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Tax and Tax Information * Income Tax

How Wealth Tax Is Better Than Income Tax   
Jim Thio

Wealth Tax


Do you want to move money from the wealthy to the poor? Well, tax wealth.

Article to continue below----------------------------------------------

U.S. Sales Tax Rates Hit Record High (Forbes)
Shopping blues: Top tax 12%. Chicago's 10.25% highest big-city rate. More Internet tax fights loom.

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Wealth tax causes far less market distortion, and hence, much fairer than income tax. Wealth tax hurt productivity less. If you live in a capitalistic country, then your income is yours fairly. However, Bob's wealth might not be traceable to productivity. Bob might have gotten his wealth through inheritance gained through slavery, or genocide. The link between wealth to productivity is less than the link between incomes and productivity. Hence, wealth tax discourages productivity less than income tax.


Wealth tax also has meritocratic justification that can actually increase productivity. Property rights are effectively contracts between a person and the society. Part of the contract is that the society will protect the person's property.

Article to continue below----------------------------------------------

NY Governor Rejects Reimposing Stock Transfer Tax (Reuters Via Yahoo! News)
New York state should not reimpose a stock transfer tax as this would make Wall Street firms move to other cities such as New Jersey's Newark, or other states like Connecticut, Governor David Paterson...
Rally To Push For Hike To Georgia Cigarette Tax (AP Via Yahoo! Finance)
Anti-smoking advocates say they know a way to help fill Georgia's $1 billion budget shortfall: hike the tax on cigarettes by $1.

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Well, if you protect Bob's land, you should get paid right? Wealth tax is then effectively protection fee we pay to our local gangs we call governments. How much a society should get paid for protecting wealth? Natural pricing schemes will be of course something proportional to the amount of wealth protected.


Let's examine this issue.


Wealth Tax as Protection Fee


The year is somewhere in 13th century. Kublai Khan attacked China. The peasants don't bother fighting. Why? Because all they have, their life, they can take with them in refugee. The lands belong to landlords anyway. So just let the landlord fight.


The Sung emperor realized this. So, the Sung court provided land sharing to peasants. Now the peasants have something worth dying for, land. However, it's kind of late. Also, that enraged the land owning landlords who switched side to the Mongol. There goes Sung dynasty, the most prosperous country in the world at that time.


Say a foreign investor puts 1 million dollars in 2 countries each. The first 1 million go to, hmmm... Let's see..., Somalia, where the money just goes away through local warlords. The next 1 million goes to Singapore with its strong laws and commitment to meritocracy. In which country the $ 1 million produce higher return? In Singapore of course.


Now, say Singapore taxes wealth by 1% but gives 16% return. Say Somalia has no wealth tax but provide 0% return. Where do you want to invest your money? In Singapore...


At the end, any country that can provide return on to investors will motivate investors to invest money on that country.


Countries will compete with other countries in trying to give better protection for investors. Countries that do it well can get away with more wealth tax and still be very attractive for investors. Investors will still put money in that country even though the country taxes a small percentage of wealth tax.


If governments' spending can be slashed, the rest can be given as dividend to all citizens in equal share for everyone manner. Karl Marx would love this, am I a commie or what? That'll provide incentives for citizens all over the world to vote in favor of free market, privatization, or anything that gets money in. The more investor-friendly the countries are, the more money gets in, the more dividend those citizens will get.


Some special arrangements should be around to prevent citizens from abusing the system by just making more kids to collect more dividends, but that's easy to solve.


Less Market Distortion


Back to our sample. Say you're equally poor. However, you're more diligent than your peers. Then you wouldn't pay much higher tax than your peers because you're equally poor. Hence, wealth tax do not punish the diligent as much as income tax.


When you're richer, you can build factories rather than mansions. You don't pay extra penalty for gaining income. So, you will pay the same amount of tax whether you build factories or mansions.
It takes the same amount of military power to protect a mansion and a factory. So why in the earth factories pay more tax?


Less Repulsive Than Income Tax


Will you invest money in a country with 30% income tax or in a country with 2% wealth tax? Well it depends. If you have a good business plan, then wealth tax is preferable than income tax. Good business plan means good returns on your investments, which means high productivity, income or profit. However, if your business plan is lousy or you just want to put your money for mansions that produce no return then income tax is preferable.


Exchanging income tax into wealth tax will hurt incentives for good business plan much less. You're not going to be penalized for having better business plan and earning more profit.


Higher return of investments are better not only for investors but for everybody. When businesses collapse, the ones that collapse first are usually the ones with lower returns that's just above the margin. Things go a little wrong and those bad business plans will collapse. Income tax encourages all businesses to be like that. Wealth taxes do not penalize profit and hence will increase profit.


If wealth tax is done in exchange of income tax, good investors would love it more and invest more money. Bad investors that governments will end up bailing out with IMF's help can invest somewhere else.


Doesn't Go Berserk


No people in any country, in their right minds, would demand too much wealth tax. Why? Because too much wealth tax will simply drive investors away. Some countries can demand bigger wealth tax but only if they do their homework well, such as maintaining security and explicit consistent rules.


At the end, there will be a nice supply and demand relationship where all countries try to provide the best capital protection and efficient economic and capital growth at the least possible cost or tax. The citizens in such countries can simply pocket the difference, which will be called profit. When citizens think like stock holders, then politicians will think like CEOs.


Jim Thio is a silver medalist in International Physics Olympiad. He uses his Math skills to provide free financial, business, and marketing advices in http://FasterFinancialFreedom.com/art.390.0.html

What Other Authors say about Taxes

A Guide To Tax Forms by Carl LaFresnaye

Looking at the Internal Revenue Service's website (www.irs.gov) can be a bewildering experience. A vast array of tax forms greets you and figuring out which ones to use can be a chore. This guide is designed...

