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Asset vs. Income Tax

 
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jabailo



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PostPosted: Thu Jan 28, 2010 10:31 pm    Post subject: Asset vs. Income Tax Reply with quote

There was a small crossroads with two farms and two farmers.

One farmer has a fast and mighty flowing stream of water, and a little bucket. His stream flows so fast, that he only need fill the bucket once a day, to take home at night. He knows he will have fresh water in the morning and every day to water his crops.

The other farmer has a slow stream...some days it may even be dry. One time it was dry for an entire season. So he built a tower...a big tower that can hold months of water, enough for a whole summer and more of growing.

Then came the water tax collector.

He thought...shall I tax heavily the man whose river flows fast and mighty? Because each day he has so much water, that he will not miss it and will each day get more.

Or shall I tax the man with the tower...for I can assess what he has, and take a percentage and yet he will have enough for many months still.

Who should he tax? and how?
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PostPosted: Sun Feb 07, 2010 10:55 pm    Post subject: Reply with quote

http://workingclassconservative.blogspot.com/2007/01/asset-tax.html

Quote:
For a very long time, I’ve supported a switch away from the income (“productivity) tax and toward some sort of consumption based tax (ie. The Fair Tax; http://www.fairtax.org/)

I’ve even opposed the Flat Tax as a “half measure” that still puts the complete onus on productivity, doesn’t touch those in the “off-the-books” black market, nor those who don’t depend on income for wealth (the truly “rich”).
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jabailo



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PostPosted: Sun Feb 07, 2010 10:56 pm    Post subject: Reply with quote

And in Hungary...

http://www.realdeal.hu/20100125/govt-expects-asset-tax-to-pass-constitutional-test

Gov't expects asset tax to pass constitutional test

Quote:
The government expects its new tax on high-value assets to pass muster with the Constitutional Court as the tax was created taking the court's earlier decisions into mind, government spokesman Domokos Szollar said on Friday.

The tax is expected to affect just 5pc of taxpayers, Mr Szollar said.
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jabailo



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PostPosted: Thu Feb 11, 2010 6:52 am    Post subject: Reply with quote

http://www.plantemoran.com/perspectives/articles/pages/change-in-mexicos-asset-tax.aspx

Change in Mexico's Asset Tax

Quote:
In the past, the tax was calculated by computing the Mexican company’s net assets (gross assets less non-related party liabilities), and by multiplying that base amount by 1.8%. As mentioned above, this tax is only due when the asset tax calculated exceeds the company's income tax for the year. As such, the IMPAC did not apply to many companies since it only applied to net assets, and the reduction of the base by the company’s liabilities reduced the tax to an amount less than their income tax.

A few things have changed starting with the 2007 tax year. The positive side of the change to IMPAC involves a tax rate reduction from 1.8% to 1.25%. The bad news, however, is that the tax now applies to the net assets of the operation with no possibility of reducing the tax base for the company’s liabilities.
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PostPosted: Thu Feb 11, 2010 6:54 am    Post subject: Reply with quote

http://www.progress.org/coburn01.htm

Consider Asset Taxation

Quote:
Asset taxation is proposed as a unifying position for Georgists, Libertarians, Objectivists, Greens, and Natural Law groups. A proposal that can be supported by all and employed to move the current government towards a more rational and illuminating position.

[...]

Asset taxation is proposed to replace the current federal income tax and federal inheritance taxes with a 2% tax on the market value of all assets, including but not limited to land, improvements, licenses to use natural resources, and any and all properties that can be disposed of or rented to generate income to the owner.
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jabailo



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PostPosted: Wed Feb 24, 2010 5:07 pm    Post subject: Reply with quote

http://seekingalpha.com/article/187945-three-easy-steps-to-fix-global-imbalances

Three Easy Steps to Fix Global Imbalances

Quote:
A much better approach is “capital account protectionism.” Rather than getting into the messy business of interfering with the trade in goods and services, manage capital flows directly. The simplest way to do this is to tax (or subsidize) the purchase of domestic financial assets other than zero-interest cash by nonresidents. There need be no interference in Ricardian free trade, the exchange of present goods and services. But the cross-border trade in promises would be taxed and regulated.

