of their authority, and receive 1/10 the sentence for crimes such as drunken driving, vehicular manslaughter, etc.
The second can fuck themselves because of jamming their call book - I have personally seen three fucking ladder truck crews PLUS SUPPORT show up because someone left something in the oven (no fire, just smoke).
The third can fuck themselves because they obviously failed in their primary purpose.
Apologies to all of the above that actually tried to do a good job, but it's impossible to separate you from your shitty co-workers who should have been fired, except they are unionized. Hope you planned ahead, because they are going to inflate your pension away.
throughout human world history, the fucking top.01% is and are ALWAYS The fucking problem.. ALWAYS. Tax the fuck out of them.
The reason why the top .01% are ALWAYS the fucking problem is because, throughout human history, they own the rest of us. They do the taxing, not us. That taxing is how they became the top .01%.
Income earners are employees of capitalists. This presentation is a classic strawman example to divert attention from the real controllers of wealth to the proles to fight against each other over. Percentile groups and subsequent classifications only allow the citizens to be divided and select sides to argue over.
Income tax on employees follows a communist model to control the masses via economic means. Government revenue should tap everyday commerce activities (import, export, interstate transport, luxury) and leave the worker alone, period.
Chris Rock stated that Shaquille O'Neal was RICH. But the guy signing Shaq's checks was WEALTHY. The owners of capital are not included in the so-called .01%. Remember that Buffet's secretary paid more income tax than he.
whatever, nothins going to change the status quo for the better. it just has to fall apart and so we are all sitting around waiting for it and watching it but bitching and whining like someone is suddenly going to step up and help you get something done is useless. the ones with the wealth have their plan I bet. you better make yours
Bruce, here is a page out of my book "New American Revolution: The Constitutional Overthrow of the United States Government", and gives you a little different perspective on how much each level of wealth is paying:
Data reflects IRS data from 2004.
Fig. a
As Released by the IRSPercentage
Wealth
Rank % of Income % of Gross Tax Revenues Paid % of Taxes/Income Class
Top 1% 19% 37% 37%
Top 5% 33% 57% 20%
Top 10% 44% 68% 11%
Top 25% 66% 85% 17%
Top 50% 78% 97% 12%
100% 100% 3% 3%
Fig. b
Looking at the Same Numbers a Little DeeperRank Total Percentage Population % of % Taxes/ Population
Impact Percent Wealth Rank Wealth Ratio Income Income Class Tax Ratio5th 1% 1% 19 19% 37% .51
3rd 5% 4% 3.5 14% 20% .175
4th 10% 5% 2.2 11% 11% .2
2nd 25% 10% 2.2 22% 17% .12
1st 50% 25% 1.19 21% 12% .0075
6th 100% 50% 3.849 13% 3% 1.282
WhoPaysHowMuch:
This Population Wealth Ratio is derived by dividing the % of Wealth Rank into the % of Income of that Class. Then the Population Wealth Ratio is divided by the % of Taxes /Income Class to derive a Population Tax Ratio.
Large and in charge are the richest 1% of Americans who have a Population Tax Ratio of .51, making them the second least impacted Income Class after the lowest 50% (coming in at 1.282) by a healthy margin.
The less wealthy of the top 10% come in third at .2 followed by their betters chasing the “Super Rich” at .175. Bringing up the rear is the late-great “Middle Class of America” at 1.2, and followed by that unfortunate 25% living just above the lowest 50% getting glued, screwed, and tattoed at .0075.
Keep in mind that low is bad, and good is high when you’re working with this Population Tax Ratio. Where do you fit in the formerly great “Middle America”? Where have you gone “Silent Majority”?
It’s an even greater injustice when you consider real estate taxes, gas pump tax, sales tax, et al, which have a much greater regressive tax impact upon the income classes as they decline in wealth.
In fact, if you haven’t figured it out, our current tax system is regressive, not progressive, and it is aggressively so. It makes it hard to support the Bush tax cuts for the most wealthy when the actual tax burden to the declining income class rank is actually much more regressive than anyone might have imagined, and by an incredibly wide margin.
It’s simply not equitable. But this imbalance is again what happens when you have a tired old institution that has gentrified to the point of obsolescence, because the answer isn’t to raise taxes on any one class or all classes together. That is not going to work.
