A proposal to slowly solve the growing national deficit

[Semi-Retyrd]

We can trim spending a lot to offset the unsustainable growth.

This is a start. Now please share with us where we should cut spending and how much in each area.

 

[Semi-Retyrd]

Yes, there are a lot of approximations being used. A lot.

Now some facts:
There are about 1,000 Billionaires in the US.
The total amount of wealth owned by these billionaires is $6.9 Trillion.

The U.S. has over 900 billionaires and their wealth soared by 18% to $6.9 trillion this year, UBS says | Fortune

The U.S. alone has nearly a third (31.7%) of the world’s billionaire population, according to UBS Global Wealth Management.

fortune.com

From the article:

Globally, at least $5.9 trillion is expected to be inherited by billionaire children over the next 15 years. Of that amount, at least $2.8 trillion will pass to U.S. heirs over this period.

Yes, I know the top 1% comprises more than just the 1,000 billionaires. There are about 1.5 million taxpayers (individuals and households) in the top 1%. Of these 1.5 million in the top 1%, about 500,000 are aged 65+.

The average net worth on the top 1% of taxpayers is about $35M.

What Income And Wealth Put You In The Top 1%? | Bankrate

The top 1% command a significant share of the income and wealth in the U.S. Here’s how much wealth and income the average American has and how it compares to the top earners and wealthiest Americans.

www.bankrate.com

This is why your number of $1T per year would be collected in taxes is radically high.

Thank you for finding these great articles. While nothing we read is absolutely true, I trust the numbers from Fortune more than other sources. Regarding the article comment about $$ passed to billionaire heirs, you left out the end of the paragraph. Here is the entire quote:

Globally, at least $5.9 trillion is expected to be inherited by billionaire children over the next 15 years. Of that amount, at least $2.8 trillion will pass to U.S. heirs over this period. This calculation is likely conservative as it does not factor in future appreciation of asset values over the next 15 years.

If we assume the $2.8T number is correct and if we account for the appreciation of assets over this period with a CAGR of 10%, the midpoint appreciation at 7.5 years is approximately 2x, so including asset appreciation would increase the amount passed to billionaires heirs to $5.6T.

Using your figure of 500K other members of the 1% over 65, their assets passed to their heirs needs to be added. How much? I don't know but it is likely greater than the billionaires piece based on ratio of current wealth. Billionaires have $6.9T out of a total $54T meaning the 1.5M other 1% members have $47T and the 500K members over 65 have at least 1/3 of this or about $16T. So conservatively the 500K other older members of the 1% might contribute $11T to their heirs.

Finally we need to add in the contributions to charities which is likely larger than money passed to heirs (based on comments and actions from Buffett, Gates, etc) because my proposal includes taxing these donations beyond a $2M/charity exemption at LTCG rates. So if we assume the donations to charity equal the amount passed to heirs, the total would be around $16T

Assuming the $16T passed to heirs is taxed at 40% and the $16T passed to charities is taxed at 20%, the total collected over 15 years would be .4 x $16T + .2 x $16T = $10T over 15 years.

Again lots of assumptions but IMO a conservative number and not radically less than my 10 year estimate.

What we can say for sure is that today's estate tax at 2% of $5T total revenue collected is a mere $100B. Replacing the estate tax with an inheritance tax would then raise 6X-10X more than the current tax with this additional tax falling on the estates of rich dead people which are currently escaping the estate tax via loopholes.

 

[pjigar]

I agree with the first part that SS should be addressed separately. While the second part is real, the incremental morbidity isn't anywhere near enough to offset the structural tax benefit, principally the higher benefits to taxes paid and the income tax structure, to the poor.

I was referring to the challenges on paying the taxes due. How do you sell a part of the real estate to small business to pay the taxes due?

 

[pjigar]

I think I am well on the record here as stating that individual income tax rates are well below historical averages and that is a significant part of the current annual deficit and that they should be restored to pre-TCJA levels.

^ This (along with reduced corporate income taxes) is one of the main reason for reduced revenues and budget deficits during the recent decade. Any solution to the revenue must be applied to a wide tax base (e.g. Top 50% taxable income was 13T and Top 1% income was 3T in 2022) which means good old "middle class". Trying to generate revenue from a small tax base (e.g. top 1%) would not make a dent.

 

[pjigar]

Side comment after reading all these responses: As someone said, rich people funds our political leaders so any solution or proposal to tax the rich people will never see a light of a day. That's a fact. So even if there is a perfect solution for taxing top 1%, it will never pass the legislative process. Dare I say it: we need campaign finance reforms to even start discussing any solutions.

 

[Montecfo]

Side comment after reading all these responses: As someone said, rich people funds our political leaders so any solution or proposal to tax the rich people will never see a light of a day. That's a fact. So even if there is a perfect solution for taxing top 1%, it will never pass the legislative process. Dare I say it: we need campaign finance reforms to even start discussing any solutions.

You make a good point.
I will also say some of these discussions remind me of a group of outlaws in a western movie sitting in a bar discussing how they can shanghai a rich man who they expect to be coming through town on the next stage coach. What is the best way to rob him, they wonder aloud as they trade ideas.

 

[richardsok]

Be careful what you ask for. If the bond market "makes us" put our house in order it will be through a horror of interest rate twists the people could endure only by being compelled. The Fed would no longer control interest rates as borrowers of Treasury debt would simply not show up any more. We've had 15% mortgages and bond offerings and could have 'em again. Gold has quadrupled and it could quadruple again. I had hoped that DT's tariffs might be a step toward solution; a massive new source of income that could be applied toward debt which the taxpayers and foreign exporters could share --- but I haven't seen any progress numbers.

[MOD EDIT]

And don't t ell me "this or that group worked HARD for their wealth" and so deserve extra consideration == if we're good at anything, it's creating reasons why YOU should be paying more, but not me. Societies and great nations collapse when they cannot or will not address growing crises as they accumulate in plain sight.

Own gold: the real metal, not paper promises == the sort of wealth that can be quietly and discreetly accumulated and squirreled away in mayonnaise jars.

Debt -- the problem we solve when we're compelled to -- and not a day earlier.

 

[Masquernom]

’A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that democracy always collapses over loose fiscal policy, always followed by a dictatorship.

Alexander Fraser Tytler (Lord Woodhouselee), Scottish advocate, judge, writer, historian (1747 - 1813)

 

[braumeister]