Wealth Redistribution & the Excise Tax
Reducing crime & civil unrest through tax system adaptations
The Capillary Effect principle argues that extreme wealth disparity will inevitably lead to negative social consequences, such as financial scams, black market activities, theft, and abuse of government and charitable programs. Application of the principle’s tools points to options for various adaptations to our taxation and wealth redistribution system as a practical solution to mitigate these consequences. The principle suggests that the current concentration of assets is enriching a small group while harming a larger segment of the population with the impact of limiting their access to basic needs like housing, food, and education. This situation if not modified will inevitably lead to undesirable outcomes.
To address this, the options for changes to the system would include:
implementing a 5% annual excise tax on net assets exceeding $25,000,000. This tax would make possible the wealth gap while still allowing wealthy individuals to accumulate wealth at a rate that would still leave them wealthier even after paying the tax.
Eliminating the carried interest loophole
Maintaining estate taxes
Allowing qualified charitable contributions to substitute for the 5% excise tax
A thoughtful and balanced approach to wealth redistribution would reduce civil unrest and undesirable activities. There would be a consequent reduction in crime rates, and provide funding for programs that will offer to opportunity to achieve significant standard of living benefits to a greater percentage of the population.