Obviously the tax increase target is on the higher end, and most of that higher end is due to "passive income", from interest, dividends, and other types of investments that are generally associated with far too much money. Say we start taxing passive income over $1 million dollars at 50%. Just about anybody can live on $1 million a year, but said policy would allow for a re-adjustment to the accummulation of wealth during the last 40 years of the financialization era of America... that naturally we bring to an end.
This might not be the only adjustment, but it is macro, far-reaching, and is a good start to balancing the budget and tax equalization. Nor is the large passive income holder powerless to better their situation. They can always put their money to work proactively, starting businesses and creating jobs to avoid the disincentives of a passive income tax.
However, first comes the Revolution, and this is part of it. www.electanewcongress.com / www.nar2012.com
2004?? Are you serious ??? the data is available for 2010!
jb
I see your problem right there.
You need to go WAY bigger, and broader.
tax wealth lol
first get a brain
then stop spending
then then stop taxing
the answer is not in taxing wealtjh
another foolish attempt to write rubbish
Dumpster, you saved me a rant. I'm not opposed to taxes, I appreciate clean water, good roads, prisons, waste disposal and an armed militia.
However, I strongly favor, avocate and vote for SPENDING cuts.
God Bless America, RICO all banksters and their ho politicians and Impeach the liar, Eric Holder.
How sad that the once (but no longer) greatest nation on earth now encourages applying for food stamps while success is vilified and punished.
Welcome to Obamaland, soon to be called United States of Bain Capital.
This is an extremely dangerous path to start down and will most likely end in global financial meltdown as the ensuing panic will crash the system immediately.
If this happens, I would pull every dollar I have in the bank and stuff it under the mattress, buy gold, silver, guns, etc.
It would destroy whatever confidence is left in the government and financial system and result in the mother of all depressions.
This is really just theft. Anyone with the smallest amount of intelligence would think twice before starting a business or accumulating wealth.
The solution to this problem is pretty simple: remove all of the artificial props from under the markets and let the dust settle. Savers (like myself) will come in and buy. We'll go through a rough patch for a while but will emerge all the stronger.
There is a disconnect in your post, Zer0 bewteen "will crash the system immediately" and "if this happens, I will pull...." and "come in".
Yes, please let us at least have the intellectual honesty to call it what it is. Theft.
Actually, it would be the start of a yearly global tax, but just not on the super wealthy. They would be levied against the very people that have no friends in government, and that's the productive segment of the population. For the most part, taxes that are enacted by governments rarely get rescinded.
This will be just the scheme to fund a world government run by unaccountable beauracrats. The World Bank and the IMF as the worlds central banks and the world divided up into supra regional governments with no individual national sovereignties. But, plenty of new taxes levied to be redistributed around the world with no say so in how the monies are spent or redistributed.
Just surfs and their landlords. Of course the super wealthy will still be allowed their Cayman Islands and Liechtensteins.
...And it will be TOO LATE.
DO IT NOW.
Put the super-rich in a “Brewster’s Billions” Bracket.
For context refer to that old Richard Pryor flick.
Richard Pryor, as Montgomery Brewster, suddenly finds that his recently deceased long-lost great-uncle was an eccentric multi-millionaire who was also his only living relative. The great-uncle includes Brewster in his will.
Under the terms of the will, however, Brewster is challenged to spend $30 million within 30 days in order to inherit a much larger sum.
***But there are some important conditions attached***
At the end of the 30 days, he may NOT own any assets that are not already his, and he must get value for the services of anyone he hires. Furthermore, he may donate only 5% to charity and lose another 5% by gambling, and he may not waste the money by buying expensive goods and then destroying them or giving them away. Finally, he is not allowed to tell anyone about the nature of this challenge.
So…the Brewster’s Billions Bracket would work like this:
Above a $1,500,000 income, the wealthy person is charged to spend ALL of it without acquiring new, capital assets. He can buy cars, boats, etc..but not land. Keeps the rich from getting richer. In return, though, he gets to deduct everything.
If he doesn’t spend it ALL the extra money, he pays a 95% tax on all income over the 1.5 million.... No restrictions on charity. The super-rich can revel in decadence...altruism…or they can stroke a 90% income tax check to the pigs in government. Either way the money gets circulating.
This is a terrible idea because you are going to artificially shift demand into luxury goods (that the "Brewster" money would be spent on), and away from other things that could benefit society more. A free market is needed to allocate capital with maximum efficiency.