Opinion

Lawrence Summers

How to target untaxed wealth

By Lawrence Summers
December 17, 2012

Sooner or later the American tax code will be reformed — probably sooner. Raising revenue will be the main motivation, but at a time of sharply increasing economic polarization, issues of fairness will be prominent too. There are also legitimate concerns about the complexity of current tax rules and their adverse effects on the economy.

So far, the debate has focused on scaling back provisions of the tax code that have favored activities traditionally deemed to be valuable. For example, there is talk of reducing deductions for charitable contributions, taxes paid to state and local governments, home mortgages, employer-provided health insurance and many less important provisions.

There are reasonable arguments to be made in each case. But taking only the “limit tax incentives” approach to tax reform has several major defects. First, if reform is designed to avoid perverse outcomes — such as the crushing of charitable contributions or more pressure on state budgets — then it will raise limited amounts of revenue. Second, this approach will address very little of the complexity in the code and is not likely to do much for recovery, since it will do little to increase demand. Third, it will do little to address concerns about fairness: The richest taxpayers actually make relatively little use of deductions and credits.

What is needed is an additional element, one that has largely been absent to date: the numerous exclusions from the definition of adjusted gross income that enable the accumulation of great wealth with the payment of few or no taxes. The issue of the special capital gains treatment of carried interest – performance fee income for investment managers – is only the tip of a very large iceberg. There are far too many provisions that favor a small minority of very fortunate taxpayers. Because these provisions effectively permit the accumulation of wealth to go substantially underreported on income and estate tax returns, they force the federal government to consider excessive increases in tax rates if it is to reach any given revenue target.

All parties — whether their primary concern is preserving incentives for small businesses, closing prospective budget deficits or protecting the social safety net — should be able to come together around the idea that it should not be possible to accumulate and transfer large fortunes while avoiding taxation almost entirely.  Yet this is all too possible today.

Here are some issues the Obama administration and Democrats and Republicans in the U.S. Congress should consider in light of the magnitude of prospective deficits and the extraordinary good fortune of those at the top of the income distribution.

Why do current valuation practices built into the tax code make it possible for investment partners to end up with $50 million or more in entirely tax-free individual retirement accounts when the vast majority of Americans are constrained by a $5,000 annual contribution limit?

A simple calculation shows that our estate tax system is broken. Assets that are passed to relatives or other personal relations are often badly misvalued relative to what they cost on an open market. The total wealth of American households is estimated at more than $60 trillion.  It is heavily concentrated in very few hands. A conservative estimate given the lifespans of Americans would be that 2 percent ($1.2 trillion) is passed down each year, mostly from the very rich. Yet estate and gift taxes raise less than $12 billion, or just 1 percent of this figure each year.

If a family’s home rises in value by more than a $500,000 exclusion over the course of its dwelling, then it pays capital gains tax on the difference between the value now and the value at purchase.  But real estate investment operators, who sell properties whose value is measured in the hundreds of millions if not the billions of dollars, are able to take tax deductions for “depreciation” on their properties. And they are then able to sell these properties at an appreciated price while avoiding capital gains tax through what is known as a “like kind exchange” but which is in fact a sale.

Why should international companies be able to locate the lion’s share of their foreign income in small, low-tax jurisdictions such as Bermuda, the Netherlands and Ireland, and avoid paying taxes?

There are sound arguments for a preferential rate on capital gains. But is there any real justification for allowing those who do not need to sell their assets to finance retirement to avoid capital gains taxes entirely by including them in their estates?

These examples of tax rules that permit the taxes of the wealthiest  Americans to be far less than commensurate with their good fortune have the virtue of being relatively comprehensible. There are many others involving issues such as derivative accounting, pooled interests and leveraged leases that are neither easily explainable nor easily justified.

The failure to tax capital gains at the point of death costs the federal government about $50 billion a year. Taxing those gains would both raise money in the future, and induce earlier and greater realizations of capital gains in the short term, likely adding well over $500 billion over a 10-year period. I believe it is plausible to raise $1 trillion over the next 10 years by going after such provisions that cause what adds to wealth and spending not to be regarded as income.

It has been observed that the greatest scandals are not the illegal things that people do but the things that are fully legal. This is surely true with respect to a tax code in urgent need of reform.

