Forum Post: Should we tax dormant money ?
Posted 12 years ago on Jan. 25, 2012, 4:25 p.m. EST by BackRider
(83)
This content is user submitted and not an official statement
Should we tax heavily concentrated wealth lying dormant ? Just to put it back in circulation.
ALL taxes are ultimately paid by the consumer. Every tax that is collected, regardless where it comes from, will find its way back to the consumer. Whoever you are---YOU pay it!
Perhaps we should all be driving the same vehicle. (Different colors, maybe!). Maybe living in the same kind of house, drinking a certain amount of water (and beer!), have a certain number of kids, learn from the same kind of school, and having sex at a certain time of the day. Will you then be happy to be all good little Nazi's? No matter what you do for a living, no matter what your talents are or what you contribute you will make only a set amount of money. Sounds like a hell of a plan to me!
A dormant tax .. could be avoided and perhaps would not be seen at the consumer level ..? but the real purpose of the dormant tax would be to encourage spending , thus revitalize the economy.
Most money does not lie dormant.
Why would someone hold on to cash? It loses value every day. Folks with wealth invest their money which means it is already in circulation.
as I mentioned to DKAtoday, investments such as wallstreet do not stimulate the economy , and to add , they feed off the economy .. so this does not produce the desired stimulus we want .. where as a tax on dormant money would circulate through government to the economy lightning quick.
So wrong it's hard to know where to begin.
Perhaps you could tell me what "investments such as wallstreet" actually are?
wallstreet invests in everything .. by definition an investments takes out more than it puts in .. so this is the failure of Joe's idea .. to take out more than you put in is worst than dormant ..
You have said: Wallstreet invests in everything. Wallstreet investments are bad.
By your logic, everything is bad.
Joe's observation is accurate. Most wealth doesn't lie dormant. This isn't taking sides. He's right.
Gimme your address and I will buy you "Economics for Dummies" and "Finance for Dummies"
are these the books you're reading ? you must feel ready to take on the world. lol !
oh u have no idea
actually.. plenty
I can figure that from your posts.
If the 1% were to cash in all their stocks there would be no economy.
Companies that do well can pay a higher dividend to their investors sot the price of their stock does well. Companies that suck cannot pay a dividend so the price of their stock goes down.
After a company offers an IPO they can use that money to expand, That is not he end of the story. As a company continues to grow and their stock is climbing they can sell more of their stock to pay for further expansion.
why would the one percent cash in ? what would they do with their excess wealth?
Well you told me their investments do not stimulate the economy so why would it matter to you?
your puttting the cart before the horse Joe. look around .. companies are not expanding.. why? are they short of investors ? no .. they are short of demand for their product. all the accumulation of wealth that is sitting dormant .. has clogged up the system .. we need to get it moving again .. and possibly a dormant tax would do the trick .. but nice try Joe , I know you are only trying to discourage .. capitalism
The two go hand in hand.
One of the big reasons for the recession was inability for businesses to get capital after the initial crash. Banks lowered or eliminated lines of credit. Investors moved out of stock and bonds and into commodities like gold and oil whose prices skyrocketed. The DOW went from 14,000 down to 7,000 and gold went from $400/oz to over $2,000/oz.
Demand is coming back and businesses are on the edge of expanding again. We are seeing an increase in demand especially from Asian countries like South Korea, China and India. The stock market has rebounded but credit is still tight. Dodd/Frank has made it very difficult for creditors to lend money especially small banks to small businesses.
With some businesses expanding we should see even more demand. You would be amazed at how much demand comes from businesses.
The biggest reason for the recession was a dormancy of money piling up at the top. and once the borrowing stopped boom there goes the bust. no more transfusion of money. ..
Money is supposed to circulate, or the system fails. But the designers were not concerned of this .. at the time the goal was to achieve the dream of unfettered wealth. Somehow thinking the rest will take care of itself. Well as it turns out that unfettered wealth has brought the economy to its knees, but the goal has certainly been achieved ..for some, they have more wealth than they know what to do with. With a small correction, this can be repaired .. and the basic fundamentals/principles of capitalism will remain.. the only difference will be the goal has changed , from a race to the top to wealth for everyone.
