Tuesday, August 25, 2015

Time to start taxing capital gains as "virtual workers"?

The blogster is sure some fabulous econ undergraduate - not a graduate, for obvious reasons - had the idea or something very similar many years ago. But why not re-invent the wheel, it is being done all the time, often successfully patented to boot.

Folks come up with new taxes faster than you can spell 'tax', and somehow they have been hitting the poorer citizens hardest for a generation or more. One of the more recent ideas floated was a tax on robots. The reasoning goes something like this: robots eliminate jobs, so why not take some of the gains off the top?

But this and other taxes don't address capital gains, the money that makes more money kind of profits.

We, well, "we", gave companies the legal status of "person", why don't we do the same with money? Investment consultants and banks are already behaving as if we all had little green helpers.

Let your money work for you.

How to make your money work harder. 

And for sweatshop operators: How to get more out of your money.

Let's turn the hard working money into 'worker equivalents' and tax them like employees, with payroll taxes and income tax. The payroll taxes and health insurance premiums go into the funds for human workers, the income tax goes wherever it goes today.

How do you establish a "worker equivalent"? **

A single person's annual median income,  based on existing government statistics, could be the representative base unit, any capital income larger than that would be split into "representative" equivalents. A million dollars will get you X number of workers.

No longer would Warren Buffet find himself in the situation that he pays less tax (by percentage) than his secretary because his profits would now be treated in part as many "virtual" secretaries.

Even the laziest, non-entrepreneur living largely off of interest and other capital income like the blogster, could genuinely claim to be a job creator - for "virtual workers", but still.

The idea is too simple to pass, but imagine for a second it did. "They" would immediately try to game the new system by reducing the tax burden of the higher paid worker equivalents, right?

A few percent tax reduction for higher income virtual workers would make a big difference.  Simply do what should have been done in the existing system a long time ago: you can only reduce taxes for all taxpayers or for none.

Would this actually increase overall revenue?

Probably, but that's not the primary motive. What is important is to make the point that money making more money is like having workers who do jobs you can not or do not want to do.

To the simple minded blogster, there is no philosophical difference between, say, generating electricity by putting your kids on a stationary bike to run a generator and a 600 foot windmill.

** If you find the idea of measuring something abstract by using a living, breathing being as the unit revolting, the blogster kindly suggests to look up the history of the mechanical unit "horsepower".

No comments:

Post a Comment