There Aren't Enough Rich People To Tax

Tyler Durden's picture

The colossal size (and growth) of the US government's budget deficit is a problem that seems to remain on the sidelines all the time the Fed is buying and maintaining interest rates at an acceptable level. As we noted last night, nothing points to investor concern (yet) aside from an increasing diversification from the USD as a trade currency. Many have suggested raising taxes on the rich to cover the difference between what the government collected in revenue and what it spent. Professor Antony Davies takes on this thorny issue and demonstrates that taxing-the-rich will not be sufficient tyo make the budget deficit disappear as he notes: "the budget deficit is so large that there simply aren't enough rich people to tax to raise enough to balance the budget"; instead we should work on legitimate solutions like cutting spending.

 

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wisefool's picture

corporations are people too. How is tax free G.E. doing? business should be booming after the dereco.

SilverIsKing's picture

What is the published annual deficit now, $1.4 trillion?  It's surely much higher than that.  There's nothing that can stop it so we are indeed heading off a cliff.

 

Taxes Schmaxes.  Don't mean a thing.

$16 Tril ---> $20 Tril ---> $25 Tril------------------------------------------------>>>>>>((((((KABOOM))))))

narapoiddyslexia's picture

The solution is quite simple. The net worth of everyone in the US is about $65 trillion. The richest 1% own about 50% of that, or about $32 trillion. The national debt is about, what? $15 trillion?

Hence, we just have a one-time wealth tax on the 1% of 50% of their wealth and pay off the national debt in one fell swoop.

Problem solved. Ain't democracy grand?

SilverIsKing's picture

And what about the following year when the government spends another $1.4 trillion more than it collects?  Go back to the 1% for more of the same?  Democrappy is what I like to call it.

falak pema's picture

Thin down the wealth profile of the 1%, they don't deserve it as rentiers. This business model is corrupt as hell. By any set of standards. Kill the financial economy to start with. Make it slim and simple like before, devoted to the real economy not to derivatives and manipulaitve plays. As the man says : cultural revolution and paradigm change. 

Doña K's picture

Before you argue with politicians and pundits who insist in taxing the rich to solve the problem, ask them before presenting them with the facts if they believe that numbers don't lie.

goldfish1's picture

"Before you argue with politicians and pundits who insist in taxing the rich to solve the problem"

Who's arguing? Implement a wealth ceiling of $500 million on all people, corporations and foundations.  All debt cleared. No deficit spending. No fiat money. Traitors (meaning a thorough investigation of congress and agencies) prosecuted and hanged.

Let's begin from there.

roadlust's picture

Excellent start.  But the nation's laws and tax policies shouldn't be ENCOURAGING the concentration of power ("money") and the marginalizing of democracy.  When tax and financial "laws" reflect what is good for the majority of people here, we can start to talk about "deficit" reduction.  The deficit is caused by under collection of the nation's wealth from a handful of people, not "too much spending" by the majority of people (through their democratically elected representatives).   

Our government is the only force big enough to deal with the international gangsters who have hoarded the world's resources.

A Nanny Moose's picture

Our government is the one that allows corporations (including multinationals) to exist within our borders. Our government is bought by them. You expect the problem to be resolved by those who created it? Ha!

The deficit is caused by under collection of the nation's wealth from a handful of people, not "too much spending" by the majority of people (through their democratically elected representatives).

No the deficit is the result of votes being bought. What about those individuals who are not paying taxes? Why do they get to vote themselves a paycheck?

It won't be long now. Wait for it....

ATM's picture

Corporations lobby for one reason and one reason only - it's a great investment.

The real underlying problem is the conditions that have arisen that make such lobbying profitable in the US. the Federal government has assumed far more power than it is rightfully allowed. Remove the power and you will remove the corp money. You cannot remove the money withthe power still in place.

Nels's picture

Our government is the one that allows corporations (including multinationals) to exist within our borders.

You haven't heard of Siemens?  Volkswagen? Daimler? Bayer? Krupp? Sanofi-Aventis? Sony?

If you have a point, you need to explain in more detail. 

 

SilverIsKing's picture

"The deficit is caused by under collection of the nation's wealth from a handful of people, not "too much spending" by the majority of people (through their democratically elected representatives)."

