Having lost, at least temporarily, their battle to kick 20 million Americans off their health care plans, send 20 million people back to Mexico, and close the door on future Muslim immigrants, the Republicans are now turning to their next project — reducing the taxes on well-off top money-earners and making up the deficit with a combination of higher taxes on the poor and less spending on entitlement programs. This was always at the top of their agenda, they just needed to get some momentum first. We can now look forward to a stretch of mind-numbing, demonstrably false pseudo statistics proving that Ronald Reagan’s trickle down economics was 100% correct but was sabotaged by succeeding Democratic administrations.
If that choice of topic leaves you less than enthusiastic, I advise you to just click and move on. But if you are so bored that you will read anything rather than just stare at the wall (or cut the grass or do the dishes) I am about to tackle the subject.
*
What is the fairest way for our federal government to raise the money it needs to finance its operations?
Historically we settled that question a hundred and fifty years ago. First in 1861, to be precise, when we decided on an income tax to help pay for the rising costs of the Civil War. We rescinded t briefly in 1872, but reinstated it with the Sixteenth Amendment in 1913. We decided on an income tax because income was assumed to be the best indicator of wealth and we all agreed that the wealthy should shoulder more of the burden of financing government, since they stood to benefit the most from its stability. Since then we have raised about 85% of our federal revenue that way. The more money you made, the higher your tax rate. Despite the fact that this principle comes unnervingly close to being Marxian (“From each according to his abilities; to each according to his need”), it is nevertheless now pretty much accepted across the political board. I make exception for Grover Norquist, a blinkered fanatic who is against all taxes, and for a few extreme Tea Party disciples of Ayn Rand, whose response to a cry for help from the poor is “Go get a job!”
I say we seem to have accepted the idea of a progressive income tax, but there has been at least one serious earlier effort to establish a different approach. That effort was by Henry George, an economist who advocated in 1871 a “single tax,” based solely on land ownership. Mr. George’s theory was that all land properly belonged to God and that communities and that individuals should be granted only limited use of it according to the degree that the community would benefit. People should not be allowed to just sit on their acreage waiting for it to become more valuable as the population increased. Accordingly, he said, taxes should be levied based on the amount of land each taxpayer temporarily controlled. This was a reasonably solid theory in a time when America’s economy was still largely agrarian, and the accumulation of wealth through production of tangible things—railroads, ships, buggy whips—all required actual property on which to situate one’s factories or roadbeds, rather than on the rather mysterious assets more popular today (“in the cloud”, “market share”), which require only faith. (Google’s astronomic share price rests essentially on nothing more than the computer code for its search algorithm. Microsoft’s silicon valley “campus,” luxurious though it is, represents but a tiny fraction of the company’s book value.) The amount of land one owned would today be an exceedingly inaccurate base for taxation.
(As an ironic footnote to the story of Henry George and his theory it can observed that in his later years, after his books had become famous, he supported himself — quite handsomely — by lecturing and writing, occupations that required no more land than enough floor space to accommodate a desk. He would have paid a negligible tax under his own proposal. But that’s a digression.)
I think we do all still share the belief that the wealthy should bear a bigger tax burden than the poor. I will argue here only that we are not calculating it right. Specifically, by using income as an indicator of wealth, we are short-sheeting ourselves.
The first problem is that you can be exceedingly wealthy and have no income at all. For example: let’s say I hit the lottery. I pay my one-time tax on my winnings, and I decide to stick the rest of my millions under my mattress, withdrawing only what I need to live on year by year. Thus I have no income to declare. I am wealthy by any common-sense measure, but I have “broken my arm,” as the priests used to say — I can no longer reach as far as the collection plate.
The second problem comes because of the ease with which income can be hidden. Details about shell companies, subsidies, exemptions, depletion allowances, deductions, abatements, and the like dot our tax laws like cotton bolls in an east Texas field — all conceived by legislators doing favors for wealthy campaign contributors. These loopholes are tucked into otherwise non-controversial “funding” bills passed at midnight on Fridays after the reporters have either gone home or to their favorite watering holes. They are very effective at shrinking the government’s revenue, and invariably benefit those who already enjoy the greatest wealth. This shifts the burden of cutting “discretionary” spending to those who are less rich — and do not have ready access to lawyers accountants and venal legislators — and it contradicts the avowed purpose of the graduated tax.
