Soak Wealth, Not Income?

Bruce Krasting's picture

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: .



The Congressional Budget Office (CBO) wrote on this topic last week, presenting the following chart to describe what is happening:



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%:

81st to 90th percentile = $137,500
91st to 95th percentile = $175,800
96th to 99th percentile = $271,800
Top 1 percent = $1,219,700

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.


Now lets see who is paying federal income taxes. This chart from the CBO report includes transfers from the federal government: .



- 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:



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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StychoKiller's picture

The same thing can be accomplished by printing an expiration date on FRNs.

Bob's picture

Now that's what I've been asking for a long time, Bruce.  You know the ciminals are very rich people . . . so why do y'all who are bumping along on the 99th percentile give them so much cover?  Why protect them like family?

Fuck 'em.  Bravo!

I have to agree (not for the first time) with comrade Tyler's position, though, that it should be a much larger wealth tax.   

A sane "speed limit" for creative predation would prevent a lot of lawless carnage.

Lost in the ether's picture

Good money after bad?

Let's make some cuts first, then talk about taxes.

Tortuga's picture

After your comment I have to disagree with your premise that you are LOST.

nmewn's picture too...he's not.

Let them show they can restrain themselves for "the good of the country" (insert flag flapping in the breeze here) then maybe we'll talk about "sacrifice".

Every deal ever made up there in DC in my life time went something like this...agree now to more permanent taxation...and we'll agree to meet later on permanent spending cuts. 

A variation on kick the can...the taxes go into place, the meetings take place the next year and quickly devolve into the producers in society want everyone but them to starve (especially children and the elderly, producers hate them the most for some reason) and ultimately it all goes to hell.

And, of course, the cuts never happen.

They won't even agree to address the egregious practice of baseline budgeting. Its like a ponzi within a ponzi.

Fuck em.

bankruptcylawyer's picture

Bruce what you fail to point out is that taxing the ultra wealthy doesn't solve our problem, even though they were the ones that benefited from it. you are advocating to look for the real systemic symptom ( wealth inequality ) instead of income inequality , and fix it , as if that were the cause of our problems. 


our problems are not that the government is 'broke' . that too is a symptom. 


the problem is trade imalances and fraud on wall street. I agree that simply taking away the wealth of people who have sponsored both of these problems and continue to profit off these problems is likely to drain their ability to buy off politicians. but i think you are underestimating how cheap they are to buy off. 

you cannot fix wall street and the trade imbalance without political will power or the full scale destructive force of mr. market coming into play. and most likely  a combination of both will first manifest before we get to see 'change' for the better , or merely social decay and collapse , including wars of aggression that most likely bankrupt our treasury.. 


disabledvet's picture

Why not solve the problem by eliminating all taxes period? Do a transaction tax on Wall Street to "pay for said bailouts past, present and future" and leave it at that.

Pool Shark's picture



Let's go one step further:

No taxes.

Government just prints its own spending into existence.

The federal government already creates half of the money it spends out of thin air.

Just create the other half out of thin air too...


bank guy in Brussels's picture

Bruce Krasting's proposal is quite like the traditional Muslim 'zakat', or wealth tax, of 2.5% minimum on all wealth held, after essential necessities are paid, a Muslim obligation.

The traditional Muslim view is that wealth should be circulated and not hoarded ... and the wealth tax is part of that philosophy.

Perhaps BK will also say a few good words on behalf of Islamic finance, the banking and investing and lending without any interest payments? ... That also is surprisingly workable ... In Islamic banking, consumer and house purchases and such are essentially done in a kind of 'lease to own' arrangement, and lending for business is done with the lender at risk and sharing in the profits, or loss.

Certainly the global debt debacle would have been avoided under Islamic finance ... surprising that Muslims do not say more about this ... but most Muslim countries do not fully honour Islamic finance either, and use the 'forbidden' interest-paying schemes.

One of the very notable early ZeroHedge commenters, Cheeky Bastard, said that he thought in the future, something like Islamic finance would be the way banking is done globally. - Aristotle thought interest was wrong, too, and so did many early Christians and Jews. - Maybe they were all correct.

Thisson's picture

Oh please - Islamic Banking still charges interest, they just restructure the deal so the interest income has a different label (such as "rent").

