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National Sales Tax? Let's Have the Plutocrat's Sales Tax [1]

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Date: 2023-02-05  

The Republicans in Congress are embarrassing themselves with a proposal to please the ultra-conservatives by abolishing the income tax, in favor of a 30% national retail sales tax of up to 30%. They don’t understand that their own low-income, high-selfishness base voters would hate a tax like this even more than all the rest of the voters would hate such a tax.

There is, however, a type of sales tax that is highly needed in our modern, individualistic and diverse society, which would be highly likely to add significant revenues to support all the improvements that all significant sectors of our society desire. This would be sales tax on the toys, entertainments, and luxury products of our multi-millionaire “plutocrat” class. It should also, and importantly, be levied on huge businesses, when their purchases reach the level of tax, whether that is part of their regular operations or if they’re expanding or investing. Businesses always tout their investments being “good for the community” because of possible new jobs and infrastructure; yet when these are being done by the largest and most powerful businesses, there is almost always one or many smaller businesses that are hurt, there are always resources being taken by and reserved for that company that are then unavailable for everybody else. It is very true that the richest individuals are gaining far more from overall growth than the mass of society. This is a real, harmful social cost, for which these businesses should pay a relatively small social tax.

The basic principle of the Plutocrat’s Sales Tax is simple. Nearly all purchases and sales of assets and/or services, made involving assets on American soil, or purchases by American citizens anywhere in the world, with a price tag of $10 Million, shall be subject to a sales tax, generally to be collected and paid by the seller, (or by the purchaser in cases of American citizens purchasing foreign assets and/or services). For purchases valued over $10 Million, the rate of the tax shall be 5% of the overall price.

If you or your company can cut a check for $10 Million, $10,000,000, whether that is intended to increase your personal pleasure or your company’s ability to control economic resources, you can cut a check for $10,500,000 with that extra half million going to the federal government to fund all the social needs and ameliorations that the majority of non-millionaires in society need and desire, in order to balance your ability to fulfill your own selfish desires.

I’ll sketch out some of the tax code details that might be important in implementing such a tax at the end of this article, here let’s focus on the two major classes of people who would be affected by such a Plutocrat’s Sales Tax.

The first class to be affected, of course, are individuals of great wealth. The American Federal Reserve Bank provides very interesting statistics on the distribution of wealth in America, which clearly show that there is a fairly small class of persons whose bank accounts and assets are, yes, thousands of times greater than the average American citizen, and of course infinitely greater than the very lowest 1 or 2% who literally have nothing on any particular day.

The Fed’s statistics reveal a sharply polarized society. I’m going to use the stats for the end of 2021, which happened to be the peak time of wealth in America so far, the ‘22 numbers are slightly lower. The Census Estimate for Jan. 1, 2022 was 332,662,961 persons, I’m rounding to 332.7 million. Basically, the Fed shows that the top 1%, three million and three hundred thirty thousand-plus people, has rather more total wealth than the bottom 90% of the population, some 299.4 million people – the people you’ll see on a typical American street. That top 1% had about 45.7 Trillion dollars of total wealth; the three hundred million people on the bottom, which includes all the people we typically think of “middle class,” only came up to $43.22 Trillion dollars of total wealth.

The top-heaviness of this distribution can hardly be over-emphasized. A very few people at the tippy-top of the structure – imagine a shallow, very wide pyramid, but with a tower rising up sharply out of the top – the top one-tenth of one percent, represent just over three hundred thirty thousand people. If they were a typical American big city and suburbs, what the Census Bureau calls a “Standard Metropolitan Statistical Area,” they’d be way down the list, below places I knew from California, decades ago when they were still fairly small and unwanted, like Visalia and Salinas, below some place in North Carolina I’ve never heard of, they would be Number 157 on the list, below Spartanburg SC and pushing Boulder CO down to 158th. This fairly small group had $18.42 trillions of wealth at the end of 2021, an average of $55,365,194 each, by my rounded-off numbers.

The next nine-tenths of one percent, making up the full top 1% of the tower, had another $27.28 trillion of wealth (again, this plus the 18.42 trillion of the very tippy-tippy top makes up the $45.27 trillion of wealth of the top 1% that outweighs the bottom 90% of America’s living breathing people); these relatively poor folk in the next nine-tenths of one percent of America had to get by with just an average of $9,110,643 of various forms of wealth each.

