Is there anyone out there who would like to live in a world with no personal income tax, and no corporate income tax?
Do investors think that our economies would become more efficient if we eliminated all sales taxes and capital gains taxes? How about living in a world where all those taxes are gone?
No, I have not been ingesting illegal narcotics. In a world with a wealth tax, all other forms of taxation would be eliminated – as being redundant. Furthermore, across the Western world, $10's of trillions in wealth would be exposed to taxation for the first time. The obvious advantage of such a tax system (apart from the enormous improvements in economic efficiency) is that with all wealth subject to taxation, the tax rate paid by everyone would decline.
In Parts I and II, I explained why income taxation is the worst possible basis for a tax system, and also explained why it will inevitably bankrupt all economies – as a greater and greater percentage of total wealth is funneled into fewer and fewer hands, every day. Let me return to the numerical example I used in Part II.
We'll take a hypothetical billionaire, who has an annual salary of $10 million/year (greater than that of the average billionaire). As I mentioned previously, even that monster-salary only represents 1% of the total wealth of this individual. Thus, even a 100% (income) tax-rate on a billionaire only has a trivial economic impact on this individual.
More importantly, (assuming a 10% annual rate of appreciation on assets), this person's income only represents 10% of his/her annual increase in wealth. What this means is that no income tax system could ever fairly tax such individuals – with the inevitable result that more and more of a society's wealth is funneled into their pockets every year.
Now let's see what happens if we switch to a 5% wealth tax. It is simple arithmetic that a 5% wealth tax would result in the billionaire paying $50 million per year in taxes. In other words, using the numbers of this hypothetical example, a 5% wealth tax would result in 500% more tax revenues for government being paid by this billionaire than a 100% income tax-rate. Best of all, with the ultra-wealthy no longer being able to hide the vast majority of their wealth from taxation, the wealth tax can be set at whatever rate is necessary to stop this relentless plundering of all the wealth of our economies.
Ironically, the wealthy are always violently opposed to any form of “socialism�: arguing that it reduces the incentive of individuals to “get ahead� or even to work, at all. Obviously, precisely the same argument can be made with income tax: it is a major disincentive to try to raise one's income. Eliminate income taxation, and we maximize the individual incentive to increase one's income. This, in turn, would lead to real gains in “productivity� – rather than the pretend-gains in “productivity� which are reported by corporations, each time they slash the compensation of their own employees.
Hypocritically, despite being grossly under-taxed, the wealthy complain about taxation at least as much as the over-taxed poor and middle-class. They claim that “the only fair means� of taxation is a “flat tax� – i.e. where everyone is taxed at the exact, same rate, regardless of how wealthy they are.
Well, in a wealth taxation system, the wealthy can finally see their dream come true. With a fair tax system, everyone can be taxed at the same rate. It is also a perfect opportunity to test the integrity of the wealthy. There can be no possible objection to a flat, wealth tax. Should such a proposal be advanced – and meet the much more vehement protests of the very wealthy – this would prove what average citizens have suspected all along. Specifically, the wealthy have never been interested in “fair taxation�, but rather all they want to do is rob all the wealth of society for themselves.
With wealth taxation, not only would personal income tax be gone, but so would corporate taxation. With all the wealth of corporations contained in the shares of their shareholders, by taxing the wealth of shareholders, corporate income tax would become redundant (a form of double-taxation). Exactly the same argument applies with capital gains and sales taxes.
About Jeff Nielson