What's the difference to the homebuyer if they end up paying 200% of the house price in principal and interest, or whether they pay 200% of the house price as lease payments?  A rose by any other name...

Tortuga's picture

So, how's that traditional "zakat" working in the middle east with all those shieks and princes and kings and pm's? Is Abbas as rich as Araffat was, yet?

Probably as well as the one europe govt there in brussels, huh!

There isn't any difference in the .01% or ho politicians; anywhere in the world. Traditions and laws are for the little people.

Uncle Remus's picture

Probably better than you'll ever know.

spinone's picture

Come on Bruce.  You know we have an Income Tax in this country, not a Wealth Tax.  If you're so wealthy that you don't have to work and earn an income, you don't have to pay taxes.  That's by design.

solgundy's picture

F-off....."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."

giving Washington an extra $700B per year will solve what exactly??????'s an effin BLACK HOLE where tax payer money vaporizes....welcome to Club Delusional....where lunatics believe increased taxes will reduce the DEBT

azzhatter's picture

"the right amount" for about 6 months and then it would be everyone over $4 million and on and on. Fuck WAshington up the ass with a pole axe. 

knightowl77's picture

You are correct...If Washington found another $700 BILLION dollars they would just increase spending by that amount.....

I do not think anyone should give DC 1 additional dollar, until they cut spending down to current revenues, then and only then might I consider additional taxes to pay off the debt...Until fck the idiots in Washington who think that spending my money is Their RIGHT....BS.


Until spending is cut in a major way, we should not pay taxes to these morons that waste it

Never One Roach's picture

Tyler and Bruce...thank you for these insghtful articles. I could not get my head properly around this complex issue until now....


I read awhile back that wealth increased in the USA by 85% from 2002 to 2008...BUT...85% of that wealth creation went to three groups:

1. athletes;

2. celebrities on TV and movies and Hollywood; and

3. top executives on Wall Street.

Tortuga's picture

ah, the old caveat, the 85/15 rule surfaces. This time is different.

Tyler Durden's picture

Sorry to spoil the discovery, but a one time wealth tax is precisely what we said would end up happening last September as it is the only feasible (if completely impractical) solution. Only instead of 1-2% it will have to be a single, standalone, global tax of up 30%. There was roughly $21 trillion in global debt in excess of sustainable back in 2009 (as calculated by BCG), which means the number now is about $30 trillion, and about $74 trillion in global financial assets. This means that well over 30% of these assets will have to be taxed and effectively "confiscated" by global governments. Furthermore, to escape litigation (paying an IRS penalty of $1MM or paying taxes of $1 billion... let's see here), geographical (the rich are quite adept at giving up citizenship when needed in order to preserve their wealth in less tax-burdensome jurisdictions) and temporal (new and improved back-end loaded tax havens) arbitrage, the tax will have to be worldwide and one-time. So yes, you are right, and this is something that has been in the works for quite a while.

Of course the details of just how one transfers $30 trillion in assets in a vacuum limbo ex-market, from point A to point G(overnment) will be just that- details, until attempted. At that point it will be an outright abysmal failure, but we will cross that bridge when we get to it.

Read more here: The "Muddle Through" Has Failed: BCG Says "There May Be Only Painful Ways Out Of The Crisis"

bigwavedave's picture

Tyler. We don't need any wealth tax. What we need is a much lower barrier to entry for the use of Offshore Tax Havens, Cayman SPV's and foreign bank accounts. Then we can all aspire to be like our presumptive nominee for President.

Dooud's picture


Would not a global debt jubilee accomplish the same thing with less impairment? If all debts were zeroed (unannounced obviously) this would also seem to be easier to implement than a global wealth confiscation.
This, simultaneously done with revamped lending rules (Islamic? No interest and/or Reestablishment of a global gold standard) would seem to be an alternative.

Of course this bails out those who are debtors, but if it's a bank and if they are still negatively capitalized after the jubilee, then they cease to exist.

Or maybe I am missing something completely.

Yellowhoard's picture

The wealthy will just dump assets into foundations that they will run as personal piggy banks.

I once had a limo driver in NY that bragged about all of the famous people that he squired about Manhattan for the Clinton Charitable trust.