The stock market rebounded in response to Mr Obamas stimulus plan. Sure business spending is good for the economy..expansion and all that, but they won't spend unless they see profit in it ..which creates a certain amount of economic negativity. Whereas governments will spend to see positive economic growth. Therefore, money lying dormant would be better off in the governments hands ..
companies are not expanding because there is no stability in the marketplace...and the future tax liabilities are unknown...
Create another ten year freeze on individual income and adjust the corporate rate to a competitive level with the other industrialized nations of world (taking into consideration Federal AND State rates) and freez those for ten years....
Then watch the fireworks as investment increases and jobs start appearing again
but that doesn't solve the real issue.. that being taking the control away from business as to controlling job creation .. it should be in the hands of the government not private enterprise.. the welfare of the population is of no concern to private enterprise, but yet they control the economy. It is by their decision whether many have jobs or not .. this is not right.
it is the market that determines job creation....and sorry, Socialism is a failure and a murderer of millions.....
well the market job creator as you call it .. has failed millions.. look around is this okay with you ?
what is your solution then, genius? More public debt and spending?
Perhaps you think you can eliminate the deficit of 1.7 trillion with the increase on the taxes of those making over:
10 million a year (TOTAL income 240 Billion) um...nope....or
1 million a year (TOTAL income 724 Billion) um...nope....or
those in the 1% (over $350K year approx)..(TOTAL income 1.49 Trillion)....um...nope
If you confiscated ALL income over $350K you still wouldn't eliminate the deficit for a single year and you want to authorize spending billions of dollars more to "bail out" foolish people who took loans they couldn't afford..
Sorry.....it doesn't work like that
hold on - we need to agree on something..? try this:
if everything was functioning properly we wouldn't need bailouts nor would we have an out of control debt/deficit.
but everything isn't functioning properly and thats why we are in this mess .. agree ?
Yes Sir Friedman. Your insights on the economy are marvellous
god u r so stupid
We are already taxing dormant money year after year for many decades. It is called inflation and our federal reserve has been working very hard to continue doing this and also prevent the opposite (deflation) from happening. Why is everyone seemingly crying foul about the federal reserve's policies? Persistent "benign" inflation and near-zero interest rates are probably the ONLY policies to dig us almost miraculously out of the debt mess that we are in. Savers and investors: it is time for you to have your behinds kicked again. Remember though that it will only be as painful as those past decades or less. Looking away can help with not feeling the pain. Now haven't we learnt that already during childhood vaccinations?
interesting point, I hadn't thought of the inflation aspect as an incentive to spend " now " while your money still has value. great point. although, it is not enough to create the spending incentive we need.
We don't need a "spending incentive" We need a "creation incentive".
and what would you suggest for a creation incentive ?
Riches come from the use of natural resources. AND NOWHERE ELSE! Every unit of money can be ultimately "reverse engineered" to have come from the land or the sea. If the money you are getting can't do that then what you have or are doing is not "creating" anything but debt for you are taking it from someone who worked in an area connected to the use of natural resources.
That's called "taxes."
We are taxed to death. We cannot even start a lucrative business these days without having to go through a licensing and regulatory system that stifles the very ideas one might have for a successful business. Cutting a tree, digging a hole, having a campfire, hell, just driving through the woods will bring a cost factor that stifles even the fun you might have.
You cannot legislate the poor into prosperity by legislating the wealth out of prosperity.
What one person receives without working for, another person must work for without receiving.
The government cannot give to anybody anything that the government does not first take from somebody else.
You cannot multiply wealth by dividing it.
When half of the people get the idea that they do not have to work because the other half is going to take care of them; and when the other half gets the idea that it does no good to work, because somebody else is going to get what they work for, that is the beginning of the end of any nation.
Sorry. I do tend to rant.
