Taxing wealth, which has already been taxed, will lead to the same stagnation the economy experienced from 2008 to 2016.
Many politicians, all of them Democrats, are proposing taxes on wealth, especially for those who are very wealthy. Last year Elizabeth Warren (D, MA) proposed a wealth tax that was generally not well received. This year, more Democrats are calling for a wealth tax. Is this a good idea?
In California, Democrat Rob Bonta proposed a wealth tax on Californians. The tax would be paid annually and even due for ten years after a taxpayer left the state. Democrats note that income inequality is increasing and taxing the wealthy would be a way to reduce that inequality.
Some Dems want to raise income tax rates and want a wealth tax.
Others like Alexandria Ocasio-Cortez (AOC) want to raise the maximum income tax rate to 70%. This too, she argues, would reduce income inequality. And she wants New York Governor Andrew Cuomo to impose a wealth tax on all New Yorkers who have a net worth of $1 billion or more.
The reality is that these proposals are not only counterproductive, but they would increase, not reduce, income inequality.
In addition, wealth taxes are simply not fair and would double tax earned income.
The financial goal of every American is to increase wealth. More wealth provides a higher standard of living, security against unforeseen emergencies and provides for retirement. It also allows individuals to bequeath that wealth to whomever they choose, usually providing opportunity and security for future generations of their family.
How is wealth created?
Wealth is created by individuals or corporations who earn income. For individuals, they pay federal and state income taxes on the earned income. What’s leftover is their disposable income. Most of the disposable income for most income earners is spent, by consuming goods and services that satisfy needs.
If individuals have any income left over, that income is saved or invested. That creates wealth. Some individuals reduce their consumption of goods and services so that there is more available to create wealth. But savings…