By Nick Spoltore
What image comes to your mind when you think about Robin Hood? Is it the incredibly charismatic Errol Flynn in The Adventures of Robin Hood from 1938? Perhaps you envision the 12th century English folk tale adventurer as depicted by Kevin Costner or Russell Crowe. My favorite would undoubtedly be Robin Hood Daffy with Porky Pig as Friar Tuck. Where did those Saturday mornings go?
I doubt, however, that anyone reading this would think of presidential candidate Bernie Sanders in any manner akin to Mr. Hood. Maybe you should. His contemplated wealth tax proposal is viewed by some as taking from the rich and giving to the poor. He would levy a 1% tax on wealth above $32M for married couples. The tax rate or rake increases sequentially – 2% for wealth between $50M and $250M. You get the concept. The concluding rate is 8% on dough over $10B for the richest Americans.
Looking at these rates and assembling this piece on the often-segregating effects of a wealth tax, I am reminded of the quote attributed to Thomas Jefferson – “I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend.” These words should echo and resonate today. Incidentally and as a completely unnecessary digression and departure, I consider TJ the third smartest person to inhabit this planet behind Newton and Galileo. Feel free to differ. Your dissent is welcomed and encouraged. But the point remains. Here at Surgent our material is not political. This entry is simply meant to get our customers to think about the effects of a wealth tax. We take no sides. Our intent is not to support or demonize.
Let’s then assume a wealth tax in some form is levied on U.S. taxpayers. Who would benefit? Well, Medicare For All has been in the news a lot lately. Universal health insurance would certainly be on the table. As we know it currently, most people have a line item deduction on each paycheck for Medicare. No wage dollar escapes the exceedingly fine net of Medicare. That is to say – every dollar of Bryce Harper’s 13 year, $330M contract with my beloved Phillies will be Medicare taxed. Whereas 2020 Social Security taxes will only be levied on the first $137,700 of salary. After taxing signing bonuses, each dollar of his average $25+M yearly salary will similarly contribute to Medicare. Isn’t Bryce already thus paying Medicare For All? Surely these vast amounts will cover his tab and that of many, many others. Yet the Social Security vig conks out at a ridiculously lower level comparatively. And the Social Security is presumably to benefit Bryce and, ostensibly, Mrs. Harper. This seems rather benevolent and altruistic to me. I can hear the counterpoint clearly. I understand that many believe he should pay more, but let’s extend the argument to a typical worker paying in until he or she turns 65 and gets that laminated card. That taxpayer had to work and pay in until 65 to get the Medicare. Would it be fair to take the proceeds of a wealth tax and give that same benefit to Americans who didn’t earn it? Think about it. Does that seem square?
Free college stimulates an equally spirited course of discussion. Our country is in a student loan Armageddon. College costs have routinely outpaced inflation, leaving most students with no other option to obtain a degree. Predatory lending is also to blame. As a society, we are beginning to see the ramifications of debt on younger people postponing families and houses. Though this snake pit is abhorrent and appalling, we must resist the urge as decent human beings to view this issue solely through the jaundiced eye of those afflicted. We are charged with keeping this debate equitable and decidedly not partisan. As such, we must also consider those students who diligently managed their student debt load and worked in order to pay those notes off in 10 years, or as is becoming more the case, 20 to 30 years with consolidation. I am acutely aware other factors, career opportunities for instance, influence these repercussions. But would it be fair to take the proceeds of a wealth tax and create free college after so many loans were repaid by hardworking and assiduous Americans? Think about it. Does that seem square?
I can see the implicit merits on both sides. Even so, I am still continually taken aback by the burgeoning detestation of the so-called 1%. In its most recent announcement of the 400 richest people in America, Forbes includes both a Philanthropy Score and a Self-Made Score for each entrant. To me, this signals a reworking of priorities. Generosity is clearly expected of the affluent. But more telling, is there really such a pronounced movement afoot against old money? Is this the bedrock upon which a wealth tax could be viable? Maybe. Countless Americans decry the perilous offshoots of generational wealth. Others ascribe its vilification to the collective jealousy of the proletariat. Both seem a bit harsh and heavy-handed to me. After all, every decent tax lawyer knows in his or her heart of hearts that the person who marries for money usually ends up earning every penny of it. Similar indictments abound against inherited wealth. See the Season Two finale of HBO’s Succession – superb, a crescendo of television satire and dark comedy.
Consequently then, the implementation of a wealth tax will be inevitably viewed as either an unjustified taking on already taxed scratch or a noble effort at the redistribution of capital away from billionaires by Elizabeth Warren and other politicians seeking to remedy wealth inequality. Your stance on this matter will almost without exception parallel your purview on the topic of wealth itself. I hope this post is in no small measure an inducement to question both. Think about it. Does that seem square?
Nick Spoltore is VP of Tax & Advisory Content for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware