During our monthly teachers staff meeting today, I noticed a colleague of mine looking at Craigslist jobs on her phone. I was relieved to know I’m not the only employed person looking for extra gigs in this economy.
In our conversation afterwards she explained that after taxes, her checks were still too low to afford a comfortable life in LA.
Same girl!
Her comment reminded me of a podcast episode of “On with Kara Swisher” where her guest that week discussed the policy problem with increasing income taxes. The guest explained that very wealthy people don’t pay income taxes because most of their money is stored in a business, charitable trust, real estate, stocks, and other investments.
A Capitalist “makes a living” from the profits of these assets, such as a dividend from a stock, shares of profits in a business, or rents from a property.
The first capitalists were Kings and Emperors who “owned” all the land and property in their realm and rented it to lesser nobles and workers. Once these singular monarchies around the world fell, the capitalist mantle fell to thousands of mini monarchs such as 19th century industrialists or modern day landlords.
By contrast, a worker makes a living by trading their labor for an income, whether they are a doctor, librarian, or garbage collector. Even a highly successful journalist like Kara Swisher and other content creators (who make millions) are considered earners because their labor is what creates a paycheck.
So it is the owners of the Washington Post (Jeff Bezos), the New York Giants (The Mara Family), and Exxon Mobile (Neil Duffin) who have very low income compared to their high earning Editors, Quarterbacks, and Managers respectively. And thus even if we raise income taxes, these “high owners” do not pay much more, but their workers will.
And the thing about a salary is…it is limited. The capitalist who owns that business or organization has set an earnings cap for the workers, yet the capitalist can receive unlimited earnings from their assets.
This is how capitalists profit from the value that workers create.
So in this year’s presidential election, many progressive candidates are demanding that “the rich need to pay their fair share in taxes,” and in principle I agree with them.
But who are the rich?
Capitalists engage in politics everyday to make sure that voters confuse rich capitalists with rich workers, and the muddying of this distinction creates a disgustingly predictable “class war.”
You see, a very successful plastic surgeon in Los Angeles can make upwards of $600,000 a year, but a lot of that income is lost to local, state, and federal income taxes.
No, I don’t feel bad that a plastic surgeon only takes home $200,000 out of that higher salary, but that doctor has more in common with a live-in nurse than they do a the land lord they rent their medical office from.
Because whether you make $173/hour as a doctor or $20/hour as a fry cook at In-and-Out, the government treats you the same. Income taxes are the largest share of tax revenue at the federal and state levels, followed by sales (consumption) taxes which are flat rates that everyone pays on everyday goods like groceries, gas, and clothes.
So workers/earners are paying for the bulk of every government service through the income tax and sales taxe. You’ll also notice on the above graph that for the federal government relies on an additional income tax called a payroll tax, that comes out of every paycheck to fund the Social Security and Medicare programs.
What do capitalists contribute?
There are two ways to look at (and get very vey mad about) it.
The United States and most capitalist controlled countries try to tax corporations and high asset owners via a corporate tax (tax on business profits) and a capital gains tax (tax on sale of a stock or other investment).
Yet the amount of loopholes in the tax law prevents capitalists from paying these rates, and Trump’s Tax Cuts in 2017 has allowed them to pay even less.
I want to be straight with you that I am not a certified economist, but I was trained in free market economics from the Charles Koch Institute for eighteen months, conducted research on fiscal policy for two additional years, and am a lifelong student of finances and business.
I AM TELLING YOU that “billionaire” is just a fancy word for a capitalist that owns billions of dollars worth of assets and pays very little if any collective or individual taxes. A Capitalist is a hoarder.
AND the 800 capitalists in America own trillions in businesses, land, farms, rental properties, stocks, and so much more that they truly are the epitome of passive income.
AND this ever growing pool of 800 people are accumulating UNLIMITED amounts of money and property at the LITERAL EXPENSE of workers.
These 800 humans (.0000024%) have convinced 330 million Americans (99.999986%) that their hoarded wealth should not be subject to taxation AND if they do it will be high earners who face the same “punishment” as they would.
And in a sense they are correct because the only popular solution to this inequity is higher incomes taxes, which as stated previously would hike up taxes on the millionaire CEO of a roofing company or a high paid actor in Beverly Hills.
But it is the earners writ larger that need a break after 150 years of paying for a society that capitalists have fed from.
So what is needed is an asset tax, or my preferred policy an ASSET CAP. Here’s how it works:
Every Town or County Assessor evaluates the market value of a capitalists assets, which includes their homes, businesses, land, and investments. They already do this with local property tax evaluations, this would just big a bigger project.
Each year the total valuation of these assets are taxed at 30% - 80%, which means the capitalist must come up with enough cash to cover the taxable amount.
Income taxes for all earners are reduced by an equal amount to the revenue generated by the asset tax. In most cases, income taxes would drop to zero.
Alternatively, we can put a limit on how much private capital an individual or company can own through an ASSET CAP:
Assume the government creates an Asset Cap of $500 million for individuals and $1 billion for organizations.
We keep all current income, corporate, sales, and property taxes as they are but we prevent the unlimited accumulation of capital from flowing to these 800 billionaires.
So a big bank like JP Morgan Chase with over $100 trillion assets on its books would have to break up into 100,000 independently franchised banks of a billion dollars.
Then the incomes of these bank managers could only reach 500 million before they hit the cap, which under this system means a 100% tax on every dollar above 500 million.
The Asset tax feels easier to implement because the law is not preventing a capitalist from investing or building a large investment portfolio, nor does a tax discourage passive income schemes. The asset tax simply shifts the burden from earners/workers to owners/capitalists.
The Asset Cap feels more revolutionary because, well…it is. A Cap would tell all humans that until the baseline quality of life for every human is at a certain level, it is unjust and cruel for someone to make billions in passive income.
But an ASSET CAP is also real trickle down economics.
YAY you accumulated 1 billion in assets! Congrats! You won capitalism! Now, anything extra goes to your employees who can start their own enterprise instead of giving their earnings to the government or the billionaires.
Would this disrupt the business models of huge corporations? Sure would!
Would there be fewer billionaires and multinational businesses? Indeed!
Would the 99% of us be better off without such hoarded wealth and dependence on income taxes to fund a 21st century society? Absolutely.