From there, it goes down fast. I was comparing the tippy-top one percent with the lower 90%; that 9% above the 90th percentile actually had a bigger share of wealth than either the top or the bottom, a total of $53.42 trillion. That works out to a nice $1,784,056 each, spread out over almost 30 million people. These are the successful professionals in the biggest cities, their wealth is typically locked up in a nice domicile (in an expensive city) and a retirement fund, these are the people getting up to the 98th percentile of income at $400,000 that pundit Megan McArdle is so concerned about (yet as usual McArdle likes to start from shaky premises, no one considers these folks “middle class.”) These folks know they’re well off, yet they’re often comparing themselves with the tippy-top, and their own very high expectations, so it seems that often as group they don’t feel super-satisfied.

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Just to complete the picture of the wide shallow pyramid on the bottom, the actual “middle class” is mostly within the group that represents the 40% of America that falls between the 50th and 90th percentiles; these folks held $39.42 trillion of wealth in total, for an average of $296,213 each. Basically they’ve got some equity in an average house and are trying to build up retirement funds, they know darn well they are not rich. And then the 50% on the bottom, about 167,000,000 people, collectively held just $3.8 trillion of wealth, an average of $22,843 each; the folks at the upper levels of this lowest group probably have some tools and small savings, and be paying off some cars and saving for a deposit on a house, if they’re ambitious at all. The lowest ranks of this half of America, are of course the ones suffering from the various levels of poverty, debt, and inabilities to succeed in the more “middle class” levels of work and life.

So, if we want Plutocrat’s Sales Tax that looks for transactions of $10,000,000 or more, it should be clear that even among the very top of the structure, it is a pretty small number of individuals that will ever have to worry about this tax. Even among the one-tenth-of-one-percent of folks who are worth over $50 million each, I think it’s fair to say that for most of those folks, those millions are all tied up, in real estate and/or strong local/regional businesses and/or reasonably complicated financial arrangements, they aren’t regularly writing any checks for $10 million.

These are the folks who could go to the bank for a $20 million loan for a big construction project, yet (referring to the tax details I provide below) even then they could employ some accountants to break up the loan over 3 years and break up all the contractor’s payments and avoid the Plutocrat’s Sales Tax. The number of individuals that will need to worry about this tax it is far less than the population of our hypothetical plutocrat’s metro area of Spartanburg SC’s three hundred thirty thousand and change. Any individual who will “suffer” from the Plutocrat’s Sales Tax is, well, a true plutocrat, a tycoon, a multi-multi-millionaire. Since the ultra-rich are reported to play ego games over their wealth, they should boast about the amount of tax they have to pay !

The class that will be greatly affected by the Plutocrat’s Sales Tax that I am proposing, are the corporate leaders of America’s largest corporations. Those who study the stock markets generally identify about 2500 or more corporations whose stocks are listed on the major markets; while some percentage of these may have “only” $500 million to $1 billlion in annual sales, most of these large corporations have at least $1 billion in sales each year, and the largest and most prominent bring in much, much more. Household names like Disney and Proctor & Gamble sold $67 billion and $76 billion, respectively, in our statistical year of 2021; among the true giants, Apple had $365 billion in sales, and Amazon had $469 billion in sales. All these corporations can and do lobby Congress relentlessly for various tax loopholes and favorable regulations, very few of them are paying the kind of tax rates that millions of Americans in the more middling classes are paying.

And again, all these corporations promote their investments (and the fact their investments almost always qualify for very favorable tax treatment in the existing tax laws) by looking at the jobs they might provide, the products they’ll be able to sell, some new roads or other infrastructure that benefits the existing communities they’re affecting, and with the general concept of economic growth. Yet there are always more than a few social costs that come with a business expansion or investment: the competitors that are now shut out of that opportunity, land that is no longer available for any other purpose, increased burdens on physical infrastructure (like roads and phone lines) and increased burden on social infrastructure (doctors and hospitals, schools, law enforcement and emergency services). And are we finally learning that “growth for growth’s sake” may not be the best idea to guide all civilization? Of course many investments may bring up all sorts of other costs, such as specific environmental problems or a company’s past history of racial discrimination or hating to actually pay competitive wages.

Whether your huge business is cutting a $10 million dollar check to stock up on raw materials at a good price, or hiring service companies to help with your business’s desire to expand swiftly into a new field, or construction companies to build your new facilities, and especially if you are just buying up smaller competitors and buying up foreign companies for your global expansion, if you can write a $10 million dollar check, you can write a check for $10 million and five hundred thousand to help cover the social costs of your activities (whether your business plans are succeeding or failing). If you can write a $500 million dollar check to buy up a domestic competitor or a foreign source of raw materials, you definitely need to be adding another $25 million dollars in the “plutocrat’s sales tax” to help ameliorate the social costs of your activities – which you’re always ultimately doing with an eye to your own selfish benefit. This is exactly what the Plutocrat Sales Tax” is designed for.

