Mike Kueber's Blog

November 19, 2012

A wealth tax

Filed under: Economics,Issues,Politics — Mike Kueber @ 7:05 am
Tags: , ,

An op-ed piece by Daniel Altman in today’s NY Times describes an alternative for tax reform that I haven’t previously seen – a so-called wealth tax.  The piece persuasively recommends that the federal personal income tax and estate tax could and should be eliminated and replaced by a wealth tax.

According to the piece, the personal income tax and estate tax generate $833 billion a year in revenue.  Because Americans have assets amounting to $58 trillion, a tax of one and a half percent on those assets would generate the same amount of revenue.  Instead of a flat wealth tax, however, Altman recommends a progressive one, with no tax on assets less than $500,000, one percent on assets between $500,000 and a $1 million, and two percent on assets over $1 million.  Sounds simple and painless for most.

A major problem with this proposal is that it is too painless for too many.  The vast majority of Americans have assets less than $500,000 and would pay nothing.  This result would be anathema to many in the conservative community who believe that America needs for its voters people to have some “skin in the game.”  That militates in favor of a one percent tax on all assets up to $1 million and a two percent tax on assets over $1 million.

An advantage of this proposal, I believe, is that income is easier to hide than assets.  Further, it will discourage the wealthy from sitting on their assets.  And, despite the contention of some that business owners will be hard pressed to come up with the annual payment, wealth seems like a better reflection of “ability to pay” than does income.

This is an idea that deserves further analysis.


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