A wealth tax would punish the American Dream

Despite education spending that exceeds $23,000 per pupil, which is a whopping $10,890 higher than the national average, New York State United Teachers (NYSUT) thinks we should spend more. A lot more.

The teachers’ union launched an ad campaign last week called “Broken Promises” that says New York schools are underfunded by $4 billion. And, of course, it’s the fault of rich people. The 30-second commercial spends most of its time highlighting wage inequality, decadence and the accumulation of wealth.

The NYSUT hopes to use that message to compel lawmakers to reap revenues from that accumulation. Taking a page from the playbooks of presidential candidates Bernie Sanders and Elizabeth Warren, they are calling for a wealth tax.

This is something entirely different than an income tax, which would still be in play. A wealth tax would focus on the holdings of the others. Whoever would be considered “ultra-wealthy” at that time would have to pay a tax on what they own -- a company, properties, stock, cash, anything designated as an economic asset. It’s a tax upon taxes, as those assets had paid taxes already based on their productive nature in the form of corporate income taxes, personal income taxes paid by the owner and the employees, sales taxes, excise taxes, property taxes and more.    

According to a poll of 1,000 New Yorkers commissioned by the NYSUT, 92 percent support a wealth tax on those with more than $1 billion in wealth, a new ultramillionaires tax on those with incomes over $5 million and a pied-à-terre tax (a cute way of saying a tax on second homes) as a means to close off New York’s budget gap.

I guarantee that whoever responded to the survey thinks that the billionaires won’t miss their money and that this is just a temporary and limited fix to a current problem.

They’re wrong on all counts.

If you start penalizing people for accumulating wealth they will leave, no matter if they have more money than you and I could spend in a million lifetimes. As mentioned earlier, those billionaires and their enterprises already pay millions in taxes every year. If you start taxing them on wealth and not just income, whether or not they made good money that year, they will find a state that won’t. They’ll go and they’ll likely take their headquarters, if not all their operations, with them.

Those billionaires made a career, a lifestyle, out of trying to make money and create productive enterprises; they’re not going to throw it away to a new, unusual and destructive tax system, especially when you can be certain it won’t go away: This is New York; the basic law of taxation physics here is that new taxes can be created but they cannot be destroyed.

And, in such a vacuum, said taxes can always be expanded.

The NYSUT proposal might currently call for a wealth tax on billionaires but, after you’ve normalized such behavior, who’s to say it wouldn’t be extended to millionaires ten, twenty years down the road when another alleged budget (read: over-spending) crisis comes to the fore? Once the accumulation of wealth is vilified and people are punished for it, shouldn’t it hold true for all levels of wealth? After all, that’s what we do with income taxes – no one but the very poor can escape having to pay for their exertion of sweat and time.

Once millionaires are pulled into the mix with wealth taxes it would be a lot more people than you’d believe. It’s not those making a million dollars every year. It’s regular people who have accumulated assets in excess of a million dollars.

Millionaires could be those who don’t have a public pension and are planning for 20 to 30 years of blissful retirement. They’ve worked their tails off and saved their whole working lives to get to that point. Because of the forward thinking and sacrifices of such souls there are now more 401(k) and IRA millionaires than ever before in the US – 233,000 and 208,000, respectively. Many more break the millionaire threshold with what they have in the bank, their homes and other retirement accounts like mutual funds and stocks. They have paid and will pay taxes on all of the above, so why should they be taxed for the very act of ownership, too?

Millionaires could also be small business owners who are cash poor but asset rich by the essence of owning a business. Consider farmers, for example. I don’t know any farmer whose personal income would ever be considered wealthy. As a matter of fact, the ag economy has been so bad in recent years that farms are closing left and right, some farm families are using food pantries in winter’s lean months and many farmers have committed suicide because of financial woes. While they and their business may not be making money, a tax on multimillionaires would steal cash from them because they own a business that itself owns millions of dollars in assets in the form of vast acres of land, heads of cattle and equipment (a single John Deere combine costs around $400,000). Who in their right mind would stay in business if a wealth tax added even more to their losses?

Is it right to tax Average Joe retirees and farmers because they’ve accumulated millions in personal value? No. It’s not right to do it to billionaires, either. Wealth taxes should not be introduced now or ever. They punish the American Dream, saving, thrift and investment – all characteristics that were once, and still should be, considered desirable personal and professional traits. 

From the 17 February 2020 Greater Niagara Newspapers and Batavia Daily News