“Wealth taxes” are meant to moderate our dragon-like tendency to hoard excess wealth and create idle oligarchs who threaten democracy.
I understand the impulse, but the wealthy have long since determined how to successfully camouflage their wealth as anything but standard income. It’s right there in the name: passive income. It’s money that comes to you without further work involved. Most of it is from either real estate or securities, and with the right legal help, these things can be deferred almost until death or, better yet, depreciated, and actually reduce taxes. Al Capone famously had $0 in income that was visible to the state.
A different approach is to ensure that more people have wealth rather than trying to wrest it from those who have long had access to the tools to hide it. The primary store of wealth for the average person is their house, and conversely, one of the primary passive income streams for the top 2% is rent.
An effort focused on homeownership would solve the problem in a constructive way that doesn’t involve easy-to-dodge taxes.
A simple premise: Allow people to build equity in whatever housing they live in. This is the most straightforward way to transfer wealth to the masses. Get homes out of the hands of landlords and into the hands of the people who live in them.
To this end, enact policy that requires all residential leases in the state to include an option to purchase after two years at fair market value, and allow tenants access to the FHA loan program in order to mitigate down payment requirements. This option to purchase would apply only if the housing will be used as a primary residence.
Similarly, any short-term rental in the state should be subject to increasing property tax for each year of operation after the second to incentivize the owner to sell to someone who will live in and care for the property as a primary residence.
The wealthy will still get theirs too. All these extra mortgages will provide a boost to mortgage derivatives and bank stocks. But what about the retiree who relies on income from their rental unit to survive? Have no fear. If you live near the poverty line and have only one rental unit, you will, of course, be exempt.
I would urge those at the top to consider this an investment in democracy and a more free citizenry. The key to a healthy society is to give everyone a stake, and what could be more basic than the roof over your head?
Jonathan Baker
Danville
