Wednesday, December 4, 2013
Wall Street Journal op-ed: The Coming Global Wealth Tax, by Romain Hatchuel
Indebted governments may soon consider a big one-time levy on capital assets.
Between ObamaCare, Iran and last quarter's uptick in U.S. economic growth, taxpayers these days may be distracted from several dangers to come. But households from the United States to Europe and Japan may soon face fiscal shocks worse than any market crash. The White House and New York Mayor-elect Bill de Blasio aren't the only ones calling for higher taxes (especially on the wealthy), as voices from the International Monetary Fund to billionaire investor Bill Gross increasingly make the case too.
In his November investment commentary for bond giant Pimco, Mr. Gross asks the "Scrooge McDucks of the world" to accept higher personal income taxes and to stop expecting capital to be taxed at lower rates than labor. As for the IMF, its latest Fiscal Monitor report argues that taxing the wealthy offers "significant revenue potential at relatively low efficiency costs." The context for this argument is the IMF's expectation that in advanced economies the ratio of public debt to gross domestic product will reach a historic peak of 110% next year, 35 percentage points above its 2007 level. ...
What the IMF calls "revenue-maximizing top income tax rates" may be a good indication of how much further those rates could rise: As the IMF calculates, the average revenue-maximizing rate for the main Organization of Economic Cooperation and Development countries is around 60%, way above existing levels.
For the U.S., it is 56% to 71%—far more than the current 45% paid in federal, state and local taxes by those in the top tax bracket. The IMF singles out the U.S. as the country where raising top rates toward 70% (where they were before the Reagan tax cuts) would yield the most revenue—around 1.25% of GDP. And with a chilling candor, the IMF admits that its revenue-maximizing approach takes no account of the well-being of top earners (or their businesses). ...
From New York to London, Paris and beyond, powerful economic players are deciding that with an ever-deteriorating global fiscal outlook, conventional levels and methods of taxation will no longer suffice. That makes weapons of mass wealth destruction—such as the IMF's one-off capital levy, Cyprus's bank deposit confiscation, or outright sovereign defaults—likelier by the day.