Saturday, July 28, 2007

The "Maximum Estate" tax

It would be better to tax wealth than income, but that is not easy. It would be better to get more tax from death duties, but that is not popular with voters. It would be particularly nice to raise more tax from criminals. I have a simple plan.

Tax payers have to specify to the tax office their Maximum Estate. When they die, if their estate is larger than their last declared Maximum Estate then that excess goes 100% as tax. So there is a strong incentive for those who want to leave money to set their declared Maximum Estate fairly high.

On the other side of the coin there will be a small tax, less than 1%, on the Maximum Estate value. This is effectively a wealth tax.

Even more importantly there will be a hefty tax on changes to Maximum Estate beyond income. So if your taxable income in a year is $100,000, but your Maximum Estate value goes up by $150,000 then the extra $50,000 that appeared from nowhere will be taxed at something like the maximum income tax rate.

Different people will make different decisions about where to set their Maximum Estate. Some will leave it at 0, effectively leaving all their money to the nation when they die. Others will pay as they go. Either way it will be a very progressive tax that will be effective against criminally acquired wealth.