New tax structure #2, the Wealth Based Income Tax with Sales

Taxes, finance, economic theory, etc.

New tax structure #2, the Wealth Based Income Tax with Sales

Postby 4tees » Sun Apr 16, 2006 4:51 pm

Please post constructive comments and criticism on this idea, or start a new thread with your tax Idea big or small.

One of two Ideas I have to replace our current tax system is the Wealth tax.

A Wealth based income tax combined with a ?non-necessity? sales tax:

:arrow: Only individual income is taxed; All income (anything that increases your wealth in any way, shape, or form, is counted as income, unless it is just an increase in the value of assets you already own), no more loopholes, deductions, business ?expenses? or free perks.

:arrow: Individual tax rates are based on individual (single) or joint household wealth at the end of the previous tax year, not on how much you income is today. A low 5% flat income tax rate would be applied for the lowest 30% of household wealth, a flat tax rate of 10% for the middle 65% of household wealth, changing to a linearly increasing progressive rate for the top 5% of household wealth, maxing out at 95% for the top wealth bracket.

:arrow: All individual wealth that leaves the country is taxed at the maximum rate

:arrow: The ?non-necessity? sales tax would tax all items deemed not necessary to live and maintain a healthy lifestyle and home upon their purchase.

:arrow: Sale of large ticket necessities like Primary homes and transportation will be taxed on any ?un-necessary value? defined to be any amount in excess of two standard deviations above the national mean value (only the top 2 ? % of homes and vehicles would be sales taxed by this method)

:arrow: Stocks, Bonds, Real Estate (other than your primary residence), and all other purchased investments are considered ?non-necessity? and are taxed at the time of purchase. The exception is Real estate and equipment required to expand a business in the U.S., and held entirely as a business asset. If later transferred to a private asset of the business owner(s) the original sales tax and the income tax on its value must both be paid.

:arrow: When investments are sold no tax liability is incurred as the wealth of the owner did not change, just the form of the wealth did.

:arrow: NO corporate or business taxes whatsoever for companies making products in America on the portion of earnings paid to American owners, investors, and employees who wholly reside in the US. (those earnings are taxed as individual income when they are paid out to owners, investors, and employees)

:arrow: Business assets are maintained entirely separately from and are not considered part of personal/household wealth. However to be considered a business asset the asset cannot benefit the private lifestyle of the business owner in any way (no company cars, clubs, houses, etc)

:arrow: Business earnings that leave the country (to foreign investors) are taxed at a fixed rate.

:arrow: Business earnings entering the US due to overseas operations or investments are taxed at a rate to offset differences in labor costs in the country of origin when they are lower than in the US.

:arrow: All business earnings when paid to individuals or claimed by owners as personal assets are considered income.

:arrow: Inheritance would no longer be taxed, but the inheritor would in the tax year of inheritance be immediately subject to the new tax rate based on their new wealth.
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Postby mtnrambo » Sun Apr 16, 2006 5:35 pm

:? Let me sleep on this...

You do make some good points on this and the other post...
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Re: New tax structure #2, the Wealth Based Income Tax with S

Postby etowah » Sun Apr 16, 2006 8:13 pm

[quote="4tees"]

:arrow: Stocks, Bonds, Real Estate (other than your primary residence), and all other purchased investments are considered ?non-necessity? and are taxed at the time of

:arrow: When investments are sold no tax liability is incurred as the wealth of the owner did not change, just the form of the wealth did.

:arrow: NO corporate or business taxes whatsoever for companies making products in America on the portion of earnings paid to American owners, investors, and employees who wholly reside in the US. (those earnings are taxed as individual income when they are paid out to owners, investors, and employees)


To clarify these points, 4 tees: Purchase of stocks. etc are taxed at the
time of purchase. When they are sold- for a profit-they are not taxed.
What if there is a loss on the investment -is there a deduction?

Good idea on a tax break for made in America.

The rest of your ideas seem like a "soak the rich" tax, and a disincentive
to save and invest in real estate. The more your home is worth, the more
you pay?
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Postby 4tees » Sun Apr 16, 2006 11:54 pm

Purchase of stocks. etc are taxed at the
time of purchase. When they are sold- for a profit-they are not taxed.
What if there is a loss on the investment -is there a deduction?


The loss of value would decrease your wealth in that case; if the loss is sufficient to reduce your wealth so that a lower tax bracket applies, then it would reduce your taxes.

The rest of your ideas seem like a "soak the rich" tax, and a disincentive
to save and invest in real estate. The more your home is worth, the more
you pay?


For the top 2 ? %; the more their total assets are worth, the higher their tax rate. For the rest of us it is essentially a Flat tax.

Your primary home is just a portion of your personal assets, especially at higher levels of wealth. Other real estate (that which is not your primary home) is simply another investment and is treated as such.

Tax rates are significantly lower for all but the top 2% or so. This will significantly increase saving and investment for 98% of Americans. It will also stimulate the economy, create new jobs, encourage new small business, and exponentially grow the number of upper middle class and moderately wealthy.

This system is a win for 49 out of every 50 instead of the current system that only rewards 1 out of 50.
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Postby lawnguy » Mon Apr 17, 2006 8:20 pm

This seems more an example that one man's utopia is another man's hell, and I don't say that as a personal attack. What happens to all those folks who make honest livings providing the services and products that the more well to do desire? Remember a few years ago when the government, in its' infinite wisdom, decided to tax the daylights out of "luxury watercraft"? The outcome was that lots of US boatbuilders went belly up, jobs were lost, lives were changed for the worse, and how about those luxury boats? Oh, they were bought anyhow.....from foreign companies. Meddling, no matter how good intentioned has far reaching effects, often not the ones hoped for.