I can already hear the cacophony of objections, and many of them are valid. Yes, clever people would quickly find ways to circumvent a financial asset tax, especially if implemented unilaterally by a single government. (Mutual enforcement would be preferable, but not essential.) Off-balance-sheet arrangements, clever swaps, would have to be controlled (but we have a lot of good reasons to want to do that). Transactions that multinationals now consider “internal” would become more costly and subject to scrutiny (but again, there are lots of reasons to think that supervising “internal” but international corporate flows might be a good idea, given how often these flows are tax motivated). A good regulatory regime combines tactical flexibility with clear goals to which regulators will be held accountable, creating incentives for regulatory innovation to counter circumvention. Those who think capital controls are always futile and doomed to failure are simply wrong. Sometimes they fail, and sometimes they work very well.
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brian-hansen
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PostPosted: Thu Feb 25, 2010 10:16 pm    Post subject: Re: Asset vs. Income Tax Reply with quote

It is interesting, and perhaps not accidental that your story involves the value of water and the idea of water taxation.

jabailo wrote:
One farmer has a fast and mighty flowing stream of water, and a little bucket


I've written elsewhere on YRIHF on why I think of water as the ultimate
organizing element in how humans should govern themselves. We
all have a common responsibility to protect our water sources, and
to organize ourselves such that a thirsty person can drink water, even
if poor. Water forms watersheds, the natural organizing unit of political
hierarchies.

Given the preciousness and sometimes rarity of water, I find it reasonable
to tax it. More precisely, to tax the consumption of it. Since there is
nothing in your story to suggest that one farmer used more, they would
pay the same amount of tax.
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jabailo



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PostPosted: Fri Feb 26, 2010 6:39 pm    Post subject: Re: Asset vs. Income Tax Reply with quote

brian-hansen wrote:
I've written elsewhere on YRIHF on why I think of water as the ultimate organizing element in how humans should govern themselves.


I believe you are referring to "Water Law"

http://you-read-it-here-first.com/viewtopic.php?t=1046&sid=ed4c9e5ebc5e06b4cc4236128279e60c

where although the word "tax" does not appear, you talk about it as a medium of exchange.

However, water is not central to my argument, as I am using it inversely to you. I use it as metaphor and it could be replaced by any substance which has a concept of both kinetic and potential energy (electricity for example) whereas you mean literally "water".

But in re-reading the article, water resources could be consider both an actual Asset and a barometer of other assets. A bigger house has more bathrooms would be a gross illustration of said and therefore, yes, we could apply the concept of Water Law in reference to Asset Taxation.
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brian-hansen
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PostPosted: Fri Feb 26, 2010 11:05 pm    Post subject: Reply with quote

Water may be a special case. It is the clearest example of
a tax that is justified, and the clearest example of the necessity
of the "liberal floor".

Still, my conclusion does not depend on this. It could've been
buffalo chips. Assuming that there is good reason to tax them,
taxing consumption is the most fair and natural for your example.
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jabailo



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PostPosted: Fri Feb 26, 2010 11:23 pm    Post subject: Reply with quote

brian-hansen wrote:
Water may be a special case. It is the clearest example of a tax that is justified, and the clearest example of the necessity
of the "liberal floor".


I think I've given some ground on the "floor" in the past, although I have said that my problem is more in quantifying it, rather than accepting the concept. However, you might respond, that with water, it's fairly easy (5 quarts a day for humans, or whatever).

However, I guess I'm a bit more concerned about "the ceiling" than the floor in this case.

brian-hansen wrote:
Still, my conclusion does not depend on this. It could've been buffalo chips. Assuming that there is good reason to tax them, taxing consumption is the most fair and natural for your example.


