Eat The Rich

There seems to be a serious backlash against the rich afoot these days in America. Statistics are bandied about as to the degree of polarization of wealth, such as that the top 1% in terms of net worth surpass the bottom 90% COMBINED. While this statistic is stark in its imagery, there has always been a certain degree of polarization in wealth in this country, so this is really nothing new.

What is different at this time is that the U.S. fiscal deficit and national debt are off-the-charts out of control and have to be brought down soon. And, who is in a better position to make a down payment on our children's future than the ones with all the money?

Therefore I believe we should consider the following policy changes:

1. Restore the Clinton-era tax brackets and tax capital gains as regular income. Capital gains are currently taxed at a preferential rate of as little as 15%; since the aforementioned 1% receive 99% of their income in the form of capital gains, they are enjoying a huge tax advantage in spite of their wealth. If we restore the Clinton-era tax structure and tax long-term capital gains as regular income (short-term capital gains should carry a 5% penalty on top of the long-term rate), the capital gains tax rate for the 1% will jump to 39.6%, yielding a huge windfall for the cause of deficit reduction.

2. Keep the Estate tax intact. There has long been a campaign afoot to eliminate the estate tax, but the fact is that this tax is a big winner for the Federal government. Additionally, there is plenty of evidence that large sums of money that are inherited tend to have a corrosive effect on the next generation, which is why many of the super-rich decide to give away their wealth before they pass on.

3. Enact a 2% National Sales Tax for the express purpose of debt reduction. The simple truth is that there is a huge segment of the population that pays nothing to the Federal government in the form of direct taxes. A 2% sales tax will give everyone skin in the game, including those who pay no income tax.

Of course, if Congress uses this added revenue as an excuse to postpone fiscal discipline, all will be lost.

Therefore, these taxes must be enacted only AFTER significant spending cuts have been enacted. Current expectations are that the budget will be cut by $2T over 10 years, but that is wholly inadequate and will barely budge the needle.

If consensus can be found to reduce federal outlays by $4T over ten years, coupled with sensible entitlement reform and my tax proposals, our country will restore its greatness and the resulting confidence boost will drive productivity gains for decades.