Way past Time for a Wealth Tax? I Think Not

Count me out, not that it will change anything, but I’m not a fan of suddenly taxing wealth, even if it has been improperly protected. Rules are rules, even if they’re wrong. I know, it’s a popular idea and it’s always easy to defend what’s popular. Politicians do it all the time and then fail to deliver.

in America, there are (and always have been) the haves and the have-nots. Teddy Roosevelt pledged to ‘break the trusts,’ over a hundred years ago, and so we now have anti-trust legislation as the law of the land, and what pretends to be anti-monopoly laws as well.

Those were both feel-good laws, and yet we’re not feeling so good

Amazon (the horse everyone loves to beat) absolutely dominates online merchandising, Starbucks has pretty much closed every coffee-shop in town and Walmart shuttered most of downtown small America. Every once in a while, Politicians threaten anti-monopoly legislation, but then they get paid off, as expected, and the proposed laws die in committee.

That’s why we have committees in Congress, for the same reason we have funeral homes and crematories in society—a place to bury the dead and incinerate the evidence. We all have to die but, by god, we’re damned if we’re going to be taken advantage of while we’re still alive…

Hence, the popularity of a wealth tax

Yet there are two reasons that’s not going to happen.

First, it would have to pass the same congressional committees that kill off most of the stuff we’d like to see happen and, second, because it’s not morally sustainable. It may be a bit of a squeeze to discuss money and morals in the same sentence, but the way in which someone got rich isn’t a good enough reason to tax the result.

We should have learned that lesson of inequity with Al Capone. Unable to send him away for being a crook and a murderer, we sent him off to Alcatraz for tax evasion. Hey, whatever works.

And yet, there must be a way short of pitchforks and barricades

One would hope.

Way back, when the Suwanee was a river and I was a young man, we had a graduated income tax. To refresh your mind, a graduated tax has income brackets, and an earner pays a specific tax for the income earned within those brackets. A percentage for the 1^st ten thousand, another for the next, on up to a final percentage for all income above the last bracket.

Back in the day, that final percentage was 92%. That doesn’t mean the rich paid 92%, it means they paid the same amount as everyone else in each bracket and a big 92% hunk for the remainder.

Surprisingly, no one complained, business was great and we had millionaires instead of billionaires

Which was enough, when you could buy a Cadillac for $5,000. Then some strange stuff began to happen along the road to business being great.

The entire world became a market and America, shy about becoming an international colonial empire, became an international capitalistic empire instead. Capitalism, lacking the controls we once had in place, has a voracious appetite, and eats its young.

We sent our American manufacturing capability off to Asia for cheaper labor, which was great for shareholders and wealthy ownership, but not so great for the middle class, who were used to operating the machinery.

Without an assembly-line to report to, middle class taxes were in decline and the rich were getting hammered

So, they did what any intelligent wealthy class would do and began to buy the attention of those nit-picky little committees in Congress. ‘Withholding taxes’ were invented, so anyone, from an assembly-line worker to a shopgirl in a boutique, had their taxes paid to the IRS by their employer before a salary was handed over. Voila! ‘Take-home-pay’ became the watchword, and tax income from the middle class increased, but no one really noticed. After all, a job was a job.

In an international business climate, both corporations and individuals with wealth flocked to newly designated offshore addresses in low-tax countries, all made perfectly legal by congressional decree. A couple bucks here and a couple bucks there, and first thing you know those committees will actually pass legislation.

So, why not tax their wealth?

Perhaps it’s only my opinion, but I don’t think Henry Ford, Nelson Rockefeller, Jeff Bezos, Elon Musk (or their heirs) should be taxed on their wealth. Taxing wealth is a punishment, and I don’t believe in punishing success, even when that success may have been gained by terms I don’t agree with that were perfectly legal at the time.

I would settle in a moment for them being taxed on the yearly gains in stock ownership (as well as all other sources of income), that built that wealth.

We better figure this out quickly, because we are about to enter an unprecedented era of inherited wealth

The heirs of today’s 10% are about to descend upon a nation that is totally unprepared for their arrival. These middle-aged recipients of wealth beyond all imagination have never worked, have no incentive to work, or even manage non-profit charitable institutions.

But great wealth must have a home that increases its value. That’s a far larger income to tax than wealth itself and easier to get at as well. It’s a choice: take 1% of accumulated wealth or a graduated tax on the income it provides. The one is regressive and the other progressive. Beyond any discussions of morality, the numbers fall largely in favor of progressive tax.

Which is both a way of defending the farm, as well as returning to the farming methods of a graduated tax

Tax loopholes are inequitable. They were invented for just that purpose.

In order to return to our earlier tax equity, as well as the ability to pay the costs of government through taxes, we’re faced with undoing much of what has been done. This year at Davos, the rich told us to tax them more fairly, not to take what they had built. But they (and I) agree a time has come for redress.

Public opinion is ripe for a rearrangement.

Just how we affect that change is a choice affecting decades to come, but a wealth tax ain’t it.