by Charles Hugh Smith, Of Two Minds:
Looks like we need another $500 billion or so. Hum baby!
Predictions are hard, especially about the future, but two predictions are easy: 1) governments that do not yet impose wealth taxes will do so within the next five years and 2) governments will impose windfall taxes on all outsized unearned gains, from any source, anywhere on the planet.
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Glancing at the chart of federal tax revenues, we note a steep increase–hum baby! Governments have financial commitments, and these never seem to decrease, they only increase.
It’s nothing personal, we just need more money. We have responsibilities and we made promises.
A few nations already have wealth taxes: for example, Norway, Spain and Switzerland. In Switzerland, the wealth to be taxed is self-reported, and the top rate is 1%. The Swiss wealth taxes account for 3.6% of tax revenue. It doesn’t sound like much but every little bit helps, right?
That 3.6% of tax revenues applied to the U.S. tax revenues equals a cool $108 billion. That’s a useful sum.
Self-reporting isn’t going to cut it once tax revenues are viewed as inadequate. Third-party reporting will be required so wealth can’t be under-reported, and the Foreign Account Tax Compliance Act (FATCA) already requires foreign entities to report U.S. account holders’ data.
It really doesn’t take much social-media research and forensic accounting to figure out whose reported income and wealth doesn’t match their lifestyle and reported assets. Wealthy people tend to avoid going to hellhole prisons, and so tossing a few tax-cheat scoundrels in prison for tax evasion will set a banquet of consequences relatively few will risk being served.
The justification for a wealth tax is obvious: you got rich because the system enabled it, so you owe the system a slice of the wealth you only gained by participation in the system. If you think you can get rich to the same degree (and keep your wealth) in Lower Slobovia, be our guest–move to Lower Slobovia. But please note whatever income and wealth you acquire there must be reported to U.S. authorities.
Windfall taxes were famously applied to oil company profits in the 1973-74 oil price spike. The thinking went: you didn’t do anything to earn the extra profits by investing in greater productivity, etc.–you just lucked into a windfall, which you are obligated to share with the system that enabled you to create a big, wealthy corporation. Oh, and the windfall tax is on global earnings and profits.
Hollywood accounting–no movie no matter how big the box office ever makes a profit–is not going to fly. We’ll take a flat 15% of all revenues as a back-up and you have the opportunity to prove your legitimate profit was less.
Why limit windfall taxes to corporations? How about all those Bitcoin Whales, mansion-flippers and meme-stock millionaires? These gains were all unearned, and so by definition they’re windfalls.
So gold goes to $10,000 an ounce–did you earn those gains? No. So you owe a wealth tax, of course, and a windfall tax whenever and wherever you sell. If you fail to report the sale, you risk a tenner (10-year sentence) in a federal pen. Are you feeling lucky, punk?
We can also imagine a Wealth Hoarding Tax to recover some of the wealth that the wealthy are hoarding by refusing to sell any of it. (Only the wealthy have enough wealth to hoard, by definition.)
Since the world is filled with skims, scams and frauds, we can also imagine a Wealth Protection Plan which transfers terribly at-risk money socked away in pension plans, IRAs and 401Ks into Treasury bonds for safekeeping. You’ll thank us later for restricting your gambling addiction.
As for renouncing citizenship to evade taxes–we have a plan for that, too. Anyone who owns any U.S.-based asset, security, collectible or financial instrument–anything that can be bought or sold–has to report that for wealth tax purposes. If you benefit from participating in the system, you have to pay your fair share. This goes for citizens of Lower Slobovia, too.