Wednesday 2013-11-06

Europe has been debating a financial rectification wealth tax. Wealth taxes aren't new to Europe, what's new is the size and scope of the taxes they hope to raise.

Meanwhile across the pond, the US is getting ready to implement a wealth tax. FATCA is moving ahead towards world-wide implementation, with only a few hold-outs such as China. As of this year, the IRS will have global insight into every US citizen's bank accounts.

Granted, there's no wealth tax yet, so what will likely happen? At what odds?

A mid-19th-century British "scrimp and save" [10%]
The Brits' debt / GDP was over 250% after they had defeated Napoleon. They then proceeded to pay down that debt over the following years until by the eve of World War I, the ratio had fallen to under 50%. [CHART] AARP is the biggest voting block; it's unlikely they will vote up taxes and down services since they are on fixed income.

An effective IRS [100%]
The IRS' Business Systems Modernization program continues apace. On the front-end, this allows us to submit our 1040s electronically. On the back-end, it allows the IRS to right-size its enforcement measures so as to maximize revenue. Tax cheats should expect automated letters in their future. [PDF] This is already happening; however it will likely not be enough.

A wealth tax [80%]
Like Cyprus, only in the US.