i disagree. what's BS is the idea that income tax doesn't fall more heavily on the working, middle and professional classes. net worth tax (or "wealth minus debt," if you must) falls equally on everybody.

Ooops. That sounds as though I would have them impose a real interest rate by fiat. What I meant was to have them compile statistics and declare what it had been in the previous year, to use as in determining the limit on the allowable wealth-tax rate.

Wealth tax is a tax on wealth. Yes, it would be primarily the wealthy who would pay it, no matter what you call it. I'm going to keep calling it a wealth tax, because that's what it is.

My version would be a much smaller percentage, and would supplement rather than supplant the income tax. In fact, I imagine a constitutional amendment that directs some part of the government, possibly the monetary authority (currently the Fed but my amendment would still leave the nature of the monetary authority up to Congress), to say each year what the real (i.e. net of inflation) interest rate is on money not at risk. The amendment would then authorize a wealth tax not to exceed a specified percentage of that rate.

A "flat" wealth tax is far more progressive than any income tax ever proposed. Pretending it doesn't fall more heavily on the rich is BS.

A combination of taxes can have a low total rate, and a single tax can have a high total rate. Or the other way 'round. The total amount of taxation needed depends on what we have government spend money on, not on how the taxes are structured. It's better to structure that tax as a combination of small taxes, than as one big one.

You're required to report income. You can be required to report wealth. If there's probable cause to think that you're concealing income to evade income tax, a search warrant can be issued. If there were probable cause to think you were concealing wealth to evade a wealth tax, a search warrant could be issued.

obviously the plan has its flaws, most notably how to deal with commodity hoarders who don't report their assets. but i think a couple things you said were off-target.

first, wealth tax it a completely wrong way of framing it. i realize that wealth is a synonym for assets, but it's misleading because wealth implies a tax on the wealthy. while many of us do believe the wealthy should pay more, the flat net worth tax would not tax the assets of the wealthy even a fraction of a percent more than the assets of the middle class or the impoverished.

second, you're incorrect about the rate being higher. as i explained, the rate is actually lower than any other tax, much less a combination of multiple taxes. in spite of potential enforcement issues, i don't think the incentive to cheat would be any higher than it is already. goodness knows, how many people fudge their taxes right now?

certainly people would probably be able to fudge a bit and get away with it, but net worth is generally a much bigger number than income. i think it would be difficult to hide a very large percentage of one's assets without it leaving a trail that would warrant investigation.

that's a good point, i'm not sure how they'd figure out if someone was cheating by hoarding commodities. it's the sort of loophole you'd have to come up with something creative to close.

your sister already paid tax to the state on all her purchases, and it was most likely more than five percent. then the corporations she bought from paid taxes on the money they made from her purchases, and that was definitely more. then the investors in those corporations paid capital gains, which was also more, so that money has been taxed several times over. meanwhile, living deep in debt isn't exactly a huge reward for her.

your brother took on debt so he could benefit all of society. wouldn't it be the best case scenario to give him more means to get himself out? he'll be more able to afford to pay a larger share once his debt is settled, and his investments might not tank if the market has no other taxes levied on it.

as for you, five percent is not exactly the end of the world. it's less than most investments make, you pay nothing beyond the 5%, and it has the added advantage of you knowing about how much it's going to be way ahead of time. furthermore, since corporations and capital gains aren't taxed, your investments will go up much more quickly, far surpassing the measly five percent that the government takes out.

-CW

Looks like I called that Iraq thing right...

http://www.huffingtonpost.com/2011/10/21/obama-iraq-troop-withdrawal_n_1024108.html

:-)

-CW

The scenarios I presented above are my family sort of.

My older sister, is single made a little less then me and has huge debt and no net worth. She goes out almost every night, travels, hosted a huge party at a Melissa Ethridge Concert (yes, I know), upside down on her mortgage and never saves. But she is single and makes decent money.

Her lack of wealth is her choice. Why should she not pay Tax?

My Brother, a doctor, makes a bit more then I do. But he has huge student loan debt from him and his wife (who can't work). He bought a house that has not gone up in value, does not make extra principle payments, has little if any equity, drives new cars, not used rarely holding them long enough to pay them off, and has no savings.