Labor is also a natural resource , although limited, and many business type harvest this labor resource for great profit. But who supplies the labor? it is government funded schools and the middle class families that raise children .. while the elite take the cream of the crop it only seems fair they be obligated to contribute to maintaining the resource pool of labor .. by that through taxation of their profits .. especially dormant profits .. or at least be encourage to redistribute the wealth through a dormant tax.. as I mentioned earlier, the economy functions on the flow and spending of money circulation .. dormancy shuts the economy down .. it's elementary mr watson .. and besides , anyone with dormant money has more than they need ! they won't even notice a change in their lifestyle if it were taken away from them ..
Your definition of a natural resource differs from mine. That is probably true of our different definitions of "dormant" money. Dormant money, to my way of thinking, might be money in a coffee can in the back yard somewhere. I have some money I have saved over the years in a bank. It draws enough interest to keep me comfortable in my retirement. Is that dormant?
If we took everything the 1% has the 99% would have all the beer an twinkies we want for a couple of years!!!
that's not what they want
we need money to keep resources moving
Its different to tax income once. However, as soon as you get it you should be able to do whatever you want with it.
..but we are currently in a trickle down economy .. surviving at the whims of those with money and willing to spend it .. and as you can see they are not spending enough to satisfy the population with enough jobs.. so a dormant tax , perhaps after a certain timelimit would encourage increased spending to avoid the dormant tax .. just seems like a good idea to stimulate the economy .. since the wealthy are currently under no obligation to spend.. the economy suffers .. and when you consider their wealth was gained on the back of the economy .. than perhaps they should have some obligation to restoring the economies welfare .. your thoughts ..
Like joe said hardly any money is actually kept in stagnate areas because it loses its value over time.
but what Joe doesn't understand is that investing for profit does not stimulate an economy .. thats why we see investments on wall street fall during recssion .. they have no influence on creating the demand ..It would be like me hiring you at ten dollars per hour and you hiring me at eleven dollars per hour .. it doesn't work
The have influence on increasing the size of a company does it not? And then the companies create jobs and the demand.
buyers create demand. investors profit off the buyers by investing in supply .. but invesators wont invest in supply when there is a weak market , as we see now ..
Business grow this causes supply which in turn brings demand. If there was a weak market then why would you invest in it? What reason would there be for that?
The estate tax is a tax on wealth, not income, and must be restored. There are things about it that should be changed, such as tax on the value of farmland, but in principle it is a progressive tax.
has there ever been a " retroactive tax "? a tax that can reach back seven years ?
The estate tax, which used to tax a lifetime accumulation of wealth.
was that a death tax on personal assets/wealth ? if so , not exactly what I was referring to as retroactive.. by retroactive , I was thinking of capital gains . If we suddenly realized capital gains has stripped the economy of its functioning power [ as in money that fuels the economy] and we retroactively went back seven years and collected on a larger capital gains tax on all capital gains for the past seven years , that would bring in a wealth of cash and possible bring the goverments debt above water ?
I would think that would be a bad idea because those after tax profits have already been used for something else. And are you going to ask retirees who have been cashing out their 401Ks to give some of that money back. It would even be a huge headache for myself, and I am neither rich nor retired.
I don't really think there is much dormant money at all. Why would someone just sit on cash? It would loose value over time due to inflation. Even the most risk adverse people would at least put their money in US treasuries or something.
investments do not necessairily stimulate the economy , such as wallstreet investments actually bleed the economy as most investments are designed for that purpose . so yes the dividing line would and may include 401K plans .. aftera certain allowable limit ..
As I wrote in my opening post, spending money creates jobs .. and that is the desired outcome we are aiming for ..
I understand your reasoning. I just would not like to be the person who proposes this plan to all the middle class people who have realized capital gains over the past 7 years.
Yes, there was a "retroactive tax" during the Clinton years when Congress could NOT get its act together fast enough. The argument was that the buzzing was in the air for so long that everyone should know that the increased tax was coming. In other countries, there are what you may call "retroactive tax" in the form of "land reform" and "nationalization of industries." In general, those places turned rather horrible economically after the actions.
buzzing , increased tax coming .. not sure I follow ? how was this retroactive ?