Every expense that you can imagine gets expensed through the trust.

One day, Chelsea will take over the trust and she won't have to pay a dime of estate tax.

Jim B's picture

Right on! They are already doing, the system is geared to being manipulated by the top .5%  (the uber rich).  Unless the trust and foundation tax shelters are eliminated, the whole discussion is pointless.

nmewn's picture

Well stated.

Mine is going to be an unpopular view...(what else is new) but here it goes.

Bruce is talking about double taxation here.

The super-rich were taxed once already at the federal level, however they earned it...either by taxing capital gains, dividends or wages.

Its fundamentally wrong & unfair for the federal government to tax people (any people, rich or poor) twice on the same income. And its worse than even double taxation when you really REALLY grind through it...its the same rotten to the core "principle" as the ObamaTax mandate.

You are taxing people for doing absolutley nothing. Just the fact that you are rich & breathing is not a taxable event...not yet anyways. Is this what we've come to? Work hard, be smart, save your earnings, become wealthy and we sic the IRS on you and hound you till the day you die...then tax your heirs?

I'll assume this will apply to welfare mom lottery winners as well?...they're millionaires now, right?

Many dance around tax policy due to the fact that we don't want the stock market to crash again because working peoples money is in there...but the super-rich get the bulk of their money through capital gains and up!!! it at 80%.

Disclaimer...I will never be a millionaire but I am net short ;-)

SamuelMaverick's picture

Seems that this thread and Bruce have jumped the shark in a big way... Where does everyone think ' the rich ' keep there money ?? Under their bed or buried in their backyard ? No, the fucking money is allocated where the owner feels he is getting a fair return for the risk he is taking ( bonds vs equities vs Real estate etc etc.. ) A wealth tax would be an economic disaster when the 'evil' rich decide to unload one asset in order to pay the tax.  Heck, if I were one of the evil rich I would be so pissed about the theft by taxation that I would unload just one asset in order to crash its price, and then short the shit out of it to get my money back.  Oh , wait a second, I am not JP Morgan- they have that game already locked up.  Smarten up Bruce, the problem in the US and Europe is not a revenue problem. It is a spending problem, and a problem where the gov spending has become too large of a percentage of the countries economies.  

lewy14's picture

The solution is simple - and I'm surprised nobody thought of it yet.

The tax will be paid in kind - lots of asset classes accepted (maybe with differing haircuts).

Treasury will hand it all over to some bright young things at FRBNY to manage as a portfolio.

Ben will create new base money against it.

Part of the deficit paid down; inflation created to take care of the rest. What's not to like?

Especially if you're rich. (Huh?)

This is how it will get sold to the wealthy: a bail-in of the currency.

The alternative - dollar devaluation - sudden and uncontrolled - could wipe out 20%+ very quickly. OTOH, demonstrating the power of the USG to raise taxes, control structural deficits and maintain social stability? Priceless.

Dollar will retain strength (even in the presence of inflation, which the right investments will insulate from in any case. Inflation only hurts if you're poor).

A 2% a year cost to hedge currency devaluation and social instability? If you've got a few tens of millions plus in this environment, such a tax might look like a good bargain...

Orly's picture

It would seem that most of the super-rich make their money through investment in slightly harder assets than stocks, dividended or otherwise.  Most appreciate capital gains through real property and holding corporate and sovereign bonds.

It would be difficult to tax a wealthy person because of the liquidation aspect of the matter.  Sure, they're rich but can they come up with $1 million in cash rightnow, much less the astronomical sums to be expected from Buffett, Gates, Slim, et. al.?  Wouldn't the very imposition of such a tax force asset deflation upon liquidation, thus rendering the initial assessment for the tax old news... then the cycle starts over again...

Maybe they would have to sell a load of bonds to meet the payment deadline.  What would happen to the bond market in that case?  Munis?

I just don't see how such a thing would be assessed properly without a wide range of "unintended consequences."


nmewn's picture


Yeah, they have real estate but its value is down across the board. They are holding corporate bonds, I would imagine, but unsure on me corps would be "safer".

Speaking for myself, I'm pretty liquid so I would imagine they are wouldn't be that hard to come up with a million for the super-rich...a few baubles from the jewelry armoire perhaps or petty cash from the false wall in the back of one of their closets maybe.