Even though he makes more then me and a lot more then most, and lives in a nice house and drives nice cars he has little material wealth. He would pay less tax then me.

I have 4 paid for cars, A nice home with a lot of equity in it, a rental property with equity, I have been investing for 20 years, no real debt, a boat, etc so I have some material wealth.

But you want to tax my wealth because i made smart choices? Preposterous.

3 people go out and earn the same amount of money for doing similar work look what happens over the course of time if their incomes stay comparable.

1) drinks, partys, travels and is a spendthrift, living a lavish lifestyle he cant afford and wracking up huge debt. He accumulates no wealth but is in debt over his head. He pays no taxes?

2) the second lives with in his means but makes bad financial decisions, rents a house and never buys, leases cars never buys, invests in assets that lose money etc and he accumulates little wealth. He might pay some but very little

3) the third lives well but saves for the future. He buys a house or two and sells them at a profit buying a better one as his income level rises. He puts 10% of his money in investments (and about 10% to charity). he invests wisely in diversified holdings, has a few luxury items he pays for and lives a quiet life providing for his family.

He accumulates the most wealth and pays the most tax! How is that even REMOTELY fair?

We now want to encourage people to run up debt, not save and invest for the future and live above their means and if you dare to live a wholesome and wise life we will crush you with taxes?

They have a couple economics groups over there and trust me, this will get noticed. And you'll likely get some good feedback.

-David

You guys are confusing the hell outta me!! :D

But I like NYpoet's tax idea for several reasons. It's simple, easy to understand and it doesn't result in massive unemployment for accountants.. :D

When Cain is elected president, he should give the SecTreas job to NY! :D

Michale......

That is, indeed, a stunningly thought-worthy post. There are many loopholes which could be exploited, but the basic idea is one I've never even heard before.

I gotta think about this one....

-CW

Bravo, Mr. Poet! This is something to think on.

Right now, I can honestly say, I'm not sure if that would be a good idea or not. It is certainly an intriguing one though.

-David

in that vein, i have a plan that is simpler than mr. cain's, a lower percentage, and in my not so humble opinion more fair:

1. abolish all income, corporate, payroll, capital gains and almost every other current federal tax.

2. institute a flat 5% tax on net worth (calculate all assets and liabilities including anything held in trust).

obviously it would have to be tweaked to facilitate a change-over from the current system, and accountants would stay employed because it takes work to figure out exactly what someone is worth. but since our national net worth is about 50 trillion and our current tax revenue is about two and a half trillion, the overall taxes collected (2.5T) wouldn't change much, just the incentive structure.

this would stimulate the economy because nobody would be taxed for using their assets, only for having them. the more you put into the economy, the less you end up paying. perhaps there could be a penalty if it's discovered that you're hiding them out of country to avoid paying, but the details could all be worked out.

That is one excellent graph. Check it out, Michale.

-CW

80% of the people will have to pay more. I was reading the red vs blue.

If you are in the top 20% you get a tax break, if you are in the bottom 80% you'll have to pay more.

http://jaredbernsteinblog.com/9-9-9-in-one-really-long-graph/

It takes the data from the Tax Policy Center report you mention.

Will Cain's plan get this country back on it's feet?

I think it would cripple our country by driving down demand even more. That is, 99% of the people are going to have to pay more taxes which is going to mean less buying power.

-David

Yes, some people will pay more. But at least they will KNOW ahead of time how much more they are going to pay..

Put it this way... The Jones family is planning their budget for the year. They way things are right now, they have to sock all their money away because they don't know what their taxes are going to be like. The tax code is so confusing right now that they have to hire ANOTHER person to figure it out, costing them MORE money and adding MORE uncertainty..

Under Cain's plan, they know ahead of time how much they are going to pay in taxes... They don't have to hire anyone to do their taxes for them. (I guess that's another downside to Cain's plan. It will put a lot of accountants out of work,) Anyways, so they put that money away and that frees up the rest of their money to become disposable income that they use to stimulate the economy...

The one question that no one has bothered to ask is the ONLY important question..

Will Cain's plan get this country back on it's feet??

No, seriously, I am asking... :D

Will it??

Michale.....