[EM] decision process design: wealth tax
mrouse1 at mrouse.com
mrouse1 at mrouse.com
Mon Apr 10 14:48:50 PDT 2006
I recently became interested in the problem of taxation myself, though at
this point I kind of lean toward the geolibertarian side -- tax people for
the "land rent" of their property (equivalent to what renting bare land
would be, rather than the total cost of land+improvements like a property
tax), regardless of what they have on it. People would tend to either
improve their property, or sell it to someone who would, and land
speculators would have a serious disincentive to grabbing vast areas of
bare land without actually doing something with it. If the tax for a piece
of land was the same for a five-star hotel as for a slum, you would tend
to have more of the former than you do with the current system. I
particularly like the philosophical justification for it -- since no one
creates the land, and its price is determined by its location and
infrastructure improvements created by others in society, people should
repay society for that value. On the other hand, if you build something on
that land with your own capital and labor, you should reap the full value
of that improvement.
It would also somewhat sidestep the issue of the Supreme Court decision to
allow government to grab land from one party to give to another for
development -- if the value of land increased because of demand, the
current owner could either sell it or pay the higher tax. Granted, it
would be annoying to pay higher taxes just because a developer wanted your
land, but you would still have more choice than would happen via eminent
This is also extended other resources claimed by society as a whole, like
clean air and water. Companies would pay a tax (carbon tax or pollution
tax) based on what they cost society as a whole, which would give a
financial incentive to reduce pollution, rather than just government
guidelines. It doesn't make much sense to charge nothing for polluting up
to a certain point and then charge a huge fine above that point, when you
can charge what it actually costs society.
(For more info, just Google geolibertarianism and Henry George)
> Dear election methods fans:
> I'm interested in enacting a progressive wealth tax in place of the
> income tax, property tax, capital gains tax, etc.
> Although this is a bit beside the point, I'll give a quick argument for
> it here. Imagine that person A has $1 billion in the bank, and makes
> $200,000 in 2006, whereas person B is absolutely dirt poor and then by
> some wonderful stroke of luck or effort earns $200,000 one time and one
> time only. My opinion is that person A should pay more tax.
> Anyway, since this is a voting systems list, I'll not focus on that,
> rather focus on how a public vote could shape a wealth tax, i.e.
> determine how progressive it is, or whether it is progressive at all.
> This fits into a broader interest of mine, which is reducing real social
> issues to manageable public votes, preferably ones where Condorcet
> cycles are not possible, e.g. a series of yes or no choices or one
> dimensional spectra.
> Here is the wealth tax decision process that I have in mind: The basic
> idea is to use a series of brackets, as we do with the income tax, to
> have people vote on the rates for the different brackets, and to base
> the tax rates on the median vote for each bracket. If the revenue
> generated by the tax is either too great or too small to meet the target
> revenue, we can multiply all rates by a scalar (that is, if you multiply
> the top bracket rate by 1.3, you have to multiply all the other rates by
> 1.3), but this can be decided by a separate process. In other words,
> this process determines the "shape" rather than the "size" of the tax.
> To be a bit more specific about the brackets, let me give a simple
> example: The lowest bracket is from $0-$50,000, and the next lowest
> bracket is from $50,000-$100,000. The tax rate for the lowest bracket is
> 0%, and the rate for the next lowest bracket is 1%. If my wealth totals
> $70,000, then I will owe ($50,000)*0 + ($70,000-$50,000)*0.01 = $200.
> To be a bit more specific about the definition of a wealth tax, assume
> that a person's "wealth" is measured as the total of their money
> holdings and the approximate value of their non-money property (stocks,
> house, car, etc.). It is understood that no one will be able to produce
> an exact figure for their total wealth, but as long as what you report
> is "close enough", you pass.
> Note that the boundaries of the different brackets should be adjusted
> inflation over time.
> Here's one example of how the brackets might be constructed, and a
> of rates that might be reasonable. I personally like the general
> progressivity of these rates, but to be honest I don't know whether it
> would generate too much or too little revenue; this is intended as a
> very rough sketch rather than a serious proposal.
> wealth tax per year
> 0-100k 0%
> 100k-300k 0.25%
> 300k-600k 0.5%
> 600k-1m 0.75%
> 1m-3m 1%
> 3m-6m 2%
> 6m-10m 3%
> 10m-15m 4%
> 15m-30m 5%
> 30m-50m 6%
> 50m-100m 7%
> 100m-500m 8%
> 500m-1b 9%
> 1b+ 10%
> (k=1,000; m=1,000,000; b=1,000,000,000)
> I have no idea whether this level of progressivity is anywhere close to
> the kind of response that you would get if a representative subset of
> the population participated in the vote, but I would like to find out,
> if possible. In particular, I'm interested in the interplay that would
> occur between different motives such as self-interest, altruism, and
> ideas of fairness. If we inhabited a simplified world where the tax
> structure did not affect the amount of wealth that people chose to earn,
> self-interest was the only motive, then you might expect all brackets
> above the median wealth level to be voted a tax rate of 100%. However, I
> would not necessarily expect to see this in practice, in part because of
> people's idea of fairness, in part so that the very wealthy wouldn't be
> driven out of the country, or something like that.
> my best,
> James Green-Armytage
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