Her home town’s Newton Tab Blog accused her of “damning the voters” and attracted the usual negative commentators. A Boston Globe Blogger accused her of displaying Beacon Hill chutzpah, but attracted no commentators. (Actually accusing Kay Khan of having Beacon Hill chutzpah is a hilariously correct description of this sweet-looking lady who smiles politely at the “no new tax signals”’ from Leadership and then continues to starting conversations with her colleagues about “getting real about revenue options.”)
Want to participate, or even convene a conversation about progressive revenue reform with your neighbors and your legislators? We’ve got a list of planning groups all over the state, and if you want to join or start one, email Carmen Arce-Bowen and s/he’ll get you connected.
If you want to start developing your own talking points, check out the ONE Mass 2011 Revenue Campaign. Another opportunity to learn why we’re in this fiscal crisis and how to talk about taxes as a solution is to attend the first in a series of Insider Budget Briefings on this topic on March 2nd at 3:30 – 5:30 on the 9th floor of 30 Winter St., Boston.
Meanwhile — call your own Legislator and ask him/her to join you and your neighbors in a conversation about taxes. And then do call and support Rep. Khan and a growing group of Legislators willing and able to stand up for new taxes to lessen the proposed cuts in the programs that keep our communities healthy.
Cross posted at ONE Massachusetts.
come to the eternal ATM the taxpayers. WE HAVE NO MORE TO GIVE. It’s time for the gimme guys and gals to feel some pain like the rest of us.
Then why is it that tax rates are higher in places with better standards of living? Is it the shorter work weeks, longer life expectancy, or greater self-reported level of happiness to which you object?
C’mon Ebo — only da’rich, which you are not, can get so incensed.
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p>Support Schools, Towns, Health Care and Services!
Co-Sponsor “An Act to Invest in Our Communities”
House Lead: Rep. Jim O’Day, docket 2261; Senate Lead: Sen. Sonia Chang-Diaz, docket 1012
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p>THE PROBLEM: We are just emerging from the deepest Recession of our lifetimes. With the end of federal stimulus funding, we have a nearly $2 Billion budget deficit. That means our schools, Local Aid, and emergency and health care services face deep cuts this spring. Meanwhile, wealthy investors and high-income households have had their Bush-era tax cuts extended, worsening deficits and economic inequality.
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p>THE SOLUTION: We need to invest in our communities and keep middle-class families working and earning! “An Act to Invest in Our Communities” (HD 2261/ SD 1012) does just that. While there will be substantial cuts in services this year, this bill takes a balanced approach to the fiscal crisis by raising revenue to maintain the services we need and value. By asking more from high income households and investors who received large windfalls from the Bush tax cuts, while raising the personal exemption as a way to hold down the tax increase for middle-class families, the bill raises needed revenue primarily from those who can best afford to pay. With that revenue, we can keep the quality schools and services that make our state a good place to live and do business.
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p>WHAT THE BILL DOES:
1) Restores the income tax rate from 5.3% to 5.95%, but raises the personal exemption enough to hold down increases for middle-class families.
2) Raises the tax rate on wealthy investors, but provides a targeted exemption for middle-class seniors.
3) Raises revenue to maintain funding for our communities, schools and health care.
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p>For more information:
Rebekah Gewirtz, 617-227-9635 x12, gewirtz@naswma.org; or Harris Gruman, 617-316-0443, harris.gruman@seiu.org
I will call my reps this week and let them know this is a fair way to raise taxes and they need to muster the courage to do.
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p>I also believe that the tax rate for investors is so unfair and probably a huge reason why the billions in hoarded wealth is being invested in the market instead of the economy. The protection for seniors and therefore retirement accounts is absolutely essential. Terrific!
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p>Because 1.) they’re tired of the Bush excuse, and 2.) ALL the tax cuts were extended, not just those. A partial truth sounds like a lie, so the rest of what you write is automatically suspect.
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p>I have a co-worker who is very disappointed in the new Social Security payment which forgives worker’s payments. See, under Making Work Pay which expired at the same time, her credit was greater – so she comes up with $10 LESS take home each week. Lady next to her came out $5 ahead, and I can out $2 ahead myself. I tell this because these targeted cuts and expanded exemptions may not have the effect you want. Define ‘middle class’. How do you take into account people living off annuities, CD interest, etc., who don’t have earned income and get defined as ‘middle class seniors’ while sitting on top of assets that dwarf the town’s GDP?
