Tag Archives: wealth tax

Ignoring The Perspective Of The Founding Fathers

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On Sunday, Jonathan Turley posted an article about the Founding Fathers and how they would have responded to the idea of a wealth tax.

The article states:

Below is my column in the Wall Street Journal on the bizarre claim of Gov. Gavin Newsom and others that the Framers would have supported wealth taxes, including the proposed Billionaire’s Tax. It is a claim that seeks to mask the economically unwise with the historically unfounded. The Framers sought to protect property from legislative redistributive impulses. James Madison wrote that the bicameral system, and particularly the Senate, “ought to be so constituted as to protect the minority of the opulent against the majority.” That does not sound like an ally of Bernie Sanders and Ro Khanna.

…Was James Madison the Zohran Mamdani of his time? Gavin Newsom appears to think so. In joining the growing number of Democratic leaders supporting a wealth tax, the California governor claimed that the U.S. Constitution and our Founders were all about wealth distribution: “The system America’s founders built,” he said, “was designed to prevent the concentration of power in a few hands, but we have allowed that concentration to happen anyway, slowly, in plain sight, over decades.”

The only problem with this argument is that it is utterly and demonstrably false. The Madisonian democracy is designed to avoid the concentration of political power, not the concentration of wealth.

The article notes:

The Constitution not only protects property, but was later amended to allow for income taxes rather than wealth taxes. Far from supporting a wealth tax, the constitutional system referenced by Mr. Newsom makes a federal wealth tax unconstitutional.

The article concludes:

Nevertheless, wealth taxes make for great politics. What is concerning is that, in addition to a wealth tax, Democratic leaders like Ms. Warren are pledging to pack the Supreme Court if they retake power. A packed court with an insistent liberal majority would let the Democrats push through measures that would otherwise be declared unconstitutional, including a wealth tax.

Congress could then gradually lower the level of wealth needed to trigger the tax, opening up the homes and estates of citizens as an untapped reservoir of money for the taking.

“You’re next” could then apply not just to office holders but to property owners in a push to redistribute wealth.

That strategy may well unfold in coming years, but it will be the realization of a Mamdanian, not a Madisonian, system.

One of the unintended consequences of a wealth tax is that it interferes with the desire to become wealthy. Why acquire wealth of the government is going to take it from you? As stated in the article, a wealth tax will eventually apply to the non-wealthy and wipe out the middle class. The middle class is the backbone of a free republic.

Refusing To Learn The Lessons Of History

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On Friday, Hot Air posted an article about California Governor Gavin Newsom’s support for a wealth tax. You would think that with all of the people moving out of California because of its high taxes, he might have observed a pattern. Remember, this man may be a presidential candidate.

The article reports:

Gavin Newsom has, until now, opposed wealth taxes, or so-called “Billionaire” taxes. 

No longer. Joining Ro Khanna, Elizabeth Warren, and the more radical left-wing in his party, he is jumping on board the crazy train,  calling for an “economic reset” by seizing a fraction of the wealth—almost all of which is unrealized capital gains, and hence the ownership of companies and not actual cash money—and transferring to the government to spend on…whatever. Making the world poorer but “fairer.”

To quote Thomas Sowell:

What exactly is your ‘fair share’ of what ‘someone else’ has worked for?

There is also the matter of the Laffer Curve:

On Friday, CNN reported:

California Gov. Gavin Newsom on Friday proposed a national tax on billionaires that he says is the first part of an “economic reset for America” agenda, which aides explicitly say is part of his considering to launch a presidential campaign.

“The system America’s founders built was designed to prevent the concentration of power in a few hands, but we have allowed that concentration to happen anyway, slowly, in plain sight, over decades,” Newsom writes. “We can reverse it together, as a country.”

It is extremely early in the presidential campaign cycle for a policy proposal — but comes as Democrats continue to embrace economic populism and moves against the wealthy. It also comes as California voters in November will decide on a billionaires’ tax after the governor and opponents of the tax late Thursday failed to reach a deal to keep it off the ballot.

Class envy and greed are ugly, but they are often useful in political campaigns.

The article at Hot Air concludes:

Other First World countries have committed economic suicide. Argentina used to be the 7th largest economy in the world. Then it became fascist/socialist, and it has taken decades to just get back on the right track. Europe has been committing economic suicide.

America could too.