I share Mr. George’s objections to income as a measure of wealth, but I think that land ownership is no longer a good measure either in a non-agricultural society. I propose here that individual wealth can best be measured by simple ownership. Ownership of anything. Income can be too easily concealed by a leaseback deal with a shell company owned by your father-in-law, whose legal residence is in the Cayman Islands, and whose officers are your brother-in-law’s wife and kids. That will get you past the IRS’s computer check of your paperwork, but it won’t hide a privately outfitted Boeing 754 or a 55-million-dollar mansion or a 200-foot yacht. They will be visible not only to prowling IRS agents but also to whistle-blowers eager to benefit from their 15% bonuses..
Sounds easy? Fair? So what would be the problems?
All private wealth is really personal. (Each of us has some communal wealth as well — in the form of highways, the postal service, an army — but it would be hard to specify its varying value to each of us as citizens — roads to our favorite vacation spots, shipping lanes for the goods our factories produce, help for hurricane destroyed homes, means of transportation to and from our jobs. Pretty much beyond any reasonable hope of calculability.) But everything else is personal.
“Personal” would exclude taxes on companies or organizations taxes or any kind of general taxes (on cigarettes or cancer drugs, for example). The Roberts Court says that corporations are people, but that doesn’t make it so. Companies in truth “own” nothing; they are artificial entities owned by their owners or their shareholders even if their identities are sometimes concealed under layers of semantic fiscal creations like pension funds or golf clubs or “non-profits.” Such entities therefore would owe no taxes, since they don’t represent personal wealth, but their individual owners would have to own up to their individual stakes. The same logic would apply to all of Mr. Roberts’s artificial people — political parties, philanthropic foundations, churches, educational institutions, museums —they are all owned in the last analysis by individual living breathing identifiable and taxable people, some of whom are wealthier than others.
So a new-style Wealth Tax Form 1040 (as advocated by Senator Ted Cruz and several allies) would simply ask for a list of your personal assets and their value.
How to arrive at their value? Not really difficult. The prices of the most common of the items on your list (stocks, bonds, warrants, deferred bonuses, and all the other banker-defined financial “products”) have published market values. There would be no distinction between domestic and foreign assets. Other valuable items (houses, cars, artwork, jewelry collections, and the like) also have rather easily established prices (look them up on E-bay and see what’s being asked and offered). Deferred values, such as stakes in annuities or pension plans, or potential Social Security benefits, would have to be figured out by experts, but the answers have already been determined by the actuaries who designed the original plans. Their calculations need only to be made public.
The new 1040 would still be on the honor system, just as it is now, with a simple penalty for “forgetting” an item. Forgetting it would be denying ownership. The IRS would then simply take the taxpayer’s word and consider it abandoned and transfer title to the Treasury. The absent-minded taxpayer would then have the option of buying it back at market value before it was put up for public auction. (As an additional deterrent he might only be given the right to match the winning bid.)
We would each submit our lists to the IRS, and the grand total of them all would constitute that year’s national tax base.
Congress, meanwhile, as usual, would independently determine the total number of dollars required to run the country for the coming year. This is the hard part, but what did we hire these guys for? Do the schools get that billion-dollar increase, or the Pentagon? How many miles of new highway? Do we define those needs in dollars (meaning annual fights over adjustments) or in percentages based on percentiles? Their job would be to figure that out.
But after a total is agreed on, each of us would then be liable for our personal share, proportional to our stake.
For example: if the budget is 2.4 trillion dollars and our total privately-held wealth is 115 trillion (a not unreasonable guess, allowing each of our 115 million households an average net worth of a hundred thousand dollars) each of us would owe a 2¢ tax on each dollar of our wealth. In Bill Gates’s case this would surely amount to a very helpful sum, but nothing he couldn’t easily cover with a few shrewd investments. For me, with my lottery winnings, I could choose : either I could keep my job to cover my living expenses and invest my nest egg in CDs to cover my tax, or I could use part of my windfall to improve my lifestyle and see my nest egg slowly diminish. It would be up to me to estimate my life span and my future needs.
For someone making $50,000 a year, spending it all, and living in a $200,000 house partly paid for, with a car also partly paid for, the tax might be as little as $2,000, even counting his vested interest in his pension and his eventual Social Security. Allowing for complete forgiveness for those at the bottom of the wealth scale (and even a so-called “negative” tax — an outright subsidy for people whose wealth is below the poverty level), we are still talking a very modest bill. The elimination of all other forms of tax — sales taxes, “sin” taxes such as those on cigarettes or sugar-laden sodas, those niggling items carefully listed on your phone or cable bill, import and export taxes — would quite possibly leave you roughly where you were if you had been being honest on your present 1040.