The first thing one does is think about protecting what one has...whether its a car, boat or large assets. They can't be that different from anyone else. They've had almost four years to prepare, with this type of rhetoric being tossed around.

Mine is really a "principle argument" and I agree the unintended consequences of any future actions is going to be dramatic...I was also struck by BK's phrasing in this..."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."

Thats not whats happening at all...Obama is not lowering anyones taxes, those tax rates are already in place and have been for years. He can't claim a tax cut for the middle class on rates already in place since before he came into office.

Then the 10% figure...I'll stop, I must have missed his

Orly's picture

Arable farm land is still doing quite well.  Not many of them own the McMansions.  I would imagine they have the real thing.

nmewn's picture

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.

Agreed. Gold and silver are money. You can't tax money for just existing or being exchanged for other money.


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.

I can't agree with any new taxes on anyone or anything until Congress does away with the baseline budgeting process. This process allows for the expotential growth of tax revenue required to run government year after year no matter what the economy does or tax revenues come in. 

As an aside...I'm not a fan of tinkering with the Constitution by adding amendments to it. As a general rule.


3.) Ban all other forms of taxation (including fees, tolls etc.) with a Constitutional amendment.

See number two above first.

Congress has the power to raise or lower taxes. But without the revenue they could not buy or maintain the land they have now so it would sort itself out.

I'm for an across the board flat or fairtax. But spending has to come down first.

LowProfile's picture

Thanks for your input!

Agree on amending the Constitution on principle, but I think we may need to in order to get a lasting fix.  I believe this re-write addresses most of your issues (but it's still a work in progress).


1.) Let GOLD trade free of taxation and derivatives.  No more levered futures contracts.  1:1 allocated only.  No tax on gold sales - 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. 

Require that all titles show clearly which individual holds the property, so that total real estate holdings cannot be hidden behind corporations or trusts.  Net out the real estate holding included in corporate stock ownership to prevent hiding it by holding corporate stock (this is the one hiding place I haven't yet figured out a suitable solution for, I am working on it).

3.) Ban all other forms of taxation (including fees, tolls etc.) with a Constitutional amendment.

4.) 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....

5.) Include an amendment eliminating government debt, federal, state and local: All government must operate on a cash only basis.  If you want something big built, run a surplus, save it in gold, and pay for it if/when you have enough savings to pay for it.  Either that, or let the private sector take the risk.

That fixes the problem for about 1000 years.  Savers have a stable vehicle to save in (gold) that is not gamed or penalized - They will no longer have to speculate to preserve their purchasing power against inflation.

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.

The intent is to force 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.

nmewn's picture

Well you are welcome LP...(just home from work, maybe you'll see this).

It doesn't look like we're going to agree for the most part...but we can agree to disagree agreeably ;-)

I don't like progressive taxation. The reason being is it winds up pitting the people (classes, if you will) against each other. The poor envy the rich, the rich think the poor are free loaders...and we in the middle always get stuck with the bill.

Everyone needs to feel the bite of and order to see what they can live without and what they must have.

As I say, I don't like amending the Constitution over things that can properly be done by honorable men (and women of course, its just how I talk).

If we don't have them or they can't get elected for some reason its not worth saving anyways because the people are too ignorant or too corrupt which case I prefer to let it burn...out of the ashes comes new life.

Anyways...seeya round the Hedge.

LowProfile's picture

Agree (hope you read this), except I can't see any way to deal with the generational wealth amassed by treachery, corruption and theft.

Freegolder's picture

But Tyler, you often comment on how debts (at Gov level) are being defaulted over in Europe. So, a global tax won't happen, never. But debt defaults, or currency debasement, plus gold valued at physical only: all of those will do the trick quite easily.

Good luck.