For those people who have ROTH retirement accounts, there may be in the future a form of "retroactive tax." The government will "coordinate" the Social Security and Medicare benefits to those people with ROTH retirement withdrawals. In the old days, people were arguing if retirees were really hit with over 90% tax for extra income earned. Some said yes and some said no. In any case, it was due to the two additional dollars earned leading to one dollar reduction of Social Security benefit that caused the huge percentage. Some argued that there was NO additional taxes, just reduction of benefits.
The media had been reporting about the Congress wrangling with the increased taxes. Anyone not living inside a drum should have heard about it somewhere sometime. It is retroactive in the sense that it reached back to the beginning of the tax year even though it was only passed later in the tax year. We have done it once and we can do it again, right? Now we know that it can be done. There is NOTHING preventing us from increasing the duration of retroactive reach, correct?
..So when President George Bush Jr lowered taxes ..and we believe it was a mistake, we can than retroactively change his decision and collect the taxes owed going back to the time of the mistake ? correct ..
Yes. That was why the Founding Fathers wrapped so much checks and balances around our three branches of government. They wanted to make doing something like what you had suggested extremely difficult if not impossible. In the process, they made the U.S. very often "impotent and obsolete" quoting from Ronald Reagan.
We are a long way from perfect .. not even sure if were heading in the right direction at this point.. ?
We should look back at history for some lessons. In the nineteenth century, industrial production created excessive goods using laborers working under terrible conditions. In the twentieth century, the Communists had the idea of reducing the working hours to 40 a week. We have been living pretty well with that in the last century. Now that we are at an age that robots are making inroads into many jobs and achieving greater productivity and precision, we may need something like the working hour readjustment to balance things better but that should be forged on a basis of social consensus after rational examination and debate about pros and cons. We are by definition ALWAYS heading in the right direction as long as we do NOT know where we want to go. I think at this point as a country the U.S. does not know.
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I think that you have proposed a broader term of a property tax. Will there be any exemptions or is everyone going to be involved?
the thought is open at this point ..
You greedy thieves need to get our government reeled back in. You worry about taxes? I worry about an all powerful massively centralized out of control over reaching federal government, that is ever expanding when the economy is shrinking.
last time I looked the government was deep in debt and has cut many taxes ... would hardly call that greedy .. but looking on top I see where the real greed is with all that wealth piled up .. where did it come from ?
16 trillion debt. Obama has piled up more than all the presidents before him combined. Keep wasting. Keep blowing. 3 million debt per minute. Keep it coming. Keep it going.
is that actual debt , or is that debt forcast ten years down the road? and yes I agree , somehow spending shpould be regulated /monitored properly and efficiently .. not wasteful.
Yuuuuuup, especially the 1 Trillion AAPL has sitting around due to their use of SLAVE labor.
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1st - Has taxes been paid on this money at the time it went dormant or prior to it going dormant?
2nd - What do you consider dormant money?
3rd - If interest or dividends are being paid on the money. Then taxes should also be paid on the interest or dividend earned.
4th - Even if actually dormant. Assets go into net worth and are also figured ( or should be ) as to what tax bracket you are in. ( it is very possible that I am mistaken on this point as I never have had a considerable amount of money of any kind, active or dormant ).
in response to :
1st- yes all taxes have been paid.
2nd- money that is out of circulation for an overly extended period of time.
3rd- if money is collecting interest .. should it be considered dormant? .. I would like to say yes.
4th- assets are not calculated as income in tax brackets..
OK. Then the taxes have been paid once, and that is enough, as long as the proper taxes are paid on dividends and or interest.
I mean it would be beneficial to the strength of our Banking system if people could afford to have a savings account. A lot of people can not take a significant amount of money out of their checking account because it is needed to keep from being charged an overdraft. So the Savings ( ? ) Institutions ( debatable definition in today's world ) are that much more fragile as for not having long term assets on deposit to make loans against as well as paying interest to for the loaning.
well, the idea is an open one .. and considering how much money would be a starting point as " considered dormant" , as you point out everyone needs a little on hand as back up and emergency .. perhaps retirement.. But it gets to the point of an outrageous level for some at the top echelon .. for example , google was stated they are sitting on an enormous pile of cash.