Newsom’s move shows that at least some, and probably many, Organized Crime Democrats are going to try to throw the babies and old people to the ravening wolves, and you and I are those babies and old people.

This is one of many reasons I am urging common-sense Americans to vote Republican in the mid-term elections. The Democrats are very scary right now.

The Impact of the National Debt

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Author: R. Alan Harrop, Ph.D

We, the American taxpayers, need to be aware of the soaring national debt; primarily because we will ultimately suffer the consequences of this out-of-control spending. Let’s take a look at the facts. I strongly suggest that you sit down as you read this.

Much of the following data was obtained from the website www.us.debtclock.org as of the end of August 2024. The total debt is currently 35.2 trillion dollars. This debt, by far the highest of any country in history, is increasing at the rate of 1 trillion dollars every three months. This amounts to $268,000 per taxpayer. The debt to the Gross Domestic Product (GDP) ratio is 122% as compared to 35% in 1980. This is comparable to an individual having a debt that is 122% higher than their total assets and income. The interest alone on the national debt now amounts to 918 billion dollars per year, which is more than the entire military defense budget. This is clearly unsustainable.

The impact of federal spending on inflation is equally alarming. Compared to the year 2000, the price of essentials is truly shocking. For example, the average price of a new home is now $406,000 as compared to $166,000 in the year 2000. New cars now average $49,000 as compared to $22,000; annual healthcare now averages $15,000 as compared to $5,000; college tuition now averages $27,000 per year compared $11,000. Contrast these dramatic increases to the increase in median annual income that is now $39,000 compared to $32,000 in the year 2000. Clearly, the standard of living of the average American, especially the young, has diminished significantly, especially when you add the $268,000 we all owe on the national debt!

As we face the upcoming election, we need to evaluate the impact the Democrat and Republican platforms will have on the national debt and inflation. The Democrat platform, as far as we can tell, includes price controls, $25,000 gifts to first time home buyers, increases in corporate tax rates, allowing the Trump tax cuts to expire, a tax on unrealized capital gains, transferring student loan debt to others, and a wealth tax. History shows that none of these proposals will reduce the national debt or inflation–they will only increase government spending and reduce the incentive of the average person or corporation to invest.  Couple this with the money being spent to support illegal aliens, and the problem only worsens. For example, price controls lead to shortages in supplies and result in price increases. The Republican platform includes efforts to reduce the cost of energy by eliminating costly green energy programs and expanding the use of fossil fuels and nuclear power, reducing excessive government regulations, incentives to increase investments, and returning manufacturing to this country. Decreasing the cost of energy is essential to reducing inflation. The national debt crisis can only be solved by reducing the size of the federal government (e.g. abolishing the federal Department of Education and cutting the budgets of all federal agencies) and growing the economy by encouraging investment.

We have a very clear choice in the upcoming election. The fate of the economic survival of this country is on the ballot. Time to face reality.

IRS Audits For Thee, But Not For Me

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On Friday, The Federalist posted an article about how the extra money given to the Internal Revenue Service (IRS) in the last budget passed by Congress is being used.

The article reports:

The Internal Revenue Service (IRS) is using a new army of tax collectors to conduct mass audits of middle-income earners after Democrats promised additional resources would only be used to target the rich.

On Thursday, Sen. Elizabeth Warren, D-Mass., celebrated the federal government’s collection of more than $1 billion in taxes from “high-wealth taxpayers” as a triumph for the agency’s radical expansion under President Joe Biden.

…A columnist for the paper trumpeted by Warren, however, pointed out that “Buried deep in the same story: Two-thirds of IRS audits initiated last year were on taxpayers making less than $200,000.”

The article notes:

“It should also be noted that nearly two-thirds of audits initiated in 2023 were on those making less than $200,000,” Brady told the paper.

In April, The Wall Street Journal editorial board reported on a review of the federal tax agency’s auditing practices, which found 63 percent of new government inquiries were to middle-income earners who made less than $200,000.

“Only a small overall share reached the very highest earners, while 80% of audits covered filers earning less than $1 million,” wrote the editorial board of The Wall Street Journal. “Don’t forget to save those charitable-giving receipts.”

It has been reported that nearly half of American Congress members are millionaires. Why would the people who write the laws write them so that their activities would be closely watched?