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p>People bitch about the rate, but it’s flat and for everybody. People do still evade, but they evade under your new exemption sytem, too. That’s what really rich people CAN do – style their income to morph into the most advantageous configuration. Meanwhile, Joe and Mary are now paying 5.95%, but don’t QUITE qualify for that new higher examption. Sorry, suckers.
Dear Eabo –
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p>I’m a taxpayer, I’m not a gimme person (by which I assume you mean a public employee or a union member), and, like you, I’m feeling some pain.
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p>And I feel sure you are interested in hearing more about it.
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p>Because my salary has been cut by 15 percent, I can’t really afford to go to the bookstore anymore. So on a recent Saturday I drove to my closest library branch only to find that it had been closed by the city as a cost-saving move. On my way home, a car pulled out in front of me and we hit each other. The other car’s vision was blocked by one of the huge snowpiles the city would ordinarily have removed but didn’t this winter because of the season’s extraordinary plowing costs. So now I’m out at least $1000 for the deductible there. Although, like you, I have no more to give, nobody but me is going to fix my car.
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p>I recommended Judy’s post to start a conversation. If you want to talk, I’m willing to include public employee pensions and health costs in the conversation, but I’m not willing to limit it to those topics. At a bare minimum, let’s include corporate tax breaks that privatize gains and socialize losses.
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p>
I don’t know about anybody else here, but unless your household has a non-home net worth in excess of twenty million dollars, I am not talking about you. As far as I can tell from your commentary here, you are part of a mob that is long on lies, distortions, and greed and short on facts, integrity, and common decency. Feel free to spout whatever you want, but don’t be surprise when folks react with more and more hostility.
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p>The handful of Massachusetts residents who DO have such wealth should pay more in taxes than they do today. My own proposal is to raise the estate/gift tax.
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p>Let me be crystal-clear: The topmost 0.5% of the wealthiest residents of Massachusetts are not paying their share.
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p>I’ll tell you who I think should “feel some pain like the rest of us” — that upper 0.5% of this state — by wealth, not income.
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p>That segment is not worried about where their next mortgage payment, medical bill, college bill, or transportation to work is going to come from. I think it’s long PAST time for 995 of us to stop watching our quality of life spin down the tubes while the wealthiest 5 of us bleat about “death taxes”.
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p>If you want to talk about “pain”, I strongly suggest you keep your eyes on the gated compounds in Egypt, Libya, Bahrain, and Yemen. When the tea-party and the right-wing talk about “Second Amendment solutions”, I think they had better take a long hard look at the demographics of wealth distribution in the good old US of A.
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p>The times, they are a changing.
I was responding to EaBoClipper’s whining.
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p>I agree with you that the proposed bill is a minor tweak on INCOME tax. I don’t think it goes nearly far enough, and I think it effectively distracts attention from the real problem.
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p>The real problem is that our wealthiest residents (as opposed to our highest-income residents) are not paying enough taxes.
I do think EaBo’s comment highlights a perception problem. I don’t know if this is true, but I feel like the state budget has not shrunk at a rate comparable to what I’d expect. That is, I know it has shrunk, but compared to private sector businesses and family budgets, the state budget seems out of whack.
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p>The legislative response, most notably casinos, has been maddening.
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p>I feel like I could make some serious cuts that would never pass the Legislature and would not affect human services. Am I wrong?
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p>
For you! In a slide show too! (Don’t bother counting it’s two syllables short of a haiku.)
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p>From the Mass Budget and Policy Center
Protax organization love to use “percent of personal income” not tax rates. If all things were equal fine. But you can buy a house down south for 30% of what it costs in Massachusetts. Taxpayers in Massachusetts have higher expenses than other state.
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p>
from the Mass Budget and Policy Center:
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p>Facts At A Glance:Allowing for More Meaningful Comparisons: Taxes and Spending as a Share of Personal Income
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p>
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p>Argue with them. Seems to make sense to this reasonably literate reader of various economic analysis.
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p>Do you remember the answer Truman gave to his advisers when he asked them to find him a one armed economist?
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p>Hint: it’s a joke. No threat to anyone including MBPC experts.
