13 Ways to ‘Tax the Rich’
The ‘Occupy Wall St.’ movement across the USA has raised the slogan of ‘We Are the 99%’ and the related ‘99% vs. the 1%’. Thus far the idea of taxing the rich has remained stated in general terms. For greater impact it must be further clarified, or else it will be misinterpreted and co-opted by politicians pushing false ideas while claiming to tax the rich but not really doing so—such as the recent proposals by Republican presidential candidate Cain’s phony 9-9-9 or even Obama’s ‘millionaires tax’. The following is an effort to suggest various measures to ‘tax the wealthiest 1%’ that represent true, progressive tax the rich proposals.
Tax Program #4.1: Professional Investors’ Tax Haven Repatriation Tax.
About $4 trillion today is held in offshore tax havens by US investors, individuals and institutions, in island nations like Cayman islands, Vanuatu, Seyschelles, Isle of Man, Cyprus, etc., and in more traditional havens like Switzerland, Lichtenstein, and so forth. The IRS has identified 27 of these, which it calls ‘special jurisdictions’. If just $2 trillion of that $4 trillion was required to be re-deposited in US banks, those investors would have to pay the 35% top tax bracket personal income tax on the $2 trillion in the first year, raising about $700 billion. Future earnings on the remainder would also be taxed in the second to fifth years, yielding another $200 billion a year. Refusal to repatriate could result in a 10% penalty after 90 days, followed by similar penalties. Countries that refused to cooperate should have their US based assets frozen and then taxed until compliance.
Tax Program #4.2: Multinational Corporations’ Offshore Profits Recovery Tax.
Multinational corporations today are hoarding between $1 and $1.4 trillion in their offshore subsidiaries, refusing to pay the required 35% corporate tax rate. If they were required to repatriate that lower amount of $1 trillion, it would raise in the first year a sum of $350 billion and another $140 billion a year in each of the next four years. Refusal to repatriate could result in a 50% tariff on the re-importing of their offshore products to the U.S. until they repatriated.
Tax Program #4.3: One Year 15% Surtax on $2 Trillion Corporate Cash Hoard
U.S. large corporations today are hoarding between $2 and $2.5 trillion in cash and refusing to invest it in the U.S., instead preparing to buyback stock, increase dividends, or acquire other companies. Companies refusing to invest at least one third of their current $2 trillion cash hoard within 6 months in the US, and create jobs in the U.S. as a consequence of such investment, would be taxed at a 15% surtax rate for the remaining six months of the first fiscal year. That raises another $300 billion in tax revenue for the first year. The tax would repeat for those not investing the cash hoard in the subsequent second year at the same rate.
Tax Program #4.4: Financial Transactions Tax on Stocks, Bonds and Derivatives
Another $150-$200 billion a year, at minimum, is raised by implementing a financial transactions tax as follows: $1.00 per every common stock trade for stock value traded $10,000 or less. Add $100.00 for stock trades valued $10,000 to $100,000. 1% on all trades worth more than $100,000. $1.00 per each $1000 value for all forms of corporate bond sales, both investment and junk grade bonds. Similar charge for commercial paper transactions. And $1 per $100 notional value for all interest rate, currency and other derivatives trades, levied on each of the counter-parties. 1% tax of notional value for all credit default swaps derivatives trades.
Tax Program #4.5: Capital Gains, Dividends & Estate Tax Restorations.
This proposal raises taxes on capital gains and dividends from current 15% to the 35% rate that is currently levied on all top bracket personal incomes. It would also tax carrying interest at the same rate and require all hedge fund managers to pay 35% instead of their current 15%. Estate Tax rates and thresholds are restored to 1980 levels. These measures raise at minimum $125 billion in the first year, and potentially more, as well as an additional $125 billion per year for the next four years.
Tax Program #4.6: Immediate Expiration of the Bush Tax Cuts
Bush tax cuts passed in 2001-04 cost over the last decade approximately $2.9 trillion. Extended the Bush tax cuts for another decade will cost between $2.2 to $2.7 trillion more. Their extensions alone in 2010-11 cost the U.S. budget about $270 billion a year. Immediately suspending the Bush tax cuts for 2012, the second year, will save $270 billion.
Tax Program #4.7: Restore Top Personal & Corporate Tax Rates to 1980 Levels
Tax proposal 4.5 above addresses only capital gains, dividends, and estate tax rates within the broader personal income tax. Tax proposal 4.6 addresses revenue savings for only one more year, 2012. Proposal #4.6 include revenue potentially raised from raising the top marginal income tax rate or the top marginal corporate income tax rate back to 1980 levels of 50%. Nor does it include numerous tax credits, exemptions, subsidies and other tax loopholes for the wealthy and corporations. Restoring the top marginal rates for the personal income tax in general and the corporate income tax to the 50% level in 1980, as well as raising capital gains and dividends to the 50% level, together raises more than $100 billion more in tax revenue per year.
