Taxing Absolute Income or Wealth
This is part 4 of a three part trilogy on supply side economics. In part one, I explained all if the ways Government Spending becomes GDP. In part two, I discussed the creation of money and it's functions in secondary markets and how this impacts the working class. In part three, I laid out a definition of absolute income in the macro-economy: GDP + unrealized income. I explained how the elements of the latter, that it can be estimated and why it does not really exist.
Of course, anything that can be valued can be taxed. Indeed, it may even be easier to tax than capital gains, which largely rely in self reporting.
Either total wealth and growth in wealth can be taxed in the micro level.
As I wrote yesterday,
Unrealized income =
the net unrealized gain on traded equity and securitized assets held for less than a year
+ the unrealized net gain on assets held for more than a year
+ additions to retained earnings for the year that are attributable to shareholders or partners if it were to be distributed
+ increased value in a year of physical assets less their distribution expense.
All if the above include increased asset values and undistributed earnings for assets held offshore.
All if these amounts can be estimated by the entities owned as of December 31st of each year. Any overlap between stock price and retained earnings can be taken into account. Indeed, reporting this would be beneficial to investors. This is the easy part.
The hard part is generating the liquidity to pay the tax. Actually, this is not hard at all. It merely requires the entity owned to write a check. If course, you could not tax corporate income and the investor's share of it twice.
Likewise, if wealth were to be taxed, it is easier to tax the total value of the entity rather than taxing its owners. It is much less work.
Progressivity may or may not be a concern, largely because stock ownership is largely confined to the upper middle class (although they have the votes to block it) and the wealthy (who have the money to do so). Investor information would be given to the IRS so that firms may get a refund on taxes paid on behalf of the non-wealthy. The IRS must do the reconciliation to preserve investor privacy.
Who really shoulders the burden is a more serious concern. Because of the monopsonist nature of most employment and the monopolist nature of most goods, the wealthy will not pay it.
First, stock prices will go down to reduce burden.
Second, wages will go down.
Third, consumer prices will go up.
Firms have people who run the numbers and a duty to maximize shareholder value. Indeed, internal rents will increase because the labor to make such calculations will be taken from the labor surplus generated from extraction, production, distribution and enabling work.
As I have said before, the rich need to want to pay more so as to reduce the contingent income tax obligations on their children. The best tool to do so is to introduce a tax prepayment bond and an Asset VAT with incentives to sell to qualified ESOPs (including COOPs with one voting and multiple preferred shares, distributed on an equal dollar basis each financial period).
Of course, anything that can be valued can be taxed. Indeed, it may even be easier to tax than capital gains, which largely rely in self reporting.
Either total wealth and growth in wealth can be taxed in the micro level.
As I wrote yesterday,
Unrealized income =
the net unrealized gain on traded equity and securitized assets held for less than a year
+ the unrealized net gain on assets held for more than a year
+ additions to retained earnings for the year that are attributable to shareholders or partners if it were to be distributed
+ increased value in a year of physical assets less their distribution expense.
All if the above include increased asset values and undistributed earnings for assets held offshore.
All if these amounts can be estimated by the entities owned as of December 31st of each year. Any overlap between stock price and retained earnings can be taken into account. Indeed, reporting this would be beneficial to investors. This is the easy part.
The hard part is generating the liquidity to pay the tax. Actually, this is not hard at all. It merely requires the entity owned to write a check. If course, you could not tax corporate income and the investor's share of it twice.
Likewise, if wealth were to be taxed, it is easier to tax the total value of the entity rather than taxing its owners. It is much less work.
Progressivity may or may not be a concern, largely because stock ownership is largely confined to the upper middle class (although they have the votes to block it) and the wealthy (who have the money to do so). Investor information would be given to the IRS so that firms may get a refund on taxes paid on behalf of the non-wealthy. The IRS must do the reconciliation to preserve investor privacy.
Who really shoulders the burden is a more serious concern. Because of the monopsonist nature of most employment and the monopolist nature of most goods, the wealthy will not pay it.
First, stock prices will go down to reduce burden.
Second, wages will go down.
Third, consumer prices will go up.
Firms have people who run the numbers and a duty to maximize shareholder value. Indeed, internal rents will increase because the labor to make such calculations will be taken from the labor surplus generated from extraction, production, distribution and enabling work.
As I have said before, the rich need to want to pay more so as to reduce the contingent income tax obligations on their children. The best tool to do so is to introduce a tax prepayment bond and an Asset VAT with incentives to sell to qualified ESOPs (including COOPs with one voting and multiple preferred shares, distributed on an equal dollar basis each financial period).
posted by Michael Bindner at 11:34 PM
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