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After all, the un-recovery recovery may well last for a decade; but there is a time after doldrums to consider, isn't there?
Here's one, for those hungry to tax wealth itself, big fat slow-growing manta-like wealth:
Tax wealth through a lifetime income averaging program. This was one of Bill Vickrey's favorite ideas, and one this old gub of ours once utilized. They did it in a half-hearted toy fashion, but it's legal, therefore, unlike a flatfooted annual wealth tax.
Of course this requires a brand-new set of steep upper-income tax brackets to be real fun -- a nice two-birds bit here, if I do say so myself -- but such a tax might permit a one-time-only option to go to a lifetime income-averaging personal tax regime, one that avoids high-flux income years, leading to higher taxes.
Why penalize these poor souls just because of the distribution of their income realization?
Rule one: all gifts are income -- obviously. No need for an estate tax.
How does lifetime income averaging (LTIA) work?
Each year your cumulative life's income is inflation-adjusted and divided by your age.
Imagine a rentier baby from birth who never earned an honest -- or dishonest -- dollar in her life. She inherits a vast trust fund at the age of two from her uncle, who dies suddenly in bed with three hookers for company. Like Nelson Rockefeller, but better.
Rocky III's niece would show a slowly declining average income, and thus declining annual tax rate. But of course the tax when she was two would be enormous -- possibly even more than her inheritance was worth!
Hee hee hee. Uncle might loan the poor dear the tax money, against her illiquid collateral. And charge... interest!
Many long three-martini years later, our girl goes to join Uncle -- her uncle, that is -- in that great yacht club in the sky. At which point she owes, maybe, more than she's worth.
Uncle -- our uncle, that is -- smiles ruefully, eats his purely notional losses with good grace, and sweeps all the real chips off the table.
Comments (11)
What exactly is the benefit of this complicated scheme? How does it level income and wealth inequality? How does it affect investment, and greedy capitalist bastards generally, who of course are necessary for our employment?
Posted by seneca | March 12, 2009 9:54 AM
Posted on March 12, 2009 09:54
Sen
Ltia is quite simple its in effect a progressive wealth tax
But it requires
No changes to the present system
And it in essence
Grand fathers existing wealth
So long as the target soul sticks with the current period income only regime
But all estate bequests would show as income to the recipient
Instead of battling over the estate tax simply modify the income tax to cover bequests
The leveling effect here is a byproduct
The intent is
To tax the winners for the cost of the system that
Produced their winnings
Posted by op | March 12, 2009 10:44 AM
Posted on March 12, 2009 10:44
Sen
Btw a wealth tax would require a constitutional amendment
A much steeper hill to climb
Posted by op | March 12, 2009 10:53 AM
Posted on March 12, 2009 10:53
I've become too cynical. I imagine the wealthy can find a way around any kind of tax. Stock options, for example, aren't actually present wealth, but potential future wealth. And, what about the case of the Merril Lynch newbies who earned fabulous commissions selling worthless stuff in their first year -- wouldn't they actually benefit by the lifetime average rule -- reducing their obscene earnings for that year by a factor of fifty?
Posted by seneca | March 12, 2009 12:58 PM
Posted on March 12, 2009 12:58
Sen
The guy will be paying higher taxes the rest of his life
Loop holes for a life time average
Income tax
Are in fact less
Then one period income tax systems
As to the incentive
To make it fast
That is distirted by the present system
Lia smooths the flow
Creates far less disincentive to
Produce wealth
Posted by op | March 12, 2009 2:27 PM
Posted on March 12, 2009 14:27
Makes sense to me, Owen.
Posted by Peter Ward | March 12, 2009 8:22 PM
Posted on March 12, 2009 20:22
Come on, Peter, help me out here! If the Merril Lynch newbie makes three million his first year, and then retires, he'll be taxed on $60,000 the rest of his life. Under my proposal which I'm about to submit to Hope.com or whatever the direct line to Obama is, no one will be taxed on $60,000 a year. And if the newbie is smart, he should be able to live off the interest of the $3mil forever.
Posted by seneca | March 12, 2009 9:54 PM
Posted on March 12, 2009 21:54
sen you are forgeting the taxes due on prior years now revalued as part
of any opting for life time income averaging
look back as well as forward
get it ???
Posted by op | March 12, 2009 10:46 PM
Posted on March 12, 2009 22:46
sen
i suspect the trust fund liberal living off coupons
like my relatives
bothers u less then say
senior fuld or
what about
the first henry ford ??
to me its quite the opposite
these rogues and visionary projector
white hat or black hat
have a faustian sublime charm for me
okay so i'd hang a bakers dozen of em
now and again
but the slow bleed
of the horde of comfortable rentiers
is my pet
walter mitty 'waitin for the misses 'type
pipe dream
death by a thousand cuts
to
the " donor base "
of all goo goo elite undertakings
Posted by op | March 12, 2009 10:55 PM
Posted on March 12, 2009 22:55
You been reading Ayn Rand again?
OK, I agree with the above. I've known a few of those Faustain charmers in my retail days. They may walk away from their employees and shareholders in the end, but they make life interesting for awhile.
And behind almost every unconventional, politically suspect, creative venture I've been involved in, there was someone who knew how to raise money.
Posted by seneca | March 13, 2009 11:27 AM
Posted on March 13, 2009 11:27
"transitions to prog structures that involve minimal change"
But isn't political will/power the large thing that's missing? Complexity or differentness of programs aren't the obstacle. Getting the votes to veto money-first and money-always is.
Change that, and many new, often eminently simply if radical things reach the table. Fail to change it, and even the nicest lifetime-averaged plans are just more slices of pie-in-the-sky.
And what recovery do you see coming op-san, sage of historic parallels? Last time, it took WWII to graduate us into an ecologically teenaged world. Where's our WWIII coming from, and what's left to shovel into the maw of another Golden Age?
Personally, I see protracted floundering until we realize that the only possible WWIII is red-green reconstruction. And that may never happen, given the powers that be, and their preference for a real WWIII over abdication.
Posted by Michael Dawson | March 15, 2009 1:12 PM
Posted on March 15, 2009 13:12