If Massachusetts is serious about helping working families and building a stronger economy, we must invest in quality public schools, affordable higher education, and a transportation system that works.
Unions are at it again.
No, not the thugs of Teamsters Local 25, though they’re at it too in their own way.
I mean the rest of us. The progressive ones. The unions that believe in the tradition that gave Americans the 40 hour work week. The unions that fought for increases in the minimum wage. We’re fighting against income inequality, and we’re fighting for the revenue for our families, our fellow citizens, and ourselves. And we’re doing the way we’ve always done it, as part of coalition of like-minded groups. Raise Up Massachusetts is the name of the coalition, and we’re a fighting back against the redistribution of wealth to the wealthy. We’re the folks who brought you the paid sick leave ballot initiative.
The many good people serving in our state legislature are not enough. We need to follow Franklin Roosevelt’s famous, if apocryphal, dictum: “I agree with you, I want to do it, now make me do it.” I don’t know if Bob DeLeo wants to do it, but we’re going to hold his feet to the fire with the Millionaire’s Tax ballot question.
The ballot measure has been certified, and we’re actively collecting the 65,000 signatures needed to place the question on the 2016 2018 [-ed.] ballot. When implemented, the tax will raise more than a billion dollars that would be dedicated to quality public education, including public colleges and universities, and the repair and maintenance of roads, bridges, and public transportation. The tax is simple: annual taxable income $1,000,000 would be taxed at additional rate of 4%.
(For the record, I’m not a leader in the Raise Up coalition. I’m just a politically-active MTA member (who is gathering signatures for the petition), the chairman of a select board, and an active BMG member. I was inspired to write this post based on the frustrations of my BMG friend Somerville Tom).
This is a great start, and needs to be accompanied by a measure that taxes WEALTH.
If this were in effect, Abigail Johnson and those like her would simply restructure their compensation packages to adjust their “income” (as measured for tax purposes) to be whatever they are comfortable with.
I suggest we apply a similar tax to the annual increase in net worth. For any taxpayer with annual decrease in net worth, we allow such losses to carry forward so that they may offset gains in future year.
The change in net worth over time is profit or loss. That is what is taxed.
The summary of the proposal seems pretty straightforward. Two rates, 5.15% up to 1 million and 9.15% marginally above 1 million. Wouldn’t that require a constitutional amendment?
“Profit” and “loss” are relevant to corporate taxes, not individual. I do not think that “net worth” is either reported or taxed on Form 1040 or MA Form 1.
On Form 1040 and MA Form 1, only gains and losses from transactions are reported (on Schedule E, I think). While balance sheets must be submitted for some corporate filings, I’m under the impression that those are for documentation and support purposes.
What I’m talking about is to require an annual statement of net worth. For publicly traded stocks, for instance, this is the number of stocks held multiplied by their current value. This statement shall, in my proposal, include ALL holdings. Options, derivatives, founders stock, all of it.
I’m looking for something roughly similar to the “net worth” as reported by Forbes.
The fact that certain terms are not on a certain form is not in question. Your “adjusted gross income” is very close to what a corporation would define as their “operating income”. Both are gross revenues less allowable deductions. This “net” number is, after some further adjustments, what you are taxed upon. Generally that number is equal to the amount your net worth increased or decreased during the period. The concept of income taxation is conceptually the same for individuals and corporations.
What you’re promoting is a “wealth tax” which would be unconstitutional in the USA. Even assuming it could be imposed legally, how would it work? The “value” of your assets (I assume you mean fair-market-value) is easy to define for assets like marketable securities but what about real estate and other items? Who decides the value of your yacht every year? The workload relating to arriving at a fair market value of all assets held by taxpayers would make it unworkable in my opinion.
Same person who decides the value of my car every year I pay an excise tax.
We can easily discover the value of real estate as well.
I don’t see what’s “Unconstitutional” about any of this.
Imagine it this way. Earn $500 in a year and save it all. Your net-worth(wealth) increased by $500 through your income and it’s been taxed.
End of next year, you didn’t spend the $500, it sat in the bank, and now you are going to tax it? It’s already been taxed that is double taxation and is unconstitutional. Just because you use your taxed money to buy a yacht doesn’t change anything, you’ve simply exchanged one asset of value (your cash), for another asset of value (your yacht).
It won’t be any more difficult to handle the accounting of that $500 than any of the current tax policies — basis calculations and all that.
I’m not proposing to tax the $500. I’m instead proposing to tax the overall gain in net worth. If that $500 was used to purchase an asset, and that asset increased in value, then I’m proposing to tax the increase in value.
