Prepare, The Global Wealth Tax Is Coming
- Published: 10 December 2013
There is a global move afoot to increase personal income taxes and to generally tax capital at higher rates than labor. Voices as loud as the International Monetary Fund (IMF) and billionaire investor Bill Gross are increasingly making the case that we need to do something BIG to leave the recession behind.
Mr. Gross, in his November article written for Pimco, asks the "Scrooge McDucks of the world" to embrace higher personal income taxes and to stop expecting capital to be taxed at lower rates than labor. As for the IMF, taxing the wealthy offers "significant revenue potential at relatively low efficiency costs." In other words, soaking the rich is the path of least resistance.
The frightening context for this is the IMF's expectation that in advanced economies the ratio of public debt to gross domestic product will reach a historic peak of 110% next year, 35 percentage points above its 2007 level...
The core countries of the Organization of Economic Cooperation and Development around the globe have an determined that an average revenue-maximizing rate of around 60% is optimal; this is way above existing levels.
In the United States, it is 56% to 71%. This is quite a bit more than the current 45% paid in federal, state and local taxes by those in the top tax bracket. Top tax rates before the Reagan tax cuts in the US were 70%. Now, of course, the IMF points to the U.S. as the country where raising top rates to around 70% would yield the most revenue—around 1.25% of GDP. The IMF admits that its revenue-maximizing approach takes no account of the well-being of top earners (or their businesses).
Romain Hatchuel of the Wall Street Journal lays it out pretty well in his article, "The Coming Global Wealth Tax"
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