Taxing People Who Don’t Live There Anymore

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Margaret Thatcher famously said, “The problem with socialism is that you eventually run out of other people’s money.” We are seeing that principle currently illustrated in the formerly great State of California.

On Monday, Fox News reported the following:

California lawmakers are pushing legislation that would impose a new tax on the state’s wealthiest residents — even if they’ve already moved to another part of the country.

Assemblyman Alex Lee, a progressive Democrat, last week introduced a bill in the California State Legislature that would impose an extra annual 1.5% tax on those with a “worldwide net worth” above $1 billion, starting as early as January 2024.

As early as 2026, the threshold for being taxed would drop: those with a worldwide net worth exceeding $50 million would be hit with a 1% annual tax on wealth, while billionaires would still be taxed 1.5%.

…The current version just introduced includes measures to allow California to impose wealth taxes on residents even years after they left the state and moved elsewhere.

Exit taxes aren’t new in California. But this bill also includes provisions to create contractual claims tied to the assets of a wealthy taxpayer who doesn’t have the cash to pay their annual wealth tax bill because most of their assets aren’t easily turned into cash. This claim would require the taxpayer to make annual filings with California’s Franchise Tax Board and eventually pay the wealth taxes owed, even if they’ve moved to another state.

The article includes a wonderful quote:

“A wealth tax could be particularly destructive in California, home to so many tech startups, because the owners of promising businesses could be taxed on hundreds of millions of dollars’ worth of estimated business value that never actually materializes,” said Walczak (Jared Walczak, vice president of state projects at Tax Foundation). “Very few taxpayers would remit wealth taxes, but many taxpayers would pay the price. The only people who should genuinely love a California wealth tax are the ones who work in Texas’ economic development office.”

This is another really bad idea to come out of the State of California. I believe we fought a war to end ‘taxation without representation.’ If people no longer live in the state, they no longer vote in the state and are therefore not represented.

Inflation And Taxes

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On Wednesday, Steven Hayward posted an article at Power Line Blog about President Biden’s tax proposal that would only ‘tax the rich.’ Taxing the rich has never been a really good idea–the ‘rich’ have tax accountants to limit their tax liability. Generally speaking, the middle-class does not have tax accountants and gets stuck paying the taxes that were for the ‘rich.’

The article reports:

Everyone is familiar with the two great lies of modern times: the check is in the mail, and “Of course I’ll still respect you in the morning.” To which should be added a third: “wealth taxes” will only affect the very rich—the middle class has nothing to fear. When you hear Democrats say this, reach for your wallet.

This needs to be kept in mind with thinking about President Biden’s new proposed “wealth tax,” which would impose a 20 percent tax on unrealized gains of liquid assets (i.e., stocks and bonds) for households with a net worth of more than $100 million. The Biden Administration claims this proposed tax will only hit the top 0.01 percent of taxpayers, with most of the incidence of the tax falling on billionaires.

Of course, this is what liberals told us about the Alternative Minimum Tax (AMT) back in the late 1960s, when the left created a scandal around the fact that 155 people with adjusted gross income above $200,000 paid zero income tax on their 1967 tax returns. (Adjusted for inflation, that would be around $1.5 million today.) As the internet clickbait headlines like to say, “You’ll never guess what happened next!” Of course you don’t need to guess: by 2017, before the Trump tax cut finally scaled back the AMT (but only temporarily because of our strange budget rules), 5.2 million households were caught up in it, a far cry from the few hundred originally targeted in 1969.

The same thing will surely happen with any “wealth tax” targeted at the super rich, and for the same reasons: inflation, and the insatiable appetite of liberals for revenue, which can only come in sufficient amounts by taxing the middle class. Devices like the AMT or a “wealth tax” are gimmicks to disguise this fact.

The article notes:

Thomas Hoenig of the Mercatus Center at George Mason University (and former president of the Federal Reserve Bank of Kansas City) warns in Barron’s:

The proposal sounds so simple. Report income and unrealized gains in liquid assets and tax them at a minimum of 20%—the assumption being that only the richest experience significant increases in asset values. However, the truth is that in a period of persistent asset inflation, which we have had now for decades, such a tax eventually would apply to an ever-larger proportion of the population, notably the middle class.

