I sponsor the non-commercial website TaxNetWealth.com. There is a graph which illustrates both the distribution and the change in net wealth between 1995 and 2010 at http://www.taxnetwealth.com/01_The_Wealth_…. The video above is wonderful but it does not show how the tax code with its $1.2 trillion in annual tax expenditures caused a redistribution of wealth to the top 10% over the 15 year timeframe. The next 40% of the population (the middle and upper middle class) lost 8% of their net wealth. The poorer 50% of the population (the poor and lower middle class) lost a devastating 70% of their net wealth (going from a 3.6% share down to 1.1% in just 15 years).
I oppose a "soak the rich" wealth tax on top of progressive income tax rates but I support a revenue neutral 2% net wealth tax (excluding $15,000 cash and $500,000 in retirement funds). This net wealth tax would produce about 40% of federal revenue - enough to eliminate the job killing payroll taxes and provide a sound tax base for Social Security and Medicare benefits. The revenue would also enable the individual income tax to be reduced to a flat 8% (because the $1.2 trillion in annual tax expenditures are not needed with very low tax rates). The combined tax liability would be progressive even though rich and poor would pay the exactly same 2% (net wealth) and 8% (income) tax rates because the top 10% have about 75% of the net wealth.
The capital gains, estate and gift taxes tend to be wealth tax substitutes and would not be needed if all assets were taxed the same. Taxing all assets and maintaining the U.S. worldwide tax jurisdiction also makes tax avoidance difficult. Best of all, a net wealth tax has a negative reinforcement effect on investment (as in "use it or lose it"). The combination of the low income tax rate with the elimination of the capital gains tax actually accelerates business trade and investment. The elimination of the 15.3% tax on labor encourages consumer spending, full domestic employment and increased profits.
A 4% VAT would complete what is known as the 2-4-8 Tax Blend and enable the corporate income tax to be reduced to 8%. Every other developed country in the world uses a VAT to reduce corporate taxes. The low corporate income tax rate would also result in trillions of dollars in foreign corporate profits being repatriated to the U.S.
Indy Week • 302 E. Pettigrew St., Suite 300, Durham, NC 27701 • phone 919-286-1972 • fax 919-286-4274
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