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Thirteen Ways to Tax the Rich

(Photo: Justen Eason / Flickr)

Thirteen Ways to Tax the Rich

(Photo: Justen Eason / Flickr)

The Occupy Wall Street movement has raised the slogan of “We are the 99 percent” and coined the catchphrase that articulates the standoff they've begun: “99 percent vs. the 1 percent.” So far, the idea of taxing the rich has only been stated in general terms.

In order for it to have impact, it must be further clarified, or else it will be misinterpreted by politicians pushing ideas which they will falsely claim would tax the rich – such as Republican presidential candidate Herman Cain's phony 9-9-9 plan, or even Obama's “millionaires' tax.”

Here are 13 true, progressive tax-the-rich proposals:

1. Require Professional Investors to Bring Their Offshore Trillions Back to US Banks

About $4 trillion today is held in offshore tax havens by US investors, individuals and institutions in island nations such as Cayman Islands, Vanuatu, Seychelles, Isle of Man, Cyprus and others, and in more traditional havens such as Switzerland and Lichtenstein. The IRS has identified 27 of these, which it calls “special jurisdictions.”

If just $2 trillion of that $4 trillion being held offshore was required to be redeposited in US banks, those investors would have to pay the 35 percent, top-bracket personal income tax on that money the first year. This new requirement would raise about $700 billion.

Future earnings on the remainder would also be taxed in the second to fifth years, yielding another $200 billion a year. Anyone refusing to repatriate funds could receive a 10 percent penalty after 90 days, followed by additional similar penalties. Countries that refused to cooperate should have their US-based assets frozen and taxed until they comply.

2. Require US-Based Multinationals to Repatriate Funds Hoarded in Offshore Subsidiaries

Multinational corporations today are hoarding between $1 and $1.4 trillion in their offshore subsidiaries, thereby refusing to pay the required 35 percent corporate tax rate. If they were required to repatriate just the lower amount, $1 trillion, it would raise $350 billion in the first year and another $140 billion a year in each of the next four years. A 50 percent tariff could be imposed on re-imported products produced offshore by any company refusing to repatriate these funds.

3. Incentivize Domestic Investment and Job Creation for Corporations Sitting on Trillions in Cash

Large US corporations today are hoarding between $2 and $2.5 trillion in cash and refusing to invest it in the United States, instead preparing to buy back stock, increase dividends or acquire other companies. US companies refusing to create jobs by domestically investing, within six months, at least one third of their current $2 trillion cash hoard would be taxed at a 15 percent surtax rate for the remaining six months of the first fiscal year. This measure would raise another $300 billion in tax revenue for the first year. The tax would repeat for those not investing their cash hoard in the subsequent second year at the same rate.

4. Implement a Financial Transactions Tax on Stocks, Bonds and Derivatives

At least $150 to $200 billion a year would be raised by implementing a financial transactions tax as follows:

  • $1.00 per every common stock trade for stock value traded $10,000 or less.
  • Add $100.00 for stock trades valued $10,000 to $100,000.
  • One percent tax on all trades worth more than $100,000.
  • One dollar for every $1,000 value for all forms of corporate bond sales, both investment and junk-grade bonds.
  • A similar charge for commercial paper transactions.
  • $1 per $100 notional value for all interest rate, currency and other derivatives trades, levied on each of the counterparties.
  • 1 percent tax of notional value for all credit default swaps derivatives trades.

5. Raise Capital Gains, Dividends Tax and Restore Estate Tax to 1980 Levels

This proposal raises taxes on capital gains and dividends from the current 15 percent to the 35 percent rate that is currently levied on all top-bracket personal incomes. It would also tax carrying interest at the same rate, and require all hedge fund managers to pay 35 percent, instead of their current 15 percent. Estate tax rates and thresholds would be restored to 1980 levels. These measures raise at least $125 billion in the first year, as well as an additional $125 billion per year for the next four years.

6. End the Bush-Era Tax Cuts

The Bush tax cuts passed between 2001 and 2004 cost approximately $2.9 trillion over the last decade. Extending the Bush tax cuts for another decade will cost another $2.2 to $2.7 trillion. These extensions in 2010-2011 alone cost the US budget about $270 billion a year. Immediately suspending the Bush tax cuts for 2012, the second year, will save $270 billion.

7. Restore Top Personal and Corporate Tax Rates to 1980 Levels

Proposal 5 addresses only capital gains, dividends and estate tax rates within the broader personal income tax. Proposal 6 addresses revenue savings for only one more year, 2012. Proposal 6 includes revenue potentially raised from raising the top marginal income tax rate or the top marginal corporate income tax rate back to 1980 levels of 50 percent. It does not include numerous tax credits, exemptions, subsidies and other tax loopholes for the wealthy and corporations.