I passionately agree that we need to raise the tax revenue collected by the state of Massachusetts.
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p>I think our focus should be on taxing wealth rather than income, especially in Massachusetts. The analysis you present is true, as far as it goes. Sadly, it does not go nearly far enough. The problem is that it does not address the reality of the staggering gap between the wealth of the top 0.5% and the rest of us.
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p>I invite you to consider, for example, Abigail Johnson — featured in the most recent Forbes 400 Richest Americans
.
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p>Forbes calculates the net worth of Ms. Johnson at $11.3 B. Not to put too fine a point on it, but my family’s net worth is in the range of $100,000 (I’m only counting zeros here). There are NINE zeros after the decimal point in that $11.3 B number. The horizontal axis of a graph that will fit on this page and that has my family’s income on the left and Ms. Johnson’s income on the right will have about 500 pixels of resolution. That’s about $22M per pixel. Ms. Johnson anchors the right edge. Everybody who’s net worth is less than $20M is in the single pixel at the left edge.
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p>I ask you to PLEASE think about that.
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p>The same list includes:
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p>Edward Johnson: $7.1 B
Amos Hostetter: $2 B
Jim Davis: $1.8 B
Robert Kraft: $1.5 B
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p>This very short (five persons) list totals $23.7 B.
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p>My wife and I will pay about $12K in Massachusetts income taxes this year. That’s about 10% of our net worth. Do you seriously think that Ms. Johnson will pay anything approaching $113 M in Massachusetts taxes this year?
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p>The starting point for any discussion of new tax revenue is “where will the money come from?”. The obvious answer is “from wherever it is now.”
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p>Massachusetts needs to close a deficit of about $2B. I suggest that the lion’s share of that $2B should come from the wealth of those whose wealth exceeds $20M. We should be looking at those who populate the 499 pixels of the wealth distribution graph, rather than that tiny one-pixel sliver at the extreme left edge.
I should have said “The horizontal axis of a graph that will fit on this page and that has my family’s wealth on the left and Ms. Johnson’s wealth on the right will have about 500 pixels of resolution.”
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p>This confusion of “wealth” and “income” is pervasive and treacherous. They are NOT the same.
All that data, and then you end with speculation.
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p>
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p>I seriously have no idea.
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p>Even if she makes clever use of tax shelters, and I’m sure she does, I don’t think we can really even guess at her final bill.
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p>
Income and income tax information is not public, so we are forced to guess. In order to pay $113 M in income taxes, Ms. Johnson would have to report about $2.26 B/year in income. I hope we can agree that this is extraordinarily unlikely.
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p>The fact remains that when we focus on income, rather than wealth, we evade the real question of who is and is not paying their fair share.
I think it’s a bit unfair of you to single her out.
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p>Sometimes I wonder if a flat tax would do the trick. Eliminate all deductions, everybody pays X% if they make over Y amount.
I went to annual Forbes list of the 400 wealthiest Americans looking for Massachusetts residents and chose the person at the top of the list. I also listed the other Massachusetts residents. Ms. Johnson is, after all, the wealthiest American living in Massachusetts. Their call, not mine. There is no way to focus on the “wealthiest” residents of Massachusetts without “singling out” the wealthiest resident of Massachusetts. The very wealthy need to be singled out.
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p>I fear you again miss my point. When you propose a “flat tax”, what do you propose to apply that flat tax to? I ask because it is most commonly applied to i-n-c-o-m-e and that is different from w-e-a-l-t-h — as my commentary here has attempted to highlight.
Why focus on wealth, and not income? (A flat tax would apply to income.)
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p>
At the levels of wealth I am talking about “income”, as reported on tax forms, is arbitrary.
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p>As assets in a multi-billion portfolio increase in value, those assets enable the acquisition of more assets — none of it requiring taxable events such as sales. For those few who control such portfolios, the increase in value of that portfolio dwarfs taxable “income” events.
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p>Thus, when we focus on “income” (as in whatever it is that is reported on a federal or state annual tax return), we entirely miss the real situation.
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p>You and your wife apparently earn over $225K annually with a net worth of only $100K! You should defer the conversation about taxes and instead join the conversation about Saving.
While I appreciate your heartfelt advice about our financial planning, your comment is a distraction.
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p>Do you assert that those individuals whose net worth is in excess of $20 M are currently paying their fair share of taxes?
