As the Spirited Reasoner writes these words, there appear to be at least ten Democrats announcing, or preparing to announce, their candidacy for President of the United States. The majority of these propose various forms of tax relief for lower income families coupled with some form of increased tax on the wealthy.
At least one media talking head opined that a wealth tax would be hard to enforce, because the truly rich would find ways to park their money overseas in tax shelters, or form trusts and corporations in a manner designed to hide it all from the IRS. Upon hearing that opinion, my immediate response was “baloney.” Wealth can indeed be taxed; fairly and in a manner designed to encourage rather than discourage economic productivity. Here’s how:
Real estate–at least the raw land–cannot be hidden from view. State and local assessors know every square inch of land within their jurisdiction. They even know the legal name of each owner. But here’s the key to this blog:
The precise ownership doesn’t matter.
If we develop a wealth tax based on real estate, we only need to know the location of the land. We then levy the wealth tax in precisely the same way that local governments currently levy real property taxes. They don’t care if one person owns a parcel, or if it is owned by fifty partners or an international corporation. They levy the tax on the land itself.
Then they wait for someone to pay. If no one pays, then a lien is placed on the property. And then, if the tax remains unpaid, the property is sold to pay for any accrued tax plus any associated legal expenses. No matter how many corporate loopholes or offshore bank accounts the owners try to establish, the appraised value of the land will remain exactly as it is, and the tax will need to be paid by someone, or its ownership will change.
There is no reason why brackets could not be developed and applied for this form of wealth tax in exactly the same manner as brackets are currently used in our federal income tax system.
Should this form of tax be condemned because it punishes our most productive people or “soaks the rich”? To the contrary, I would argue that it should be designed in such a way that it could replace the federal income tax. That way, the tax would not be aimed at profitable people, but rather on the use of those profits to acquire lavish, exclusive estates.
Note that this form of taxation would encourage landowners to either (a) subdivide their land (to move each parcel into a lower tax bracket), thus encouraging more productive uses, or (b) donate their land to public or charitable purposes to avoid the tax, thus creating much more opportunity for parks and nature reserves.
No doubt you can come up with ideas for tweaking this system to make it fit more squarely within our nation’s stated goals of life, liberty, and the pursuit of happiness. But one thing is clear: there’s nothing impossible about it.