PHOTO: A 2011 U.S. Individual Income Tax Return form is seen in New York April 17, 2012. REUTERS/Shannon Stapleton

Comments
34 comments so far | RSS Comments RSS

Great points but we better get busy and soon. Simpson/Bowles was to accumulate $4 Trillion in tax and budget cuts over ten years. Since the plan was introduced in 2010 we have added at least $2 trillion in debt to the equation. There is a rational for closing all the loopholes. Then no one income class has an advantage. David Walker is concerned that we will need charitable organizations as the Federal Government will shrink due to cuts in spending. Perhaps we will need to be self reliant with contributing aid without the government involvement. Charity deduction other that education and health are over $40 Billion annually.

Posted by northcentral | Report as abusive
 

Taxing Wealth? Sounds a bit like socialism, or is it Sharia? But then, Roman did it too. And so do Kings and despots. Anyway, Mr. summers has new spin on it for what we now call U.S. capitalism.
We absolutely need to scrap our tax code and start again, but beware the sophist guile.

Posted by tmc | Report as abusive
 

Commie

Posted by Crash866 | Report as abusive
 

So easliy solved by punishing the successful…except it won’t work but what the hell someone has to pay…let’s get em!!!

Posted by Crash866 | Report as abusive
 

The comments above just reflect the immaturity of the general population regarding the tax debate, in particular fed by misinformation from talk radio and biased media like Fox or MSNBC.

The key take away from the points, is that we need more consistency in the tax code. Our politicians have been bought by a few companies and individuals, leading to some of the ridiculous examples quoted.

All tax codes need to contain a “fairness’ principal, at both ends of the spectrum. Everyone should pay taxes, and everyone should pay their share. The USA is currently one of the least socially mobile countries in the world, busting the myth of the American dream. If you are born to money, you will keep it, if you are born poor, mostly likely you will live poor. There are exceptions, but hard work and entrepreneurship are not rewarded the way they should be. We need to stop protecting very large and rich companies and individuals, and focus on fostering wealth generation, not preservation

Posted by GA_Chris | Report as abusive
 

The problem with your arguement is that by tax reform the wealthy class — meaning people like you — means reduction in the taxes levied on the wealthy class.

The very same people who have no problem cheating on their taxes by every connivance possible, including hiding their wealth in secret bank accounts in other coutries.

WhY would we trust you people to construct a “fair and just” tax code, if you got a chance to revise it?

There is only ONE reason why the wealthy class would want to revise the tax code to make it “fairer” and that is to give them a chance to lower their already egregiously low rates.

THAT is what people like you will not tell the non-wealthy in this country.

For example, you state in your first paragraph, “Sooner or later the American tax code will be reformed — probably sooner. Raising revenue will be the main motivation, but at a time of sharply increasing economic polarization, issues of fairness will be prominent too. There are also legitimate concerns about the complexity of current tax rules and their adverse effects on the economy.”

It is important to remember, when we begin to talk about tax reform and fairness, the massive obfuscation of the tax code was carefully and lovingly built by the wealthy class for many decades into the Frankenstein monster it is today.

In truth, NONE of the proposals for a “simpler and fairer” tax code made by the wealthy-controlled government would pass the test of fairness. Do the math, as I have and tell the truth for a change. But you would never do that would you, since you believe the American are too stupid to understand what you are doing.

So, what you are really selling is yet another scam to steal from the American people what is rightfully theirs as a result of their labors, not yours.

Posted by Gordon2352 | Report as abusive
 

I agree with the ideas in the article. In my opinion, all income should be treated the same, and most of the tax code is a result of corruption in the legislative process.

Posted by M.C.McBride | Report as abusive
 

I think this article is clear and simple, and makes perfect sense as a result. The loopholes in the tax codes favor those who have incredibly large amounts of money to hide and to invest outside the U.S. to avoid taxation. I, on the other hand, am staring down the barrel of losing the two or three deductions I can take. Today I’m in the middle-class, but tomorrow I’m not so sure.

Posted by JL4 | Report as abusive
 

Summers’ point is exactly where the tax discussion should start: preferential treatment to certain sectors, transactions and entities. From oil/gas partnerships, 1038 Real Estate Exchanges, Carried Interest for Private Equity, Depletion Allowance, to Off-Shore hoarding of corporate profits, companies charging subsidiaries for “trademark use”, etc. have all shifted the tax burden to salary/wage income.

