New York Times Op-Ed (the meme is spreading...spread the meme!)

To Reduce Inequality, Tax Wealth, Not Income

Wealth inequality has worsened for two decades and is now at an extreme level. Replacing the income, estate and gift taxes with a progressive wealth tax would do much more to reduce it than any other tax plan being considered in Washington.

http://www.nytimes.com/2012/11/19/opinio…

A ridiculous plan. Suppose an older person has $100,000 in savings ("wealth") but only $950 in monthly Social Security income. They'd be draining that savings for the rest of their life, but they'd be taxed more than someone who has no savings (no "wealth") but has a military pension, a civilian pension, and Social Security, and is thus guaranteed a better-than-average income for the rest of their life.

#2

Well, you could start by reading the whole article...oh, I see, you need a little baby spool...open wide...

These tax rates would garner a small portion of the extra wealth America’s richest families could expect to accrue simply by investing what they already had. The rates would also be enough to slow — if not reverse — the increase in inequality. To see how the wealth tax would work, consider a family with $500,000 in wealth and $200,000 in annual income. Right now, they might pay $50,000 in federal income tax. With the wealth tax brackets described above, they would pay nothing. On the other hand, a family with $4 million in wealth and $200,000 in annual income would owe $65,000. Most families that depend on their wealth for their income would pay more, and most that depend on their earnings would pay less.

Well, Bailo, here's what you said, "Most families that depend on their wealth for their income would pay more, and most that depend on their earnings would pay less." Which means that my example -- someone with some savings but little income -- would pay more. How just.

Wouldn't a pension be considered wealth?

I see a few drawbacks, though. The first is that it is really complicated to measure. The second is that it discourages the creation of wealth. However, the same could be said for income taxes, and we've lived with those for a very long time.

It might also end up hurting people who hadn't planned on this. If income taxes go up, it is just bad luck (after all, you never know how much income you are going to earn in the future). But if you retire and put all of that money in the bank, you might have assumed that you could simply spend it over several years. As the author suggests, phasing it in and applying it only to the very wealthy might alleviate that problem.

The biggest drawback I see is that the super rich will just live elsewhere. This happens already with income, but not that much. Most of the big companies are American companies, so most of the income is American income (or American capital gains). But it wouldn't take much work for someone to simply move most of their wealth to another (typically tropical) country. It might as simply as moving all the cash to a Swiss bank account and then renting everything (a yacht, a mansion, a Rolls Royce). Corporations would be set up to make it simply for the super rich to lease such amenities.

@5 good point. If you mean retirees.

However, you are legally required to pay US taxes no matter where you reside, if a US citizen.