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When I was five years old and my eldest sister was just starting school,
my dad quit his steady job.
He came home and told my mom,
I'm going to start my own business, my mom burst into tears.
They had two kids and a mortgage, how are they to make ends meet?
My dad didn't come from immense privilege he never earned a bachelor's degree, but
he was hungry for success and wanted better for his children.
So he scrapped together all of his savings and
invested everything into his new advertising business.
After five years of hard work, the business was struggling and
his co founders quit.
Undeterred, my dad remortgaged our house to raise funds and
pressed on without them.
Over the next 20 years, he painstakingly bootstrapped his business, taking
measured risks and working relentlessly to ensure the success of his organization.
He works tirelessly to provide a better life for his family and
today his business employs over 50 people.
Although my accent betrays the fact that my dad's success was in Australia
rather than America, my dad lived his own version of the American dream.
But my dad was one of the lucky ones we know that today for
most people, the American Dream is a myth.
64% of the wealth of the United States is held by the top 10% of families.
A child's chance of earning more than his or
her parents has plummeted from 90 to 50%.
And the key determinant of your financial outcome in life is whether you were born
into a wealthy family.
America has a long history of systemic racism and unequal access to opportunity.
Many remedies have been proposed and many remedies are needed.
But I'm a tax nerd and from my perspective, one important remedy is to
reshape our tax code so that we focus on taxing wealth rather than income.
Yes, my friends, this is a talk about taxes.
My father accumulated his wealth through hard work, and
he paid his fair share of income taxes.
But our tax code can't end there,
his net his wealth now self perpetuates more wealth.
And I, as his son am one of the undeserving beneficiaries, so
how does a tax nerd like myself propose to change this dynamic?
I want to suggest two possible wealth taxes first an inheritance tax,
an inheritance tax also known as an estate tax is a tax on
the assets transferred from deceased persons to their heirs.
Inheritance taxes have a long history Augustus,
the first Roman Emperor, impose the tax on 120th inheritance in 6 AD.
In the US, the first inheritance tax was adopted in 1797.
But recently, inheritance taxes have been on the decline in 1976,
the highest inheritance tax in America was 77% today, it is just 40%.
Simultaneously the exemption threshold, the amount that can be passed down,
tax-free has continuously risen.
With the tax reform in 2017, the tax-free threshold for
a state taxes is $22.8 million for married couples.
Let me say that again today if you are a married couple with less than
$22.8 million in assets, you don't pay a dollar of a state tax.
Some say this situation is justified,
there's a righteous belief among some that American Freedom demands that people
should be able to hand their private property to their children.
And that any estate tax represents dreaded double taxation they say my parents
have already paid tax on these assets why should they have to pay them again?
But these arguments overlook the fact that a significant portion of family wealth is
earned from unrealized capital gains.
That is the increase in the value of assets like stocks and bonds,
these unrealized capital gains have never been taxed.
And more importantly,
the people who inherit the estate have done nothing to earn this inheritance.
I ask again, why am I entitled to the fruits of my dad's hard work?
Letting fortunes pass across generations risks creating a hereditary elite.
This is antithetical to America's spirit of rewarding enterprise above bloodline.
The constitution prohibits the US government from granting titles
of nobility, so why should Americans allow nobility in all but title?
For those like myself who treasure the dynamism and innovation of the American
economy, an inheritance tax is one of the most efficient ways for
the government to raise revenue.
Unlike income taxes they do not reduce the incentive to work,
unlike capital gains taxes, it doesn't dissuade saving or
investment and unlike sales taxes it's progressive.
As we search for efficient ways to help close the wealth gap,
inheritance taxes are part of the answer.
In 2019, American raised just $17 billion from its inheritance
tax if instead were willing to tax the states above a million dollars,
with a progressive rate structure, starting at 30%, and going up to 75%.
For a state above $20 million, we would be able to
raise approximately $130 billion annually.
But inheritance tax by itself is not enough and
economists have another tool to help close the wealth gap.
We also need to implement a national land value tax a land value
tax is an annual percentage tax say 3% on the value of only the land.
It is different from a property tax because it excludes the value of the house
or building sitting on the land.
Economists love land taxes in 1978, Milton Friedman declared it the least bad tax.
And even earlier, Henry George's book on land taxes, Progress and Poverty,
sold more copies in America in the 1890s than any other book except the Bible.
The reason for this popularity, at least among economists is that typically
taxing a good lowers supply and raises price.
It's for this reason that we tax cigarettes to deter smoking,
or tax gasoline to deter frivolous driving.
But land is different in that it's supply is fixed and
as long as landowners are competing with each other for renters, whose numbers and
willingness to pay are unaffected, the tax should not be passed on in higher rents.
The other reason taxing land values is so adored by nerdy economist is its
fairness no person has a moral claim on the land itself.
And when the government builds roads, installs lights and expands transport
links, the value of land increases without any effort from the landowner.
No landowner deserves these windfalls gains the value
of land in America is estimated at $23 trillion.
A National Land value tax of 3% would raise almost
$700 billion for the government every single year.
This could be used to help close the wealth gap,
improving education for our children and health care for us all,
I'm not delusional these tax reforms alone won't end inequality.
Inequality is a deeply rooted issue in our society that will take correlation
of politicians, advocate and business leaders years of hardwork to change but
am hopeful that tax reforms can be a path of the solution.
My mother and
father should enjoy the wealth that there have created over a lifetime of hard work.
But while they are alive, a land value tax should ensure that their wealth
is not enriched by windfall gains of property prices.
And when they pass away, I hope I live in a society where
any wealth they leave behind is donated or taxed.
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