It's Time For A Wealth Tax

It is time for a wealth tax.

I believe the U.S. needs a complete reform of the Federal tax system, which will inevitably mean reform of the states tax system as well.

Suppose this was a nation where every family owned a million dollars. Since there are about 106.5 million families in the country, the total personal wealth of the country would be 1 million times 106.5 million, or $106.5 trillion dollars. Actually, the total wealth of the country in 2001 was at least $42.1 trillion (and was about $54.3 trillion dollars if government assets are included). If the personal wealth of $42.1 trillion) was spread equally across all families, each family would have about $395,500. Not very close to a million but within striking distance.

In such a society, every family would be somewhat wealthy and everybody would pay taxes. Since few or none would be poor, most people wouldn't need Social Security. They probably would need less Medicare or Medicaid. Such a society can never be attained but it can be approached much more closely than the society we have now, where we have a few hundred billionaires, several million millionaires, millions doing pretty good, and tens of millions just above or a little below the poverty line.

How could we get to a society of all or mostly millionaires? The only way is a drastic redesign of our tax system. Many of the people who now make $50,000 or more have to pay very substantial taxes, consisting of a combination of federal and state income taxes and federal wage tax (social security), plus local real estate and sales taxes. If the taxes on this group could be substantially lowered, it is certain that it would push their total wealth upward. If the group making $100,000 to $200,000 or more had their taxes lowered, their wealth would begin to approach or exceed one million. One million dollars per family becomes the magic number! When a family reaches this level of wealth, a wealth tax would kick in. It could be based on the idea that the first one million of wealth is not taxed. But all wealth greater than one million would be taxed at 1%. If you had 2 million, you would pay a tax of 1% on the second million, or $10,000. This would be in addition to whatever other taxes you might owe. In 2003 the number of millionaires (plus a few hundred billionaires) is about 3.8 million (NFO Financial Services). The number of households with wealth of $500,000 to $1,000,000 is about 3.6 million.

The total wealth of the top 10% of US families is about 70.9% of $42.1 trillion, which is $29.8 trillion. The total wealth that would not be taxed under the one million exemption rule would be 3.8 million families times one million dollars each, which equals $3.8 trillion. Subtract this amount from the $29.8 trillion and you end up with about $26 trillion subject to the 1% tax. One percent of $26 trillion is $260 billion. Remember, this is a tax of only 1% on the wealth of families who have more than one million.

This is the amount that could be used every year to lower income taxes, reduce the wage tax to near zero, provide universal health care, and do other things.

Do you think this would be a good issue for some Democratic politician who would like to be the next president?