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p>Do you deny that if they did pay their fair share, the $2B budget gap would be readily closed?
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p>If a distration to comment on, then it was probably a distraction to mention it in the first place.
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p>
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p>The DOR guards the statistics quite well, but looking back to 1996, we see that there were nearly 4,000 returns filed with income over $1,000,000. Those 4,000 returns reported taxable income of nearly $11 billion dollar.
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p>
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p>Not a clue.
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p>
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p>Leading question because I have no clue whether they did or did not pay “their fair share”. (What a dumb phrase BTW)
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p>But if those 4,000 people each paid $500,000 then yes the gap would close.
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p>Or, if all the people earning over $25,000 paid $10 extra per month for 12 months then the gap would close. Is $10 extra per month “their fair share”?
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p>”Fair share” is a meaningless and political term best printed in caps because both sides are yelling it loudly.
You do appreciate the ten-thousand-fold difference between $1,000,000 and $11,300,000,000 (I know it can be hard to count all those extra zeros), right? Just as you also surely appreciate the difference between income and wealth.
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p>You continue to focus on income. This conversation is about wealth.
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p>I think the “fair share” question is straightforward to quantify, if somebody — sooner or later — would force the government to report the data required to calculate it.
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p>I would like to see a distribution showing household wealth on the horizontal scale and taxes paid by that household, as a percentage of its wealth, on the vertical scale. I suggest that a “fair share” is a roughly linear horizontal line, ideally trending upwards and to the right (because I am, after all, a “progressive”, and that is what “progressive” means when it comes to tax policy). I suggest that the actual graph, were we to ever actually draw it, is a curve that starts high on the left edge (let’s not forget that the horizontal axis needs either a log scale or a REALLY wide piece of paper), turns sharply downward, bottoms, and then trends approximately level all the way to the right.
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p>I do not believe that Ms. Johnson pays nearly the same share of her wealth, annually, in taxes (expressed as a percentage of her wealth) as any of us participating in this exchange.
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p>I believe that my meaning of “fair share” is actually straight-forward and clear. Were it “meaningless”, you’d not bother to so strenuously avoid discussing it.
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p>Actually, it’s 11,300 fold difference. And, whether I appreciate it or not is irrelevant. The DOR data only reports those people with income over $1 million, not wealth at any level. In 1996 about 4000 returns showed income exceeding $1 million.
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p>And probably you focus on wealth, because relative to your claimed income, your wealth is small. Thus, in your world of bias, it’s “fair” to pay on wealth because your ox won’t be gored by a wealth tax but rather the bill will levy on other folks who’ve saved. Your tax theory punishes savings.
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p>Regretably, most of the world, the US and the states and the localities pay based on income, not wealth. That reality is why I focus on income, not wealth.
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p>And, if we wish to debate “fair share”, I repeat if everyone earning over $25K paid $10 per month, the deficit would vanish. Seems “fair,” whatever that means.
…you have no reply to reasonable questions, so you avoid the question with a one word neo-babble response:
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p>
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p>You have NO idea of the quantity of tax Ms. Johnson pays. None. Yet, you BELIEVE. What is the basis for your Belief?
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p>You insist on a tax on wealth, not income. Yet, the US and a preponderance of the States tax income. If your method is preferable, why do so many taxing jurisdictions reject your method?
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p>If the meaning of “fair share” is so straight forward and clear, what does it mean? For example, if all mass taxpayers earning over $25K paid $10 per month, the deficit would vanish. Is that $10 monthly assessment on everyone a “fair share?” After all, presumably, we all generally benefit equally from the government services.
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p>
Right now, the state collects whatever she pays in state taxes. Whatever it is, it’s more than you and me put together.
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p>What would stop her from moving her legal residence to a state like Florida to avoid your wealth tax?
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p>Then we forfeit even what you regard as her inadequate state taxes.
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p>This is endemic on Cape Cod, and even includes certain political Democrats who declare FL residency for estate purposes.
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p>By trying to snatch away what your regard as obscene wealth, you will kill this golden goose.
Make the estate tax too high – people leave.
The approach I like best is to create a way to establish a wealth tax at the federal level and then return portions of it to various states based on residence.