Basically the big, big money avoids most of the taxation that hard working, salaried/wage workers pay before they even see their pay check. Remember the conservatives rant about double taxation on dividends or the “death tax”? Yet they never addressed the issue of sales tax that individuals pay on already taxed wages/salaries.

However, Summers forgets to discuss how these tax preferences skew the US economy and lead to boom/bust, gluts and over dependency on certain resources (oil for one). However, the worst is how the low, low tax rates on short term capital gains relative to long term rates (often less than a 100 basis points 28% vs. 15%) has made our financial markets a speculators dream and driven out real investors.

In any capital gains tax discussion, the tax code should clearly reward the long term investor over the speculator, and make speculation so expensive (like 80% tax rate) that day trading, leveraged programmed trading, derivatives, etc. become obsolete. These changes combined with eliminating preferred tax treatment in real estate, oil/gas, private equity, etc. would move the US economy back to an investment mode and away from pure speculation.

Posted by Acetracy | Report as abusive
 

One additional comment, for those of you who believe what Mr. Summers is saying.

You need to understand it is a carefully crafted argument to distract you from what the wealthy class will be doing to other areas of the tax code, such as income from investment — which is where the wealthy get most of their income (i.e. passive investment, not income from wages) — and which they intend to drop down to the present 15% for capital gains, which would cut their taxes for investment income literally in half.

THAT is the bulk of what they want.

For example, why do you think Mr. Romney is one of the richest men in this country? It isn’t from wages, but from passive investment income. The wealthy class in this nation want to become a bunch of Romneys at YOUR expense!

I know Mr. Summers argument sounds rational, but it is what he is NOT telling you that matters.

Mr. Summers is “throwing the dog a bone” to keep him occupied while the wealthy break into your house to steal your valuables.

What Mr. Summers is NOT saying is they want a “flat tax” which, despite it name, mathematically is anything but flat. It favors the wealthy class.

Also, to offset the losses in wealthy revenue from the new “fair” tax codes, they want to implement a national VAT (i.e. a sales tax that works like compound interest) that would begin in the high teens as an initial rate. The VAT can be adjusted every year when the tax shortfalls occur without further legislation, and they WILL occur every year. Just look at Europe as an example.

That means the cost of living for the middle class and poor would suddenly increase MASSIVELY as the federal VAT is implemented.

Mr. Summers is a liar and he thinks we are all fools.

Posted by Gordon2352 | Report as abusive
 

GA_Chris, there is a difference in fair taxation of income and transactions, and taxing wealth. A huge difference actually. Taxing accumulated wealth has the direct and undeniable intention to eliminate wealthy people. Assuredly not a good idea.
Mr. Summers is “talking” about fair tax reform. Yet the opinion is titled with “un-taxed wealth”. I’m sure as he persuades people of one thing, the other is sure to happen. This is the Sophist Guile I warn of. He is a Sophist, he knows the difference, and knows the psychological implications of titling it one thing, and discussing details of another.

Posted by tmc | Report as abusive
 

@Gordon2352 – I usually agree with you, but not today.

Posted by AdamSmith | Report as abusive
 

@ northcentral –

Simpson/Bowles is unworkable.

—————–
From Wikipedia (solely for ease of access):

“Built off a baseline called the “Plausible Baseline”, which closely resembled the Congressional Budget Office’s Alternative Fiscal Scenario, the plan achieved roughly $2 in spending cuts to $1 in revenue increases.

The Plausible Baseline built off of a current law baseline by assuming that the 2001/2003 tax cuts were extended except for those above $250,000, the estate tax and Alternative Minimum Tax would continue at 2009 levels, the Medicare physicians pay freeze would continue and war spending would decrease based on current administration policy.

——————–

It is a joke on the face of it.

“The plan achieve(s) roughly $2 in spending cuts to $1 in revenue increases.”

HUH???

Think about the “logic” of that “Plausible Baseline” scenario for a moment.

The real question is how long would it take for the US economy to crash — considering we are losing over $1 trillion per year on the present budget (due entirely to the wealthy class simply refusing to pay their fair share of taxes). And we have an accumulated debt of over $16 trillion, much of it due to wealthy bailouts.

