To Reduce Inequality, Tax Wealth, Not Income

New York Times ^ | November 18, 2012 | DANIEL ALTMAN

[reaganaut1]

WHETHER you’re in the 99 percent, the 47 percent or the 1 percent, inequality in America may threaten your future. Often decried for moral or social reasons, inequality imperils the economy, too; the International Monetary Fund recently warned that high income inequality could damage a country’s long-term growth. But the real menace for our long-term prosperity is not income inequality — it’s wealth inequality, which distorts access to economic opportunities.

Wealth inequality has worsened for two decades and is now at an extreme level. Replacing the income, estate and gift taxes with a progressive wealth tax would do much more to reduce it than any other tax plan being considered in Washington.

When economists try to measure inequality, they typically focus on income, because the data are most readily accessible. But income is not always a good gauge of economic power. Consider a group of people who all have high incomes but differ widely in their wealth. Who’s going to get into the country club? Who’s going to have the money to finance a new venture? Moreover, income data may not reveal the true economic power of people who are retired, or who receive their pay in securities like stocks and options or use complex strategies to avoid taxes.

Trends in the distribution of wealth can look very different from trends in incomes, because wealth is a measure of accumulated assets, not a flow over time. High earners add much more to their wealth every year than low earners. Over time, wealth inequality rises even as income inequality stays the same, and wealth inequality eventually becomes much more severe.

This is exactly what happened in the United States. A common statistical measure of inequality is the Gini coefficient, a number between 0 and 100 that rises with greater disparities.

[reaganaut1]

Who did not see this coming? Encourage low-skilled people to come here, legally or illegally, and then complain about "wealth inequality". A quotation of Jefferson comes to mind.

I'm sure that if a wealth tax comes, it will be on top of an income tax, not instead of it.

[Eric in the Ozarks]

No wonder they’re going out of business.

[Cincinatus]

This will never happen -- the Kennedys and the Pelosis and the Rockefllers and the Heinz-Kerrys will never permit such a thing to pass.

Only the suckers who actually work for a living are to be plucked.

[Opinionated Blowhard]

As horrible as this idea is, as much as it creates perverse incentives to spend and not save, at least it would hit hypocrites like Warren Buffett and other “patriotic millionaires” who already have a pot of money in the bank and want everyone else’s income taxed.

[Oldexpat]

If you want to see the Rats bail out on tax increases..the GOP should propose a wealth tax. All those trust fund babies and billionaires would be on the phone to DC so fast.
One thing he does overlook..is that we do have a partial wealth tax..it is real estate tax..plus dividend tax tends to be related to wealth.

[LucianOfSamasota]

Once ‘the people’ (read the state) possess all the wealth, the Marxist revolution is complete!

Who controls the means of production, (land , factories, etc.) controls the nation.

[central_va]

A tax on net worth would be better than an income tax. However hiding tangible and liquid assets is 100 times easier than hiding income. End all individual federal taxes and go back to tariffs and user fees.

[bk1000]

This is the same idea that causes people to have to sell family farms or small business to pay death tax. No thank you. If the government needs revenue it isn’t because its not taxing enough, its because it is spending too much.

[Arm_Bears]

Actually, we had such a thing in Florida. In lieu of a state income tax, there was this creation called an intangibles tax that was levied on all personal financial assets. Each year, you toted up the value of your cash, savings and checking accounts, stocks, mutual funds, bonds, and any other monetary instrument (retirement savings were exempted) and paid a small percentage (around 1%-2%)of that amount. The system was scrapped several years back due to enforcement difficulties.

I think imposing a similar assessment on rich DemocRATS is a fine idea, but at a much higher percentage (say 25% annually). Dillweeds like Buffett and Gates don’t have much in the way of real income, so they can piously (and hypocritically) talk about raising income taxes on everyone else. I suspect they’d start singing a different tune once their wealth and assets were targetted and they actually had some skin in the game.

[Lou L]

Once ‘the people’ (read the state) possess all the wealth, the Marxist revolution is complete!

Once "the people" possess all the wealth, it's all just parasites finishing off the long-dead carcass.

[Triple]

WOW -

“From each according to their means to each according to their needs.” - NYT, Obama, Marx.

The mask is coming off.

[mreerm]

i wasn’t able to find reader comments.

am i going blind or do they not want to hear what people have to say in about the piece?

[DesertSapper]

To Reduce Inequality, Tax Wealth, Not Income

No. Tax consumption, not wealth or income.

[theBuckwheat]

As night follows day, proposals to tax wealth will leave us with a permanent tax on wealth AND on income. The result will be bigger government, which is the Time’s real objective. But this proposes that society and the economy would be better off when government seizes $1.00 from the private sector and spends it on the welfare-warfare State.

What has previous spending given us? ObamaPhones and Solyndra.

[King Moonracer]

Is Narcissim more about wealth or power. Soros worships money and power, but which one does he worship more? Barry likes power, but is too lazy to work hard at it.

[Brooklyn Attitude]

Income/wealth inequality is a phony issue designed to rationalize hatred of the wealthy and theft from high earners. If my neighbor makes 100X as much as I do it has no effect on my income, freedom or lifestyle. In England they used this justification to steal 95% of income from high earners. It didnt increase revenue, so they abandoned it. Leftys never learn.

[MrB]

Yep. Consumption tax, and a consumption tax alone, would be the real only fair tax.

Income taxes punish hard work and tax the measure of your contribution to the economy (your salary).

Wealth taxes and investment taxes punish another input to the economy, because without investment, we have no economy.

Consumption tax taxes/punishes how much you take OUT of the economy.

[Graewoulf]

OBAMANATION COMMUNISM

Inequality is the primary motivator for the athlete on the field of any sport.
“I can win.”
Inequality is the primary motivator for the newly hired worker.
“I can improve my skills with this company.”
Inequality is the primary motivator for an inventor.
“I can build a better product.”

Without inequality there will be no fear of failure.
Without inequality there will be no grades at school,
No discipline at home,
No scores at a sports event,
No hope for change.

All will be equal
In the never-never land of Zombie Obamanation.
The ointment of Communist Equality
Will stifle all that it touches - - - .

[Phlyer]

This will never happen -- the Kennedys and the Pelosis and the Rockefllers and the Heinz-Kerrys will never permit such a thing to pass.

Actually, they would - and quickly. When you get to a certain point, the amount of money you have in the bank is not the key issue. You're not consuming that wealth - you're using it to generate income. You need the income from it to live the lifestyle you want. If you institute a wealth tax and reduce the income tax, they might be better off for the rest of their lives. Yes, the principal would eventually be consumed - but not for many years, and in the meantime they get a greater income after taxes.

The real problem is that the really rich each have a lot of wealth, but there still aren't that many of them. The absolute quantity of wealth is greatest in the sum of all the upper middle class - those who have put money aside for retirement. The Pelosis of the world want access to all that 401K money. This is absolutely a ploy to capture that wealth.

And I'd bet all the wealth that I actually do have that they'll work out the law that seizes 401k funds in a way that establishes enough loopholes to shield their own wealth anyway. It'll be Obamacare all over again, with government workers and unions exempted from the rules that apply to the rest of us.

[Buckeye McFrog]

This will never happen -- the Kennedys and the Pelosis and the Rockefllers and the Heinz-Kerrys will never permit such a thing to pass.

ahhhh, but Dr. Frankenstein always had this funny way of losing control of the monster once he had built it.