Death and taxes are the only certainties in life. With the tax reductions of the Tax Cuts and Jobs Act of 2017, we need to be on the guard for future taxes. Why?
Check out the U.S. debt clock. The U.S. national debt is enormous. Our federal budget deficit will exceed $1 trillion this year. Federal debt per individual taxpayer is $187,632—and rising. Here are 4 new taxes to guard against.
Inheritance Tax
The first $11.58 million of a deceased person’s wealth is exempt from federal estate taxes. Whew! At this rate, most people will never pay an estate tax.
A recent article says that if the exemption threshold was $2.5 million, the government would raise an estimated $34 billion more a year. At $1 million, taxes collected would go up by $92 billion. The tax is favored by Democratic presidential candidates Bernie Sanders and Elizabeth Warren.
Wealth Tax
The Hamilton Project has proposed four types of wealth taxes. As far as I can tell, this is an annual tax on people’s net worth above a threshold. The proposed net worths start as low as $8.25 million but average $25 million and up. Warren has suggested an ultra millionaire wealth tax of 6% on people’s assets above $1 billion. Wealth taxes could raise approximately $300 billion a year according to The Hamilton Project.
A Financial Transaction Tax
This would put a 0.1% fee on all trades of stocks, bonds, and derivatives. This would raise costs for investors, but it might if implemented, raise government revenues by $60 billion a year.
Value-Added Tax
VATs are taxes levied at various levels of production for goods and services. I believe this is how they would tax Roths all along. A popular tax method in most developed nations, this tax would cause prices to rise for consumers. A 10% VAT would raise around $1 trillion a year—which might conceivably reduce our annual debt to $0.
The article also talks about raising corporate taxes, but this isn’t likely unless tax havens like Ireland and Luxembourg do the same. Otherwise, companies would set up shop in those lower-tax countries (many have already) and avoid the higher U.S. rates. It might be possible to raise the highest corporate tax rate from 21% (today) to 25% or 28% and not cause corporations to create offshore tax solutions. This would raise an additional $110 billion per year, and might also boost economic growth and stimulate investment.
Takeaway
Some form of additional taxation is coming. What the article doesn’t say is that raising today’s personal income tax rates (particularly on the higher end) will probably be the first thing our next President and Congress consider.