Tax Program #4.8. Business-to-Business 2% Value Added Tax (VAT)
Consumers and households pay a significant sales tax to provide state government revenues. Businesses buying from other businesses should also pay an appropriate ‘business to business’ sales tax on intermediate goods they buy from each other, just as households pay on final goods sales. The initial tax should be levied at a half the consumer sales tax rate in the first year, and subsequently scaled to an equal rate over a five year period. This business sales tax, a ‘value added tax’ only on intermediate goods sales, would in most cases fully stabilize state revenues.
Tax Program #4.9: State-to-State Business Relocation Equalization Tax
This tax prevents states’ from competing with each other in a ‘race to the bottom’ to lure companies from each other, which has been increasingly undermining state revenues for more than a decade. A federal level tax, it is designed to offset any tax advantage to a company from moving from its current state to another state. Should the company relocate nonetheless, the revenue from the tax is earmarked for spending on job creation and job retraining for workers negatively affected by the relocation.
Tax Program #4.10: Increase 12.4 % Social Security Payroll Tax on Wages & Salaries (Earned Incomes)—i.e.‘Scrap the Cap’
Currently less than 85% of all wage earners pay up to the current top annual limit of $106,800 because wage income at the top wage levels above $106,800 has risen faster than the social security base increase. This proposal raises the limit to $250,000 a year and indexes it thereafter to inflation, to recover the remaining 15% of earned incomes (wages) not paying the social security tax above $106,800. This is sometimes called ‘scrap the cap’. This proposal, however, also calls for requiring an equivalent 6.7% tax on all capital incomes (dividends, interest, capital gains, rents) as well up to the $250,000. It is called ‘pay the same’. It would enable not only the stabilization of current social security payments for the rest of the century, but would enable raising monthly social security benefit payments by at minimum another 20% above current levels.
Tax Program #4.11: Levy 6.7% Payroll Tax Equivalent on all Capital Incomes up to $250,000 annually—i.e.‘Pay the Same’
An even larger social security surplus would result if a 6.7% tax were levied on all incomes (capital gains, dividends, interest, business rents, etc.) up to $250,000 annually and also indexed. It is called a ‘pay the same’ payroll equivalent tax. This would transform social security from a ‘payroll tax’ to a true social insurance tax. The tax revenue raise would amount to additional hundreds of billions of dollars a year, stabilize the social security trust funds for the rest of the 21st century, while simultaneously providing a 20% raise in monthly social security benefit payments for the 48 million current and future retirees.
Tax Program #4.12: Increase Medicare’s 1.45% Payroll Tax by 0.25%.
An initial 0.25% in the payroll tax for the next ten years provides all necessary funding to stabilize the Medicare system for ten years. That’s a combined 0.5% for employee and employer. Starting the eleventh year, 2022, another 0.25% each tax increase is necessary. Thereafter, the 77 million baby-boomers begin to decline as a cost factor, the costs of Medicare level off, and then decline. So a total tax increase of 0.5% over 20 years for both worker and employer totally covers the Medicare cost shortfalls. Those who consider this mere 1.7% tax for the next ten years unacceptable, should consider that the typical employer insured health care plan costs the equivalent of 30-35% of a worker’s take home pay today.
Tax Program #4.13: Excess Profits Tax on the ‘Big 4 Parasite’ Industries
There are four industries that are sucking the economic life blood from the U.S. economy, at the expense not only of their workers, the bottom 80% households, but also at the expense of millions of smaller businesses. These industries ‘suck’ super-profits out of the economy—away from wages and other businesses income. They are the most powerful in terms of both economic and political influence. They are the banks, the oil companies, the health insurance companies, and the big pharmaceutical companies. They charge excess prices, rising at double digits now for decades, and thus reap super-profits at the expense of everyone else. An excess profits tax equivalent to a minimum 10% of the gross profits or net income of the companies in these industries should be levied on the biggest companies in these industries. Those excess profits should be returned to consumers and small businesses as offsets for health care costs and gas and electric utility costs and mortgage interest in the form of credits on annual federal tax returns.
The preceding proposals to ‘Tax the Rich’ are excerpted from the recent pamphlet by Jack Rasmus, ‘An Alternative Program for Economic Recovery’, recently produced for various Teamsters Unions in the San Francisco bay area and New York. The longer pamphlet also includes proposals to restructure the banking and retirement systems in the U.S., create 17 million jobs, save 11 million homeowners, and stabilize state and local government finances. For more information re. the pamphlet, contact the author, Jack Rasmus at: [email protected] or call 925-209-3933. The pamphlet may also be ordered from the website, http://www.kyklosproductions.com.