Alternet has published the article Robert Reich: A Handful of Ultra-Rich Families Are Bleeding the Country Dry.
Taxing dynastic wealth is an absolute necessity if we hope to restore our democracy.
Then, President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” could destroy American democracy.
Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916 and the capital gains tax in 1922.
There may soon be an even more immediate reason why we will need to tax this dynastic wealth. The Federal Government created $29 Trillion to bail us out of the crash of 2008/2009. This flood of money did not create inflation because most of that money went to the rich who did not spend it on economy stimulating consumer goods and investments to make consumer goods and investments to make jobs. Since there was a severe lack of consumer demand in our stagnating and collapsing economy, there was nothing worth investing in. All this money was used to increase the price (value) of the things that rich people wanted. One example is corporate stocks. The stock market is now significantly over-priced, but the companies are not hiring at living wages, and they are not making more goods in the USA.
If the economy turns around, all this money that is not being spent into the economy will start to return. This is what will cause inflation. If we could convince Congress to raise taxes, that would suck this excess money out of the economy in a way that would stop inflation. However, raising income taxes will not be enough. The money is already in the hands of the wealthy, so there won’t be enough income to tax. We will need to tax accumulated wealth.
One of the things that might have a hand in stimulating the economy is the transition to single-payer health care. The reduction in health care cost to the typical resident might be enough to get them spending again. If spending were to increase faster than corporations could expand to meet the demand, we would have inflation. We would need a tax that could lower the demand, but not lower the ability of corporations to expand to meet the demand.
Taxing the wealth and income of the very wealthy would discourage their spending on personal wealth accumulation, and redirect it to investment in economic growth to satisfy consumer demand. This is the history of our economy after WWII and up to the years before the Reagan presidency.