A New Push to Tax the Rich; Top Regulator Wants to Break Up the Banks
Author: Greg Valliere
January 18, 2023
THE WASHINGTON POST REPORTS THIS MORNING that bills will be introduced tomorrow in in California, Connecticut, Hawaii, Illinois, Maryland, New York and Washington state.
IN ADDITION TO HIGHER TAXES on income and capital gains, the activists are determined to enact a “wealth” tax that would force rich taxpayers to pay taxes annually on assets that they own, rather than just their income that year. This idea, pushed by Sen. Elizabeth Warren (D-Mass.), has gone nowhere in Congress.
HERE COME THE MOVING VANS: If the states consider a wealth tax, the obvious response from “the rich” will be to continue moving to low-tax states like Florida and Texas, The exodus could continue in California, where activists want to impose a 1.5% percent tax on assets of $1 billion or more.
OTHER STATES, SUCH AS NEW YORK, would impose an extra 7.5% tax on capital gains for married couples with income above $550,000, and 15% for couples with income above $1.1 million. One can only imagine the reaction from people in New York City who would be classified as “rich” with annual income of $550,000, over half of which is gobbled up by taxes already.
BOTTOM LINE: Congress won’t raise taxes in the next two years — simply continuing the Trump tax cuts that expire in two years will be tough enough. But if the states, now flush with money, begin to falter in a recession, tax hikes might be on the table.
FOR NOW, THE ACTIVISTS are simply putting their ideas on the table, but they know that polls overwhelmingly show that the public thinks “the rich” don’t pay enough in taxes. Austin and Orlando will continue to grow.
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JOE BIDEN’S TOP FINANCIAL REGULATOR sent a chilling message to big banks yesterday, warning that they are becoming so huge and unwieldy that they may have to be broken up.
WE DON’T ANTICIPATE AN IMMINENT THREAT to the industry, but “headline risk” is likely after comments from acting Comptroller of the Currency Michael Hsu, who said yesterday at the Brookings Institution that big banks are becoming “unmanageable.”
HSU DIDN’T CITE ANY PARTICULAR FIRM, but the Wall Street Journal speculates this morning that he had Wells Fargo in mind because the giant bank is an example of what he said are huge banks that have “become so big and complex that control failures, risk management breakdowns and negative surprises occur too frequently.”
THERE’S LITTLE DOUBT THAT HSU WAS REFEERRING TO Wells when he targeted banks’ failure “to resolve longstanding deficiencies despite reprimands from its regulators and onerous restrictions such as caps on its growth.” This is evidence, he said, that some firms are unmanageable and need to be broken up” because of their “sheer size and complexity.”
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