The actual numbers are of course impossible to calculate before we see the first national wealth list, but if we really believe in fairness, no matter what they actually turn out to be we should not complain about meeting our share of the obligation to the government that we expect to support us when we need to go to court or appeal FEMA’s downgrade of our hurricane damage.
My own suspicion, is that there might also well be a substantial number of hitherto hidden dollars that will surface when the income test is dropped and corporate exceptions and “charitable” deductions are eliminated, especially if the price of “forgetting” is severe. This is a backhanded tribute to the brilliance of today’s crop of tax lawyers and Certified Public Accountants. (Just as a matter of curiosity, it would be fascinating to see how many original art works would suddenly be reclassified as cheap forgeries, and how many diamond tiaras would turn out to be paste copies.)
*
So what are the chances that anything as radical as a wealth tax could actually make its way through Congress? Not very good, I agree, but stranger things have happened. What odds would you have given just a couple of years ago that an orange-haired snake-oil salesman would become president of the United States? The mass conversion of 635 American legislators to a system that would relieve them of having to spend half their time listening to lobbyists and the other half raising campaign funds must have some allure for our beleaguered representatives. A revision of the income tax is in the works. Adoption of a wealth tax — if anyone had the nerve to propose it — is hardly more unlikely than our embrace of the Pussy-Snatcher in Chief now actually sitting in the Oval Office.
How, in practical terms, would we get there? Not by throwing up our hands in a horrified Stop Trump movement. “Stop Trump” is not a viable political rallying point. Even his devoted followers know he is not anybody they would want their daughters to marry. But too many angry uneducated people have been willing to let their frustrations overcome their common sense. We saw that in Hillary’s debacle. We would need a crusade, like the New Deal, led by a credible leader who would have to be so admired that he could actually publicly take the risk of talking common sense. A hero, comparable in stature and star power to a game-show-host-and-race-to-the-bottom leader like the Donald, but with a social conscience and a taste for books instead of the crotches of Miss America contestants. He, or she, would also have to understand the basic fairness of the Wealth Tax, meaning he or she would probably not come from either the strivers of Wall Street or Silicon Valley. My choice would be a PhD farmer (yes, Virginia, such people do exist) with dirty fingernails and a drawl. It might also help if he or she had un-dyed hair.
Any volunteers?
Having lost, at least temporarily, their battle to kick 20 million Americans off their health care plans, send 20 million people back to Mexico, and close the door on future Muslim immigrants, the Republicans are now turning to their next project — reducing the taxes on well-off top money-earners and making up the deficit with a combination of higher taxes on the poor and less spending on entitlement programs. This was always at the top of their agenda, they just needed to get some momentum first. We can now look forward to a stretch of mind-numbing, demonstrably false pseudo statistics proving that Ronald Reagan’s trickle down economics was 100% correct but was sabotaged by succeeding Democratic administrations.
If that choice of topic leaves you less than enthusiastic, I advise you to just click and move on. But if you are so bored that you will read anything rather than just stare at the wall (or cut the grass or do the dishes) I am about to tackle the subject.
*
What is the fairest way for our federal government to raise the money it needs to finance its operations?
Historically we settled that question a hundred and fifty years ago. First in 1861, to be precise, when we decided on an income tax to help pay for the rising costs of the Civil War. We rescinded t briefly in 1872, but reinstated it with the Sixteenth Amendment in 1913. We decided on an income tax because income was assumed to be the best indicator of wealth and we all agreed that the wealthy should shoulder more of the burden of financing government, since they stood to benefit the most from its stability. Since then we have raised about 85% of our federal revenue that way. The more money you made, the higher your tax rate. Despite the fact that this principle comes unnervingly close to being Marxian (“From each according to his abilities; to each according to his need”), it is nevertheless now pretty much accepted across the political board. I make exception for Grover Norquist, a blinkered fanatic who is against all taxes, and for a few extreme Tea Party disciples of Ayn Rand, whose response to a cry for help from the poor is “Go get a job!”
I say we seem to have accepted the idea of a progressive income tax, but there has been at least one serious earlier effort to establish a different approach. That effort was by Henry George, an economist who advocated in 1871 a “single tax,” based solely on land ownership. Mr. George’s theory was that all land properly belonged to God and that communities and that individuals should be granted only limited use of it according to the degree that the community would benefit. People should not be allowed to just sit on their acreage waiting for it to become more valuable as the population increased. Accordingly, he said, taxes should be levied based on the amount of land each taxpayer temporarily controlled. This was a reasonably solid theory in a time when America’s economy was still largely agrarian, and the accumulation of wealth through production of tangible things—railroads, ships, buggy whips—all required actual property on which to situate one’s factories or roadbeds, rather than on the rather mysterious assets more popular today (“in the cloud”, “market share”), which require only faith. (Google’s astronomic share price rests essentially on nothing more than the computer code for its search algorithm. Microsoft’s silicon valley “campus,” luxurious though it is, represents but a tiny fraction of the company’s book value.) The amount of land one owned would today be an exceedingly inaccurate base for taxation.