Taxes Necessary Evil by Frank Vanderlugt

Ah, taxes. We all pay them. And in contrast to the popular myth that the poor and middle class pay the bulk of the taxes in the United States, in actuality, the rich do.According to the National Taxpayers...

Advice For Using Free Tax Forms by Carl LaFresnaye

There are many different avenues that can be used to obtain free tax forms from the government. There are usually free tax forms that can be found at the local libraries during tax season. There are...

A History of the Income Tax in the U.S. by Garry Gamber

After the United States declared its independence and fought the Revolutionary War, the U.S. Congress relied on excise taxes on alcohol, tobacco and a few other products for revenue to pay off its war...

Tax Preparation and Electronic Tax Preparation Options by Amber Lowery

Just in time for tax season you will find yourself presented with this years editions of popular tax preparation programs that promise to make tax filing a breeze for the average person. Which one is right...

Use Tax Credits To Help Finance Your College Education by P. Nash

Students are always on the lookout for ways to help pay or offset the cost of their tuition. There are various government grants and scholarships available to you if you qualify. But what if you don't...

Some Useful Information; Tips And Tricks About Taxes. by frank vanderlugt

The first attempt to impose an income tax on America occurred during the War of 1812. After more than two years of war, the federal government owed an unbelievable $100 million of debt. To pay for this,...

Getting a Tax Credit for Your Kids by Richard A. Chapo

As you know, raising a family is a full time job and can put stress on your finances. Fortunately, you can claim a tax credit to help cut your IRS bill if you have kids.Getting a Tax Credit for Your KidsWith...

Need a Copy of Your Tax Return Information? by Richard A. Chapo

Taxpayers have two easy and convenient options for getting copies of their federal tax return information. Tax return transcripts and tax account transcripts -- by phone or by mail.A tax return transcript...

Doing Your Taxes by Carl LaFresnaye

When an individual is younger, it is much easier to do taxes at the end of the year since there usually is not anyone to claim other than the individual him or herself, as well as the fact that not many...


Who are the CPA Moms?      Your Tax Professional Forever!!!!

“CPA Moms - Tax Moms - EA Moms" are trade names given to Accounting and Tax Professionals who chose to work in an “relaxed” environment. Some "Moms" work from home, other work from personal offices. Not all are Moms, there are some Dads. We call them Mr. Tax Moms. CPA Dads or Enrolled Agents Dads.
Each Mom is independent. Once a client starts working with a Mom, the client will keep the same “Mom” year after year regardless of where the client moves or relocates. Being in a “relaxed” environment has many advantages. Lower overhead, faster response time, more availability, etc.
To be a member a CPA Mom, Tax Moms, or an Erolled Moms the Tax Professional must ALWAYS be in good standing with their state licensing agency, experienced, and must demonstrate a high level of ethics, professionalism and proficiency.
Tax Net Inc, the parent company for all CPA Moms, Tax Moms and Enrolled Moms, developed the marketing and on-line systems to help qualified Tax Professionals who "choose" work from their “relaxed” environment and offer better service at a lower price to the consumer.
Since the “Moms” do taxes and accounting of all complexities, there is always a Mom available for every level of work. Since each Mom has a private 800 number, you are just a phone call away, regardless of where you live.
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Index of Articles about Taxes

What Other Authors say about Taxes

A Guide To Tax Forms by Carl LaFresnaye

Looking at the Internal Revenue Service's website (www.irs.gov) can be a bewildering experience. A vast array of tax forms greets you and figuring out which ones to use can be a chore. This guide is designed...

Taxes Necessary Evil by Frank Vanderlugt

Ah, taxes. We all pay them. And in contrast to the popular myth that the poor and middle class pay the bulk of the taxes in the United States, in actuality, the rich do.According to the National Taxpayers...

Advice For Using Free Tax Forms by Carl LaFresnaye

There are many different avenues that can be used to obtain free tax forms from the government. There are usually free tax forms that can be found at the local libraries during tax season. There are...

A History of the Income Tax in the U.S. by Garry Gamber

After the United States declared its independence and fought the Revolutionary War, the U.S. Congress relied on excise taxes on alcohol, tobacco and a few other products for revenue to pay off its war...

Tax Preparation and Electronic Tax Preparation Options by Amber Lowery

Just in time for tax season you will find yourself presented with this years editions of popular tax preparation programs that promise to make tax filing a breeze for the average person. Which one is right...

Use Tax Credits To Help Finance Your College Education by P. Nash

Students are always on the lookout for ways to help pay or offset the cost of their tuition. There are various government grants and scholarships available to you if you qualify. But what if you don't...

Some Useful Information; Tips And Tricks About Taxes. by frank vanderlugt

The first attempt to impose an income tax on America occurred during the War of 1812. After more than two years of war, the federal government owed an unbelievable $100 million of debt. To pay for this,...

Getting a Tax Credit for Your Kids by Richard A. Chapo

As you know, raising a family is a full time job and can put stress on your finances. Fortunately, you can claim a tax credit to help cut your IRS bill if you have kids.Getting a Tax Credit for Your KidsWith...

Need a Copy of Your Tax Return Information? by Richard A. Chapo

Taxpayers have two easy and convenient options for getting copies of their federal tax return information. Tax return transcripts and tax account transcripts -- by phone or by mail.A tax return transcript...

Doing Your Taxes by Carl LaFresnaye

When an individual is younger, it is much easier to do taxes at the end of the year since there usually is not anyone to claim other than the individual him or herself, as well as the fact that not many...