 

So you don't think the politicians conjure up reasons to give money to special interests for the benefit of their own political coffers?

falak pema's picture

we need AcTS and pronto, not words. These politicians don't deserve to be in their positions. If they stay US decline is ensured. Its for the people to ask themselves what future they want. The way the US power structure has morphed means it will get worse on its OWN past momentum. The cover up and the arm twisting will get ominous. And the can kicking. If the US people don't decide their fate, others will by opting out of Pax Americana and USD hegemony. 

Tipping times, ask the Brits what it feels like to look back to their past. Or the french or anyone else. Time waits on NO empire. 

walküre's picture

Clearly there are a few agents of the 1% who are voting you down?

They keep arguing about the debt that cannot be serviced but they keep omitting that the debt is someone else's wealth.

Ergo, we cannot afford to service the huge wealth which as you describe correctly is largely built upon fraud and corruption.

goldfish1's picture

Must be plenty of shills here representing the 1% give the downgrades. Your cake eating days are numbered.

Crash N. Burn's picture

"We’ll take a hypothetical billionaire, who has an annual salary of $10 million/year (greater than that of the average billionaire). As I mentioned previously, even that monster-salary only represents 1% of the total wealth of this individual. Thus, even a 100% (income) tax-rate on a billionaire only has a trivial economic impact on this individual. More importantly, (assuming a 10% annual rate of appreciation on assets), this person’s income only represents 10% of his/her annual increase in wealth. What this means is that no income tax system could ever fairly tax such individuals – with the inevitable result that more and more of a society’s wealth is funneled into their pockets every year. Now let’s see what happens if we switch to a 5% wealth tax. It is simple arithmetic that a 5% wealth tax would result in the billionaire paying $50 million per year in taxes. In other words, using the numbers of this hypothetical example, a 5% wealth tax would result in 500% more tax revenues for government being paid by this billionaire than a 100% income tax-rate. Best of all, with the ultra-wealthy no longer being able to hide the vast majority of their wealth from taxation, the wealth tax can be set at whatever rate is necessary to stop this relentless plundering of all the wealth of our economies"

The Solution to Sovereign Insolvency, Part III: Taxation Salvation
twh99's picture

I think you are overlooking the fact that people of all income levels already pay a wealth tax.  It's called property tax.

Mentaliusanything's picture

"the budget deficit is so large that there simply aren't enough people to tax to raise enough to balance the budget"

Fixed it for you!

Quantum Nucleonics's picture

This is so asinine as to be laughable.  The net worth of most wealthy people is in the form of assets.  In order to pay the tax, said 1%-er would have to sell those assets into a market where every other 1%-er would be selling.  Get out your Dow 1000 hats.  Or, you could just seize the assets directly.  But then you'd still need to turn it into cash.  I guess you could just hand the assets over to the debt holders.  But then, instead of Bill Gates, George Soros, and the Koch brothers as your alleged overloards, you'd have the Chinese dictatorship, the Fed, and a bunch of pension fund managers.  Boy, that's sooooo much better!

I'm sure your plan would have no negative effect on economic growth or employment. None at all.

A 50% tax on someone's net worth would likey be considered a "taking" under the 5th Amendment, so you'd need to repeal it to implement your plan.  Those pesky civil liberties!

Dr. Sandi's picture

Repeal? So quaint.

Why not just IGNORE the 5th. Pretend somebody imporant just took the 5th and now we can't find it.

Stuck on Zero's picture

The real advantage to taxing the wealthy comes from depriving them of some of the money they would spend buying politicians.  Oh wait.  The politicians would never tax the wealthy because that would cut off their benefactors.

 

falak pema's picture

absolutely, go after them and their corporates, to the Caymans, to the end of the world. And never let them do this pile up of wealth again. Today, the part of wages in GDP has never been lower and corporate profits never been higher. And taxes paid by corporates for a business model which is a screaming disgrace, for the real wealth it generates in home countries, is very low : 8% for the big boys! As they transfer price to death from Caymans. 

walküre's picture

I don't know what's the better approach. Go after the huge pile of wealth which is largely illegitimate as well as the debt or declare the wealth completely worthless unless it is tangible. At least if there was a plan to reset and reform including a jubilee, the super wealthy would have to put their capital into production.

Either way though, the end game is approaching and the balance sheets need to be blown to Smitherines.

tarsubil's picture

What do we do 10 years after your "one time" solution when the debt is at $1 quadrillion?

Why do we even want to fund the Federal government?

walküre's picture

Think outside the box.

Mercury's picture

You mean like Bobby Mugabe has been doing since 2000 in Zimbabwe?  Genius.