When I exchange my money for a yacht, and the value of that yacht increases by 15% in a given year, then I propose to tax that 15% increase.
None of this is hard. It’s persuading our elected officials that it must be done is what’s difficult.
So I buy a house. I’m not rich, but I put down my 20 percent and mortgage the rest, 30 year fixed. My wife and I work, we live an honest, humble middle class life.
Our neighborhood gets better. More favorable. Not our fault; we keep the lawn mowed or whatever. Our house, though, went from $400k to $600k in four years.
I’ve got $200k more “wealth.” Thing is, my house isn’t for sale. I’m not moving. My kids are in 6th and 3rd grade, I’ve got a good job, my mother-in-law lives four blocks away. That $200k is fictional wealth right now.
You know what I don’t have: the extra cash to pay the taxes on a gain of $200k that I can’t actually get my hands on unless I take out a second mortgage on my house.
And what if I do pay taxes on that $200k in “gain” and then, bam, the neighborhood goes south. The house is now worth $400k again, not $600k. Is the government going to refund the taxes back to me?
Thresholds are certainly needed. I suspect some sort of exemptions for a principal residence is also appropriate, phasing out similarly to the present home mortgage deduction.
I intend these wealth taxes to apply to the wealthy, not the middle-class family you describe here.
In many ways the vacation home is quickly becoming an extension of one’s primary residence. Me and wife call our vacation home “Home Sweet Winnipesaukee”
Just because your family can afford a vacation home (at Lake Winnipesaukee, no less!) does not mean it isn’t a luxury. Millions of Americans stretch themselves to the limit to get and keep their principal residence. I doubt you’d get much sympathy from any of them because you might have pay taxes on your Winnipesaukee vacation home.
I’ve been talking about a FIVE MILLION DOLLAR floor for the wealth tax.
If your household net worth, including your vacation home, is worth in excess of that amount then in my view you ought to be a wealth tax on annual increases in that net worth. If, as I suspect, you do not cross that threshold then you have nothing to worry about.
Mitt Romney, on the other hand, should be forced to pay a wealth tax on the waterfront mansion (and 11 acres) he owns in Wolfeboro, NH. The news item notes that two sides of the 11-acre estate face the lake.
Mitt Romney’s Lake Winnipisaukee waterfront vacation home
…if you have a second residence you are EXACTLY the kind of person who can afford having your wealth taxed a bit more.
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In my comment that this thread is discussing, I wrote:
Is something about that difficult to understand? We already treat other losses in a similar way.
n/m
Whatever workload this implies is roughly proportional to the number of assets to be valued. Those taxpayers with enough assets for this to be burdensome already hire people to do their taxes. I don’t see an issue here.
So people would have to do that every year for each property they own? And what about assets which are harder to value, like art, antiques, home furnishings? What about the fluctuation in the purchasing power of the dollar? Every year, every asset? It will never happen.
You’re right Tom, about many assets being easy to value, and a tax could be levied on those but you know what the wealthy would do. They would move out of assets classed for taxation and into those which were not.
I’m not against the idea per se but I see it as unworkable in the real world.
This really isn’t that hard.
Of course I’ve had homes appraised. I’ve also had to assign a value to capital equipment while filing a form 1120 for a subchapter-S corporation. For the latter, I used a receipt if I had it and guessed if I didn’t. I’m under the impression that there is an easy default way and harder more expensive ways.
I can pull a current market value for any property I want from zillow.com in about 30 seconds. I grant you that an actual appraisal is harder and more expensive. It will probably come in higher. So what?
I just don’t think any of this has to be nearly as burdensome as you suggest.
Repeal the income tax and have a simple tax on wealth over a certain threshold (with progressive rates but with very few, clearly enumerated exceptions). I can’t see it costing anymore to do periodic appraisals of assets than it currently costs for the legions of tax accountants and lawyers that spend all day looking for loopholes in the vast complexity of existing law, preparing returns in an attempt to comply with existing filing requirements, litigating disagreements with the government, etc.
I wouldn’t think there would need to be annual appraisals for all assets. It would probably make more sense to have periodic appraisals that are indexed for inflation, then formally reappraised every x years. The most difficult assets to value, and the ones with the most potential for tax avoidance, will be privately owned businesses. They would need to be valued more frequently.
All this has to apply at all levels of government (federal, state, local). It makes no sense to have income tax in one place and wealth tax in another.
The transition from the old system to the new one would be messy, no doubt. But well worth it in the long run.
Very hard to imagine this ever coming to be given the political friction that would need to be overcome, but it would be a vastly superior system in every way to what we have now in my opinion.
tax wealth:
I agree it could be done that way, if it could be done. This comment “
explains why I don’t think it is possible.