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p>I wholeheartedly agree that the shenanigans practiced by a certain well-known and well-endowed political family from Hyannis exemplify behavior that should be specifically addressed.
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p>I did not use the term “obscene”, that is your invention. I did not even say I object to any individual accumulating such wealth (I would happily do so if I could). I am, instead, observing that these individuals are not paying enough taxes.
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p>By the way, the Kennedy family is not on the Forbes 400 list. I know they are a favorite target of those of your political wingedness, but the individual portfolios of the various members seem to be in the $100M range from what I can glean from Google.
And the interstate highways were built; the great universities rose, and the greatest generation built an infrastructure that has been allowed to crumble.
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p>Is that what you want? Are you a social darwinist and anyone who cannot make it on their own because of illness, abandonment as a child, or layoffs should just lie down in the street and die?
if the market demands that people should die in the streets, then that is what should happen. Because the market is always right.
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p>Right, EaBo?
Absent any proof, whether the wealthy paid a “fair share” in the 50s but not today isn’t proved if you look at tax paid as a % of GDP..
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p>Intuitively, you would think that if the wealthy paid more, then the % in the 50s or 60s would be higher, but yet according to the link about, that’s not the case.
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p>True, rates were higher. Perhaps evasion too.
I too find it hard to believe that people earning a lot of money in the 1950’s willingly paid 90% of that income in taxes. A more likely scenario is that they incurred tax-deductible expenses to put that money to better use.
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p>Expenses like research & development, salaries, paying to get better employees, expanding their business, etc. Activities that have a much more positive economic effect than speculating on mortgage-backed securities.
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p>I run a business. If the tax rate went to $0, there are expenses I would probably curtail because it might be more worth it for me to take the profit. Consequently, if my top $100,000 in income was going to be taxed at 90%, I would definitely find a way to spend that money on deductible expenses, maybe even hiring someone to do something to give me more free time. Spreading the wealth around, so to speak.
1) The wealthy of the 50s evaded taxes 2) spent/invested the money and reduced their income….either way leads to the same conclusion that the wealthy paid no more taxes as a percent of their income than today.
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p>That’s what the chart shows measuring tax as % of GDP.
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p>Others point to a high statutory tax rate and conclude that means the wealthy paid more tax. Yet, the link doesn’t support that stretch at all.
50+% of the budget and zero of the cuts, because they are sacred. Without meaningful change to those 3, what we do on a federal level is essentially meaningless. Everyone gets that.
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p>Do we have any equivalent to that on a state level, as far as huge expenditure that we’re avoiding even though nothing we do matters unless we address it?
SS is expected to continue to have a surplus until 2037, at which point outlays will only be able to equal income. There is no SS crisis.
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p>I agree that Medicare and Medicaid costs are serious problems. The cost of care needs to be addressed to keep the federal deficit at a reasonable level.
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p>See http://krugman.blogs.nytimes.c… for more on how SS differs from Medicare/Medicaid.
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p>and http://krugman.blogs.nytimes.c… for charts showing the contribution of Medicare/Medicaid to the nation’s health care costs.
in 2041 with current retirement rates. Oops no SS for me! Why should I pay in then?
…we’ll have it modified by then and you can collect. However, you demonstrate exactly the what’s-in-it-for-me attitude I find so objectionable among conservatives.
If nothing changes in SS, SS will be taking in about 75% of it’s obligations in 2041. That means you’ll get 75% of your SS, not “no SS.”
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p>Good grief. Man up and join a reality based discussion using facts, not nonsense.
…until we amend the MA Constitution to allow for graduated tax rates. We need to bite the bullet and push for this.
Taxing income won’t solve the problem, because the problem is about untaxed wealth, not income.
Judy mentioned this proposal above, and one of the provisions is that it would increase taxes on “wealthy investors.” I don’t know the exact details, but it seems like a start to addressing the untaxed wealth issue.
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p>Christopher, while I agree with you, given the long time it takes to amend our Constitution, a graduated income tax won’t be a reality until the end of 2012 at the earliest. In the meantime, the O’Day/Chang-Diaz proposal does increase the rate, while also increasing the personal exemption, which effectively makes our income tax more progressive.
…what it means to tax wealth? Is that similar to an excise or property tax where you retax the same assets year after year? Any increase of wealth over the course of a year qualifies as income in my book from whatever source it is derived. That would include wages, salary, tips, proceeds of sales, interest, investments, lottery or game show winnings, etc.