Have you guys considered sending your resumes to central planning?...I bet they'd like the cut of your jib.

walküre's picture

Bullshit.

Speaking of "cut". What's yours under the current system? Enough to forgive and forget the oppression and the theft?

narapoiddyslexia's picture

The rich own Congress. Let them pay for it and it's excesses.

Quantum Nucleonics's picture

If only.  The rich own a part of Congress.  The welfare entitlement state owns the majority.

goldfish1's picture

Bull shit. You're comparing the trillions to the millions. Congress pacifies the slaves to avoid an uprising.

Bob Sacamano's picture

A. No such thing as a "one-time tax" in government

B. It's why the Founders wanted to avoid democracy.  However, the idea of a republic has been getting watered down for many decades (e.g., individuals voting for Senators instead of States).

Solution: Get rid of the corporate tax (which individuals pay -- just buried in the price of their products).  Tax only entities that can vote (i.e., individuals) -- then when it becomes clearer how much each of us is paying, then maybe some folks will be more inclinded to shrink the federal government rather than continue with its incessant growth.

Mercury's picture

You'll still likely end up with more voters than taxpayers and the incentives that go with that...

Pool Shark's picture

 

 

True "Democracy:" Three wolves and two sheep voting on what's for lunch...

 

 

Bohm Squad's picture

Gets ugly on the third day...

Dr. Sandi's picture

And on the third day, the Lord made lunch.

And it was wolf.

And it was good.

A little greasy though.

walküre's picture

Your view is clouded by too much technocratic nonsense.

The Founders are rolling in their graves as they watch how a small corrupt group with illegitimate powers has created illegitimate wealth for themselves and oppressing the rest of the population to suck it up.

The rule of law has been suspended. We are no longer a democracy,  no longer governed by the people for the people. We are governed by the corporate interest for the corporate interest which is the interest of the bankers. Those who have hijacked the country in 1913 when they signed their currency into law. Nice gig if you have access to it. It's called Oligarchy which is a form of Aristocracy but without the titles.

roadlust's picture

Our "founders" wanted to avoid democracy?  We're well on our way there, thanks to morons who actually believe that.  (By the way, the world is flat.  The whole round thing is a communist conspiracy).  

Quantum Nucleonics's picture

Yes.  The Founders did not want a democracy.  They designed a republic.  Please enlighten yourself by reading Federalist Papers #10 and #39.

Bohm Squad's picture

You've really showed the forum the depths of your knowledge...!

The Founders wanted a constitutional republic...not a democracy...that's why we have a constitution that limits powers and protects citizens from the majority.  Well, at least it used to.

 

aerojet's picture

Corporations don't pay taxes now, so getting rid of the tax would effectively do what again?

Ruffcut's picture

Sure bob, there is one time tax.

One time each fill-up

One time each pay check

ONe time each property tax statement.

Kinda like that, Bob.

When you die, you might have a one time estate tax, and then you are done.

Paul451's picture

And move the date of national elections from November to April 15th!

AnAnonymous's picture

Ain't democracy grand?

------------------

Ah, an excellent point.

Indeed, as US citizens in their quest for fantasy, have built a strawsman to avoid facing that US citizenism is the prevailing system and no other, according to their depiction of democracy, this is what should happen.

Time will tell. Or a basic knowledge of US citizens...

jekyll island's picture

Since when did something as insignificant as the facts stop the US Gubmint?  They have proven time and again they will not do the right thing, they will do the wrong thing, and most of the time it is exactly the opposite of what should be done.

 

 

akak's picture

Oh dear Chinese Citizenism troll of fabled anti-American Chinese propaganda past and now, will you please tell us all again your delightfully nonsensical fairy tale of how your supposed "US Citizenism" led to the societal and environmental collapse of Easter Island literally centuries before the USA was even founded as a nation?  That insanitation and wording of mind of yours is one of my favorites!

AnAnonymous's picture

Easter Island population did not collapse centuries before 1776,July, 4th.

akak's picture

Of course it did.

"Sometime before the arrival of Europeans on Easter Island, the Rapanui experienced a tremendous upheaval in their social system brought about by a change in their island's ecology... By the time of European arrival in 1722, the island's population had dropped to 2,000–3,000 from a high of approximately 15,000 just a century earlier." (http://en.wikipedia.org/wiki/Easter_Island)

But you keep on repeating your garbled and nonsensical anti-American bigotry and Chinese Citizenism propaganda, and make us laugh.