Let’s suppose the Republicans would agree to increase their taxes to meet the yearly deficit. That means our current yearly deficit would be covered, thus bringing us to breakeven in terms of our current revenue and expenditures.

However, there is still the little matter of $16 trillion in accumulated debt on the books that must be paid off.

But, per the agreeement, the Republican commitment is fulfilled at that point, which means cutting yearly expenditures to the bone for the middle class and poor at the rate of $2 trillion per year.

So, for example (holding all other considerations steady for the sake of argument), if the wealthy contributed at that ratio we could theoretically balance the budget within 8 years.

But during that period, literally TWICE AS MUCH MONEY would have to come from cuts in middle class and poor spending.

The wealthy would not allow cuts in miltary spending, because much of their profits come from the Military/Industrial Complex.

Does any sane person think this economy can withstand a $2 trillion reduction in social spending per year over the next 8 years?

And, NO, doctors will NOT continue to treat medicare patients, even at this level of reimbursement. Thus, huge numbers of the US population will be forced to do without medical care.

Why?

To pay off the debts that wealthy gambling has caused!

THEY CHOSE to gamble, and they lost big time. The simple truth is that now THEY WANT US TO PAY FOR THEIR GAMBLING LOSSES.

The ONLY feasible solution is to force the wealthy class to bring their tax revenues up to what our expenditures are presently, without ANY cuts in social spending, which would immediately balance the budget.

Yes, it really IS that simple!

Posted by Gordon2352 | Report as abusive
 

Regarding my comment immediately above, perhaps I did not make myself clear about what would happen to the $16 trillion in debt on the federal government books.

It should be obvious, but I will spell it out.

The wealthy created the debt by their reckless speculation, let them pay for their own debts for a change.

A surcharge must be added to the wealthy class until THEIR DEBT is paid off.

Posted by Gordon2352 | Report as abusive
 

My last comment made me think of a joke (some of you) will enjoy.

It is from the UK newspaper The Guardian, and is one of a series of 6 cartoons.

Hopefully, it will open on the one entitled “My Little Banker” showing a kid opening his Christmas presents.

http://www.guardian.co.uk/business/galle ry/2012/dec/07/kipper-williams-christmas -cards-2012#/?picture=400641495&index=4

Posted by Gordon2352 | Report as abusive
 

@tmc: The wealthy own the government; I truly doubt the goal is to eliminate the wealthy. The goal should be to ensure that everyone has incentive to work not that the super rich have a way of hoarding wealth. The wealth gap creates a dual caste system where most of the population is left in a stagnant working class with declining adjusted income while the capital class reaps all the benefits of their work. The rentiers of the aristocracy do not create jobs or innovations; they pull money away from the actual sources of labor and creation. Who is the moocher when a thousand men work so that a single man can buy a new personal jet?

Posted by anarcurt | Report as abusive
 

Observing the rapid descent of the American middle class into hopelessness and poverty, I can’t help but think that one day the wealthy class in America will look back and wish they had been a little less greedy. The comfortable lifestyle of the wealthy in America may not always be an available luxury.

I took special notice today of a Reuters story today entitled: Kidnap gangs use leaked bank details to prey on Afghan tycoons. Here is the link.

http://www.reuters.com/article/2012/12/1 6/afghanistan-kidnappings-idUSL4N09G1PM2 0121216

It appears that in Afghanistan the wealthy are beginning to realize that having great wealth while living in a nation of poverty and hopelessness my no longer be safe.

Posted by AdamSmith | Report as abusive
 

Of the thousands of ways the wealthy in America force American youth into hopelessness is by the H1B Visa program, a law written and lobbied for by American corporations, just as they have written the tax code.

The H1B visa program has destroyed the backbone of the American middle class: the American engineering profession.

It’s really a simple case of supply and demand. Consider an analogy. Consider, for example, what would happen if H1B were applied to plumbers instead of engineers.

Pick any city, let’s say, Denver, Colorado. Now, bring in 100 busloads of freshly graduated plumbers (4,000 new plumbers), who want to enter into the plumbing business in Denver, and make a living.

The result? Wage rates for plumbers will become depressed. The existing 960 plumbers in Denver, once busy every day, and making a good living, will now have much less work, or no work at all.

