Can the law not be modified to collect from corporations and trusts?
That's my concern with this line of reasoning: Money, which is just a transfer mechanism of wealth, is a human creation, just as the rules around its taxation are. People seem to think that "If you change the rules, people will just find other ways!". Well, the rules can change at any time.
> This is not a route to saner tax policy
A saner tax policy taxes the wealthy at a higher rate than the middle and lower classes. Trickle down has proven not to work.
> Can the law not be modified to collect from corporations and trusts?
I would hope so too, but functionally the only way to do this efficiently would be to tax them all at the same rate (meaning no marginal brackets). Any time you introduce different brackets, you leave yourself open to gaming the system. People will gravitate towards solutions that maximize their wealth.
Flat rate tax systems are not politically popular, since everyone paying the same rate has been portrayed as regressive (and arguably so, given the reduced marginal value of more money), so I find it unlikely for a political solution to be tenable.
> Well, the rules can change at any time.
Yes, well, starting a business in such a climate is sketchy. Just look at countries like Venezuela. You don't want things to change, you want certainty and stability for long term economic growth.
> Trickle down has proven not to work.
Really? Are the middle class living in poorer conditions than they were 100 years ago?
Wealth inequality is obviously destabilizing over a long period, and I agree that it would be better to live in a system that is inherently more stable and equal. However, if you look at inflation adjusted income or purchasing power, it's been getting better and better for the middle class for most of our country's history (flat the last 5 years, though).
> I would hope so too, but functionally the only way to do this efficiently would be to tax them all at the same rate (meaning no marginal brackets).
I've always thought that ideally corporate tax rates should be flat, and should be at the maximum marginal rate for personal income tax, but that all corporations (not just those which currently do this) should be able to take advantage of the lower personal marginal tax rates of their shareholders, essentially having the option to be taxed at a rate as if its taxable income were additional income to its shareholders, distributed in proportion to the ownership share, except for the income share of shareholders that aren't individual taxpayers (e.g., nonresident foreigners.)
However, I don't think that we're at the point where this would be administratively feasible. OTOH, given that there are options for corporations to distribute tax liability to shareholders, they just take special up-front decisions and impose some limits, I'd be happy to settle with corporate income tax fixed at the top marginal personal rate.
Capital is just more mobile than labour income. To take a big example, someone can just pick up and move somewhere for 180 days of the year. For more realistic examples, they just put their assets in a foreign corporation. The loopholes are sometimes intentional. But more often, they are just there because money is global and tax law is local.
US tax system is based around tax events, i.e. triggers, which require a transaction to take place. Unlike other economic systems, money sitting quietly will not be taxed until it kicks off a dividend, pays interest or changes hands thereby triggering capital gains.
Outside of municipal property taxes there's currently no framework for taxing wealth. An extreme theoretical case would be a billionaire with nothing but a savings account earning 0%. Under current system, he could while away indefinitely, making small withdrawals here and there to cover the lifestyle, while generating 0% tax burden.
Which is why discussing income taxes is a red herring - at this point people generating eight-digit incomes choose to work, and have a rather nice and comfortable way out if/when they decide to "spend more time with the family".
Wealth tax is a third-rail for either party, as majority of donors on both side are wealthy, but not necessarily high-income individuals.
That's my concern with this line of reasoning: Money, which is just a transfer mechanism of wealth, is a human creation, just as the rules around its taxation are. People seem to think that "If you change the rules, people will just find other ways!". Well, the rules can change at any time.
> This is not a route to saner tax policy
A saner tax policy taxes the wealthy at a higher rate than the middle and lower classes. Trickle down has proven not to work.