I for one would not say so.
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PostPosted: Fri Feb 26, 2010 11:39 pm    Post subject: Reply with quote

Okay.
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jabailo



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PostPosted: Thu Mar 18, 2010 9:35 pm    Post subject: Reply with quote

It appears that the Reconciliation Health Care plan will be funded in part by what is essentially an asset tax:

http://www.washingtonpost.com/wp-srv/special/politics/health-care-5-questions/

"The reconciliation package would keep the Senate's tax but scale it back, while adding a new Medicare tax on wealthy taxpayers' interest and dividend earnings."

If true, that's the most radical part of the plan and I like it!
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jabailo



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PostPosted: Fri Mar 26, 2010 9:37 pm    Post subject: Reply with quote

Time for a tax on assets not income to pay for Healthcare

http://seminal.firedoglake.com/diary/32628

Quote:
We need to stop taxing income and tax assets a one time 10%, 20 % tax on the assets of the richest 10% should cover it. Middle Class America however has no cash forcing us to pay when we have debt on homes worth less than the price we bought them at means we can’t pay!
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PostPosted: Fri Mar 26, 2010 9:45 pm    Post subject: Reply with quote


Health care bill extends wage tax to investments


http://news.yahoo.com/s/ap/20100319/ap_on_bi_ge/us_health_care_taxes

Quote:
Section 1411 of the bill, “Imposition of Tax,” also provides that the surtax would be applicable to any estates or trusts held by taxpayers falling into those brackets.

Unearned income is comprised of funds gained outside of a paycheck from an employer—largely from capital gains, dividends, annuities, and rental income.
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jabailo



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PostPosted: Thu Mar 31, 2011 9:51 pm    Post subject: Reply with quote

Inequality Is Most Extreme in Wealth, Not Income

Quote:
As you can see, the nation’s income distribution may be quite lopsided, but its wealth distribution is even more so.

The top 1 percent of earners receive about a fifth of all American income; on the other hand, the top 1 percent of Americans by net worth hold about a third of American wealth. (Note that the top income earners are not necessarily the same people as the top net-worth Americans — after all, lots of high-net-worth people don’t work or have much else in the way of sources of new income.) Wealth-related inequality has also been relatively stable over the last few decades, whereas income-related inequality has been growing since the ’70s.


http://economix.blogs.nytimes.com/2011/03/30/inequality-is-most-extreme-in-wealth-not-income/
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aprilaa



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PostPosted: Sun May 01, 2011 11:54 pm    Post subject: Reply with quote

How do I calculate Income and SE Tax? I have sole-proprietorship. After expenses my taxable income is $1275.90. My question is do I take 15% off that number for Income tax THAN out of that number after Income tax I subtract additional 15% for SE Tax or do I have to use $1275.90 as a starting point for both taxes??
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PostPosted: Mon May 02, 2011 9:16 am    Post subject: Reply with quote

I see from Google that you've asked this question over 1800 times, going back to 2008. It would seem that you are not interested in an answer.
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jabailo



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PostPosted: Sun May 22, 2011 3:17 pm    Post subject: Reply with quote

Asset Tax idea making it to the mainstream.

Not only does Washington State have a bill in the legislature for an asset tax on intangibles (HB2100) but one of the local daillies featured a front (web) page article about such taxes.

