A “Wealth Tax” is a proposed overhaul of the current tax system whereby people with higher incomes and greater assets would be taxed at a higher level, as opposed to those with lower incomes and less net worth.
The U.S. currently has a progressive tax system, meaning that the more an individual earns, the higher percentage they pay in taxes. The higher an individual’s income, the more money they pay in taxes. For example, an individual making $50,000 per year would pay 10% of their income. An individual making $100,000 per year would pay 15% of their income.
With this progressive tax system in place, the wealthy are paying a higher tax rate than those who earn less money. This progressive system is one of the major factors contributing to wealth inequality. The wealthy few are doing much better under the current tax system than at any other time in history due to government assistance and other programs that have been put in place for this purpose. The poor and middle class have been contributing much more to the economy, yet paying much less in taxes.
In a “Wealth Tax” system, those who have higher incomes and greater net worth would be taxed at a higher level as opposed to the current progressive income tax. The proposed “Wealth Tax” also proposes that people who earn more than $1 million per year would pay 25% of their income in taxes.
The primary argument for this is that the wealthy will be incentivized to work more if they are required to pay a higher tax rate than others with less net worth.
The main argument against this proposal is that many people will attempt to hide their income to avoid the higher tax rate. Many have stated that they will move their money to overseas banks, simply stashing it away in a bank in a different country for a larger net return.
Some people have even mentioned that this proposal would require a complete overhaul of the United States tax system, not just a change in how the wealthy pay taxes. The “We Are Change” Network has asked several times how an overhaul of the tax system would take place and what steps would need to be implemented in order for there to be an effective transition from one type of tax system to another.
How much money would Wealth Tax raise?
The wealth tax would raise money, but not enough to fund public programs. Most wealth taxes are direct taxes on the worth of assets rather than taxes on income. Income taxes are easier to collect because they can be traced directly to wages and salaries, but wealth tax is harder to trace because the money can be invested into other sources of income. It is possible that people will end up paying more taxes than they currently do, but it is impossible for them to pay more than what they pay now combined with their salary or wages. Some people end up paying high amounts of income tax because their salary or wages are high, so the addition of a wealth tax might not have a noticeable effect on them.
There are many wealthy people in the United States. There is a lot of money to be gained from increasing taxes on wealthy people, but there are also many people who would suffer if the government levies heavy taxes on them. The amount of money that can be raised by increasing taxes on the wealthy is limited. Government programs are already funded by income tax, so they wouldn’t need to rely on wealth tax for funding. Wealthy people will still have enough money after the wealth tax increase without having to reduce their outgoings.
American billionaires and tax
There are over 2,000 billionaires in the US, but there is a large gap between America’s richest and poorest. In contrast to the rest of the world, where many countries have a progressive taxation system that taxes higher earners more heavily than lower earners, in America one of its most popular tax systems is called “flat tax”, which is simply equal rates on everyone regardless of income. To get around this problem some billionaires have been forced to move their money abroad.
Americans must pay federal income taxes on their earnings, and they also have to worry about state and local taxes. If you’re a billionaire, your tax rate is going to be a whole lot different from your colleague who makes less than $50 grand a year. We’ll demonstrate the tax rates for billionaires in the United States, how much each tier pays in comparison with their counterparts’ take-home pay, and how it all adds up when you’re living large. Ignoring Elon, Steve, and Tim there are many such personalities who rule cities. Some of them are discussed below.
Sheldon Adelson Net Worth – $28.5 billion
Tax Rate – 39.6%
Sheldon Adelson is the second-richest person in Nevada, and his company, Las Vegas Sands Corp., does so well that its stock price has increased by 1,822% since January 2007. His federal income taxes are calculated at a rate of 39.6%, which equals out to $11.7 million per year based on the median wage for American workers of $46,149 per year.
George Soros Net Worth – $34 billion
Tax Rate – 21%
George Soros is a long-time supporter of liberal causes around the world, funding a wide array of non-partisan groups and special interests. His income is calculated at a rate of 21%, which equals out to $7.1 million per year based on the median wage for American workers of $46,149 per year.
James Simons Net Worth – $14 billion
Tax Rate – 17.4%
James Simons is the co-founder of Renaissance Technologies, a hedge fund that racks up annual returns of more than 40%, which is about ten times the average for other hedge funds. His federal income taxes are calculated at a rate of 17.4%, which equals out to $3 million per year based on the median wage for American workers of $46,149 per year.
Elizabeth Warren on Wealth Tax system
Elizabeth Warren has been a professor of law, a board member at the Consumer Financial Protection Bureau, and a leader in the fight against corporate power. She is running for president as a progressive candidate who wants to make America work for everyone again. Warren has put forth several policies that will be beneficial to the majority of Americans, but one that got very little attention was her proposal for an annual wealth tax on those with over $50 million dollars in assets. It’s an interesting policy that could help revive America’s economy and provide much-needed relief for those struggling to make ends meet between paychecks.
Also Read: US Economy-Under the shadow of Biden
The current tax system in place is not working. The top 1 percent of Americans pays 35 percent of all income taxes, when it should be much less than 10 percent. In 2016, the top 5 percent paid an average of 43.2 percent in taxes while the bottom 50 percent paid only 8.9 percent, according to the Tax Policy Centre. The wealthy aren’t paying their fair share and our current tax code is rigged in favor of them, which means there is nothing getting done to benefit the everyday person struggling to get by and pay for necessities like housing and healthcare.
Warren had this to say about her specific plan of action. “Over the past thirty years, incomes of middle-class families have flatlined, while top earners have seen their incomes grow exponentially.” She says that her wealth tax will help ameliorate this problem by transferring more money into the hands of average Americans, which is necessary in order for our country to thrive again.
Warren would tax assets over $50 million at 2% per year on the first $50 million, 4% on the next $50 million, 6% on the next $500 million and 8% thereafter (on assets over $1 billion). This tax would raise an estimated $2.75 trillion over 10 years. The money would be used to create jobs, invest in our infrastructure and refund student debt. This is a plan that makes so much sense, but sadly for so many Americans, it’s too little too late.
The tax commission also estimated that this plan would not discourage economic growth (despite many predictions to the contrary), which would result in an additional 200,000 jobs per year by 2027; $2,000 per worker per year; and $1.5 trillion in capital gains revenues over 10 years ($175 billion of which would go to the middle class). This is an excellent policy proposal (and one that many countries around the world already use) and would do wonders for our struggling economy.