The ultra rich do not deserve punishment any more than the poor. Doing so is most likely unconstitutional and just won't happen, because for every one person who might support such an action because of envy, there are a hundred who would reject it outright, because they dream and work to become wealthy themselves.
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Postby 4tees » Mon Apr 17, 2006 10:12 pm

Where we differ lawnguy is that I think there is a reasonable ceiling above which one is being irresponsible in striving for more wealth. Greedy hording behavior hurts the economy and ultimately the welfare of our nation. However we have a free society where one is allowed to act irresponsibly, but irresponsible behavior should not be without consequences.

If you had read my post history, which is unlikely since the AC-T kept deleting everything; you would find that I want to help small business, and help people achieve moderate levels of wealth. In a long ago thread the majority reached a consensus that $1.5 million in today?s dollars is a reasonable limit, above which we agreed you are just being selfish.

I might start up a small business myself. I would love to operate under either plan I propose as opposed to the anti-small business climate today. I think you are being over dramatic in suggesting my ideas resemble "hell" :twisted: :wink: I ask that you explain the ideas you think are beneficial to our economy, and why they are so, rather than just bash at mine. It is easy to criticize and throw about labels; much harder to put forth your own ideas.

On the old Forum you brought up your lawn business. To put it quite frankly there is less opportunity to conduct a dishonest business in that field; and I have little doubt (without knowing you personally) that you are an honest business person. I would agree that you probably earned whatever wealth you have fair and square. I also bet that you would fall in the 10% tax bracket under this plan, meaning your taxes would be much lower than now.

I would also agree that you do have to compete in a competitive marketplace; where it is quite easy for new competition to spring up. Local home services are one area where the free market can still work. My ideas will help small businesses like yours and likely lower your taxes. If you disagree please explain in detail how the status quo is more beneficial to you than either of my tax ideas.
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Postby lawnguy » Mon Apr 17, 2006 11:21 pm

For starters since you have ignored the examples I have given and seem to think that I am bashing you personally I will just try one more scenario. Given that you think anything above $1.5 million is "too much" and should be taxed almost back to that amount, can you envision a situation where a businessman is about to go over your limit, which he for some strange reason does not accept. Said greedy rascal then takes a look at just how much he wants to make and decides that if you are going to tax him at 95% he will have to make that much more to reach his goal. In order to do that he just raises prices, or cuts labor, or what ever he has to do to get where he wants to be. Since foolish little Lawnguy works for him and buys his product, now I get cut back in my work and have to pay more for what he makes.

I am not being overly dramatic in characterising taxes that punish success as hell. Fortunately they have about the chance of a snowball in said location of getting put into practice. What I would support is an across the board FLAT tax; somewhere I read that we were equal in this country and that is one way of confirming that equality. The bill of rights makes mention of equal rights to persue happiness, and no mention of just who gets to decide how much happiness is OK for us.
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Postby 4tees » Tue Apr 18, 2006 2:57 am

lawnguy wrote:For starters since you have ignored the examples I have given and seem to think that I am bashing you personally I will just try one more scenario. Given that you think anything above $1.5 million is "too much" and should be taxed almost back to that amount, can you envision a situation where a businessman is about to go over your limit, which he for some strange reason does not accept. Said greedy rascal then takes a look at just how much he wants to make and decides that if you are going to tax him at 95% he will have to make that much more to reach his goal. In order to do that he just raises prices, or cuts labor, or what ever he has to do to get where he wants to be. Since foolish little Lawnguy works for him and buys his product, now I get cut back in my work and have to pay more for what he makes.

I am not being overly dramatic in characterising taxes that punish success as hell. Fortunately they have about the chance of a snowball in said location of getting put into practice. What I would support is an across the board FLAT tax; somewhere I read that we were equal in this country and that is one way of confirming that equality. The bill of rights makes mention of equal rights to persue happiness, and no mention of just who gets to decide how much happiness is OK for us.


I said you were bashing ideas without providing an alternative; I never said you were bashing me. You like a flat tax? Take the time to describe how it would work on a new thread. You think my idea is bad, great! State which points you believe are flawed and then detail WHY. You may even suggest an improvement!

Your example of luxury boat builders failing is true, but the cause may not be. The failure of these boat builders is contradictory to the free market theories you support. The U.S. builders failed while the European builders survived. Should they not have been able to compete with the European Builders? They survived. Both had access to the same markets, and the amount spent on luxury "boats" has skyrocketed far more than any increase any tax caused. Perhaps they were to fail soon anyway because they were not competitive.

It is also possible that the wealthy boycotted the builders to ?protest? the tax, purposely causing their failure. They have never shown real concern for US workers so I wouldn?t put it past them.

Even if the tax caused their failure it was a very small contributor to the overall economy, as compared to the mass layoffs caused by profiteering and outsourcing. What significant sector of the economy ?failed? irrefutably because of the luxury tax?

History shows that our previously much higher tax rates for the wealthiest Americans did nothing to discourage their quest for wealth. That is a fact that can be verified all over the internet and local library. Claiming higher taxes for the wealthy will discourage wealth generation is at best an unproven Theory, and at worst an outright deception. History backs my view that truly progressive taxes are good for America.
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