Driving along the Dan Ryan on my way out of Chicago today, my eye was drawn to a billboard advertising a local talk radio station.
The big, bold headline read “TAX THE BILLIONAIRES.”
At first, my conservative, capitalist, free enterprise, work ethic, Republican gut growled with disapproval.
They’re at it again, I thought. The class warfare people, trying to divide America. Playing on the cupidity of the masses. The politics of envy. 99 % versus 1%.
But then I had a second thought. As crass as that billboard sounds, it is in fact expressing a policy that I believe makes sound economic sense.
Bear with me here, this is not so unreasonable.
First off, I firmly believe that the 16th amendment was a mistake, and should be repealed.
For those of you who don’t know, the 16th amendment was passed in 1913. It’s the amendment that empowers the federal government to levy income taxes.
The constitution as originally written provides that all federal taxes levied on the American people must be proportional to the population of the states.
Basically, that would only allow a ‘head’ tax, and not a tax that takes account of wealth or income.
The 16th amendment is the only exception to that rule. A tax on billionaires or trillionaires or millionaires would be unconstitutional if it taxes their wealth and not their income.
I would favor repealing the 16th amendment and replacing it with an amendment permitting the federal government to levy a wealth tax.
A wealth tax would be levied not on what you earn, but on what you own. All of the states already have real estate taxes, and some of them have intangibles taxes which are levied upon the value of investments.
Why tax wealth instead of income?
Very simply because income which is earned and spent stimulates the economy. That’s why everyone cheers when the stores report record Christmas spending. The faster money moves around from buyers to sellers, from earners to businesses and back again, the better it is for everyone.
The worst thing anyone can do with money is to hide it under the mattress.
The parable of the talents teaches us about the social obligation of wealth. Matthew 25: 14-30. The servants who put their talents to work were commended by the master. The guy who buried his talent was condemned as wicked and lazy.
The second worst thing you can do with wealth is to buy gold. Gold doesn’t employ anybody, doesn’t make anything, doesn’t stimulate the economy.
The third worst thing to do with money is to buy government bonds. Unless, of course, you think that the government knows best about how to run the economy.
The total wealth of the United States is around 60 trillion dollars. To replace our income tax would require an averge asset tax of about four percent.
A graduated wealth tax would assure that money would be invested in income producing assets as opposed to being gambled on speculative holdings.
It would have to permit and encourage household savings for retirement, education, and rainy days of course, but, if properly graduated, it would be levied on those with the ability to pay and the obligation to invest in the community.
Capitalism is not a system that can be abolished or amended. It is instinctive human behavior. Free enterprise is nothing more than free people making free choices.
There are winners and losers in the marketplace, just as there are in sandlot softball.
The one thing winners can’t do is take their bat and ball and go home.
Dear Judge
ReplyDeleteAs always, I enjoyed your blog regarding taxing wealth. For over a year I have been pondering the same alternative. How do we capture the trillions of dollars being held in non producing assets into the creation of job producing goods and services.
When I grew up in Pittsburgh, Pa my family and the family of my friends all were involved in producing or selling things. The Government was there to protect us and insure our lives were un intruded upon. There were stories about the terrible working conditions that use to exist in the steel mills up and down the rivers. At the entrance to Homestead and Braddock Works there were hugh signs indicating the number of days it had been since a fatal or serious accident occurred. The unions had provided a well needed change in the safety of the mill workers. In the late sixties the Japanese, who had become strong competitors in the steel industry invented the B.O.A.F. A method of producing steel twice as fast with half the people. The unions resisted, less people and fewer hours and today Homestead Works is a water park and Braddock Works is a apartment complex. There were over 50,000 people employed in these two locations alone.
I mention the Pittsburgh history because the second step along with taxing wealth is to eliminate the restrictions and regulations which impeded the creation of business. Do we want to get back to the horrible working conditions of the steel mills? No. However, do we need entire government agencies devoted to adding more barriers to business creation and growth?
Let's insent people to invest in productive job creating assets and make it easier for them to make this transition.
John
Tom, welcome home. Happy to have you on our side.
ReplyDeleteWonder about the opposition though...If all of us pay 4% of net worth, hmmm, my taxes would about double.
Is there is some sort of application form for me to get into the GOP? :)
J