[PEN-L:4855] Re: PEN-L digest 745

["Michael A. Dover" <mdover@xxxxxxxxx>]

Assets taxes, or as they are called in the remaining states which have
them, intangible assets taxes, should clearly be a prominent part of a
progressive taxation agenda.

I have accumulated some files on the legislation from various states, but
haven't really looked into them in depth.  Anyone else out there know
someone who is expert on them?  As I understand it, the history is that
when the progressive taxation movements early in the century came about,
the property tax was seen as progressive and was levied in most states on
both real property (land and I think valuable objects like jewelry - not
sure about that) and intangible property (stocks, bonds, mortgages held,
cash on hand, etc.).

Over the years, property tax rates went up to the point where they are
confiscatory, in that retirement income or unemployment benefits aren't
enough to ensure you can hold onto a home you have paid off.  To protect
against this, many states have homestead exemptions, but with housing
inflation many homes no longer qualify.

Intangible assets taxes generally have an exemption of some kind as
well, to protect savings less than 25,000 or 10,000 or 100,000 (it
varies.)  Typically, states also exempt holdings in stocks headquartered
in that state.

Some of the states still having these taxes are the last time I checked,
Louisiana, Michigan, PA, NC.  I talked to the taxation staff in a couple
of states at one point and people whose profession is collecting taxes
think these are very fair and collectable taxes.  But collecting is not
as easy as it may sound apparently.  There is the problem that people
transfer assets into land and jewelry and art; hide personal assets in
corporate shells; etc..

"Reformers" in many states are trying to get the constitutional
requirments or legislation for these taxes eliminated.  I think Engler
made a campaign promise to do that here in Michigan.  So these are live
issues.

Currently, rates are more like 1/10 of 1% on assets over 10-25000, and so
they are often referred to as nuisance taxes.  I've heard in Europe there
are such taxes at about 2%, but am not sure.  One must keep in mind that
there really ARE people who LIVE on the income from substantial savings
in retirement, and at 3% this could be half their income.  The fear of
confiscatory taxes has been put in people's hearts by property taxes.
There may be issues of generational equity in taxes which are based
mainly on assets as well.  I personally would favor an aggressive
campaign for a 1% assets tax.  This would not be confiscatory, but would
generate substantial income which could potentially be targeted to some
public purpose that was universally beneficial to society, such as
education or education and maintenance of health care benefit premiums
for those not making social insurance contributions due to unemployment,
disability, retirement, etc..  However, equally justified would be a
purer "rich to poor" transfer to SSI.  Some combination of use for
universal and selective purposes might be best.

This is clearly the time to raise truly innovative and progressive
proposals.  An assets tax would be an excellent component of such a
package of proposals, no?