[PEN-L:4879] Re: Asset tax

[mmeeropo@xxxxxxxxxxxxxxxxxxxxx (Mike Meeropol)]

Jim Devine wrote:

[responding to Paul]
>
> >How exactly do you think the mechanism by which capital would
> >pass on the tax would operate?
>
> (1) disinvestment from high-tax areas of the world;
> (2) investment in low-tax areas of the world.
>
The process by which this occurred would involve the sell-off at a
significant discount so that the new buyer would be able to make a
"satisfactory" rate of return AND pay the asset tax.  Thus, current owners
of assets would EITHER have to live with lower rates of return by keeping
the asset and paying the new tax OR they'd take their losses immediately.

> A tax on real assets might cause an absolute fall
> in the amount of real investment, encouraging recession.

With a decent zero bracket, the new investors that do a lot of the start-up
work would still have a great "reward" to shoot for before the asset tax
kicks in.  I see the major long run consequence of an asset tax, the
reduction in the (pre-asset-tax) cost of investment.  In the short run, it
would be a windfall loss to current asset holders!
>
> As noted, this process depends on what kinds of assets you're
> discussing.
>
> >If the tax fell not on companies but on individuals who own the companies
> >I do not see how they are going to 'pass it on' to non-proprietors.
>
> The individuals could emulate Rupert Murdoch and become citizens of
> other countries. Depending on the tax code, they could move their
> asset ownership to other countries.

THough it makes good copy, the "traitorous billionaires" are not very
significant in terms of "revenue loss."  The tax law could deal with that by
stating that all "American assets" (that is, property in this country, bonds
and stocks issued by businesses located OR DOING BUSINESS IN this country
[if a business doesn't have its headquarters here, the percentage of
business that it does in this country would be the percentage of assets of
those businesses owned that are subject to the tax -- the law could even
make the asset tax payment DEDUCTIBLE by the corporation BEFORE paying out
interest and dividends to their creditors and owners --- making the
corporations the asset tax collector!]) are subject to the tax even if the
owner is a foreign national.
>
> >The fact that the wealthy will oppose it hardly seems a sufficient
> >argument for socialists when considering what tax policies they should
> >advocate.
>
> Ideally, you're right. But if I were sending troops to storm
> a machine-gun nest (to choose a bloody example), I would be
> interested in trying to figure out what the machine-gun nest's
> responses would be when my troops storm it.
>
I would suggest that the machine-gun nest's response would be that this will
destroy incentives --- and our response ought to be, with a zero bracket of,
say, $500,000 everyone has a chance to "get rich" before paying a penny ---
and with a 3% asset tax, people can still INCREASE the value of their assets
and pay the tax.  But I agree, it would be a tough sell --- I have a hard
time convincing my students that a 5% asset tax with a zero bracket of
$1,000,000 would be "a good idea"!  Perhaps our best line would be this is a
good alternative to the current tax system which is getting tougher and
toughter on people who make up to $58,000 (the social security limit, I
believe).

> in pen-l solidarity,
>
igualmente!

> Jim Devine
--
Mike Meeropol
Economics Department
Cultures Past and Present Program
Western New England College
Springfield, Massachusetts
"Don't blame us, we voted for George McGovern!"
Unrepentent Leftist!!
mmeeropo@xxxxxxxx
[if at bitnet node:  in%"mmeeropo@xxxxxxxx" but that's fading fast!]