The idea I was looking at was to tax idle wealth to encourage spending , as spending is what fuels the economy and gets her engines runing. At this point the poor are broke , the government is in debt up to their eyeballs , but the wealthy have piles of cash with no obligation or encouragment to spend...so here we sit as they spend a little at a time and watch it trickle down ..slowly ever so slowly... a little incentive of a dormant tax may speed up that trickle down effect .. would it not ?
I don't see why a tax the insight the wealthy to spend
though the government could spend on the people with the money collected by tax
if the aristocracy moved their number around,
would that money be considered dormant ?
Well if net worth were taken into account as well as considering dormant cash ( as you say ) above a specified limit, then yes I think it would be an approachable subject to get some money out and working. This is also in consideration of hidden money/assets off shore. So it wouldn't necessarily be a tax on dormant money as such, but more of a penalty for non-working capital. Because if money is in a legitimate savings/lending institution and that institution is lending money legitimately, then the money is working.
..ok good .. so you see how it could be a working idea .. an incentive to spend . but the big question , how do we decide what is dormant? calculate our earnings and our spendings and what ever is left is dormant [ minus an allowable savings buffer ] , even if it is in a bank collecting interest and being borrowed out .. it is not actually being spent by the owner .. therefore dormant..
No you mistake my agreement on this point.
If the money is parked in an institution that borrows out money against those deposits, then the money is already at work.
If the money is parked where the institution is sitting on a major amount of cash and not making legitimate loans, that should be considered fair game. And that might well be action against the institution.
perhaps.. but putting money in a bank does not ensure economic stimulus nor job creation .. therefore how would we determine its activity? just as we once discussed investing in wall street does not stimulate the economy .. somewhere there is a dividing line on this .. and perhaps a few grey areas .. but thanks for the discourse.
Determination of activity. Follow the money ( like TuCan Sam and his nose and his junk food cereal ) it always knows. What is on deposit on average - 1 week, 1 month, 1year. How much is out in loans, to whom for what purpose. Proper use of an audit.
But the loan would be 2nd hand ..twice removed from the original owner.. and to consider this non dormant would be a loop hole for those with excessive wealth. The dormant tax serves more than one purpose. encourages spending and prevents accumulation . to allow 2nd hand lending to be considered non dormant would fail the purpose. ..not?
That is why it would not necessarily be an action on the depositor, but on the non-functioning institution.
I think I understand .. so if no one is borrowing money from the institution .. who would pay the dormant tax ? it would have to be the depositor .. not ?
The depositor will always be required to pay taxes due on interest. If the Institution is dormant in lending, then it should be looked at as why they are not lending. People are looking to borrow money so it would be strange to see an institution in this business not lending. It is also a mater of the type of lending being done.
Further depending on how much interest is being earned on an account or bundle of accounts perhaps taxes should be adjust upwards on hefty amounts of interest or dividends earned.
well currently there is not much lending going on .. and this has caused recession .. partly .. and with the loss of this borrowed money input into the economy , plus the debt so high .. as Mr Obama tried to stimulate with 800 plus billion .. every economist knows it takes money spending to produce economic growth but that only leaves the money lying dormant that is avaible .. and they do not want to spend because they are investors and they only spend where they can take out more than they put in .. but with the recession and lack of demand .. investors are holding off .. waiting .. and here we sit .. so a dormant tax would surely be a spending incentive.. or should we all borrow more money ?
No [ or should we all borrow more money ? ] it is the type of loan that also counts as useful and active for the economy. The institution should be making a specified number ( or value ) of loan (s) to qualify for economic support status. If an institution does not qualify for that status then perhaps the mega depositors should be charged a higher tax as well as the institution itself.
Like on my last reply, it might be smart to look at bundles of accounts rather than individual accounts. Why? Accounts are only insurable up to a specified limit, so a large amount of money say...250,000,000 will be divided into no less than 1000 accounts if 250,000 is the limit of insurance for any one account. If these accounts are at maximum, then to protect the interest it will be paid into one or more other accounts set-up to receive the interest as it is paid out. When you have an account of 250,000 dollars earning a fixed interest it will only qualify for a certain amount of tax to be paid. Singly an account may pay less tax than would be owed on the complete combined amount ( bundle of accounts ).
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