I most commonly propose an increase in the estate/gift tax, so that these portfolios are taxed when accumulated wealth is transferred from one generation to the next.
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p>I like the idea of something analogous to an excise or property tax, but I haven’t thought through the specifics.
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p>The problem with attempting to tax “income” is that large portfolios can be readily adjusted to increase in value while avoiding taxable events such as those you enumerate. As an obvious example, a margin loan causes no taxable event while simultaneously allowing a portion of increased value in one holding to be used to acquire another.
…but what I was trying to get at was that any increase to one’s worth, such as adjusted portfolios, should count as income for that year. Property and excise taxes could hit people who are vulnerable if we’re not careful unless we say that such tax only applies to property worth over than X. I’ve always been hesitant conceptually with the idea of taxing inheretance as such, but I could probably live with that being counted as income and taxed as such.
I would set the threshold for the “wealth tax” at something like $20 M — well above the level where anybody vulnerable is going to be hit.
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p>An estate/gift tax discussion probably merits its own thread.
I’ve always found it funny that the Federal Government seems to have a more progressive tax system than “liberal” Massachusetts.
Also, and perhaps neither here nor there, but instead of giving people the choice to pay a higher tax rate, the state might be more successful allowing people to donate their refunds to the state (no need to write a check).
As Frank Zappa pointed out in his autobiography decades ago, the principal effect of a graduated income tax is to raise the wall that protects the very wealthy from being diluted by “new money” and the riff-raff that come with it. Those who are already wealthy are not affected, and so a graduated income tax serves to make it more difficult for those who are not wealthy to become so.
But seriously, you seem to be on the right track with the idea of taxing wealth, but it seems easier said than done.
Chris – check out Mass. Budget’s Power Point on state taxes. (The link is in Judy’s comment above entitled “Pies, graphs, charts out the kazoo.”)
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p>Slide 30 shows the effect that the income tax changes proposed in legislation filed by Senator Chang-Diaz and Rep. O’Day would have on taxpayers at different income levels. You can see that increasing the personal exemption from $4400 to $7500, which is the tool the bill uses to increase progressivity, is pretty effective.
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p>And, although you are right that the State Constitution does not allow for a graduated income tax rate, it does allow for “reasonable exemptions.” (Amendment 44).
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p>The “reasonable exemption” contained in the proposed legislation gets us pretty far toward a progressive income tax. And since proposals to amend the constitution to allow for a graduated income tax rate have failed on the several occasions when they have even made it as far as an appearance on the ballot, there’s no reason to think that success on that score is anywhere on the horizon (especially in a post-Citizens United world).
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p>
but I implore you to learn to call it a “graduated tax” and not a progressive tax. Uninvolved and uninformed people are more open to understanding the concept of a graduated tax. A progressive tax confuses them.
And I don’t think your point is petty or unimportant. I’m happy to go along with whatever term best convinces uninvolved and uninformed people that this change in our tax law is a good one. If that term is “graduated,” then that’s OK with me.
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p>My point in referring to the tax change as “progressive” was to distinguish it for Christopher (who, relatively speaking, is among the cognoscenti in these matters) from the “graduated” tax prohibited under the State Constitution — that is, a tax in which the rate of taxation rises as taxable income rises.
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p>It seems to me to be very good news that, before advocating for the tax changes we want, we don’t first have to amend the State Constitution. That was the purpose of my comment.
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p>Also, the word “progressive,” I think, accurately describes the tax, in that it is the opposite of the many “regressive” taxes, such as the sales tax.
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p>Anyway, onto the campaign.
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p>
you used “graduated tax rates”. Half the battle in getting the general electorate to understand the concept. Calling it a progressive tax ends the conversation in seconds when on the ground trying to gather support.
Here’s the listing of the Co-Sponsors of the legislation just filed:
An Act to Invest in Our Communities
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p>Senate Co-Sponsors
Sonia Chang-Diaz (Lead)
Ken Donnelly
Jamie Eldridge
Pat Jehlen
Dan Wolf
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p>House Co-Sponsors
Jim O’Day (Lead)
Ruth Balser
Sean Curran
Marcos Devers
John Fresolo
Kay Khan
Liz Malia
Paul Mark
Denise Provost
Angelo Puppolo
Carl Sciortino
Frank Smizik
Ellen Story
Alice Wolf
We need to support and champion these legislators who understand the need for a balanced approach to the budget deficit. Our children, families, communities, infrastructure, quality of life for all…cannot sustain the continued Draconian budget cuts to basic and necessary services, maintenance…our future. I applaud these legislators who co-sponsored An Act to Invest in Our Communities.
