Aside from its sheer incomprehensibility, the U.S. federal tax code is immoral, by design. Its 75,000 pages exceed its 1917 length 187-fold. Paradoxically, even though the tax code contains more than four million words, the United States effectively has no tax code. At that absurd immensity the tax code says whatever your team of lawyers and accountants convinces a frazzled IRS agent it says during your audit. Elected officials sacrifice the tax code to the fevered dreams of lobbyists and other influence peddlers in the same way a doting mother offers a plate of freshly baked cookies to her hungry children. Like a locust swarm, greedy powerbrokers descend on Washington during tax negotiations, behaving as though wolves had raised them. In their zero-sum attack on venal legislators, they demand deductions, credits, and other preferential treatment, all at the expense of their fellow citizens. Their boundless rapacity sticks middle-class Americans with fiscal deficits they will have to fund through higher marginal rates and assorted new taxes. Then, whenever a new regime assumes power with the promise of reforming the tax code, these same despicable rent-seekers shift their focus to the idealistic, but easily bought, freshman congressmen.
Political change, as Edmund Burke taught us, should be gradual. But, contra Burke, the United States’ $21 trillion national debt will soon force our legislators to consider a revolutionary change in how the government funds its operations. And that radical revision should start with scrapping the current farcical tax code. Contrary to the guiding wisdom behind the GOP’s recently passed tax-cut bill, we should listen to the likes of multibillionaire Warren Buffett, who once remarked, “I think that people at the high end—people like myself—should be paying a lot more in taxes. We have it better than we’ve ever had it.” And now a vocal group of plutocratic socialists, “The Patriotic Millionaires,” are echoing Buffett’s prescription. In addition to tweaking the tax code, The Millionaires’ agenda includes a “guaranteed living wage for all working citizens” as well as ensuring, for all those same citizens, “political power equal to that enjoyed by millionaires.” They also call for a “fair” tax system, an impartial concept only a lobbyist could object to. Since the Revenue Act of 1913, which reinstituted the federal income tax after the passage of the 16th Amendment, Americans have come to accept the basic equity principle that the rich should pay the bulk of the tax burden. No one has expressed that idea better than The Millionaires themselves:
The wealthy have the greatest ability to contribute to the collective pot, and frankly, because they have been the biggest beneficiaries of the system called America, they should pay more to keep it running. They have reaped the greatest share of the benefits. They should contribute the largest portion of the investment. And by the way, they should do it without fussing.
Agreed. But The Millionaires’ policy recommendations—“eliminating the most egregious tax loopholes, increasing the number of tax brackets, defending the estate tax, and repatriating overseas assets”—falls far short of the wholesale change needed to solve our national predicament.
As Lenin pondered in the May 1901 Iskra, we, too, must ask ourselves “Where to Begin.” In order to reset our tax code to Year Zero, the first step will be to reorient what exactly the government should tax. And to make both Warren Buffett and The Patriotic Millionaires happy, the federal government should switch from an income tax to a wealth tax. Why should Americans who are struggling to save have 20 to 50 percent of their income confiscated when patriotic millionaires and blowhard billionaires are complaining that they aren’t having enough siphoned from their own bottomless pots of gold? What’s fair about taxing the earnings of a disabled Iraq War veteran making $19 per hour at higher regular income rates than the lower capital-gains rates patriotic millionaires and blowhard billionaires pay on their appreciated capital assets? Why should a widowed mother of three, subsisting on meager tips while waiting tables for truckers at an interstate rest stop, pay higher regular income tax rates than patriotic millionaires and blowhard billionaires who deduct dining and entertainment expenses to reduce their taxable income? And what about my recent Uber driver, a Sarasota, Florida, grandmother who told me, through tears, that her seven-year-old grandson’s dashboard photo motivated her to ignore her debilitating arthritis and diabetes? She’s now his sole provider after his father was killed fighting in Afghanistan. How much of her fare and my tip should the government swipe? And while we’re at it, we might as well ask The Millionaires, who’s the real patriot here? Each of these cases reeks of injustice. So we need to stop focusing on taxpayers’ income and instead focus on taxpayers’ wealth as the primary revenue source.
The Federal Reserve reported that the U.S. household net worth for 2017’s third quarter totaled $96.939 trillion. While the media browbeat us constantly about income inequality in the United States, wealth inequality is arguably worse. In 2007, the richest 1 percent of Americans owned 35 percent of the nation’s wealth; the next 19 percent owned another 51 percent. In other words, the top quintile of Americans, roughly those with a net worth greater than ten million dollars, owned 86 percent of the nation’s treasure right before the Great Recession. Not surprisingly, the sharp rebound from the lows of 2009 has only further concentrated the nation’s wealth among the top 20 percent.
But let’s stick with the 2007 distribution ratios: the top 20 percent of Americans now own roughly $83.4 trillion in aggregate wealth. And in 2017 the federal government’s total outlays ran to $3.65 trillion, or 4.38 percent of the top quintile’s wealth. Conclusion: Let’s shift our federal tax code from taking 10/12/22/24/32/35/37 percent (until recently, it was 10/15/25/28/33/35/39.6 percent) of the income of those trying to build their lives and financial futures to a wealth tax where government takes 4.38 percent of the net worth of the top 20 percent. After all, Warren Buffett even admits—albeit through crocodile tears—that he “should be paying a lot more in taxes.” And The Patriotic Millionaires need to act out their own suggestion that “they should contribute the largest portion of the investment . . . without fussing.” And no fussing from their lobbyists, either.
Will Americans dismiss a wealth tax as futile revolutionary excess? They haven’t yet. Real-estate taxes currently tax wealth. Each year residents pay a percentage of their house’s value to their local government. So wealth taxes already have a successful precedent. And in many ways calculating the tax on the top quintile’s net worth will be even easier. Readily available daily market prices for financial assets, a large part of the top quintile’s wealth portfolios, will simplify net-worth calculations as compared to the assessment and grievance—and incessant whining—processes involved with real-estate taxes. No longer will we hear cries from the left that the wealthy don’t pay their fair share of taxes. Under this plan, only the wealthy will pay taxes. They will be entitled to no deductions, no credits, no write-offs, no tax-exempt income on municipal bonds, no tax shelters, no protection from trusts, and no exemption for assets domiciled overseas or “offshore.” Every other hard-working American will watch the gross amount of his biweekly paycheck hit his bank account, not some disheartening fraction that the taxman failed to seize. Politicians will only have to debate what percent of the plutocracy’s affluence to grab. Newly unemployed lobbyists can go back to their earlier occupations running three-card monte games in Times Square, selling swampland in central Florida, or running 1-900-SEX-4YOU telephone lines. For the first time in history a revolution will occur in silence: The Patriotic Millionaires have promised us they won’t make a fuss.
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