wealth tax

Doug Henwood dhenwood at panix.com
Tue Sep 28 17:21:06 PDT 1999


"A Comprehensive Wealth Tax"

BY: DAVID J. SHAKOW

University of Pennsylvania Law School

REED SHULDINER

University of Pennsylvania Law School

Document: Available from the SSRN Electronic Paper Collection:

http://papers.ssrn.com/paper.taf?abstract_id=169728

Paper ID: University of Pennsylvania Law School, Institute for

Law and Economics, Working Paper No. 266

Date: September 1998

Contact: DAVID J. SHAKOW

Email: Mailto:dshakow at oyez.law.upenn.edu

Postal: University of Pennsylvania Law School

3400 Chestnut Street

Philadelphia, PA 19104-6204 USA

Phone: (215)898-6190

Fax: (215)573-2025

Co-Auth: REED SHULDINER

Email: Mailto:rshuldin at oyez.law.upenn.edu

Postal: University of Pennsylvania Law School

3400 Chestnut Street

Philadelphia, PA 19104-6204 USA

Paper Requests:

Contact Donna Gallagher, Institute for Law and Economics,

University of Pennsylvania Law School, 3400 Chestnut St.,

Philadelphia, PA 19104. Phone:(215)898-7719. Fax:(215) 573-2025.

Mailto:dgallagh at law.upenn.edu

ABSTRACT:

Income, consumption, and wealth are all possible bases for a tax

system in the United States. Scholars have specified the

structure of income tax and consumption taxes, but no one has

attempted to describe in detail a comprehensive wealth tax for

the United States. In this paper, we begin to develop such a

structure. In particular, we hypothesize that the combination of

a flat rate tax on networth and a flat rate tax on earned income

along with an appropriate level of exemptions, could be an

attractive tax base.

In order to explore the structure of a wealth tax, we first

specify the base of the tax. Using the Federal Reserve Boardís

Survey of Consumer Finances we then estimate the tax rates that

would be needed to raise the same revenue as currently raised by

the personal and corporate income tax. We find that rates of

1.57% on net worth and 17.7% on earned income would be required.

We also explore the rates that would be required under

alternative specifications of the base.

Once we have specified the base and the rates, using the SCF

data we are then able to explore the distribution of the tax by

income class. We compare the distribution to the distribution of

the current Federal income tax. We find that the wealth tax we

describe is able to achieve the same level of progressivity over

much of the income range.

JEL Classification: H21



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