Wealth inequality is a pressing issue in many countries, including the United States. While the richest individuals often appear to hold vast sums of money, much of their wealth is tied up in assets, not cash. This reality makes traditional wealth taxes difficult to implement and enforce. A new model focusing on realized income and involving both individuals and corporations could offer a practical and fair approach to wealth redistribution.
Understanding Realized Wealth
Most ultra-wealthy people hold their wealth in stocks, private companies, or other assets. This means their net worth fluctuates with market values but is not always liquid or spendable.
- Wealth tied to assets is like a promise of future value rather than actual cash.
- Taxes based on unrealized wealth are hard to enforce and may destabilize markets.
- Focusing on realized income, such as dividends, sales of shares, or loans against assets, creates clearer opportunities for taxation.
A Progressive Tax System on Realized Income
The model proposes a progressive surtax on realized income at very high levels, targeting the top 0.25 percent of earners. The tax rates increase with the size of the realized gains.
Individual Capital Gains and Proposed Surtax Rates
| Income Range (Realized Gains) | Current Capital Gains Tax Rate | Additional Proposed Surtax | Total Effective Rate* |
|---|---|---|---|
| Up to $44,625 | 0% | 0% | 0% |
| $44,626 to $492,300 | 15% | 0% | 15% |
| $492,301 to $600,000 | 20% | 0% | 20% |
| $600,001 to $5 million | 20% | +5% | 25% |
| $5 million to $50 million | 20% | +10% | 30% |
| $50 million to $500 million | 20% | +15% | 35% |
| $500 million to $1 billion | 20% | +20% | 40% |
| $1 billion to $5 billion | 20% | +25% | 45% |
| $5 billion to $10 billion | 20% | +30% | 50% |
| Above $10 billion | 20% | +35% | 55% |
*Note: This table simplifies rates for clarity and excludes the 3.8% Net Investment Income Tax (NIIT).
Corporate Tax and Proposed Surtax on Dividends, Buybacks, and Gains
| Corporate Activity | Amount Range | Current Corporate Tax Rate | Proposed Additional Surtax | Total Tax Rate (Approximate) |
|---|---|---|---|---|
| Dividend / Distribution Payments | Up to $100 million | 21% | 0% | 21% |
| $100M to $500 million | 21% | 5% | 26% | |
| $500M to $1 billion | 21% | 10% | 31% | |
| Above $1 billion | 21% | 15% | 36% | |
| Stock Buybacks | Up to 5% market cap | 21% | 0% | 21% |
| Above 5% market cap | 21% | 10-20% | 31-41% | |
| Corporate Asset Sales / Realized Gains | Up to $500 million | 21% + 20% capital gains tax | 0% | 41% |
| $500M to $1 billion | 41% | 5% | 46% | |
| $1 billion to $5 billion | 41% | 10% | 51% | |
| Above $5 billion | 41% | 15% | 56% |
This side-by-side view is to help us average readers understand how proposed surtaxes build on existing tax rates, especially for the ultra-wealthy and large corporations.
An Independent Authority for Fund Allocation
To ensure fairness and transparency, funds collected from these surtaxes would be managed by an independent authority similar to the Federal Reserve.
- The authority would maintain a registry of approved initiatives, including education, health, environment, and scientific research.
- Wealthy contributors could propose and earmark a portion of their taxes for preferred initiatives, with a limit to ensure balanced funding across projects.
- The board would be bipartisan, with appointed experts serving staggered terms to maintain stability and reduce political influence.
- Regular public reporting would maintain accountability and build trust.
Benefits of This Model
- Taxes are applied only when wealth is realized, avoiding market disruption.
- Progressive surtaxes ensure the wealthiest contribute a share proportional to their wealth and the wealth of society.
- Corporations are encouraged to reinvest profits rather than over-distribute.
- Donors maintain some influence over funding priorities, increasing engagement and satisfaction.
- Independent management ensures transparency and reduces political interference.
Conclusion
This new wealth redistribution model offers a balanced, practical approach that respects economic realities and encourages social responsibility. By taxing realized income progressively and involving both individuals and corporations, it creates clear rules and fair contributions. An independent authority managing the funds further strengthens the system’s integrity, ensuring that wealth contributes meaningfully to society.
Personal Reflection
While this model presents a thoughtful and balanced approach to wealth redistribution, I recognize it is unlikely to be fully implemented anytime soon. There are many important questions to consider, such as why the ultra-wealthy would agree to such a system and, perhaps even more intriguingly, why they might not.
I am not an economist or policy expert, just an average person trying to understand and explore ideas that could make society fairer. This is my way of starting a conversation, and I welcome all perspectives.
Random Average Person 
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