21 August 2011

The Professor Weighs in On US Tax The Rich Concept

A small disclaimer - its Sunday and I often think about larger scale things on the weekend. Today my thoughts turn to the current conundrum of taxes. I was triggered by a Facebook "like" from an old friend of mine. So Professor CP - this is all your fault!

There are many problems with the US taxation system.

1. Its too complex
2. It is very costly to run
3. It is probably unfair
4. it doesn't collect enough

We face a future where our efficiency has in fact caused us to eliminate the very thing that we all depend on. Jobs! We have approx about 30 million unemployed, underemployed or otherwise able bodied but non-taxpayers in the USA.

The USA is no different from many other countries where the concentration of wealth has occurred. USC's Bill Domhoff writes extensively about this.

In the USA unlike emerging markets - there is a majority of mature wealth owners who are no longer actively "earning" new money. So their old money is being used to preserve rather than necessarily grow.

So here is a radically different approach to taxation that I believe everyone can live with and support.

In my concept - it is easy to introduce and easy to calculate. It does not cost much to administer and It is fair. It will increase the coffers of the US Treasury.

My concept is as follows: A flat tax after the social charge of an individual has been paid. The problem of the usual tax rate is that the rich are taxed for being - well rich. My concept is to acknowledge that there is a charge based on the current tax laws to cover that equalization. However over a certain amount the rich have paid their contribution back to society. But we still need their tax revenues. Both on their cash flow inbound and on their assets. Thus I want to recommend a simplistic tax approach.

Tax everyone at one of the following rates:

10% for all income over $1 million after you reach $1,000,000 in gross taxable income


1% of your total net worth is you have a net worth over $2 million.

Which ever is lower.

Then we can adjust based on the level of taxation necessary to support our respective live styles and social needs.

There are many things necessary to ensure equality of contribution to society. We can never solve all the world's ills. but I believe that society has to both incentivize the rich to spend their money and what money is not being actively spent should be "encouraged" to be used productively in the economy.

Consider if the money that went into the stimulus package had been used to spend rather than increase and build more secure capital structures. Interesting no?


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