Whether we are trying to catch the luxuries and toys of ultra-rich individuals, or the un-intended social costs of huge businesses that are trampling many others below them every time they “take a step” with their “gigantic economic footprints”, the plutocrat sales tax needs to be as wide and as comprehensive as possible. It needs to include nearly all types of purchases and other transfers that reach a $10 million dollar level.

This includes all types of real estate, all types of securities and bonds including cryptocurrencies, any type of physical property such as machinery, aircraft, watercraft or spacecraft, art or collectible items, entertainment products or other personal products, and all types of corporate or other business properties including purchases of any type of business services.

There are a few types of financial transfers that may reach the ten million dollar level that are not purchases, and which are already exempted from or given other special treatment under our current tax laws. Lottery and contest winnings, inheritances and estate distributions, court judgements and insurance payments and/or settlements, and transfers that may be subject to the existing IRS Gift tax should be excluded. Loans of over $10 million should definitely be included, those are plutocratic transactions that are not available to 99% of the population, are these the sale of a loan by the bank to the borrower? Yet if we know banks, somehow the borrower will always pay the tax. For installment contracts, let’s keep it simple: if the payments are $9,999,999 a year, no tax, if they’re over $10,000,000, there’s some tax. Again, companies on the margin can work a bit harder to legally evade some taxes by stretching out times if their lenders are willing. And frankly, for any company that says “the tax is too much, now we can’t make our investment,” I would say, please don’t make that investment, leave some space for a more nimble competitor to have an economic opportunity.

In a shameless ploy to court public opinion, one particular type of service contracts should also be excluded: contracts for the services of professional athletes competing in established sports leagues. The poor suffering fans of long-struggling teams do not need the extra bit of worry about their team-owners having to pay a tax, if and when those owners finally decide to hire a big expensive star to boost their chances. The big contracts of coaches and sports announcers, however, do represent the toys and luxuries of plutocratic individuals and businesses, and should be subject to the plutocrat sales tax.

Governments don’t tax themselves, so all the levels of American government will not have to pay this tax, however any foreign government or government-controlled body should pay the tax for any purchase of American assets. And any American entities that are teaming up with foreign governments in multi-million dollar projects in foreign lands, whether it’s providing financing or services or whatever, should be taxed, as these are precisely the type of projects that are taking opportunities away from the less-privileged and allowing the ultra-rich to grab the greatest share of any new income growth. Spending by political campaigns and political committees should also be covered, despite the special pleading that such a tax might be harming their “free speech.” The vast majority of political campaigns will never be close to spending $10 million at a time; the few that are that big are finding plenty of opportunities to get their message out, these campaigns are making the choices to buy huge chunks of advertising (or whatever), which restricts the ability of others who are not so rich to get their message out. (The fact that our courts have no problems with lies being broadcast widely by multi-millionaires who are allowed to hide their responsibility for the lies is prime example of the problem of plutocracy literally holding back the majority of society to make democratic reforms.)

A tremendous inequality of wealth is not only an American problem, and the Plutocrat’s Sales Tax is not going to cure the problem by itself. Of course, in the current American reality of unequal wealth and unequal political power, it is highly unlikely that anything like this Plutocrat’s Sales Tax could ever be instituted, precisely because the wealthy individuals and wealthy corporations are already very much in control of our Congress, with their open donations and their huge pools of “dark money” giving that comes from hugely wealthy individuals and corporations, which are the same wealthy individuals and corporations that are busy 52 weeks a year in their relentless lobbying of Congressfolks, who are worried they can’t get re-elected without the donations of those wealthy individuals and corporations.

The changes we are going to need to survive our future challenges are unlikely to come through the choices of wealthy individuals and corporations focused on maintaining their existing privileges. There are so many reforms that need to be worked for, so many things we need to be doing to reduce the huge inequalities of wealth and government power that keep our global societies less than satisfactory for the vast majority of the world’s people. I am trying to listen to the scientists, and I am pretty worried about humanity’s future. If there are sudden catastrophes, like major failures of food crops or fisheries, or a sudden rise in sea levels that brings tens of millions of migrant refugees within nations and across borders, do we really trust the richest corporations and individuals to make decisions that will help anyone besides themselves? Global income inequality is a huge problem for our children, and we can barely talk about it. Promoting and advocating for a Plutocrat’s Sales Tax and similar policies are basic first steps we need to take now.

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[1] Url: https://www.dailykos.com/stories/2023/2/5/2151250/-National-Sales-Tax-Let-s-Have-the-Plutocrat-s-Sales-Tax

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