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Since we are constantly bombarded with dire economic predictions regarding debt to GDP, I think it's worth sharing a different image that helps explain why we need to move beyond simply an income tax to a wealth tax:
I think that federal debt/GDP (as %) is mentioned more often because it may indicate the taxing power or burden of the economy. It is available for most countries (self-published, or by IMF, World Bank, etc) and concerns arise when it starts to exceed 100%. It is about 120% for the US. There were significant jumps post-GFC (2008) and post-Covid pandemic (2020). https://fred.stlouisfed.org/graph/?g=YcQu
Household debt/GDP is only 76.8%. There is no asset tax in the US, so the household assets/GDP of 600%+ don't really tell anything about the US federal tax situation. https://fred.stlouisfed.org/graph/?g=1074J
There are some asset taxes in the U.S.—estate taxes for the extraordinarily wealthy, low capital gains taxes 20% for investors who choose to sell, local property taxes to pay for schools in some states. All of the above taxes have proven evadable in various ways, and in the estate and capital gains cases have actually declined over time. My point is as our population has aged and inequality grown, more money has been accumulated on the asset side than on the income side of our finances. My impression is about 10% of the population controls about 75% of our household net worth, upwards of $105 trillion of our $143 trillion total. (Note: I corrected this number as it turns out the wealthy control even a greater percentage than I thought.) There is no reason we can’t have a wealth tax to help pay down the national debt. Yet GDP does not recognize all of those accumulated assets. So brandishing the debt to GDP ratio makes it seem like there are no means to pay the debt and the government is overspending.
Here's an illustration of Warren's version of a wealth tax: https://brookings.edu/opinions/whats-elizabeth-warrens-wealth-tax-worth/ But a more aggressive estate tax, which some economists view differently from a wealth tax, might be more easily administered as the value of assets is assessed when heirs receive them. It is also harder to argue that the estate tax is a disincentive to entrepreneurialism and work because the heirs did not work to produce the money they are inheriting. It also could go a long way to preventing basically a generational aristocracy of trust fund kids in America equivalent to European dukes and kings who inherit their power instead of doing anything to create or deserve it.
So modern monetary theory has been exposed as lunacy and now you want more wealth redistribution? Gimme a break.
How many times do you want to tax the same dollar?
Lewis. You come across as a highly educated person but I have to ask. Have you ever talked to anyone who has lived in a country with autocracy, socialist or communism and heard first hand of the misery and poverty that exists or existed? If you did they would run you off with a stick with your consistent expousing of your views.
I respect your viewpoints and ya, would agree does anyone really need to be a billionaire but completely disagree with virtually all of your posts except when you actually post on actual investment topics.
@Baseball_Fan The fact that you assume a wealth tax is proof of the existence of some form of autocracy when countries like Belgium and France have had one, with, admittedly, some difficulty enforcing it, and the fact you make no distinction between communism and socialism makes it pointless discussing this with you. I don't hear folks from Belgium, weeping and saying "Oh, the oppressive regime there!" I never said I "dislike this country." Of course, anyone who believes taxation should exist "dislikes this country" in your view. More likely, they just disagree with you, one of the things I genuinely like about this country. People can disagree, and that's OK.
I also could just as easily argue that those Americans who think they shouldn't have to pay taxes are the ones who truly dislike America. What do you think pays the salaries of our soldiers, our police and firemen, our teachers? What pays for our roads and bridges, our beautiful national parks? What pays to care for the elderly who've worked their whole lives here? Avoiding taxation is one of most unpatriotic things a person can do.
@Old_Joe I agree. One of the moments among many that shocked me about Trump's original campaign was when he boasted of evading his income taxes during a presidential debate by saying: "That makes me smart." And he was cheered for doing so. It seems one of the most unpatriotic things a wealthy person blessed with so many gifts America has given him to say. When did tax evasion cease being shameful?
Comments
I think that federal debt/GDP (as %) is mentioned more often because it may indicate the taxing power or burden of the economy. It is available for most countries (self-published, or by IMF, World Bank, etc) and concerns arise when it starts to exceed 100%. It is about 120% for the US. There were significant jumps post-GFC (2008) and post-Covid pandemic (2020). https://fred.stlouisfed.org/graph/?g=YcQu
Household debt/GDP is only 76.8%. There is no asset tax in the US, so the household assets/GDP of 600%+ don't really tell anything about the US federal tax situation. https://fred.stlouisfed.org/graph/?g=1074J
So modern monetary theory has been exposed as lunacy and now you want more wealth redistribution? Gimme a break.
How many times do you want to tax the same dollar?
Lewis. You come across as a highly educated person but I have to ask. Have you ever talked to anyone who has lived in a country with autocracy, socialist or communism and heard first hand of the misery and poverty that exists or existed? If you did they would run you off with a stick with your consistent expousing of your views.
I respect your viewpoints and ya, would agree does anyone really need to be a billionaire but completely disagree with virtually all of your posts except when you actually post on actual investment topics.
Why do you dislike this country so much??
Best regards
Baseball fan
I also could just as easily argue that those Americans who think they shouldn't have to pay taxes are the ones who truly dislike America. What do you think pays the salaries of our soldiers, our police and firemen, our teachers? What pays for our roads and bridges, our beautiful national parks? What pays to care for the elderly who've worked their whole lives here? Avoiding taxation is one of most unpatriotic things a person can do.
Taxes = Communism". "Communism = Socialism".
He's surely not unique in this... lots of people operate the same way: cf. "Donald Trump and followers".
https://messaging-custom-newsletters.nytimes.com/template/oakv2?campaign_id=116&emc=edit_pk_20230310&instance_id=87416&nl=paul-krugman&productCode=PK&regi_id=22268089&segment_id=127474&te=1&uri=nyt://newsletter/4bd85c9f-13a6-59af-9f1d-5783720b47e8&user_id=83d45440ead1d14c2a89a1e7221337d1