Tuesday, May 13, 2003

Discussion: Taxation of Wealth

Hello all.

I was just reading some of the posts (and talking about it with Barry) and wanted to throw a few cents in on the tax issue. First, I am in favor of a progressive wealth tax. This is for two reasons. The people with the most wealth can most afford to pay and these same people are the ones who benefit most from the main function of government which is to prevent people (whether from within the nation or without) from beating other people up and taking their stuff. Whoever has the most stuff needs the protection the most.

It seems silly to me that somebody like me who makes a great salary but has $150,000 in loans and 0 in the bank pays the same tax as someone who sits on their ass with a fat bank account on which they earn $125,000 in interest. Nor do I think that it is practical to attempt to limit inheritances. There are always accountants who can figure how to transfer excess wealth to the people the transferor wants to, through gifts, joint ownership, corporate formation or some other tool. I understand that a wealth tax would potentially discourage saving, but there is a difference between saving enough to live on in old age and hoarding a massive fortune. Through the progressive nature, it shouldn't be too hard to lay off the former while reaching the latter. After all, assuming the total revenue collected remains the same, the people in my position would have to foot less of the bill and could save more. Besides, consumption is a good thing in that it keeps the economy running strong. Economic problems result when large chunks of the nation's wealth is socked away where neither the public nor the private sector can reach it. Besides, with the revenue collected, it shouldn't be too hard for the government to provide enough for a basic existence to the needy among retirees; the choice would then be whether to save enough to have more than a basic existence in retirement or consume and take what is offered. Either way is fine. Second, it is wealth that the police force, the fire fighters, and the army are protecting--not income or consumed goods. Therefore, it seems only fair that those with the most wealth pay more for these services.

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