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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

2% Net Wealth Tax

 The word "tax" comes from the Latin “taxio” which means approximation.

Net Wealth is the "Average" - "Cash" - "Fair Market" Value of Assets

Less the Value of Legal and Enforceable Debt

The “average” aspect of the valuation seeks to adjust for assets that may fluctuate during the tax period. Items such as stocks or gold should be value averaged over the tax period. This should also eliminate any advantage that might be gained by selecting a valuation day when the market price of an item is at its lowest. It also equalizes the effective tax burden for those who might file annually, quarterly or even monthly.

The “cash” aspect of the valuation seeks to allow for the adjustment of an estimated sale price by permitting an offset for all reasonable and normal costs of a sale. It is essentially the same as the cash liquidation value. For example the cash value of a house would be the sale price less the typical closing costs and broker’s fee. [As a practical matter, it would not be unreasonable for the tax authority to permit a tax filer to elect a standard fee or percentage as the equivalent cost of selling assets. For example, in estate practice, a 6% fee is an accepted standard for the administration and liquidation of an estate].

The "fair market” aspect of the valuation seeks to limit the scope of assets subject to taxation of those items for which there is a normal and customary market. For reasons of custom, public policy and/or legal restriction there is no market for ones kidney, a personal copyrighted item not put up for sale, a wedding ring during the term of a marriage, personal clothing, food, controlled substances, family bible and similar items. Retirement plans subject to strict government control, such as an IRA or 401k plan, would also be exempt from taxation until a proper withdrawal is made. Many jurisdictions and laws also permit a fair burial fund (i.e. $15,000) to be beyond the reach of creditors including the government. An exemption for a burial fund might also serve as the equivalent of a deduction, effectively eliminating wealth taxes for very poor families with net wealth of less than $15,000 per person (i.e. $60,000 for a family of four). In the example of a family of four with $60,000 in a bank account where $1,200 may have been withheld by the bank, a refund could be requested (which would incidentally also provide an incentive for compliance with the tax filing obligation).

Business: The average value of a corporation's stock would determine the value for individual wealth tax purposes. The 2% wealth tax would be paid by the business directly to the government on behalf of the owners or stockholders of record (on a pro rata basis). The stock value is easy to determine for a publically traded corporation but may require an inventory of assets for the millions of small corporations. A similar inventory would be necessary for partnerships, sole proprietorships, etc. In most cases the small businesses would benefit from a valuation based upon a liquidation of assets computation rather than an often higher sale of stock or ongoing business basis. The key difference with a small business is that the principals of the company may account for much of the value of the business and their non-contract services should not not valued for wealth tax purposes.

Foreign Businesses: Another issue arises in regard to which, if any, businesses should pay wealth taxes on the net wealth of the business.  To the extent individual owners are paying the wealth tax (or the business has paid it on their behalf) it would be double taxation. However, a business may be owned by a combination of domestic and foreign businesses and individuals. The regulatory aim should be to make sure that foreign owners pay the wealth tax while avoiding double taxation of US corporate owners. [The corresponding regulatory burden is also compounded a bit by stock holding corporations, subsidiary corporations, multinational corporations, mutual funds, etc.] A workable solution may be found in a rule that imposes the wealth tax on individual US citizens and all foreign owners (weather individuals or corporations).

Foreign Assets: Generally US citizens are  required to file and pay US taxes regardless of where they live. Assets held in foreign banks and even real estate in a foreign country should be taxed (subject to a tax credit for tax paid to the foreign government). The intent of any enforcement regulations should be that the movement or location of assets anywhere in the world should not reduce the taxes owed by a US taxpayer.

Private Trusts: Some trusts are intended to benefit a particular individual or family. Occasionally they are created tin an attempt to avoid the creditors of a deadbeat beneficiary. Some are even located overseas in an effort to avoid US taxation. The assets of family trusts should be considered as individual assets of the US beneficiaries for tax purposes, with the tax avoided only to the extent paid by the trust on behalf of the individual(s).

Digital Filing: Completing and filing wealth tax returns should be little more than compiling a simple grouped inventory of assets and liabilities. There should be no need to furnish an itemized list of each and every item (unless and until an audit is necessary). The government should be expected to operate an online system to help in the valuation process - including a comprehensive database of items with approved values. With near universal access to computers, it is also time for the IRS to require the digitally filing of all returns.

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Copyright 1985 to 2015 by Eugene Patrick Devany