Warren Buffet along with various other wealthy individuals called for higher taxes on the wealthy. His claim was that he was under taxed, suffering a rate lower than his secretary and other employees (who must be well paid, as he claims they are suffering a 33 percent burden). Perhaps there is a way we can give Buffet and friends what they want.
In an earlier post, I suggested a tax on wealth instead of a tax on high income. However, that may not be politically palatable, as too many it smacks of socialism. Buffet’s lower tax rate is due to dividends suffering a lower rate of tax than other forms of income. The logic (and yes, I realize the logic is convenient for the wealthier political donors) is that the corporate income is already taxed, before becoming dividends.
What I suggest is that we cut the corporate income tax rate to, say, 5 percent, but charge dividend income as regular income. This would allow Buffet and friends to pay tax at rates they deem fairer and might encourage capital formation or the repatriation of overseas profits. Such rate changes are likely easier to implement than more complex “reform.”
I am sure such changes could be set to achieve the magical “revenue neutral” effect on the budget. It might even allow Warren to pay as much tax as his secretary.
I suggest a low corporate tax rate rather than a zero rate because I hope to slyly capture some pass through income from corporations flying flags of convenience. At current rates US companies may headquarter or declare profits overseas to avoid high rates. I would hope that a low rate would convince overseas companies to do the same in the US.
Regarding the tax on wealth and “socialism”: I see true socialism as about ownership, control, and a punitive attitude to wealth. While punitive is, to some degree, in the eye of the beholder, I feel that a low enough tax on wealth is no more punitive than a tax on income, sales, or any of the other myriad of existing taxes. Capitalistic societies provide strong protection for property. It does not seem unfair that such property bears a charge for that protection. Of course, such a tax is not without its own problems (e.g., the cash poor but asset rich) and opens another channel of potential abuse.