Now let’s get other legislators “on board” and all people educated and mobilized!
I use them interchangeably and graduated is what happened to come out this time. I don’t even see why one sounds different from the other.
With the elderly couple on a fixed income that own a house worth 600k? How are they continually going to pay taxes on their “wealth”.
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p>I lived in the South End in the ’90s and that was a big discussion on gentrification… people could not pay their taxes because their “income” was low, but their “Wealth” was growing every year with the rising real estate market.
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p>How many times do you tax “wealth”? Every year? How do you define “wealth”? Who determines the value of the “assets”?
The elderly couple on a fixed income that own a house worth $600K will not be affected by the wealth tax that I contemplate — at least, not unless their joint net worth exceeds $40 M.
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p>I am not sympathetic to the claim that an individual with a net worth in excess of $20M or a couple with a net worth in excess of $40M are “unable” to “afford” taxes on that wealth.
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p>You asked several questions:
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p>1. How many times do you tax “wealth”? Every year?
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p>The new direction being developed on this thread is to tax it annually, just like an excise or property tax. A direction I’ve suggested earlier is to use the estate/gift tax to tax it when it is transferred to subsequent generations.
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p>2. How do you define “wealth”?
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p>An excellent question. My first impulse is to say something along the lines of “aggregate market value of all assets and liabilities under the control of the individual.” I note that most personal bankers and portfolio managers seem to have sufficient chops and tools to solve this problem well enough to establish their own fees for managing a given portfolio.
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p>3. Who determines the value of the “assets”?
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p>Another excellent question. The traditional conservative answer is “the market”, and in this case it may well be a good starting point. The market value of real estate, stocks and bonds can be calculated in a straightforward way. Assets like fine art and similar collectibles are more difficult to appraise.
You mentioned that you would tax wealth every year. In all cases? Let’s fantasize that I had a company worth $40 million. All of my wealth is tied up in this company employing 5,000 people. The company pays me $1 million a year, but it also breaks even. Where do I get the money to pay this new tax? Assuming you are asking for 5%, that is $2 million a year I need to come up with, where do I get it without taking a loan or selling off/shrinking my company?
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p>I agree that “Wealth” can be fairly reasonably defined when a person owns stocks/bonds but not with assets like a company. Also, taxing wealth will make most of these people move assets off-shore (if federal) and out of state (if state). If I owned that company, the first thing I would do if this came to pass would be researching how to move my “wealth” to a new location.
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p>I completely agree that using the estate/gift tax is a good way to go.
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p>Personally, I fundamentally have an issue with yearly taxation of wealth. I do not see that as much more than saying “You can only have 20 million in wealth” or “any income over a million is taxed at 100%”. Because you are saying that if you do have more than 20 million in wealth, we are going to tax you every year until you only have 20 million.
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p>In my view, taxation should be set up as follows:
Flat tax on all income of x% (about 15%). Any income below a certain amount has all taxes refunded. So, if that amount is $40k, then anyone who made more than $40k would have taxes paid on their first $40k refunded at year-end. ZERO Deductions. Income is all realized income, whether income, LT gains, ST gains, cap gains…
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p>Consumption tax on all non-essential purchases of 10%.
I’m not sure an annual tax would have to be more than 1% or so if it were actually collected.
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p>One way to get those taxes is to grow, not shrink, your company and either take a distribution or pay yourself more. I’d like to point out that it is relatively hard to spend $1M/year for very many years without accumulating some other assets, so I’m not sure that your premise holds up.
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p>In reality, this hypothetical $40M company will probably grow, and meanwhile this sole shareholder is probably accumulating other assets that also have value. To the question becomes how to make some portion of those assets liquid enough to cover the taxes due in a given year.
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p>That’s a question for whoever manages the portfolio of this hypothetical business owner.
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p>Like you said, the estate/gift tax is perhaps easier to understand, and perhaps more fair as well.