Tax rates over time

[kan...@aol.com]

https://www.instagram.com/reels/DXKKECDFHX5/

A living, breathing tribute to the power of the wealthy to purchase influence and thereby acquire massive wealth at the expense of the rest of us. 

We need better people to advocate for us in gov't. People that aren't being bought and paid for by the very wealthy. 

[David Fairchild]

Morning Ken. 

I can't click an Instagram link at work, but I assume this shows marginal income tax rates falling over time? 

If so, yes but... The but is that the very wealthy have always paid significantly lower rates than income rates by ensure the majority of their income is derived through capital gains. This has been true since the re-advent of the national income tax in 1913. No one since has ever paid a 90% tax on their last dollars of income -- or if they did, they have very poor accountants.

That said, the advent of the borrow, spend, die, strategy has really given the ultra wealthy a mechanism to avoid even more taxes than the would pay via capital gains.

[kan...@aol.com]

Thanks, Dave. You sound like you're dipping your toe into the waters of progressive thinking. How's it feel? 

The solution being bandied about is a wealth tax. That fixes the problem with "borrow and die". 

Although I don't quite get this, apparently the heirs don't inherit the entire amount of the debt. The article mentions a 'basis" concept. Got any idea what they're talking about? 

[David Fairchild]

Whoa, Ken. Let's not go crazy. Philosophically I am for three things:

1a. Every dollar of individual income should be taxed at the same rate, regardless of how it is earned -- via direct labor or via capital gains. And only individuals should be taxed, and only when a earned/a gain is realized (and possibly with an exception of $0 tax on the first $20k or $25k earned for yourself and for each family member/dependent). There should be no wealth tax.

1b. An income floor for everyone regardless of employment status (possibly around a similar $20k or $25k for yourself and for each family member/dependent), a.k.a. UBI.

2. A hard cap on government spending relative to GDP of X% (12% or 15% might be a reasonable cap.) Currently spending is 23% of GDP (steadily climbing from 11% immediately after WWII), and with about a third of current spending exceeding tax revenues annually.

3. The right to pay U.S. Federal tax obligations in dollars, or gold, or silver, or bitcoin, or even perhaps any currency of a G20 nation. This would effectively neuter the government's ability to perpetually spend in excess of tax revenues (see 2 above). Currently taxes must be paid in dollars, thereby ensure demand for the dollar despite it's supply being increased at an increasing rate.

As to basis, yes, an inheritee generally receives an asset's current value as their cost basis upon inheritance. If the inheritee's basis was instead set to the original purchaser's basis, then death would effectively amount to an immediate wealth tax on the entire estate and force mass selling to pay the capital gains since the original purchase (think millions of forced home or farm sales). 

Instead loan interest payment should not be tax deductible for anyone, and an estate should be made to pay a stepped up amount of taxes on any outstanding debt it owes upon the owner's death, and only after should the remaining portion of the estate pass to the inheritees on a stepped up basis. This would ensure WtP are not permanently short changed on rightful tax revenue due to the borrow, spend, die strategy.   

[kan...@aol.com]

Well, okay, Dave. That all makes sense. But it still sounds more than a little progressive. Feet wet yet?

You say "taxed at the same rate". I assume you mean regardless of how it's acquired. Still a graduated tax structure? Or flat tax? 

Strong capitalists would dislike your notion of taxing all income regardless. If CG's are taxed like income, wouldn't that ripple through the stock market? Or would that just be a temporary disruption? 

Not sure that loan interest is tax deductible. I know that we can't any longer deduct interest on our house mortgage. 

I like the notion of a floor on wealth with everyone getting a minimum payout from the gov't. Sounds pretty progressive from here. I'd go with less, perhaps $700/month. I've said before that this would allow someone to go to school, maybe work parttime, or tinker around in their garage trying to become the next Hewitt/Packard. They could live on PBJ and ramen. I'd throw in health care too. But also the gov't could end more than a few benefits like food stamps, etc. 

  This very progressive notion was enacted by Sarah Palin in Alaska. She financed it from oil revenues. Kind of a windfall situation. 

Do we also mean "only individuals taxed" suggest no corporate taxation? I'm smart enough to get that corporations just pass their tax burden onto customers. But selling this notion to Congress members and unbright Americans would be a huge lift. (Was that an accidental tautology? Unbright and Congress being redundant). 

If corporations have their tax burden lifted, I think that the gov't would have to oversee prices dropping proportionately. Otherwise I'd expect a LOT of windfall profiteering. As it is a lot of corporations  get paying very little in taxes. Don't know how/why; but they do. That seems unfair, moreso than if they all went untaxed. 

Great ideas: ain't gonna happen.