I'm not sure I can be more explicit than I already have been: a tax that is easily avoided by some is not a fair tax. In theory, you may be right; in practice, you'll for sure be wrong. I believe any effort spent on a tax on wealth would be counter-productive to the ultimate goal of fairness. At its core, the US income tax system is a fair and progressive one. It has been perforated over the years by special rules for special parties that, in most instances, work against the existing fairness of the system.
A simple rollback would go a long way.
As a for instance, as recently as 7 years ago, a company like Microsoft paid approximately their fair share. I mention Microsoft because it had, what some would say is, "a tax problem" -- their revenues were largely cost-free. They had very little capital invetment. They had, in short, no deductions. Each new license of Windows or Office didn't have an associated cost other than packaging (in the case of a retail sale; in the case of an OEM sale, it wasn't even that). This means that their tax return was fairly simple: big revenue minus small costs is net profit; 35% of that was owed in tax. During their big run up in growth and profitability, their taxes were sometimes on the order of 1% of total tax revenue in the US. Income taxes were almost always their largest expense, far ahead of things like rent and salaries. That has mostly changed, due to new-ish provisions that make tax avoidance a blood sport. Not much has changed about their revenue: it has climbed steadily from $58B in 2009 to $62B in 2010 and $69B in 2011 (what some would call 'moderate growth' even during a troubled time in the market). Their effective tax rate, however, has dropped. They paid $5.2B in 2009, and will pay $4.9B in 2011 even as net income went from $19B to $28B. Yes: their net income went up by $9B and their income tax went *down* by nearly half a billion dollars. You don't even have to dig any further into it: there's something rotten here. A decade ago, their tax burden on $28B of profits would have been close to $10B. And that doesn't even address how much more of their gross revenue has been recategorized to lower the $28B number. Google "double-dutch sandwich" for more details. Oh, and stick *google* in your search to see how Google itself has been successful at this, while you're at it.
This trend has accelerated over the last decade due to two factors:
- The rules keep changing in-trend: more ways to avoid tax legally appear each year
- The players are getting better at the game. For a given circumstance, if you have an active tax avoidance department that has been cast as a "profit center" then your effective tax rate will most likely go down just because they are trying harder. A generation ago, the cherry jobs for newly minted lawyers and accountants were on Wall Street. Today they are in "tax compliance" at major multinationals.
By and large, these changes don't generate much media attention: they are not "tax cuts" in the common vernacular. They are merely rule changes that, if taken advantage of, lower your effective tax liability. And when you do take advantage of them, the net effect is to reduce the progressiveness of the income tax; to lower the fairness. I'm positive that, given the charge to do so, a small panel of people could identify rule changes made in the last decade that, when applied to the current scenario, serve only to reduce the progressiveness of the net tax burden in the US and put them in a pile to be rolled back en masse. It would be a simple task: remove the aggressive attack on fairness. It would be very clear to anyone who looked.
How to get that to happen is beyond the scope of this posting. But: I am certain that it would be a better avenue of approach than concoting some tax-on-wealth scheme.
/jordan