Income taxes won't cut it: we desperately need a wealth tax
By: Tom Malleson (thestar. com)
S E E D E D C O N T E N T
All in all, the evidence is clear: an effective wealth tax is completely feasible as long as it is designed cautiously and carefully.
TMBy Tom MallesonContributorMon., March 13, 2023timer3 min. read
For 100 years, the primary method for dealing with inequality has been the income tax. Unfortunately, this tool is becoming increasingly inadequate for dealing with the new phenomenon of superrich billionaires.
The richest person in Canada, David Thompson, is estimated to possess family wealth of $77 billion. Imagine for a moment that society were to try to tackle this by implementing a 100 per cent income tax on his annual income, on top of which Thomson spends, say, $100 million a year on various mansions, banquets, yachts and other frivolities of the superrich. It would still take 770 years to reduce his total wealth to levels of normal people.
To meaningfully reduce inequality the income tax simply won't cut it. We require a wealth tax.
Wealth taxes are not new. They have existed in a dozen countries in Europe over the last several decades, working decently in some cases and terribly in others. In practice, wealth taxes typically face three reoccurring obstacles:
- One is accurately valuing the assets of the rich, since certain assets like artwork or private businesses might not have an obvious price.
- A second is exemptions. These are deadly to the wealth tax because they lead to widespread gaming of the system. For instance, in Sweden, exemptions on business equity made it easy for rich individuals to simply shift their wealth into ownership of firms and thereby avoid the wealth tax.
- The third problem is tax avoidance. Estimates of this vary widely but the most pessimistic estimate is that it can be a big problem indeed: a 1 per cent increase in the wealth tax lowers the amount of wealth that rich individuals declare by roughly 40 per cent after five years.
Luckily the last few years have seen an explosion of studies examining what makes wealth taxes succeed or fail in the real world.
We now know that the valuation problem is actually smaller than it first appears, since at least 80 per cent of the wealth of the top 0.1 per cent wealthiest families is in the form of assets that are regularly traded. These include publicly traded stock, bonds, and real estate, and so have a clear market price. Does anyone really believe that Elon Musk can hide the bulk of his wealth when everyone can readily see the value of Tesla shares?
For private businesses, simple effective formulas can be used to approximate their value. For instance, Switzerland uses rules based on the book value of business assets plus multiples of the firms' profits. Mistakes will happen, of course, but tax authorities can correct them by using retroactive adjustments when assets are finally sold. Tax payers can then be refunded or debited if it turns out their assets were worth slightly less or more than originally estimated.
Avoidance can also be substantially mitigated by having a centralized tax system for the whole country, since in Switzerland and Spain the rich often avoid wealth taxes by simply moving to a different city. It's also necessary to make extensive use of third-party reporting whereby one's financial information is passed directly to the tax authorities by intermediaries such as employers or banks.
After all, it's not as if the wealth of the rich is truly unknown. The wealthy know exactly how much their investments are worth since it's meticulously recorded in their banking documents. All that's needed is legislation requiring such information to be automatically shared from the banks and money managers to the tax authorities, as is already common practice with many people today for their regular income.
According to state-of-the-art research, instituting a centralized tax system and third-party reporting would likely reduce total avoidance in Switzerland from a disastrous 43 per cent to a sustainable 6.9 per cent.
All in all, the evidence is clear: an effective wealth tax is completely feasible as long as it is designed cautiously and carefully.
Just as the income tax was a fundamental requirement for building the welfare state in the 20th century, the wealth tax is a fundamental requirement for building a decent society in the 21st.
Tom Malleson is an associate professor of social justice and peace studies at King's University College at Western University. SHARE:
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This is an ideological issue. One either believes in economic justice or one doesnt. The extremely wealthy benefit from the laws and regulations that permit obscene accumulations of wealth. This isnt written in the cosmos, it is man made.
Exactly, in 2019 the top 20 of earners (+$168,600) only paid 68% of the federal taxes collected . They should pay 85 or 90% of future federal taxes. It's only their fair share.
Wealth tax is not an income tax, it is a wealth tax.
It is legalized theft.
When they run out of rich people's money they will come for the middle class next. Anyone with a personal savings account will be fair game.
$168,000 earned income is basically upper middle class. John's seed deals with the uber-rich and also deals with wealth (not earned income).
It's another swing at equity. It's ridiculous to try to force equal outcomes. Why don't you try to fix the education system in this country so that everybody gets a good grounding in STEM and has a good standing for building a leg up for themselves.
How much money is collectible there?
Be more specific in your question.
This has nothing to do with obscene accumulations of wealth.
JB hasn’t defined extreme wealth or how much their taxes should increase. The Biden 2024 Budget request includes a $1.8 trillion deficit. I’m asking how much JB wealth tax will raise beyond current taxes.
