Santelli's 'Tax-The-Wealth, Not-The-Income' Plan

Tyler Durden's picture

With the varied interests of constituents very much in mind, finding a compromise over taxation will be worse than Sisyphean in nature we suspect. CNBC's Rick Santelli offers a strawman, that gets around Norquist's 'pledge' and perhaps provides cover for both parties. The Chicagoan recognizes that what seems like a high-salary to some is very much not to others and suggests instead of focusing on the income, we should focus on the wealth. This is not the first time such a proposition was suggested (as we noted 14 months ago that 'muddle-through' was over and "we are confident, that one way or another, sooner or later, it will be implemented. Namely a one-time wealth tax: in other words, instead of stealth inflation, the government will be forced to proceed with over transfer of wealth") Strawman or not, the fact that Santelli is discussing it (and demurs on whether he has been contacted) means it is on the table...

 

The Pledge...

The Strawman...

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spastic_colon's picture

o/t kevin must be back from vacation....ctrl/p very evident today

redpill's picture

If you want to tax wealth, repeal the 16th amendment and the income tax and institute a consumption tax on new retail goods and services.  Wealthy people always buy new.  The poor can avoid tax altogether by buying second hand.  It would also encourage savings, which is necessary for *actual* economic growth (not borrow n' pretend).  The money would come flooding back into the country since there would be no advantage in hiding it offshore anymore.

RSloane's picture

Yes. Yes. Yes!!!! We furnished two rooms in our house all with furniture and lighting we bought at auction. The rooms look great and we spent a fraction of what we would have spent buying new. We were able to buy great brands like Duncan Phyfe for our dining room at reduced costs, and the stuff was barely if ever used. We're not poor by any metric, but hell, it gave us some leverage on buying things brand new, like durable goods.

After Sandy we drove people to the local Goodwill to buy clothes and things they lost in the hurricane. I would love to see stores like that be given a tax advantage and screw Wal Mart into the ground.

 

Flakmeister's picture

Now thats more like it...

First sensible post out of you yet...

adr's picture

Taxing consumption is not the answer. If it was the VATs in Europe would have led to incredible growth. How are you supposed to grow an economy through the production of goods if nobody can afford to buy anything new?

The issue is that wealth without labor is taxed far below the rate of earned income. We need to follow Andew Mellon's lead and tax capital gains at a far higher rate. We also need to reduce credit massivley and increase interest rates.

Without access to credit you will curb unnessesary spending and over consumption.

Capitalism, especially free market capitalism, requires the production of goods to work. Or are we going to draw lines on what gets taxed, hybrids and electric cars won't get taxed, but gas models will. Or is it that any car under $20k isn't taxed but luxury models are?

IN any case we already have a sales tax. {f you want to encourage the used and resale market, get rid of taxes on used products. Does a used car really needto be taxed on it's value every time it is sold?

yrbmegr's picture

Just remove the distinction between capital gains and ordinary income from the tax code.  Boehner wants a simpler, fairer tax code.  There's a fruit nearly on the ground.

Thisson's picture

I agree, and favoring one kind of income over another is just more central planning.  As is setting interest rates.  Let the market determine the allocations between present consumption and future gains.  Let the market determine whether it is more efficient to add more labor or more capital to the mix of inputs used to produce goods.

No more central planning.  No more economic calculation problem.

kito's picture

Please don't equate a faux conservative like Boner with simple or fair.......please can the fairyland partistan heroics.....Boner will continue to work in unison with the dems in stripping the citizens clean......that much is assured....

Buckaroo Banzai's picture

A VAT is not a consumption tax. It is exactly what it says it is: a value-added tax. It is a tax that is taken at every step in the value chain.

A sales tax is a consumption tax, as it is only paid by the final consumer. You are correct in that "we" already have a sales tax, but that tax is collected at the state and local levels. There is no federal sales tax; consequently, there is room to add that.

Consumption taxes are in fact fully compatible with a free society; income taxes on the other hand are not at all compatible with freedom. You can control how much consumption tax you pay by controlling your own consumption of taxed goods; unfortunately you cannot freely control how much income tax you pay. That is taken from you by force, whether you like it or not, and the only way to avoid it is to utterly impoverish yourself.

