Carol Becker wrote:
> We talk about the progressively of taxes based on income because the
> government has a system of measuring income while it doesn't really have a
> system measuring wealth.   If own say a diamond mine, the government
> have a system for valuing that diamond mine to determine your wealth.  All
> it can really measure is the income that you derive from that asset.  That
> is why progressivity of taxes is usually related to income.
> I would agree with Mark about being able to talk about taxation in
> relationship to wealth as a much better approach.  How progressive a tax
> should be discussed in terms of wealth if it is at all possible.  The
> problem comes about from getting data.

So, you would advocate taxing *potential* earnings first, then tax the
actual earnings, and then tax the earnings again as wealth when you put it
in the bank, or buy somthing with your earnings (never mind sales and luxury

OK. Let's look at this. I have $12,500,000 (I wish). I spend  $10,000,000 on
a diamond mine. Now, I own a $10,000,000 mine. I also still have 2.5 million
dollars. It's all wealth. I pay a tax on the wealth, on a progressive scale,
of course. Since it's a bunch of wealth, it will be a BIG percentage. Say,
25%. Well, 25% of my 10 million dollar mine is 2.5 million. Lucky I set that
money aside... except, that 2.5 million I set aside is wealth, and taxed
too!!! Oh no! I'm short $625,000 to pay my taxes. OK. Well, maybe I earned
$625,000 that year. Taxed at roughly 50% as income, that leaves me $312,500.
Oops. Not enough to pay my wealth tax. Now that's in the bank, and oh no!
It's wealth! 25% of that goes too! Alright. So, maybe I earned double that.
That makes more sense, right? Millionaires have to make at least a million
dollars a year, don't they? OK. So I earned $1,250,000 that year (becasue
it's just that easy to increase your income when your taxes go up). Let's
see. Half goes to income tax, leaves me $625,000 in the bank. Wealth tax...
CRAP! I'm still short to pay my wealth tax on the other wealth I have. Man.
I probably have a house too. CRAP! If I'm making 1.6 million a year, I
probably bought a nice mansion by lake Calhoun for about $3 million. My
house payment is $212,000 for the year. My tax on the house comes in at
$750,000 (next year it will be more)!

My total wealth is now 16,125,000. 25% wealth tax = $4,031,250 I have
$3,125,000 cash.

Alright. I'm still in the hole $1,118,250. I better start mining some
diamonds quick! A really good investment will double your money in 10 years,
I'm told. So, I hope that diamond mine I bought in Eden Prairie pays off! I
need the dough! Let's see here... Ten million dollars becomes 20 million in
ten years. I should make about $2 million a year from the diamond mine.
Good. Now we're talking. I pay income tax (50%) on my mine income, leaves me
$1 million there. Hmmm. This isn't looking so good after all. I pay my
wealth tax on the cash I banked from the mine. Leaves me $750,000. Dang it!
I'm still in the hole $368,250. Oh well. I'm rich. The bank will extend me a
loan to float that. I've got a diamond mine that's earning 2 million a year
now. Next year should be looking better. My tax on the diamond mine will
only be... uh... 3.75 million....??? Um. Does anybody here know how to set
up an off-shore corporation?

Dan McGrath

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