Tyler Durden's picture

From the linked article:

We believe that some politicians and central banks - in spite of protestations to the contrary - have been trying to solve the crisis by creating sizable inflation, largely because the alternatives are either not attractive or not feasible:

  • Austerity - essentially saving and paying back - is probably a recipe for a long, deep recession and social unrest
  • Higher growth is unachievable because of unfavorable demographic change and an inherent lack of competitiveness in some countries
  • Debt restructuring is out of reach because the banking sectors are not strong enough to absorb losses
  • Financial repression (holding interest rates below nominal GDP growth for many years) would be difficult to implement in a low-growth and low-inflation environment

Inflation will be the preferred option - in spite of the potential for social unrest and the difficult consequences for middle-class savers should it really take hold. However, boosting inflation has not worked so far because of the pressure to deleverage and because of the low demand for new credit. Moreover the inflation "solution" while becoming more tempting, may come to be seen as having economic and social implications that are too unpalatable. So what might the politicians and central banks do?


Since the publication of Stop Kicking The Can Down The Road, a number of readers have asked us what would happen if governments persisted in playing for time. To what measures might they have to resort? In this paper, we describe what might need to happen if the politicians muddle through for too much longer.


It is likely that wiping out the debt overhang will be at the heart of any solution. Such a course of action would not be new. In ancient Mesopotamia, debt was commonplace; individual debts were recorded on clay tablets. Periodically, upon the ascendancy of a new monarch, debts would be forgiven: in other news, the slate would be wiped clean. The challenge facing today's politicians is how clean to wipe the slates. In considering some of the potential measures likely to be required, the reader may be struck by the essential problem facing politicians: there may be only painful ways out of the crisis.

steelhead23's picture

It appears the folks broadly distrust government, including our representative democratic government.  Yet, we clamor for services.  Yes, I agree that the focus of government revenue on income taxes is adverse to economic progress and ad valorem taxes even more so.  But we also want the creation of capital, i.e. savings.  So a wealth tax has to be small and infrequent.  If we are to have a periodic wealth tax (and yes, I think it should be recurring (say once every 5 years, as there is no indication that our clamoring for services is likely to diminish), it should be small (1 or 2 percent max.) and extremely progressive (i.e. only be imposed on the top 10% of wealth holders).  Oh, and we should use threaten to nuke any nation that assists in the hiding of wealth.  Nuke Zurich has a nice ring to it.

andrewp111's picture

They are doing Financial Repression now. I see no evidence that anything will force them to stop. Japan did this for 20 years and counting. The USA did it through the Depression, WW II, and long after. Financial Repression is sustainable for decades.There was inflation during that time too.

Growing out of the debt problem is not possible without a dramatic new source of energy. Ain't Gonna Happen.

Wiping the slate clean is what would happen if TPTB allowed Nature to take its course. Naturally, every debt is someone else's asset. All your bank deposits are the bank's debt. FDIC insurance is only to 250K.....

boiltherich's picture

I have said for a long time that estates will have to go back to being taxed at a much higher rate, and what is the estate tax but a wealth tax only paid upon your death? If you want gross inequality of wealth and a recipe for social disruption then allow wealth to transfer from those who worked and earned it to those that did nothing to earn it but be born to rich parents. That is how you create entitled dynastic wealth that becomes entrenched and goes on to take a greater and greater slice as financial wealth that is unearned at the expense of the workers.

But I have a few thoughts about the bullet points TD; austerity can mean many things not just paying cash that was saved up for spending. It can mean a RATIONAL budget that ends ALL forms of corporate welfare, AG subsidies that 90% of go to major corporations. Like ending alcohol subsidies that mega ag and oil companies get to turn our food supply into shitty watered down fuel for cars. Stop building airplanes for the military that cost hundreds of millions or billions of dollars each copy, if it cost that much we cannot afford to lose one in battle. Means test ALL federal payments to individuals. End medical care supports, it sounds rough but medical care will cease to bankrupt us only when we stop paying the ransoms demanded by providers, a good start would be to ban private insurance as those fuckers inflate costs while adding NOTHING to the health of the people.

Higher growth is not unachievable. I do not buy the inherent lack of competitiveness arguments. Switzerland is a tiny landlocked mountainous alpine nation with virtually no natural resources, yet they have one of the highest standards of living on the planet. American uncompetitivness boils down to off shoring jobs and wealth for the financial benefit of a small number of wealthy owners who are doing it as much to punish organized labor as to make money. And their bought and paid for shills in government negotiate cushy "free trade" treaties that enable this. When you do "free trade" deals with mercantilists you get hammered every time. We need cheaper and more secure domestic energy, do that and watch growth shoot for the stars. We must find clean safe nuclear/fusion, at least till we can get solar and battery technology to be cheaper than oil and coal, and I do not mean by RAISING the prices of fossil fuels, by LOWERING energy cost/prices for new tech.