Nels's picture

A VAT is not a consumption tax. It is exactly what it says it is: a value-added tax. It is a tax that is taken at every step in the value chain.

Eh, it's just a difference in mechanism, not a difference in what is taxed.  Buy nothing and you pay neither sales tax nor VAT.  The more you buy the more VAT and/or sales tax you pay.  Whether I consume something as the 'end-user' or it's consumed in making some end product is of little or no distinction.   The VAT is just more pervasive.

Sales tax and VAT are both consumption taxes, they just measure consumption at different points.  The sales tax does it only at retail, the VAT does it all along the production chain to be sure and capture all consumption that might be hidden in the production chain.

It's about as much difference as arguing whether U3 or U6 is the appropriate unemployment measurement.  The folks being measured don't give a damn in which slot they are, they are still out of work no matter how it's measured.

If the next book I buy carries 10% of tax, do I really give a damn if it's labeled as sales tax or VAT?  Does that really make any difference to the final cost?

redpill's picture

The extremely critical point you miss is that with a VAT the tax is hidden in the price of the good (much like corporate and payroll tax today), whereas a single point-of-sale consumption tax is transparent; the payer knows exactly how much tax they have paid. If you do not realize how important that is, you haven't thought about it enough.

MSimon's picture

Also VAT requires a LOT of paperwork. It keeps the little guy from troubling the big guys.

blunderdog's picture

   Capitalism, especially free market capitalism, requires the production of goods to work.

Don't be ridiculous.  Banks are capitalist institutions.

RichardP's picture

Banks came into existance to facilitate the production of goods.  They have taken on a life of their own and finance seems to exist regardless of the production of goods.  (Is a CDS a good or a service?)  It would be interesting to see how long financial activity would continue if the production of goods was totally stopped everywhere.  Methinks finance folks would keep on buying and selling financial products to each other for quite some time.

blunderdog's picture

    Banks came into existance to facilitate the production of goods.

No, they didn't.  They came into existence to pay for the survival expenses of the folks who had discovered the power that came from the ability to "create money."  Just like all the other business-models out there.

Oldwood's picture

VAT is not the same as a sales tax, as I understand it. Sales tax is a one time thing at point of final sale, that is to the actual person who would consume the product or service. VAT taxes production at each level. It is a hidden tax for the most part to the consumer and allows the government more slight of hand. Taxes need to be on consumption and transparent, to prevent the constant and ever growing theft we see daily. Taxing income takes incentive from production, where consumption tax incentives savings, the one thing we need for a stable economy. Sales tax already discriminates to product or service. tobacco, fuel, booze, homes and cars are all taxed differently. In texas we do not tax unprepared food to simulate a progressive tax. And we have sales tax systems already in place in most states so no need for more government employees and we can get rid of the IRS. No tax on business either. Sales tax taxes imports the same as domestic so we have a more level playing field with our competitors. While many corporations have maniplulated laws to minimize their taxes, most smaller businesses end up paying it in full. We have to get savings back, jobs back and our country back. A fair taxing system plays a roll in all of that and the beauty of a sales tax it is transparent, so the fairness is much less a subjective idea as to opposed to the way it is now, where everyone "assumes" that they are getting a raw deal because all they hear are accusations against everyone else yet tax records are largely private.

jamezelle's picture

The government should not be used as a tool to "screw X business into the ground". 

JuliaS's picture

How about producing something of value instead of taxing someone else's work?

venturen's picture

Ha, Ha really how many "new" things does buffet, the rockfellers buy. The consumption tax is dumb! A flat tax with no decustion across the board Income, cap gains, every year....regardless if you cash out of your capital gain...would do the trick. But the actual wealth don't want that. 

Herd Redirection Committee's picture

A tax on wealth is a prime way to reduce the record wealth inequality facing the world.  Most of that wealth was stolen, so it makes sense for it to be taken back.  But for it to go from the hands of oligarchs into the hands of gov't officials?  That is no solution at all.   The wealth should go back where it came from, to all the people of the world (who aren't psychopaths).

