Impact on Other Taxes
Capital Gains Taxes:
Since a wealth tax continually adjusts for the change
in the value of investments over time, there is no legitimate reason to
maintain a tax on the appreciation in the value of stock and other
securities.
Estate Taxes:
The implementation of a net wealth tax provides some
equity to the arguments favoring the elimination of federal estate taxes
(35% over $5,000,000). Since all estates would be taxed at 2% per year it
may be viewed as the financial equivalent of pre-payment of an estate tax.
Nevertheless, consideration might be given to treating an inheritance by
someone outside the family as income (with a tax rate of 8% to the recipient).
Gift Taxes:
This 35% tax on gifts in excess of $13,000 arguably
helped some avoidance of the estate taxes and perhaps even the income tax in
some family owned or closely held businesses. Nevertheless, the desperate treatment of
gifts in the amount of $12,999 is hard to justify. It might be better to
eliminate the gift tax and treat gifts outside the family as income (taxed at 8% to the recipient).
Not-For-Profit Organizations:
Churches, charities and other not-for-profit groups are
often exempt from some taxation. Any major tax policy reform provides an
opportunity to revisit these tax exemptions. While this is essentially a
political question, it is noted that improved accounting and reporting may
enable targeted treatment for liquid investments not immediately being used
for the benefit of the not-for-profit purpose.
Gasoline Taxes:
The 18.4 cent per gallon federal tax on gasoline would
be the same as a 4% sales tax if gas sold for $4.60 per gallon. It is
largely a political question as to whether gasoline should be taxed at the
same or a different rate than the proposed 4% federal sales tax.
Social Security Taxes:
It is tempting to suggest that the Social Security and
Medicare taxes which are typically paid in part by an employer
payroll tax and in part by withholding simply be eliminated. After all, the
anticipated revenue of the 2-4-8 Plan is sufficient to cover the loss of
government revenue. One problem relates to benefits which have been determined, in
part, by the Social Security amounts contributed over the years. The many changes to the
system since 1935 suggest that this may be much more of a political
entitlement (i.e. spending) question rather than a tax policy issue.
Nevertheless, it is possible to maintain an effective 8% income tax rate and
social security calculations by simply using an accounting device that would
treat the tax on the first approximately $120,000 as a Social Security tax
equivalent.
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