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NEW - In 2016 the 2-4-8 Tax Blend will become 2-4-8 Tax Choice
The "choice" would allow all taxpayers to choose an income tax rate between 8% and 28% paired with a net wealth tax rate of 2% going down to zero. Wealth taxes paid would reduce Estate and Gift taxes (also set at 28%). This would encourage wealthy individuals to pay some net wealth taxes as a form of inexpensive life insurance.


C - Corp
4% VAT
8% Income

Wall Street Journal, January 11, 2012

WSJ Editor, Robert Frank, Questions Valuation of Private Business

The Problem with a Wealth Tax [summary]

The Wealth Report is a daily blog focused on the culture and economy of the wealthy. It is written by Robert Frank. The Wealth Tax proposal of Professor Ronald McKinnon published in the Wall Street Journal two days earlier recieved over 450 comments (mostly negative) and warrented a more reasoned response from Frank.

He notes that the idea of a wealth tax, "seems to be gaining popularity". He asserts that, "The wealth tax, however, has a fatal flaw: valuation." and goes on to cite statistics showing that private business account for up to 40% of the assets of the wealthyist. He argues that, "Even the rich don’t know what exactly what they’re worth in any given moment" and implies that the regulatory process could not be fair.

Our Response

I sponsor the website www.TaxNetWealth.com but I oppose a net wealth tax on the wealthy unless it also applies to the poor. In August of 2006, I proposed the 2-4-8 Tax Plan to the President’s Advisory Panel on Tax Reform which consists of three taxes: a 2% Net Individual Wealth tax, a 4% Retail Sales tax and an 8% Payroll/Business Income tax.

Please try to think outside the box before you react. The 2-4-8 Tax Plan is the only reform proposal that applies the exact same rates to the rich and poor. There are no deductions. There are no tax brackets. There are no tax credits or entitlements. There is no favoritism. It would yield about $2.6 trillion per year (slightly more than the current combination of Income, Social Security, gasoline and other federal taxes and fees).

In the last couple of months, both the New York Times and the Wall Street Journal have published opinion pieces from academics recommending European style wealth tax surcharges on the wealthy. These have been around for over a century and are often described as socialistic – at least in the government’s blatant effort to redistribute the wealth of a few to entitlements for many. These ill-considered proposals to tax only the wealthy are just as inequitable as the so called “Fair Tax” attempt to impose a national 30% sales tax which would devastate the poor.

Concerns about valuation (especially for private businesses) are often raised. In today’s environment of near universal access to internet databases there would be no real obstacle to the valuation of 99% of assets. A private business, at least in the early years, will no doubt need to be valued almost entirely on its tangible assets alone (i.e. liquidation value). As income grows the ratio of income to assets would likely require an upward evaluation based upon accepted guidelines. When the business is sold any huge discrepancy might be grounds for an audit. The process does not have to be exact to be fair.

Lastly, I invite you to consider the fact that many wealthy people (and many more who want to be) would gladly accept a 2% wealth tax in exchange for a flat 8% individual and corporate income tax, and the elimination of Estate and Capital gains taxes (… and just suck up the 4% sales tax without being a cry baby).

Eugene Patrick Devany

See also 2% Wealth Tax for related issues.

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Copyright 1985 to 2015 by Eugene Patrick Devany