Who can compete with improverished hordes of plumbers from India who will work for any price? India has 1.17 BILLION people, and many of them are coming here, flooding our labor markets.

The H1B visa law was created, written and lobbied for by large American corporations as a means for decreasing their engineering labor costs. Indeed their corporate profits have zoomed up, up, up — while the wage rates paid to their American engineers have gone down, down, down.

This is what the H1B visa has done to the American engineering profession. H1B has already brought in over one million foreign engineers to America, thus driving down wages, closing American engineering schools, and discouraging American kids from majoring in engineering.

So I agree with Larry Summers. I say the wealthy should be taxed and shown the same mercy they show the working class.

Posted by AdamSmith | Report as abusive
 

“Punishing the successful”

How did they achieve this success exactly? The accumulation of any wealth and by any means is all good right? Is it a level playing field? I thought it takes money to make money? What of the absurd levels of wealth accumulation? It was all purely with the pull of the bootstraps was it?

You keep shoveling that BS but it’s BS.

Socialism, sharia, kings and despots oh my! Bunch of fools. The wealthy have never had it easier in American history. Inequality has never been greater.

Ah, but socialism for the wealthy is a-ok though isn’t it. After all America is about dog eat dog capitalism and every man for himself. Of course unless you’re wealthy, then socialism is there to save you when you go bankrupt.

Posted by TheUSofA | Report as abusive
 

It seems to me that some of the comment writers did not even read Larry Summers’ article.

His suggestions, all of them, are ways to address and alleviate the growing income inequality in America by taxing the huge pools of wealth that escape taxation under the current system.

In other words he is on OUR side.

So, for those who attack him for this essay, please first take the time to read what he says.

Posted by AdamSmith | Report as abusive
 

anarcurt, I agree with what you are saying in principle for sure. The wealthy can be quite despicable. The tax code must be re-written as soon as possible. The wealthy don’t want to. Mr. Summers does (even though he’s wealth). I believe he leans very far to the left and would actually, as he titled this article, target untaxed wealth. Again. Different story. Taxing wealth means if you have a pot of money that fits the description of wealth, then the government should tax it every year. Eventually, if you are not replenishing the wealth, it runs out and you are wealthy no more. I think that is wrong and goes to far. The wealthy are a necessary evil.

Posted by tmc | Report as abusive
 

anarcurt said, and I quote:

The wealth gap creates a dual caste system where most of the population is left in a stagnant working class with declining adjusted income while the capital class reaps all the benefits of their work. The rentiers of the aristocracy do not create jobs or innovations; they pull money away from the actual sources of labor and creation. Who is the moocher when a thousand men work so that a single man can buy a new personal jet?

@anarcurt – Well said sir.

Posted by AdamSmith | Report as abusive
 

AdamSmith, the global tech firms really don’t use the H1b lottery anymore. It is used by consulting companies and local support offices that hire from the street. They shuffle talent around now, and have for a while, via L-1 visas. Much easier, no reporting so less PR problems, and no lottery limit. I’d love to see numbers on all of the various ways they have to race to the bottom.

Posted by tmc | Report as abusive
 

I think GOrdon2352 is on target and the government is complicit in the plans of the wealthy to avoid taxes – but that is the foolish part of most of the articles written by academic/political types. It is too easy to sway the weak minded Washington bureaucrats – how much money would a person/industry spend to save millions. Lobbyists are money launderers for the wealthy. Our tax code is corrupt and politicians have been paid well to make the changes.
But – this is where the absurd enters the sublime. Who really wants to give the government more money. Everything should be focused on the reduction of spending and debt till our house is in order. So – I agree the super wealthy will pay and corrupt the political process to protect their wealth – but we don’t have a revenue problem we have a spending problem that more taxes with never solve. Sure go after the special interest tax breaks – but removing the few deductions the middle class enjoys is not the kind of ‘fairness’ needed. Means testing the tax breaks – seems to be the new way to create a broader and more upwardly mobile economy. The accumulation of wealth – should expanded for middle class – it would lessen the reliance on retirement benefits from the government and provide greater stability.

Posted by xit007 | Report as abusive
 

@ AdamSmith –

You state, “So I agree with Larry Summers. I say the wealthy should be taxed and shown the same mercy they show the working class.”

I think you missed the point of my comment above where I mention Summers is not telling the whole truth about tax reform.

