Elizabeth Warren's tax concept

Feb 2010
33,463
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between Moon and NYC
If we taxed individuals at a reasonable amount we would not need a coorporate tax at all. As long as people like Romney can pay tax rates of 13% which are less than his secretary we are going to have to get the funds somewhere.
The conversation seems to now be conflating income with assets.

The Warren proposal is focused on taxing financial assets/holdings. Which is stepping into a whole new category.




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Feb 2010
33,463
23,157
between Moon and NYC
I'm offering an alternative taxation idea that's long overdue but will never be passed by the Rich-Man's Club.....aka Congress.
Believe your proposal is old news. Is already in effect. Or at least was in place.

As i recall it became problematic and was adjusted (or possibly eliminated...)



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Apr 2015
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Katmandu
Well, in the context of this thread, I misspoke - Warren's proposal is a tax on wealth, not income. When I realized this, I attempted to delete my post.

But in all other contexts, "money" and "income" are very different things. Assuming you have a wallet, it probably contains money. Put the money on your nightstand for a few years, and you will never pay any taxes on it.

Some people call the inheritance tax a "double tax," which is incorrect. An inheritance is income; ownership of the money has been transferred from one person to another, and that means the money is "income" from the recipient's perspective. And income is taxed - once.
The tax you pay on that money on your nightstand is called inflation, you effectively have less over time.
 
Feb 2011
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Boise, ID
The administrative difficulties that have been pointed out are real. We can't tax a foreign resident or a foreign asset, so we would have to come up with a system that properly identifies taxable assets.

These proposals also often pay no attention to any economic analysis that advises caution about international tax dodging as a result of these policies.

Here's another critique: Sen. Warren’s Wealth Tax Is Problematic | Tax Foundation

Imagine a saver who expects a normal return and makes an investment. Her decision was based on the after-tax return. But suddenly, the investor receives a super-normal return, which, in her case, would be unexpected. Getting taxed on those surprise super-normal returns doesn’t have much of an impact on her decision to save.

Exempting normal returns, while taxing super-normal returns, is the principle underlying why expensing of capital investment for businesses is such a good idea. It preserves the tax on capital but targets it at a less sensitive tax base.

Unfortunately, a wealth tax does a poor job targeting this type of income. In fact, it gets it exactly backwards: a wealth tax lightly taxes super-normal returns while heavily taxing normal returns.

You can think of a 1 percent wealth tax as a 1 percent subtraction from annual returns. If we earn a return of 5 percent, but there is an annual wealth tax of 1 percent, our return is really 4 percent. This low-return asset is hit hard—a 20 percent(!) tax on its returns. In contrast, an asset earning 20 percent gets reduced to a return of 19 percent. That’s only a 5 percent tax on those returns.

And these issues matter for more than just the wealthy individuals directly impacted by the tax. The capital owned by these high-net-worth individuals is used to employ others, to make products consumed by other individuals, or to generate returns for pensions and retirement accounts owned by others. While the legal incidence of the tax would be on the wealthy individuals, the economic impacts (incidence) would be much more dispersed.

This is another example of why policymakers, when discussing issues such as income inequality, should consider the limitations and negative consequences created by using the tax code as a fix.
 
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Macduff

Moderator
Apr 2010
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This isn't Constitutional. The 16th Amendment.
The Congress shall have power to lay and collect taxes on income, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
The federal government is authorized to tax income. It's not authorized to tax property.
 
Likes: Ian Jeffrey
Feb 2011
16,337
5,681
Boise, ID
This isn't Constitutional. The 16th Amendment.

The federal government is authorized to tax income. It's not authorized to tax property.
It could be construed as Constitutional if people whose net worth decreases in a year are exempted, making the tax a de facto capital gains tax that is just administered strangely (regressively, i.e. taxing huge returns relatively lightly and normal returns Draconianly) so that the tax seems like it's a wealth tax, even though it's technically not.

Otherwise you'd have to amend the Constitution, which no one seems to be interested in doing anymore.

Just another grand scheme to soak the rich into poverty.
The entire economy would suffer very broadly long before the wealthy would ever become impoverished. And they'd say "oops, nevermind" and undo the policy as evidence of its failure became apparent.
 

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