U.S. Government shuts down.

[kandrathe]

If four million in the positive is going to be taxed at a very low rate, you're not going to capture that much tax, unless you're planning on some truly punishing tax rates on the extremely wealthy.

The tricky part would be in calculating the wealth of assets (within the US), since value is usually only determined when a thing is sold. But, as with land, or homes, or business, we have some experience in valuing assets. If I have my wealth(e.g. 4 million) tied up in a business, maybe I also own stocks, and I choose to pay myself a salary. Under the current tax regime the government would gain tax revenue on any business profits (crudely, gross income less gross expenses), net capital gains on stock transactions, and on payroll to employees.

If instead, we just looked at the value of stuff owned (wealth), and assessed a relatively small, flat tax on that, I think it would get closer to fair. The estimated net worth of all US stuff is about $245 trillion. A %1.6 flat tax on wealth would result in the tax revenue we have now. The median net worth of households in 2010 was 80,000, resulting in an average tax of $1300 per household.

For example, GE is worth about $265 billion, and would pay about $4.3 billion in taxes, rather than the zero they paid in 2010 (having 14.2 billion in profits). Their 10 year effective rate has been 1.8% on $81 billion in profits since 2002.

Even if we decided to give corporations a break, and have them pay much less than the other wealthy, they'd pay more than they do now. The well off small business person ($4 million), from our first example would pay $65,200 regardless of how that owner used their assets. If you assumed they just invested in large cap stocks, and a modest return of 5%, they'd still be able to pay themselves a decent income of over $100K without losing wealth.