He is lying by ommission, and doing quite a good job of it.

The wealthy WANT tax reform! Why would they want that after spending decades creating the labrinthine network of tax loopholes for themselves?

As I said, they intend to CUT their “income” taxes literally in half and shift the massive shortfall that creates onto the middle class and poor by implementation of a VAT, which works basically like compound interest instead of simple interest on a loan.

A VAT (i.e. Value Added Tax) is a tax charged MANY times at MANY levels before reaching the consumer, not at all like the simple state sales taxes we have now. It is not easy to explain in this venue, but it is insidious in terms of collecting money for the government.

For an independent explanation, which I thought was quite good, please read the comment by “Acetracy” above. What he is saying in somewhat more technical terms than I did, is that the wealthy want to shift even more of the taxes from passive investment (i.e. their MAIN sourced of income, like Romney, onto the salary/wage workers in America.

This would cut their “income” taxes nearly in half from what they are today.

That WILL create a tremendous shortfall in revenue, far greater than the $1 trillion per year we have now, which they intend to fill with a VAT sales tax, which “AceTracy” does not mention, but is a fact from many other reputable articles I have read.

The other main leg of their tax reform plan is to implement a “flat” tax, which as I said is anything but flat. Only the name sounds good. But mathematically it basically reverses the progressive tax structure we have today into a regressive one, which will generate a huge amount of additional income for the wealthy class.

THAT is what Summers is NOT telling you in his article.

By your other comments, you seem to think the wealthy class is, or will be, reasonable at some point — unfortunately, history is NOT on your side.

The US is at a critical juction, where we must realize what the wealthy class is doing through their wholly-owned subsidiary (i.e. the US government) and somehow stop them before it is too late.

No matter what happens at this point, the US economy WILL crash because of wealthy excess — just as it did in 1929 — and the only question now is how bad will it get.

Right now we can’t think in terms of “recovery” — with $16 trillion in debt and going into the hole at the rate of $1 trillion per year, it is far too late for that — but only of “damage control”, and we are quickly running out of time for even that measure to work.

We NEED to stop listening to people like Summers because they are not telling the American people the truth about anything.

The wealthy class want to take us back to the good old day, their good old days, but at our expense. Think of what this country was like prior to the Great Depression when no one but the wealthy class had ANY security at all and the American people were living in 3rd world country conditions. THAT IS A FACT!

They want Social Darwinism back again (i.e. survival of the fittest), and they intend to survive at your expense, just as they did before.

Don’t take my word for anything. Check it out for yourself in terms of taxation and where this country is heading.

All I am asking is that you think for yourself.

Posted by Gordon2352 | Report as abusive
 

@ tmc –

I suggest you read my comment above to AdamSmith, since both of you seem to be of the same opinion regarding Summers’ article — taking it at face value, which is exactly what he intends — and “look this gift horse in the mouth”.

The same goes for your feelings about the wealthy class. They are NOT a “necessary evil”, at least not to the extent of their present amount of wealth.

It is a historical fact that when the disparity in wealth reaches this level it tends to distort society and create social upheaval.

This country, government and wealthy class is NOT an exception to the rule.

Posted by Gordon2352 | Report as abusive
 

As I said, don’t take my word for it.

Here is a nice summary — from Reuters leading article today — of what I have been trying to say in terms of what the wealthy are saying versus reality, plus the amount of control they exert over the government.

————————-

The Unequal State of America: The economics paper that rattled Washington

By Deborah Nelson

WASHINGTON, D.C. | Tue Dec 18, 2012 7:12am EST

(Reuters) – The work of government economists is often so dry that the public never hears of it. And then there’s the work of Thomas Hungerford.

An employee of the Congressional Research Service, Hungerford in 2011 published a paper that found that after-tax income inequality rose 11.2 percent between 1996 and 2006.

Rising capital gains and dividends among the wealthy were the main driver of the widening gap, he concluded, accounting for 72 percent of the increase.

Tax cuts, he found, accounted for the rest. The cuts had an especially big impact because income from capital gains surpassed salaries for the top 1 percent of earners over that period.

This September, the CRS followed up with a 65-year retrospective by Hungerford on whether tax cuts for the rich help the economy.

“Analysis of such data suggests the reduction in the top tax rates (has) had little association with saving, investment, or productivity growth,” he wrote.

