Why a wealth tax makes sense
A wealth tax would do a much better job of capturing the various forms of income enjoyed by the very rich, but often missed by our messy tax code, said Ronald McKinnon at The Wall Street Journal.
Ronald McKinnonThe Wall Street Journal
A modest wealth tax on the very rich is an idea even conservatives should get behind, said Ronald McKinnon. President Obama’s current plan is to increase marginal tax rates on those earning more than $200,000 a year, but that would only drive more people to seek loopholes and tax shelters. A wealth tax would do a much better job of capturing the various forms of income enjoyed by the very rich—including capital gains, dividends, and stock options—but often missed by our messy tax code.
If levied only on domestic and foreign assets above $3 million, a wealth tax would leave more than 95 percent of Americans untouched. And at a modest rate of, say, 3 percent, a household with $5 million in assets would pay $60,000—hardly enough to trigger massive tax avoidance. Such a tax would also “hit old wealth along with new wealth,” and the revenues could lead to lower marginal income-tax rates on everyone.
It’s a political trade-off, but hitting the very well-off would mollify Wall Street protesters and get us closer to a “much-needed rationalization of the income tax.”