Tuesday, November 20, 2012
Whether you’re in the 99%, the 47% or the 1%, inequality in America may threaten your future. Often decried for moral or social reasons, inequality imperils the economy, too; the International Monetary Fund recently warned that high income inequality could damage a country’s long-term growth. But the real menace for our long-term prosperity is not income inequality — it’s wealth inequality, which distorts access to economic opportunities.
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. ...
Trends in the distribution of wealth can look very different from trends in incomes, because wealth is a measure of accumulated assets, not a flow over time. High earners add much more to their wealth every year than low earners. Over time, wealth inequality rises even as income inequality stays the same, and wealth inequality eventually becomes much more severe. ...
American household wealth totaled more than $58 trillion in 2010. A flat wealth tax of just 1.5% on financial assets and other wealth like housing, cars and business ownership would have been more than enough to replace all the revenue of the income, estate and gift taxes, which amounted to about $833 billion after refunds. Brackets of, say, 0% up to $500,000 in wealth, 1% for wealth between $500,000 and $1 million, and 2% for wealth above $1 million would probably have done the trick as well.
(Hat Tip: Mike Talbert.)