Restructuring of all debt is going to play a major role like it or not and the banks can just freaking die, newer and stronger banks will emerge from the smoke of a self inflicted immolation by that industry. But wait, there is no fixing ANYTHING until speculation is totally removed from both banking and commodities. And that CAN be done, just reintroduce Glass-Steagall for banksters and carve that fucker in stone this time so it never gets repealed again. As for commodity speculation, some small amount of speculation is required for efficient management of resources and price discovery, but you can end excess speculation by requiring that all contracts be cash not margin, and that all bidders accept delivery of the contracted lots. What they do with it after they accept delivery is up to them, but paper markets have unlinked prices of vital necessities from any fundamental factors of price and distorted markets to the point where price is becoming meaningless. Without meaningful prices the day will come when there will be no food on our tables.

Interest rates mean nothing in this debt soaked atmosphere, that is they have NO meaning, why does a crooked bank with a shitty balance sheet that has been repeatedly bailed out and is hiding bad assets that make up the majority of it's worth get to borrow at zero percent, but I who have worked hard all my life and have a good history of reasonable repayment has no choice but to borrow at 30% or not borrow at all? Nobody is going to accept negative returns on their own real, hard earned cash. It is only the continued creation of thousands of millions of new FRN's each day that makes this possible. Every day of repression of market forces in setting borrowing costs is another day of gross misallocation of capital which will come back to haunt us all for years to come in the most painful and tangible ways. That money being "invested" in negative or very low positive returns is either other people's money or it was just invented a few seconds ago. In fact a devaluation of the dollar. Given the state of the euro I see a lot more of that dead ahead.

The only thing I really agree with from your post above is that there will only be painful ways out, not just a thorough corn-holing, but a daily giant pineapple up the old bum. And I would not object to paying the price as long as the price is paid proportionally by those that caused this, and the 1% bear most of the burden to suffer, they have walked away with ALL of the goodies for years. I am just deathly sick and tired of a disproportionate share of the pain for the poor and disabled and old on fixed incomes, the veterans and the kids not yet gotten started in life and born with a yoke of debt they can NEVER satisfy. I am getting close to the point of preferring a noble death in battle to free us of our masters whip than to go on much longer like this, pretending to accept lies as truth.

LowProfile's picture

The 1% don't pay estate taxes.   Estate taxes are for the 99%.

The 1% use trusts, offshore vehicles etc.

The only way to fix this is to force them to deploy their capital into CAPITALISM, instead of what they are doing, which is RENT SEEKING.


boiltherich's picture

As far as I can tell the 1% don't pay much of any taxes, unless they are too stupid to hire a good accountant.

We used to have a balanced budget.  When spending exceeded revenues because business got it's filthy foot in the door of government by bribing our politicians they had to make a choice.  Either raise tax rates on those that had it to pay, or borrow.  They picked borrowing.  Later of course it got so bad that they had to increase borrowing exponentially and it still was not enough, so they raised taxes, on the middle class, while also raising taxes on the poor via a stealth inflation tax and refusing to honestly adjust or even measure CPI.  And that was not enough so they CUT the fucking taxes for the dirty filthy rich because some dumb ass with the ear of the fascists in charge said that if you lower taxes on the rich everyone will get richer.  Of course that meant they had to increase the poor tax and tax rates on the middle and it gutted the economy meaning they had to now borrow a LOT more. 

Watch for a national VAT that further destroys the economy.  Watch for closing of loopholes, deductions, and exemptions for the poor and middle thus raising their tax bite.  Watch for vast new unmeasured inflation especially on rents and groceries.  Watch for a sudden jerk north in the unemployment numbers lowering the national share of income for the lower 90%.  Look for many new fees couple with huge cuts to services and infrastructure.  Just do not look for unearned financial gains to be taxed at even the ordinary income rate, or any increase in tax on the wealthy or corporations.  Be sure to watch for the total collapse of business and infrastructure because it is coming and things are so unstable now it could all crash any damned day.  Could also just get worse for a few years more, but it is unavoidable at this point.