Restoring the top marginal rates for the personal income tax in general and the corporate income tax to the 50 percent level in 1980, as well as raising capital gains and dividends to the 50 percent level would raise more than $100 billion more in tax revenue per year.

8. Stabilize State Revenues With a Business-to-Business 2 Percent Value-Added Tax (VAT

Consumers and households pay a significant sales tax to provide state government revenues. Businesses buying from other businesses should also pay an appropriate “business to business” sales tax on intermediate goods they buy from each other, just as households pay on final goods sales. The initial tax should be levied at half the consumer sales tax rate in the first year. After that, it should be scaled to an equal rate over a five-year period.

This business sales tax, a “value-added tax” only on intermediate goods sales, would in most cases fully stabilize state revenues.

9. De-Incentivize States' “Race to the Bottom” With a Relocation Tax

This tax would prevent states from competing with each other in a “race to the bottom” to lure companies from each other, which has been increasingly undermining state revenues for more than a decade. It would be a federal level tax designed to offset any tax advantage to a company from moving from its current state to another state.

Should the company relocate nonetheless, the revenue from the tax is earmarked for spending on job creation and job retraining for workers negatively affected by the relocation.

10: Increase the Social Security Payroll Tax on Wages and Salaries (Earned Incomes)

Currently, less than 85 percent of all wage earners pay up to the current top annual limit of $106,800. This imbalance occurred because wage income at the top wage levels above $106,800 has risen faster than the Social Security base increase.

This proposal would raise the limit to $250,000 a year and indexes future limits to inflation to recover the remaining 15 percent of earned incomes (wages) not paying the Social Security tax above $106,800.

This approach is sometimes called “scrap the cap.” However, the full proposal here – “pay the same” – also calls for requiring an equivalent 6.7 percent tax on all capital incomes (dividends, interest, capital gains, rents) up to the $250,000.

“Pay the same” would not only stabilize current Social Security payments for the rest of the century, but would also create enough revenue to raise Social Security benefit payments by at least 20 percent above current levels.

11. Transform Social Security Into a True Social Insurance Tax

A 6.7 percent tax levied on all incomes (capital gains, dividends, interest, business rents, etcetera) up to $250,000 annually, and also indexed for inflation, would create an even larger Social Security surplus. It is called a “pay the same”: payroll equivalent tax.

This plan would transform Social Security from a “payroll tax” to a true social insurance tax. The tax revenue raised would amount to additional hundreds of billions of dollars a year and stabilize the Social Security trust funds for the rest of the 21st century while simultaneously providing a 20 percent raise in monthly Social Security benefit payments for the 48 million current and future retirees.

12. Increase Medicare's 1.45 Percent Payroll Tax by 0.25 Percent

An initial 0.25 percent increase in the payroll tax – that's a combined 0.5 percent for employee and employer – for the next ten years provides all necessary funding to stabilize the Medicare system for ten years. Starting the 11th year, 2022, another 0.25 percent each tax increase is necessary. Thereafter, the 77 million baby boomers begin to decline as a cost factor and the costs of Medicare level off and then decline. So, a total tax increase of 0.5 percent over 20 years for both worker and employer totally covers the Medicare cost shortfalls. Those who consider this mere 1.7 percent tax for the next ten years unacceptable should consider that the typical employer-insured health care plan costs the equivalent of 30-35 percent of a worker's take-home pay today.

13. Tax the “Big-Four Parasite Industries”: Banks, Oil, Health Insurance and Big Pharma

There are four industries that are sucking the economic lifeblood from the US economy at the expense of not only their workers (the bottom 80 percent households), but also of millions of smaller businesses. These industries “suck” superprofits out of the economy, away from wages and other businesses income. They are the most powerful in terms of both economic and political influence. They are the banks, the oil companies, the health insurance companies and the big pharmaceutical companies.

The excess prices they charge have been rising at double digits now for decades, allowing the big four parasites to reap superprofits at the expense of everyone else. An excess-profits tax equivalent to a minimum 10 percent of the gross profits or net income of the companies in these industries should be levied on the biggest companies in these industries. Those excess profits should be returned to consumers and small businesses as offsets for health care costs, gas and electric utility costs, and mortgage interest in the form of credits on annual federal tax returns.

The preceding proposals to “Tax the Rich” are excerpted from the recent pamphlet by Jack Rasmus, “An Alternative Program for Economic Recovery,” recently produced for various Teamsters unions in the San Francisco Bay Area and New York. The longer pamphlet also includes proposals to restructure the banking and retirement systems in the United States, create 17 million jobs, save 11 million homeowners, and stabilize state and local government finances. For more information about the pamphlet, contact the author . The pamphlet may also be ordered online.

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