This comment
implies we agree. Perhaps if we could just switch to a dictatorship for a while….
As I wrote upthread, I suggest that thresholds be used to keep the contemplated wealth tax focused on the wealthy.
I’m not talking about middle-class families who might end up in a principal residence worth a few million dollars. I’m talking about households whose net worth is measured in tens or hundreds of millions.
I must emphasize again how counter-intuitive America’s current wealth distribution is. You REALLY need to stare at the numbers to see just how wealthy the very wealthy are.
I suggest that most of the “political friction” originates in the very wealthy, and is injected into the 99% like malware. It really ISN’T so hard.
In particular, it does not need a dictatorship. It needs, instead, an electorate that truly understands how much of their wealth the top 0.01% (never mind 1%) BY WEALTH has taken from them.
If you want to go after wealth, do it at the time of inheritance. The problem there is that it’s a state matter and one state will always work against the other in taxation and people can move.
I agree that we should significantly increase the gift/estate tax above some floor. There is both a federal and state gift/estate tax. I suggest that the federal tax can be set to whatever congress decides. I’m perfectly happy to let the states fight it out afterwards.
My suggestion is something like a 90% rate for non-household wealth above $5M (where non-household wealth is wealth excluding the principal residence), together with a similar 90% rate on the value of a principal residence above $5M.
I’m not stuck on the thresholds, I’m happy to make them $10M or $2M. For the estates that matter, such minutia is irrelevant.
I think that the unconstitutionality of “double taxation” applies to multiple states taxing the same income without providing a credit to the tax payer for tax paid elsewhere. 5/4 vote in the USSC. At least, that’s the recent USSC decision. There’s no constitutional issue (of which I’m aware) with states and municipalities taxing transactions just because income tax has been paid on the money funding the transaction. In your example, the boat can be subject to sales/use tax, or excise tax even though the money used to purchase it has already been subject to income tax. If you keep the $500 in the bank, and it earns interest, then that income is subjected to tax. At this point, I’d like to see us push for five things (1) a graduated tax structure in Massachusetts (through amendment, or some way that doesn’t violate the constitution), (2) capital gains being treated as ordinary income, (3) “carried interest” being treated as ordinary income, (4) the estate tax rules being changed to subject much “smaller” estates to estate taxes, (5) higher marginal rates for the top earners.
The biggest block of undecided voters on this issue will be the suburban liberals and independents who are “fiscally conservative” and worries about jobs leaving the state. These are the same folks who voted down the gas tax, bottle tax, and narrowly voted in Charlie Baker. A lot of folks in tech and biotech who might say this is taxing the innovators.
It’s bupkis and we crunched the numbers at Progressive Mass showing why this is the best thing we could do for our economy. This isn’t just restoring fairness it’s also a down payment on our future.
They love to quote the founders. We ought to do the same.
Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise. Thomas Jefferson
I note that Mr. Jefferson’s quote was directed at “higher portions or property”. That’s wealth, not income.
The first modern income tax was introduced in Great Britain in 1799 and that letter was written in 1785.
Abolish the relatively new income tax, and revert to a wealth tax entirely!
Yes, I signed and will vote for it, but amending the Constitution should not be so specific. This sounds like if down the road someone decides it needs to be 5%, or that the additional revenue should be used for some other area, that we have to come back to re-amend the Constitution. I would have preferred something more like, “The People of this Commonwealth, through the General Court or the initiative process, shall have the power to lay and collect taxes on income which may be set at different rates for different ranges of income.”
The gas tax adjustment was killed by indexing it to inflation which confused voters and made them think future hikes would be automatic without the people having a say. The legislature doesn’t have the public’s trust to spend their money wisely. Specifying this is just on millionaires and forcing the money to go to education and transit is good policy and good politics.
Christopher. I think both know we have to start somewhere. This effects relatively few people and raises significant revenue. And it will give Bob DeLeo and Charlie Baker an opportunity to show which side they are on,
I’ve collected signatures a few times in Malden/Melrose area. Shooting. Fish. In. A. Barrel.
Seriously, this is easier than min wage and earned sick time. People get it in a visceral way.
So proud of the Raise Up MA coalition for sticking together post 2014 and having the guts to take this on. Bodes well for our future, I think.
The sig deadline is late Nov/early Dec so if you have a spare hour or two, help us smash that goal and make sure this moves forward. Think how much that will help getting it through the Leg twice! 🙂
http://raiseupma.org/constitutional-amendment-campaign/