(As an ironic footnote to the story of Henry George and his theory it can observed that in his later years, after his books had become famous, he supported himself — quite handsomely — by lecturing and writing, occupations that required no more land than enough floor space to accommodate a desk. He would have paid a negligible tax under his own proposal. But that’s a digression.)
I think we do all still share the belief that the wealthy should bear a bigger tax burden than the poor. I will argue here only that we are not calculating it right. Specifically, by using income as an indicator of wealth, we are short-sheeting ourselves.
The first problem is that you can be exceedingly wealthy and have no income at all. For example: let’s say I hit the lottery. I pay my one-time tax on my winnings, and I decide to stick the rest of my millions under my mattress, withdrawing only what I need to live on year by year. Thus I have no income to declare. I am wealthy by any common-sense measure, but I have “broken my arm,” as the priests used to say — I can no longer reach as far as the collection plate.
The second problem comes because of the ease with which income can be hidden. Details about shell companies, subsidies, exemptions, depletion allowances, deductions, abatements, and the like dot our tax laws like cotton bolls in an east Texas field — all conceived by legislators doing favors for wealthy campaign contributors. These loopholes are tucked into otherwise non-controversial “funding” bills passed at midnight on Fridays after the reporters have either gone home or to their favorite watering holes. They are very effective at shrinking the government’s revenue, and invariably benefit those who already enjoy the greatest wealth. This shifts the burden of cutting “discretionary” spending to those who are less rich — and do not have ready access to lawyers accountants and venal legislators — and it contradicts the avowed purpose of the graduated tax.
I share Mr. George’s objections to income as a measure of wealth, but I think that land ownership is no longer a good measure either in a non-agricultural society. I propose here that individual wealth can best be measured by simple ownership. Ownership of anything. Income can be too easily concealed by a leaseback deal with a shell company owned by your father-in-law, whose legal residence is in the Cayman Islands, and whose officers are your brother-in-law’s wife and kids. That will get you past the IRS’s computer check of your paperwork, but it won’t hide a privately outfitted Boeing 754 or a 55-million-dollar mansion or a 200-foot yacht. They will be visible not only to prowling IRS agents but also to whistle-blowers eager to benefit from their 15% bonuses..
Sounds easy? Fair? So what would be the problems?
All private wealth is really personal. (Each of us has some communal wealth as well — in the form of highways, the postal service, an army — but it would be hard to specify its varying value to each of us as citizens — roads to our favorite vacation spots, shipping lanes for the goods our factories produce, help for hurricane destroyed homes, means of transportation to and from our jobs. Pretty much beyond any reasonable hope of calculability.) But everything else is personal.
“Personal” would exclude taxes on companies or organizations taxes or any kind of general taxes (on cigarettes or cancer drugs, for example). The Roberts Court says that corporations are people, but that doesn’t make it so. Companies in truth “own” nothing; they are artificial entities owned by their owners or their shareholders even if their identities are sometimes concealed under layers of semantic fiscal creations like pension funds or golf clubs or “non-profits.” Such entities therefore would owe no taxes, since they don’t represent personal wealth, but their individual owners would have to own up to their individual stakes. The same logic would apply to all of Mr. Roberts’s artificial people — political parties, philanthropic foundations, churches, educational institutions, museums —they are all owned in the last analysis by individual living breathing identifiable and taxable people, some of whom are wealthier than others.
So a new-style Wealth Tax Form 1040 (as advocated by Senator Ted Cruz and several allies) would simply ask for a list of your personal assets and their value.
How to arrive at their value? Not really difficult. The prices of the most common of the items on your list (stocks, bonds, warrants, deferred bonuses, and all the other banker-defined financial “products”) have published market values. There would be no distinction between domestic and foreign assets. Other valuable items (houses, cars, artwork, jewelry collections, and the like) also have rather easily established prices (look them up on E-bay and see what’s being asked and offered). Deferred values, such as stakes in annuities or pension plans, or potential Social Security benefits, would have to be figured out by experts, but the answers have already been determined by the actuaries who designed the original plans. Their calculations need only to be made public.