Nels's picture

Yet another idiot being misdirected by the bullfighters red cape.  The wealth that you worry about isn't going to be visible to any tax man.  All that stolen wealth is in the Ford Foundation, the Carnegie Foundation, etc.   It won't be taxed.

What will be taxed is your parent's 401K.  The only great pile of money visible to the tax man belongs to the middle class and their 401Ks.

The 'all the people of the world' who aren't psychopaths, are kleptomaniacs?  They think they deserve part of what their neighbors worked for, but they did not?

What wealth came from the slash and burn farmers around the world, that they deserve more from the rest of us?

Psychopaths or kleptocrats, is that really our only choice for leaders?

Publicus's picture

It's simple really. Repeal all tax and fees. Have Ben print to fund the governement. And when there is too much money, issue an asset tax on the super rich and then just cancel the money.

Flakmeister's picture

Yes... a wealth tax is very stimulative, it forces productive use of assets and punishes those that will not use their means to better themselves or society....

I do tip my cap to Santelli...

Beam Me Up Scotty's picture

So I am a bad citizen for saving for my retirement and my kids college education?  They will count those savings as "wealth" and take it from me.  Real nice.  Typical parasite.

Dr. Richard Head's picture

Good luck taxing portfolios of cash (outside of the banking industry) and metals in the bottom of the lake.

Jean Valjean's picture

Yes, but the easiest, most direct way to tax the vampire wealth, rather than the productive sources can be explained in a single word: jubilee.

falak pema's picture

jubilees only occur for Queens like Victoria Britannicus  and they celebrate empire not dissolution of imperial oligarchs; the latter only occurs in revolution; dirty business for sure, as jubilees are never open to plebes; its that simple. So they tend to take the other route.

Are you proposing that the Oligarchs of US Senate and WS proclaim, like in the sermon of Jeu de la Paume, we hand our lolly back to the people to nullify the public debt???

Now that would be a jubilee like no other.

disabledvet's picture

Rick "we gotta eat here" Santelli? (that's what he said on air and without teleprompmpting after the failure of MF Global. Goes to show you how little money for trading there ever is.) I'm not sure why Illinois is complaining when they have a beautiful high yield debt vehicle in the form of a nuclear utility. I'm sure he can get all the leverage he wants if he wants to slam that thing into oblivion.

RSloane's picture

Flakmeister is one of Obama's legion of the 400% uptick in our disability rolls. Don't read too much into whatever he posts.

Flakmeister's picture

Jealous are we?

Remember who said what... Rick Santelli said it, you know, the patron  Saint of The Holy Tea Bag...

RSloane's picture

Why would I be jealous of your disabilities?

nugjuice's picture

I'm sorry but there are two things we have to acknowledge:

A) That there are a certain basket of people who have disproportionately benefited from the past decade of bleeding the American people dry: namely the heads of corporations, banks, and politicians.

B) That the people who have sucked money out of the system through loopholes (money printing, handouts, etc) should be the ones who have to help the economy grow again.

I'm not sure people who have worked hard their whole life and saved for retirement/kids' education are the ones he is targeting but I could be wrong. I am all for a wealth tax on people with excess of, say, $20 million (just arbitrary number) as the odds are they unfairly benefited from the insiders' game that has been going on for years. There WILL be business owners who worked hard and came by their money honestly in that group of people and it's unfortunate, as I am all for a free market society where the sky is the limit. But I don't see any other (easy) way to punish the people who have been punishing us.

viahj's picture

image how much Faceplant stock Zuck will have to sell (and pay capital gains on) just to raise the cash to pay the wealth tax on his vast mountain of Faceplant stock wealth....wha, wait....I think I just blew a circuit.

fuu's picture

Or you are in the running to replace Timmah or The Beard.

Jean Valjean's picture

See my post above. I have the answer to both your concerns: debt jubilee

Panafrican Funktron Robot's picture

It's looking more like this is going to be in play in the next few years.  

ejmoosa's picture

I'm just imagining the amount of cap gains taxes eleiminated due to the suckers selling Faceplant...

 

Bet they didn't budget for that in Kalifornia...