LowProfile's picture


As far as I can tell the 1% don't pay much of any taxes,

Exactly, which is why I propose you familiarize yourself with this , give feedback to improve it, and begin discussing it with like minded people.

Unless you have a better idea...

boiltherich's picture

The question for me is not about raising revenues, be they from property value (wealth tax), current income, sales taxes (all regressive), fees (pay as you go or insurance like SS) or any other scheme we can devise. The real meat of the problem is A) how it is spent, and B) that those who benefit most pay the most.

Those that pay the most bitch the most, duh! But a society can't survive by a wealthy elite paying off government to not tax them. It is a complex nation, world, and it is not cheap, but the price has got to be paid, not to will destroy the civilization we live in. The wealthy and the loner cranks with their ammo think they can get through it, they can't. No amount of preparation for the apocalyptic future will get you through the collapse some here so loudly predict. And the 1% can't hold out against starving hordes for long in their gated estates once power and government are gone.

In a nation as complex as America we will never strike just the right formula, there will always be the unhappy Unabomber types that have their reasons to hate and bitch. But, we are so far away now from as good as we can make it that I am sad for our future. There are people alive like me that remember when life was good, things worked, we had security, then came the age of corporations, and the ruling that they are people, people exempt from bribery laws. From that day on our way of life was doomed, they were in a stroke appointed status as nobility above us. The raw ideas of capitalism were solid in simple form, but capitalism as we define it now is equal in evil only to religion. It now only assures slavery and bloodshed.


oldmanagain's picture

Boiltherich, I do agree with you. The dream was shot down by the courts.

LowProfile's picture


No amount of preparation for the apocalyptic future will get you through the collapse some here so loudly predict

You sound like you haven't done shit to prepare.

This is going to be quite uncomfortable for you.

Tortuga's picture

Sure, let's wipe the slate clean and everybody starts where they are, today.

Hmmm. 48 million on foodstamps, 14 million on the books as unemployed.... AND

the .001% now just the .01% but still in the Hamptons.

falak pema's picture

there may be only painful ways out of the crisis.

Understatement of the century! 

There HAS to be only painful ways out of the crisis. Thats why current civilization is at tipping point. 

The issue is who pays; we know the historical answer : always the people; rarely the Oligarchs.

LetThemEatRand's picture

As Tyler points out, the oligarchs are very good at keeping what they've taken.  The middle class and poor are much easier to fleece.  Case in point -- the middle class routinely pays in income taxes every single year a very large percentage of their entire net worth.  In fact, given that many who are considered middle class actually have negative net worth due to underwater mortgages and other debt, they pay far more than their net worth in taxes each year.  The lower middle class lucky enough to own property pay a large percentage of their net worth every year in property taxes and sales taxes.

Freegolder's picture

The paper gold market will break, gold will reset at $60k+, and govts will be made whole again.

It is just a matter of time!

Pure Evil's picture

Yes governments will be made whole, and those that hold gold will make out like bandits, but everyone else will become instant paupers.

This will never happen as it would be blantently obvious even to the most dense obliviate that government fiat is more worthless than used toliet paper resting at the bottom of a septic tank.

There was a reason FDR made it illegal to own gold, then required everyone to turn in their gold to the government. You can't revalue gold if there is a market for gold, if the government tried this while the people still held gold, the genie would be let out of the bottle and gold, silver and other precious metals would find their natural market value, which would be a phenomenom outside the control of said government.

The government will do its best not to allow this to happen as the serfs would lose all trust in government printed fiatscos, and would return to using silver and gold as monetary units instead of FRN's.

If that were to happen, the whole edifice would collapse. Social Security, Medicare, Medicade, and Obamacare would all become moot. Foodstamps, EBT cards and unemployment would cease to exist. Everything the government does, which is mainly redistribuion of wealth, is built around its printed central bank Fiatscos Reserve Note's, a return to the gold standard would cause the whole house of cards to implode.

If that were to happen, can you imagine any central bank willing to redistribute its gold reserves? Its easy to redistribute other peoples wealth as long as the wealth is held in worthless paper, but no one will be willing to redistribute their gold, not even the banks.

Nixon closed the gold window for this very reason. Governments and Central Banks don't like to redistribute their own wealth, which is gold.