If any economist were to analyze President Donald Trump's success, they would wonder how he remained wealthy with all of the fees and taxes that real-estate entrepreneurs must pay.
During his 50-year working career, Trump had to deal with city taxes, real-estate taxes, state taxes, insurance, estate taxes, employee taxes, water tax, electricity tax, sewage taxes, gambling taxes and so forth.
In contrast, a stock investor who owns $4 billion in publicly traded stocks doesn’t need to pay these annual taxes on the value of their assets. However, a real-estate investor must pay these assessments and taxes every year, which can add up to 4% or more per year, plus taxes on any income.
The moral of the story is that if the government had to find money to tax, it would be idle assets of stocks in companies or securities sales. Personally, I was one of the first to foresee that politicians would eventually install a wealth-preservation tax on people like Warren Buffett, Bill Gates, Mark Zuckerberg and George Soros.
Maybe a 1% ad valorem tax per year on total assets will be exacted upon the Forbes 400? This isn’t income tax, this is a wealth tax. The strange thing is that most left of center folks love to talk taxes but are frightened to directly go after these super-rich assets for new taxes.
Even the poorest of the poor will pay asset taxes on their old cars each year to most county or state governments. However, the bulk of the super-rich don’t pay tax on their assets or stocks. Many of the wealthiest Americans have billions in stock and have created foundations to inherit their securities, which eventually avoids estate taxes. Thus, a person such as Buffett may never pay any asset taxes or estate tax. While the money goes to charity, the foundations still control the money, expenses, and employees.
During my first visit to China, I realized that the Chinese government may actually own about one-half of many of the companies which have shares traded on stock exchanges. Thus, the government has a vested interest and stake in the achievements of a company while it taxes companies less for annual operations.
In the same vein, the U.S. may begin taxing the stock held by all people over a certain amount, such as $22 million, which is roughly the excludable amount of a couples’ estate. The government need not take the money each year as the stockholder may elect to have the value taken at death. In this way, the national debt, Social Security and Medicare could be collateralized by securities. This isn’t a bad thing because the owners of securities receive many benefits such as voting rights, dividends or the ability to borrow on margin. Generally speaking, the entire national debt could be collateralized not with gold or silver, but with stock of Facebook, Microsoft, Google, Apple, and other companies at zero cost to the taxpayer.
As for free college and waivers of loans, there are several issues. Each person with the loans should be able to pay them off tax free but politicians always put limits on that. Further, the recipient of the interest on the loans should pay a higher tax on the usury fees charged, much like a royalty. Overall, colleges and universities should never make the money that they have made over the last 30 years as free college tuition is already available with thousands of courses and diplomas online for free.
Those who already paid their student loans off should receive a tax credit on taxes owed going forward for 30 years. In this way, equal protection violations wouldn’t be asserted. As for university and college professors who made profits from all of these loans, we should consider raising the taxes on all people who benefited from what many believe is unconscionable profit-taking.
Is this article sarcasm or theory, it does not matter. All I can say is that I may be the first person to forecast a model of “stagnant asset taxation,” predict the taxation of Wall Street sales activities and foresee the taxation of traded securities to fund the government debt. I call it the Buffet Tax Model which is a form of service à la française. The Buffet Model prevents the loopholes of holding stocks for a lifetime and never paying any taxes.
Overall, dormant economic activity and quiescent innovation is what stifles government sustainability. Thus, taxing people who work hard and produce is not the answer, but rather how to tax dormant assets and lazy activities is the real challenge to freeing up capital. In the midst of this discussion, Art Laffer just received a Presidential Medal of Freedom from Trump. Basically, Laffer stated that a lower broader fee/tax model would make more money than a system which gouges customers. We all know Laffer was right and we only need to look at Wal-Mart, Amazon and Target as evidence of the success of Laffer’s theories.
Overall, if you watched Trump’s speeches in 2015, he wasn’t against a tax on wealthy stock owners. I guess as a real-estate statesman, he may have felt that others weren’t contributing fairly. In any event, Bernie Sanders and Elizabeth Warren are all over this issue, particularly to find a way to pay the loans of the 45 million with student debt. While student debt is $1.5 trillion, it is nothing compared to the other $10 trillion that Barack Obama “misplaced” during his 8 years. Don't forget that the Obama White House almost levied new taxes on 529 education plans. Obama did eventually abandon this 529 tax path, but it took him and his White House team a while to figure out that this tax would only reduce money available to teachers, colleges and universities.
In closing, Obama once also said, “You didn’t build that.” Americans are now ready to tax the 1% into a new paradigm.
George Mentz JD MBA CWM Chartered Wealth Manager ® is a licensed attorney and CEO of GAFM ® global education, which is an ISO 29990 Certified professional development company operating in over 50 nations. Mentz is an award winning author and advisory board member to several companies around the world in education, charities, and crypto currency.
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