Quote:

<b>Should state tax 'intangible' property, such as stocks?</b>

As state budget shortfalls loom and spending on schools has been cut, a number of people have begun to think so. There are tentative estimates that the state could raise as much as $4 billion each year by taxing assets such as stocks, bonds, mortgages, commodities contracts, patents and trademarks. That's attractive to state lawmakers who worry about maxing-out the property tax burden on the middle class Taxing intangible property would shift it back toward people with more means and help shore up school funding, supporters say.


http://www.seattlepi.com/local/article/Should-state-tax-intangible-property-like-1390753.php#ixzz1N7sPGA7b
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jabailo



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PostPosted: Sat Jul 30, 2011 12:36 pm    Post subject: Reply with quote

Washington State's HB2100 (asset) tax on intangibles

Status

http://apps.leg.wa.gov/documents/billdocs/2011-12/Pdf/Bills/House%20Bills/2100.pdf

Text

http://apps.leg.wa.gov/documents/billdocs/2011-12/Pdf/Bills/House%20Bills/2100.pdf

Quote:
(2) "Intangible personal property" means:

(a) All moneys and credits including mortgages, notes, accounts, certificates of deposit, tax certificates, judgments, state, county and municipal bonds and warrants and bonds and warrants of other taxing districts, bonds of the United States and of foreign countries or political subdivisions thereof and the bonds, stocks, or shares of private corporations;
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PostPosted: Sat Jul 30, 2011 4:13 pm    Post subject: Reply with quote

Now that we've talked about this a bit, perhaps you can clarify some things for me. I see from one post that your intangible asset tax (or what I'm starting to think of as a property tax without all the loopholes) would include things like bank accounts and IRA's. Can you confirm this?

Also, let's say that I have the copyright on some interesting pamphlet, say, on how to build a solar oven. Will someone be coming along and putting a value on that? Then I would have to pay taxes, even if I wasn't currently pursuing making income from it? Likewise, lets say I have a patent on a design for a "rocket stove" but am not aggressively marketing it or protecting it (and not deriving income from it). Would I owe taxes?
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jabailo



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PostPosted: Sat Jul 30, 2011 6:32 pm    Post subject: Reply with quote

include things like bank accounts and IRA's. Can you confirm this?

Again, it's open to definition.

My definition would say "yes, of course". In HB2100 they mention "accounts" which I would say covers the items in question. You might want to read it further to answer your own question.

have a patent on a design for a "rocket stove" but am not aggressively marketing it or protecting it (and not deriving income from it). Would I owe taxes?

Excellent question. With a stock, we know its value because its sold in a "market" and the price is determined by multiple bidders and sellers seeking the optimum price. I guess a patent might fall somewhat into that range, but then extend down into something like a postcard...which can be valuable to a single person (or need) only. Or else, be valuable at a point in time (suddenly, Belgian ocelots in tuxedos are popular. Who knew?!)

So, the value would have to be set based on combination of actually license revenue and the money earned when it is sold. Or, if you are purchasing the patent as an investment, then it would have that value.

Of course then, if you only value it when its made liquid, that value would go into a bank account or stock or bond etc -- things that already being valued as assets!

This question is very key to the whole idea -- potential income versus "kinetic". However, we have the case of land...which we assess and place value on regularly. We might have to institute a similar, but even more complicated system to create these assessments for intellectual property.

This may dovetail into my argument about whether patents are transferable at all. I argue that according to the Constitution...no! That they are in essence a form of medal or award to the original inventor. You can license a manufacturer to make your idea as a product...but you retain the ownership. There is no "transfer" possible, hence it is not really valued until revenue comes in.

Of course, that is a side argument, because obviously transfers are done, and more law about intellectual property has been written to make these things possible. Still, I have grave doubts about these things.
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brian-hansen
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PostPosted: Sat Jul 30, 2011 7:55 pm    Post subject: Reply with quote

This is becoming a bit clearer. Thank you.

Maybe I picked an area (underachieving copyrights or patents) that was at the "frontier" of the applicability of your idea. There are areas that are much clearer, I understand from your post, with the intangible assets that produce predictable income, or have recently been transferred, or exchanged, for a particular price (otherwise called a "comp", or a comparable). I might want to return to the question of establishing value of assets in these hard-to-valuate areas later.