The new 1040 would still be on the honor system, just as it is now, with a simple penalty for “forgetting” an item. Forgetting it would be denying ownership. The IRS would then simply take the taxpayer’s word and consider it abandoned and transfer title to the Treasury. The absent-minded taxpayer would then have the option of buying it back at market value before it was put up for public auction. (As an additional deterrent he might only be given the right to match the winning bid.)
We would each submit our lists to the IRS, and the grand total of them all would constitute that year’s national tax base.
Congress, meanwhile, as usual, would independently determine the total number of dollars required to run the country for the coming year. This is the hard part, but what did we hire these guys for? Do the schools get that billion-dollar increase, or the Pentagon? How many miles of new highway? Do we define those needs in dollars (meaning annual fights over adjustments) or in percentages based on percentiles? Their job would be to figure that out.
But after a total is agreed on, each of us would then be liable for our personal share, proportional to our stake.
For example: if the budget is 2.4 trillion dollars and our total privately-held wealth is 115 trillion (a not unreasonable guess, allowing each of our 115 million households an average net worth of a hundred thousand dollars) each of us would owe a 2¢ tax on each dollar of our wealth. In Bill Gates’s case this would surely amount to a very helpful sum, but nothing he couldn’t easily cover with a few shrewd investments. For me, with my lottery winnings, I could choose : either I could keep my job to cover my living expenses and invest my nest egg in CDs to cover my tax, or I could use part of my windfall to improve my lifestyle and see my nest egg slowly diminish. It would be up to me to estimate my life span and my future needs.
For someone making $50,000 a year, spending it all, and living in a $200,000 house partly paid for, with a car also partly paid for, the tax might be as little as $2,000, even counting his vested interest in his pension and his eventual Social Security. Allowing for complete forgiveness for those at the bottom of the wealth scale (and even a so-called “negative” tax — an outright subsidy for people whose wealth is below the poverty level), we are still talking a very modest bill. The elimination of all other forms of tax — sales taxes, “sin” taxes such as those on cigarettes or sugar-laden sodas, those niggling items carefully listed on your phone or cable bill, import and export taxes — would quite possibly leave you roughly where you were if you had been being honest on your present 1040.
The actual numbers are of course impossible to calculate before we see the first national wealth list, but if we really believe in fairness, no matter what they actually turn out to be we should not complain about meeting our share of the obligation to the government that we expect to support us when we need to go to court or appeal FEMA’s downgrade of our hurricane damage.
My own suspicion, is that there might also well be a substantial number of hitherto hidden dollars that will surface when the income test is dropped and corporate exceptions and “charitable” deductions are eliminated, especially if the price of “forgetting” is severe. This is a backhanded tribute to the brilliance of today’s crop of tax lawyers and Certified Public Accountants. (Just as a matter of curiosity, it would be fascinating to see how many original art works would suddenly be reclassified as cheap forgeries, and how many diamond tiaras would turn out to be paste copies.)
*
So what are the chances that anything as radical as a wealth tax could actually make its way through Congress? Not very good, I agree, but stranger things have happened. What odds would you have given just a couple of years ago that an orange-haired snake-oil salesman would become president of the United States? The mass conversion of 635 American legislators to a system that would relieve them of having to spend half their time listening to lobbyists and the other half raising campaign funds must have some allure for our beleaguered representatives. A revision of the income tax is in the works. Adoption of a wealth tax — if anyone had the nerve to propose it — is hardly more unlikely than our embrace of the Pussy-Snatcher in Chief now actually sitting in the Oval Office.
How, in practical terms, would we get there? Not by throwing up our hands in a horrified Stop Trump movement. “Stop Trump” is not a viable political rallying point. Even his devoted followers know he is not anybody they would want their daughters to marry. But too many angry uneducated people have been willing to let their frustrations overcome their common sense. We saw that in Hillary’s debacle. We would need a crusade, like the New Deal, led by a credible leader who would have to be so admired that he could actually publicly take the risk of talking common sense. A hero, comparable in stature and star power to a game-show-host-and-race-to-the-bottom leader like the Donald, but with a social conscience and a taste for books instead of the crotches of Miss America contestants. He, or she, would also have to understand the basic fairness of the Wealth Tax, meaning he or she would probably not come from either the strivers of Wall Street or Silicon Valley. My choice would be a PhD farmer (yes, Virginia, such people do exist) with dirty fingernails and a drawl. It might also help if he or she had un-dyed hair.
Any volunteers?
Vance Weaver 