This introduction overviews and briefly describes the contents of this book. The book focuses on the potential for reforming taxes on the wealthy and, especially, the wealthiest to stifle the tax avoidance and evasion that fuels increasing inequality in wealth and income. The various avenues through which globalization has facilitated tax avoidance and evasion by the wealthy are identified and the various initiatives, both bilateral and multilateral, to stifle such activities are recognized. Included in the possible reforms are the reconfiguration of managerial equity compensation by removing the distinction between personal wage income and capital income to encourage the payment of taxes on current business income in lieu of the deferment of taxes on capital income inherent in the ‘realization principle’. In general, this book is aimed at determining how, in conjunction with increasing levels of poverty and homelessness, the economic progress provided by globalization and technological change has been biased to increasing wealth and income for the 1 per cent and 0.1 per cent at the top of the wealth and income distributions.
This chapter covers basic definitions and descriptions for wealth, the wealthy, the wealthiest, and the measurement of wealth and income inequality. Exploring the connection between wealth and the wealthy owners of that wealth reveals a lack of homogeneity. Colloquial usage of ‘wealthy’ encompasses not only those who have accumulated substantial ownership of assets, but also those with high income levels. Close inspection is given to claims about the distribution of income, typically estimated from income tax returns. Serious difficulties with this evidence arise from the inability to represent income from unrealized gains on all capital assets, and income generated in offshore jurisdictions. By comparison, available wealth distribution estimates have even more severe methodological problems. Reliance on surveys and, from tax returns, realized capital gains and estate taxes, provide incomplete and possibly misdirected information about the upper tail of the wealth distribution. Description of significant, perhaps dramatic, undercounting in estimates for the upper tail of the empirical distributions for income and, especially, wealth is followed by examination of taxes on the wealthy, and comparison with the traditional hard-to-tax problem. The practical difficulties of imposing net wealth taxes are identified and other, more viable methods of raising taxes on wealth are examined. Specific attention is given to the treatment of taxes on capital assets, especially the taxation of capital gains.
This chapter provides information on the current composition of taxes used to raise government revenue in the United States (US), Canada and other Organisation for Economic Co-operation and Development (OECD) countries. The discussion reveals a bewildering array of taxation methods in the OECD spread across local, state/provincial and national jurisdictions: income taxes, social security, payroll and salary taxes, consumption taxes (goods and services taxes, sales taxes, excise taxes), property taxes and a small residual category of ‘other taxes’. The percentage contribution of each type of tax to total tax revenue and the size of revenue as a percentage of gross domestic product are reported. This aggregate overview is supplemented by detailed examination of government revenue sources in Canada and the US broken down into federal, state/provincial and local jurisdictions. Specific details for British Columbia, Nevada and the city of Vancouver are provided. With this background, available imprecise estimates of the contribution by the wealthy to the various tax burdens are reviewed. The chapter concludes with a glimpse into the world of tax havens and the use that the wealthy make of these jurisdictions.
Edited by Geoffrey Poitras
This chapter contains a brief historical overview of state revenue generation from ancient times to the modern broad-based income tax system. In the past, some mix of wealth, income and ad valorem taxes were combined with other methods of government revenue generation such as the leasing or sale of public lands; granting of commercial charters; collection of tithes, property taxes and port taxes; sale of patents and licences; and borrowing. The historical timeline covers Roman tax farming companies, the societates publicanorum; the Florentine catasto of 1427, an early wealth tax; the 1710-17 French dixième, arguably the first income tax; evolution of the English property tax; the early English income tax of 1799-1816; and passage of the 16th Amendment to the United States (US) Constitution in 1913. The rise of the broad-based income tax during World War II is detailed, starting with the US ‘social taxation’ reforms of Franklin D. Roosevelt in 1935 and continuing to the neoliberal reforms of Prime Minister Thatcher in the United Kingdom and President Reagan in the US during the 1980s. These latter reforms facilitated the subsequent rise of globalization and international tax competition that has seen the rise of tax havens for tax avoidance and evasion by the wealthy. The chapter concludes with a discussion of globalization and the rise of international tax competition.
This chapter considers insights from modern tax policy in general, and taxation of the wealthy and the wealthiest specifically. This involves some discussion of key topics from the public economics of taxation. More precisely, the traditional neoclassical public finance approach examines the equity, efficiency and distributional aspects of broad-based taxation, especially taxes on income and consumption. For various reasons, this broad-based ‘optimal taxation’ approach fails to adequately focus on the equity implications of taxes, especially taxes on capital, that are most applicable to the wealthy in general, and the wealthiest even more so. The discussion considers how the Haig_Simons definition of income relates to the analytical rationale for a progressive income tax. Recognizing that studies on the merits of taxing specific components of wealth rather than wage income or consumption have a history that predates the introduction of the modern income tax, the long and ongoing debate over capital income taxes is examined in detail. The symbiotic relationship between the organization of a capitalist economy and the use of the realization principle to tax capital income is identified and discussed.