Paul L. Caron

Monday, July 20, 2020

Morse Reviews Gergen's Taxing Global Capital

Jotwell (Tax) (2016)Susan Morse (Texas), Raising Revenue by Taxing Capital (JOTWELL) (reviewing Mark Gergen (UC-Berkeley), A Securities Tax and the Problems of Taxing Global Capital):

The federal government’s spending to try to contain the economic fallout from the COVID-19 pandemic already approaches $3 trillion. It will cause U.S. national debt to exceed GDP for the first time since World War II. The current crisis has emphasized deep distributive justice concerns and raised calls for more public spending to help address them. Such public spending is important and necessary, but there is a question of how to pay for it. Taxing wealth and capital income can be part of the solution. These are systematically undertaxed, even though careful analysis demonstrates that wealth taxation would not create an unacceptable drag on the economy.

Within the broad wealth and capital income tax literature, Mark Gergen’s work offers a particularly clever and tidy approach to taxing capital. He proposes a securities tax to reach capital touched by the public market. This tax would be collected and remitted by market participants like public corporations. A complementary tax on imputed normal returns would reach private capital. Gergen recently posted A Securities Tax and the Problems of Taxing Global Capital, which describes international issues raised by his proposal. This paper follows on a 2016 article, How to Tax Capital, which covers the fundamentals of his idea. ...

Gergen’s proposal for taxing capital is ambitious. It would be a big change and raises political economy and transition questions. But it is also a clever and above all administratively practical way to tax capital broadly and effectively. It should be on the table as we consider our pressing and increasing need for public revenue.

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From the linked article: "The cornerstone is a flat periodic tax on the market value of U.S. publicly traded securities. An annual tax rate of around .8 percent (80 basis points) would roughly approximate the average tax burden on capital income in the U.S."

Is there a Constitutional problem with a federal tax on intangible property? Or are we all now willing to admit that the Constitution is fictional, allowing or requiring anything that has 5 votes at the Supreme Court?

Posted by: AMTbuff | Jul 20, 2020 4:22:54 PM