Typical reply.
"Anyone with a personal savings account will be fair game."
I think that happened in Greece several years ago.
I would suggest that extreme wealth is upwards of $500 million in assets.
Because fixing the broken education system and getting everybody a good education will do more to raise their standard of living than our inept financially criminal federal government will be able to do.
That would definitely help ease the disparity between the lower and middle classes. It will not do anything to address the disparity referenced in this seed (uber wealthy class and everyone else).
Should the uber wealthy disparity be addressed? Given this wealth is enabled by society, society certainly has the right (and means) to mitigate extreme wealth. In most cases society should not interfere with the accumulation of wealth under the principle that the accumulator earned it (albeit this is clearly not true with generational wealth). But there is a point, in my mind, where the wealth is so extreme and the power it enables is so vast compared to the average citizen and enables such a gross disparity in opportunity that it is net harmful to society.
If we could get a system where tax dollars were actually used responsibly, I could see myself supporting a progressive wealth tax. Something like 0% on wealth < $500 million and a progressive tax as wealth levels rise. I use $500 million because that seems to clearly be in ballpark of more money than anyone would ever need for themselves and family. When we get into the multi-billionaire range we are clearly in the realm of kings who have extraordinary power based on their wealth.
Unfortunately that will never happen in this country. Simple human nature gets in the way and our elected leadership is too used to spending every penny they can get on their pet projects, all in the name of returning to their constituency. And I don't expect it to change as IMO the voting public is mostly a bunch of sheep.
At least not in any of our lifetimes.
Ignorance and apathy. Largely driven by name recognition and/or a few issues / rumors / talking points with the depth of mere slogans.
Yes. Or it's an idiotic issue. Or both.
You obviously do not.
Who gets to define "obscene"? Why isn't wealth envy considered "obscene"?
I think it's obscene to stake claim to some mythical "right" to interfere with other people's lives simply because they have something you don't.
When does that happen in our Congress?
Better start on amending that pesky constitution.
And will people get refunds when their unrealized wealth goes down?
They will pay less wealth tax.
This is great. Pay taxes on speculative, ever changing guesses as to your wealth, and if your assets goes down, you are out of luck. Sorry about that 20 million you had to pay out of pocket for money that you never had.
Which is as asinine of an answer as it gets.
The rich will offshore their money- hell they may even renounce their citizenship if that is what it takes. I am sure a work VISA into the US is cheaper to maintain than paying this suggested "wealth" tax.
Leaving the middle class to make up the difference again. No one will want to keep a savings account. Precious metals, foreign currency, etc- that cannot be tracked will be the new safe havens.
Oh... just sit tight and prepare to be amazed.
Once again the left talking about taking from the productive to give to the worthless.
So the only productive people are the extremely wealthy? That is a warped view.
Of course not.
But you already know this won't stop with just the "wealthy".
They will just change the definition of wealthy.
In 2020 the top 1% received 22.2% of the national total adjusted gross income, yet only paid 42.3% of the total income taxes paid. The bottom 50% only received 10.2% of the national total adjusted gross income but unfairly had to pay 2.3% of all federal income taxes paid.
That ain't right.
When a wealth tax was proposed in the United States a few years ago , the threshold to kick in the tax was 50 million. How many Americans have 50 million dollars in wealth?
Exactly, this isn’t about feelings, it’s about taking money.
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should have their say
A society has every right in the world to control the accumulation of extreme wealth.
Exactly, what’s yours is mine and what’s mine is my own.
Do you have 50 million dollars? If you do you should be happy to contribute 3% of your excess (over 50 million) to your country. Or are you going to take it with you?
No.
good song
Yes, the frustrations of liberal youth.
Not in the USA. Perhaps in socialist/liberal/progressive kind of utopian country.
Don’t forget the line:
”But I don’t know what to do.”
Could’ve fooled me ....
Do you really want to start a thread on what you don’t understand?
Again; you think they are going to stop with just the wealthy? Dream on.
I am sure there poor that are looking at the middle class thinking, "They aren't paying their fair share!"
More every year. That's what makes America great.
Why do you think the threshold would stay at $50 million?
The problem with more taxation (regardless of the method) is that this simply makes more money available to a corrupt body who has shown to be incompetent, wasteful and corrupt. That body being the U.S. Congress and the distribution arms of funding.
Our problem here is profound; I see no solution ... how do we reboot Congress and get it populated with responsible statespersons? No idea.
Spot on, exactly what I was going to say.
We don’t need a wealth tax. We need a Government that doesn’t spend money like a drunken sailor on leave.
Exactly,
Well, I'm left, well, you know, you right
I bet she gone