The income tax is a good example of how a tax on the wealthy becomes a tax on the middle class. In 1913, Congress passed the first income tax under the newly passed 16th Amendment to the Constitution, which topped out at 7% for income above $500,000. After a temporary, significant tax increase to pay for World War I, tax rates settled in at 25% on incomes above $100,000. It was only a matter of time before the politicians forgot about the “wealthy” part.

Taxing the rich is one of those ideas that sounds really good but never actually works!

Does Your Government Work For You?

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Yesterday The Washington Times posted an article about President Biden’s $1.75 trillion expansion of the federal safety net.

The article reports:

An analysis by the Tax Foundation, a nonpartisan fiscal watchdog, estimates that President Biden’s $1.75 trillion expansion of the federal safety net could kill more than 103,000 jobs over the next decade and add $750 billion to the federal deficit.

The estimate is based on a thorough analysis of the White House’s spending “framework” and the corresponding 1,684-page bill text released by House Speaker Nancy Pelosi, California Democrat. Experts from the Tax Foundation say the proposal would fall far short of White House promises.

“We estimate that the House bill would reduce long-run economic output by nearly 0.4% and eliminate about 103,000 full-time equivalent jobs in the United States,” the experts wrote. “It would also reduce average after-tax incomes for the top 80 percent of taxpayers over the long run.”

It should be shouted everywhere that according to a CNBC article posted in August 2021, more than 100 million U.S. households, or 61% of all taxpayers, paid no federal income taxes last year, according to a report from the Tax Policy Center. Think about that for a minute. If you are not paying taxes, why should you care how much the government is spending or how much the government is planning to raise taxes? This is not a good situation.

The article at The Washington Times concludes:

Mr. Biden is backing a 5% “wealth tax” on those with adjusted gross income above $10 million. The figure jumps to 8% on adjusted gross income over $25 million.

“I can’t think of a single time when the middle class has done well but the wealthy haven’t done very well,” Mr. Biden said. “I can think of many times, including now, when the wealthy and the superwealthy do very well and the middle class doesn’t do well.”

Despite the rhetoric, Tax Foundation economists say, the provisions would affect all workers by killing more than 29,000 jobs.

The White House did not immediately respond to requests for comment. 

The report was released one day after Sen. Joe Manchin III, West Virginia Democrat, accused his colleagues of engaging in “budget gimmicks” to hide the true cost of the spending package.

“As more of the real details outlined … what I see are shell games and budget gimmicks that make the real cost of this so-called $1.75 trillion bill estimated to be twice as high,” he said. “That is a recipe for economic crisis. None of us should ever misrepresent to the American people what the real cost of legislation is.”

Actually, the middle class did very well during the Trump administration. Trump administration policies helped increase the number of Americans in the middle class.

Does anyone remember the Luxury Tax of 1990.

On September 10, 2011, The American Enterprise Institute posted the following:

Flashback:Wall Street Journal editorial on January 6, 2003

“Most Americans celebrated as the ball fell in Times Square New Year’s Eve. But for auto dealers this new year is especially sweet. January 1 marked the expiration of the federal luxury tax on cars, the last vestige of the destructive luxury tax package in the infamous 1990 budget deal.

Starting in 1991, Washington levied a 10% luxury tax on cars valued above $30,000, boats above $100,000, jewelry and furs above $10,000 and private planes above $250,000. Democrats like Ted Kennedy and then-Senate Majority Leader George Mitchell crowed publicly about how the rich would finally be paying their fair share and privately about convincing President George H.W. Bush to renounce his “no new taxes” pledge.

But it wasn’t long before even these die-hard class warriors noticed they’d badly missed their mark. The taxes took in $97 million less in their first year than had been projected — for the simple reason that people were buying a lot fewer of these goods. Boat building, a key industry in Messrs. Mitchell and Kennedy’s home states of Maine and Massachusetts, was particularly hard hit. Yacht retailers reported a 77% drop in sales that year, while boat builders estimated layoffs at 25,000. With bipartisan support, all but the car tax was repealed in 1993, and in 1996 Congress voted to phase that out too. January 1 was disappearance day.

The end of any federal tax is such a rarity that it’s well worth celebrating. And the luxury tax lesson of economic damage is worth keeping in mind as politicians begin to wail that President Bush’s new tax proposals aren’t punitive enough on the rich.”

HT: Pete Friedlander

The recession that followed the 1990 luxury tax cost President George H.W. Bush re-election. The Democrats might want to keep that in mind.