“However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”

Landing in the last weeks of a tight presidential race in which tax cuts were a big issue, the report caused a stir in Washington.

Senate Republicans pressed the CRS to retract the document. They also objected to a 2011 report by two other CRS economists that reached similar conclusions about the impact of tax cuts on the economy.

The analyses overlooked contrary evidence and were being misused by partisans, Senate staff told a top CRS official.

Over the objections of Hungerford’s superiors, the service temporarily withdrew his September paper. “I stand by my report,” Hungerford told Reuters.

Last week, the service re-issued the report with the same conclusions as the old, but adding new mention of a study with contrary views.

——————

DUH!

Posted by Gordon2352 | Report as abusive
 

I mentioned above the reason we will not survive is because of the massive amount of debt we are currently carrying — and which is increasing constantly — due to our efforts to bail out the wealthy class.

This article proves my point:

Bernanke’s Balance Sheet Ensures Disaster

by Michael Pento
December 18, 2012

http://www.prudentbear.com/index.php/gue stcommentaryview?art_id=10742

Posted by Gordon2352 | Report as abusive
 

@Gordon2352 – You make many sensible points.

My only point is that the ideas presented here by Larry Summers appear to me to be very practical and capable of making a big impact.

Now, whether his words are a subterfuge to installing a VAT, I cannot say. Nothing surprises me anymore along those lines.

But until I see evidence otherwise, I have to take him at what he says. And that leads me to believe he is being forthright.

Just as I have to take your words as stating your own true thoughts.

By the way, thanks for your link above to The Guardian cartoons. I very much enjoyed that.

Posted by AdamSmith | Report as abusive
 

Gordon, I agree with Adam, and yourself on virtually every point. I also think Mr. Summers is sincere in this piece and agree with him. But like you, I believe he is omitting additional goals. That’s what a Sophist with Guile does. They use expert language skills and information to persuade others to do something they would not want to do. I was really just pointing out that Mr. Summers has a tricky tongue. I don’t like the idea of taxing accumulated wealth. But, I could easily be convinced of an income cap of some kind, or a personnel holdings limit.

Posted by tmc | Report as abusive
 

The problem with redistribution ideology is that it is highly addictive.

Once you get into the negative feedback loop of redistribution that is the zero sum game of take from one and give to another, it is so hard to get out. You dig yourself deeper into the hole every time and come up with even more sophisticated redistribution scheme.

With the ever more sophisticated redistribution scheme, you need even more human resources to keep this zero sum game going smoothly.

The end result is always the same, more and more people doing things that don’t generate net gain value. Less and less people actually contribute. The redistributors then become the new elites, the powerful, the rich.

Remember, the more you play the redistribution game, the more the wealthy, the fortunate play the defensive game and everyone gets hurt. You think you can tax their wealth? Well, they will move their wealth in private, in defensive mode. The situation gets worse.

Imagine what happens when most of the public companies go private so the owners can pass the ownership of their companies to their children while depressing the real valuation to minimize tax?

The proper way should be about how to help the unfortunates change their lifestyle, their attitude (and even their DNA), how to educate them and create an environment so they can generate value, accumulate capital and hold on to capital.

I wish there would be a better way to run a society while keeping it in balance.

Posted by trevorh | Report as abusive
 

One more note: if the intention is to target certain kind of gain that is escaping the tax system because of certain loop hole, then it is a good thing to do and is a different story.

Posted by trevorh | Report as abusive
 

One newborn baby (Baby #1) inherits a trust fund at birth, where he will own one thousand rental apartments units for his entire life, managed by the trust.

Another newborn baby (Baby #2) inherits nothing at birth, except the poverty of his parents, who are always behind on their rent. During his entire life Baby #2 will pay, as the American average now is, 60% of his monthly earnings from labor, for his rent, to Baby #1.

Baby #1 is what is called a rentier, someone who receives automatic income without having to work.

This is what the estate tax is all about. This is why I think Larry Summers is correct to raise the issue of the estate tax. America used to have an estate tax, but it has been written away to obscurity by the wealthy.

Posted by AdamSmith | Report as abusive
 

well put trevorh.
I think the global corporations will ask for national autonomy within the next decade. Just say’in….

Posted by tmc | Report as abusive
 

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