Herd Redirection Committee's picture

The money the gov't takes in is one problem (i.e. who they take it from), but how they waste, I mean, spend it, is another one entirely.  Personally I would like to see the wealth taken from the elite by way of debt jubilee, the 1% lose their ass, the 99% in debt serfdom are set free.  And gov't doesn't get a piece of the action (other than also getting to start with a clean slate).

 

What people will do once given a clean slate, well, that is up to them.  But you know that some will max out their credit cards, and try to get as uber-leveraged as possible.

lasvegaspersona's picture

hyperinflation = debt jubilee

don't worry it will be here soon

Beam Me Up Scotty's picture

Debt jubilee is bullshit too.  Most people are debt slaves because they made themselves debt slaves of their own free will.  They just had to have the new truck with 4 snowmobiles and 4 jets skis and a boat and a motorhome and all the fancy stuff.  And they bought it all on credit and now they can't afford it.  Well BOOHOO.  All of these homeowners who took out big mortgages with adjustable rate mortgages and then couldn't afford the payment when the rates went up--I dont feel sorry for them one bit.  Pay attention in school and learn how an amortization schedule works and dont be such a dupe and the bankers can't take advantage of you.

Debt jubilees are nothing more than exactly why we are having the problems in this country that we have.  There is NO MORAL HAZARD anymore.  Not for the rich or the poor.  The responsible people are the ones who get the shaft then.  Otherwise, you better announce the jubilee is coming so I can max my credit out too right before it happens.

blunderdog's picture

   Most people are debt slaves because they made themselves debt slaves of their own free will.  They just had to have the new truck with 4 snowmobiles and 4 jets skis and a boat and a motorhome and all the fancy stuff.  And they bought it all on credit and now they can't afford it.

Bullshit.

"Most people" have never HAD a new truck and 4 snowmachines and 4 jet skis and a boat and a motorhome.  "Most people" are working shitty low-wage jobs so they can pay for shitty cable teevee to watch on shitty big-screens while drinking shitty beer.

You're talking about maybe 25% of the population, tops.  The working class idiots who cheered the destruction of their infrastructure and tax-base and social contract because they'd somehow convinced themselves they were on their way to the BIG-TIME because the housing bubble permitted them to buy a new truck and 4 snowmachines and 4 jet skis and a boat and a motorhome...

The Clintons, Sarah Palin, David Axelrod, Chris Mathews, and Bill O'Reilly are examples of the people YOU mean.  

Not one of them has a damn thing in common with "most people."

Itch's picture

Rip the face off anyone with over $50mm in redundant assets, lets face it they will never use it and its just sucking interest from the rest of us. The game is over, time for the money to go back in the box motherfuckers, but dont worry, we'll let you'll play again if you’re nice.

TruthInSunshine's picture

I have a much, much, much better-- infinitely better-- idea:

Cut government spending 20% across the board while guaranteeding that a balanced budget guarantee will go into effect by 2014, and reduce the Internal Revenue Code to a 3 page pamphlet, with the new and complete taxation consisting of a postcard filled out showing net income earned, multipled by 15%, with a sum line showing that amount. Period. The End.

No one can possibly complain about a flat tax system (except tax attorneys, accountants & government employees) where it takes 3 minutes or less to do you income taxes (even Timmmay could get it correct).

20% ACROSS THE BOARD CUTS IN GOVERNMENT SPENDING.

MANDATORY BALANCED BUDGET BY 2014.

ZERO NEW TAXES IN ANY FORM.

Beam Me Up Scotty's picture

Stop talking all smart and logical and shit.  Sheep don't like to hear the truth. 

I wholeheartedly agree.  The tax code is nothing more than a conduit for the political class to buy votes.  Take that away, and maybe they would start voting for whats best  for the country instead of what is best for their political career.  Sadly, we won't get a 20% reduction in the rate of growth of spending, much less an actual 20% cut in spending.

Dr. Richard Head's picture

15%?!?!?!  That would raise my federal taxes by 30%!  I'll pass, but thanks for asking.

TruthInSunshine's picture

Fine, 8%.

Warren Buffett's secretary will no longer pay a higher % of her income in taxes than Charlie "Suck It Up, Taxpayers" Munger.

Buckaroo Banzai's picture

I like the way you think, but a 95% cut of federal spending sounds much better to me.