For now, I'm struck with the need to correct my misunderstanding of your idea. From just reading the headlines (sorry), I got the impression that you emphasized the loopholes that things like trademarks, patents, trade secrets, etc. represented, that these were the "intangible" assets you were talking about. But now, as it becomes clearer, you mean a tax on all assets, including, in particular, financial assets such as CDs or money market accounts, along with the typical house, and commercial real properties.

There are a lot of people with significant financial assets, as in stocks, bonds, mutual funds, iras, 401ks, trust funds, etc. These assets are not now typically taxed, as I understand it.

This part of the change you propose seems more significant than the valuing of trademarks and otherwise intangible "goodwill", etc. as property subject to tax.
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PostPosted: Sun Jul 31, 2011 7:28 am    Post subject: Reply with quote

My argument for an asset tax is not based on correcting inequality or redistribution; however, the article below summarizes some interesting numbers about assets versus income.

<b>Inequality Is Most Extreme in Wealth, Not Income</b>

Quote:

Typically, comments about rising inequality refer to the stark disparities in incomes of the very highest-paid Americans and everyone. We have observed in several posts, for example, that most of the income gains over the last few decades have gone to the very richest Americans. That means the highest-paid Americans have been claiming a larger and larger share of earnings.

[...]

The top 1 percent of earners receive about a fifth of all American income; on the other hand, the top 1 percent of Americans by net worth hold about a third of American wealth. (Note that the top income earners are not necessarily the same people as the top net-worth Americans — after all, lots of high-net-worth people don’t work or have much else in the way of sources of new income.) Wealth-related inequality has also been relatively stable over the last few decades, whereas income-related inequality has been growing since the ’70s.


http://economix.blogs.nytimes.com/2011/03/30/inequality-is-most-extreme-in-wealth-not-income/
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jabailo



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PostPosted: Sat Oct 29, 2011 10:04 am    Post subject: Reply with quote

This article from 1996 is old but prescient.

Time for a Wealth Tax?


Quote:
Whereas a majority of advanced industrial countries -- including those with high savings and growth and low levels of inequality -- provide for a direct annual tax on household wealth holdings, the United States does not.

It may be time to reconsider. Because wealth is so highly concentrated, a wealth tax -- paid principally by wealthier Americans -- would be a gain for equity; because wealth inequality is tied to unequal political power, a wealth tax could make the country more democratic; and because wealth concentration is growing, a large political coalition might be prepared to endorse it.

With debate on the deficit currently dominating American politics, a wealth tax would help to close the budgetary gap without visiting the costs on those who can least afford them.


http://bostonreview.net/BR21.1/wolff.html

I will note that several European countries have recently changed or eliminate such taxes on the premise of capital flight.
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jabailo



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PostPosted: Mon Nov 07, 2011 7:03 pm    Post subject: Reply with quote

2% Asset Tax Can Eliminate All Other Taxes

Quote:
If the total value of all US assets is about $200 trillion, and the total tax revenue in the US (federal, state, and local combined) is about $4 trillion per year, then if follows that a simple tax of 2% on all US assets would pay all taxes.


http://patrick.net/forum/?p=1133205
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PostPosted: Mon Nov 19, 2012 9:01 am    Post subject: Reply with quote

NYT Op Ed

To Reduce Inequality, Tax Wealth, Not Income

Quote:
Trends in the distribution of wealth can look very different from trends in incomes, because wealth is a measure of accumulated assets, not a flow over time. High earners add much more to their wealth every year than low earners. Over time, wealth inequality rises even as income inequality stays the same, and wealth inequality eventually becomes much more severe.

This is exactly what happened in the United States. A common statistical measure of inequality is the Gini coefficient, a number between 0 and 100 that rises with greater disparities. From the late 1970s through the early 1990s, the Census Bureau recorded Gini coefficients for income in the low 40s. Yet by 1992, the Gini coefficient for wealth had risen into the mid-70s, according to data from the Federal Reserve.


http://www.nytimes.com/2012/11/19/opinion/to-reduce-inequality-tax-wealth-not-income.html?hp
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