Subject Line: Iceberg Ahead!
Since 1914, this has been the time of year for Americans to gather for their annual wrestling match with the internal revenue code. Famed smart guy Albert Einstein once said, “The hardest thing in the world to understand is the income tax.” Decades later, Jimmy Carter called our tax system, “a disgrace to the human race.” More recently still, Fran Lebowitz declared that “A dog who thinks he is man’s best friend is a dog who has clearly never met a tax lawyer.”
And yet, for all that effort, it’s not enough. We’re adding a trillion dollars to the national debt every hundred days now. So this week, let’s take a look at some new ideas for bringing home some bacon without making Form 1040 even more unbearable.
First, something at the international level we might try adapting here. Right now, the shipping industry emits 2.9% of the world’s greenhouse gases. The International Maritime Organization, a United Nations body that regulates global shipping, is proposing up to $80 billion in annual taxes on carbon emissions. The goals would be to nudge shippers towards greener alternatives and raise money to help poorer countries cope with climate change. The tax would add a few pennies to the price of a pair of shoes, though, and one study projects it would cut GDP across developing countries by 0.13%. Tax proposals are full of tradeoffs, but it’s hard to see how 175 different countries can agree to assign winners and losers like that.
Next, a national effort. Our current estate tax, which kicks in on fortunes starting at $13,610,000, treats money you earn during your lifetime the same as money you inherit. Earlier this month, a professor in San Diego proposed a “Rignano” tax that would let you pass an unlimited amount of wealth you create yourself, while nicking inherited wealth at the current 40% rate. (Eugenio Rignano was an Italian philosopher who first proposed the concept in 1919.) The tax is designed to satisfy estate tax critics who argue that taxing the proceeds of hard work and thrift is less fair to survivors than taxing generational wealth that may still be left over from some Gilded Age robber baron with muttonchops and a pocket watch. The problem, of course, lies in determining how to separate clean, first-generation money from dirty inherited money. You might as well just call it “The Accountants, Attorneys, and Appraisers Full Employment Act” of whatever year the bill passes. Can you imagine the fine print?
Finally, something at the local level that Uncle Sam might also consider. In Chicago, housing advocates proposed a referendum that would have raised transfer taxes on properties selling for more than $1 million and lowered transfer taxes for properties below that amount. The goal was to use overall higher proceeds to fund services for the homeless. In 2022, Los Angeles voters approved a similar “mansion tax” equal to 4% on residential sales over $5 million and 5.5% on sales over $10 million. Now, a million dollars goes a lot farther in Second City than it does in the City of Angels. But Chicago’s levy targeted commercial properties, too, which scared away voters worried it would drive rents up. Despite the chance to lower taxes on smaller sales, the proposal failed in this month’s primary.
None of these three proposals would raise the sheer volume of dollars a government as large as Uncle Sam’s needs to operate. But they illustrate the sort of incremental efforts we can expect to see more often as our current budget deficits continue to grow. That’s where we come in – consider us your “distant early warning line” keeping an eye out for those incoming threats!
Subject Line: Iceberg Ahead!
Since 1914, this has been the time of year for Americans to gather for their annual wrestling match with the internal revenue code. Famed smart guy Albert Einstein once said, “The hardest thing in the world to understand is the income tax.” Decades later, Jimmy Carter called our tax system, “a disgrace to the human race.” More recently still, Fran Lebowitz declared that “A dog who thinks he is man’s best friend is a dog who has clearly never met a tax lawyer.”
And yet, for all that effort, it’s not enough. We’re adding a trillion dollars to the national debt every hundred days now. So this week, let’s take a look at some new ideas for bringing home some bacon without making Form 1040 even more unbearable.
First, something at the international level we might try adapting here. Right now, the shipping industry emits 2.9% of the world’s greenhouse gases. The International Maritime Organization, a United Nations body that regulates global shipping, is proposing up to $80 billion in annual taxes on carbon emissions. The goals would be to nudge shippers towards greener alternatives and raise money to help poorer countries cope with climate change. The tax would add a few pennies to the price of a pair of shoes, though, and one study projects it would cut GDP across developing countries by 0.13%. Tax proposals are full of tradeoffs, but it’s hard to see how 175 different countries can agree to assign winners and losers like that.
Next, a national effort. Our current estate tax, which kicks in on fortunes starting at $13,610,000, treats money you earn during your lifetime the same as money you inherit. Earlier this month, a professor in San Diego proposed a “Rignano” tax that would let you pass an unlimited amount of wealth you create yourself, while nicking inherited wealth at the current 40% rate. (Eugenio Rignano was an Italian philosopher who first proposed the concept in 1919.) The tax is designed to satisfy estate tax critics who argue that taxing the proceeds of hard work and thrift is less fair to survivors than taxing generational wealth that may still be left over from some Gilded Age robber baron with muttonchops and a pocket watch. The problem, of course, lies in determining how to separate clean, first-generation money from dirty inherited money. You might as well just call it “The Accountants, Attorneys, and Appraisers Full Employment Act” of whatever year the bill passes. Can you imagine the fine print?
Finally, something at the local level that Uncle Sam might also consider. In Chicago, housing advocates proposed a referendum that would have raised transfer taxes on properties selling for more than $1 million and lowered transfer taxes for properties below that amount. The goal was to use overall higher proceeds to fund services for the homeless. In 2022, Los Angeles voters approved a similar “mansion tax” equal to 4% on residential sales over $5 million and 5.5% on sales over $10 million. Now, a million dollars goes a lot farther in Second City than it does in the City of Angels. But Chicago’s levy targeted commercial properties, too, which scared away voters worried it would drive rents up. Despite the chance to lower taxes on smaller sales, the proposal failed in this month’s primary.
None of these three proposals would raise the sheer volume of dollars a government as large as Uncle Sam’s needs to operate. But they illustrate the sort of incremental efforts we can expect to see more often as our current budget deficits continue to grow. That’s where we come in – consider us your “distant early warning line” keeping an eye out for those incoming threats!