- JPMorgan chief Jamie Dimon has warned that a wealth tax would be “almost impossible to do,” due to underreporting and the difficulty of calculating wealth.
- Yet evasion and underreporting is common to all taxes, while evidence from some European nations shows that modest wealth taxes can bring in revenue.
- With lower-income individuals suffering the most due to the coronavirus pandemic, it would be more sensible to extract any extra tax from the wealthy.
JPMorgan CEO Jamie Dimon has spoken out publicly against a wealth tax, saying that it would be “impossible to do.” Citing the difficulties involved in accurately calculating wealth, the billionaire banker claims that any wealth tax introduced in the U.S. would be evaded on a large scale.
Dimon is right to say that assessing wealth is a tricky business, with property, stocks, financial assets, cash, and even valuables (e.g. jewellery) likely to be subject to a wealth tax. He’s wrong to think that a wealth tax is “impossible,” however since a small handful of nations have implemented their own wealth taxes.
And at a time when the United States is desperate to repay its debts without straining an already strained population, a wealth tax — even one that encounters a degree of evasion — would provide some much-needed revenue.
Take It From Jamie Dimon: Don’t Tax Wealth
JPMorgan’s Jamie Dimon is no stranger to being wrong. He slammed bitcoin as a “fraud” in 2017, only to oversee JPMorgan’s launch of its own JPM Coin in February 2019 and to begin working with crypto-exchanges in May of this year.
Dimon now has another mistake to add to his list. Talking to CNBC-TV18 at the J.P. Morgan India summit, he declared that “a wealth tax is almost impossible to do.”
I’m not against having higher tax on the wealthy. But I think that you do that through their income as opposed to, you know, calculate wealth which becomes extremely complicated, legalistic, bureaucratic, regulatory, and people find a million ways around it. I would just tax income.
It’s true that some rich people would underreport their wealth to avoid paying all the tax they owe. This has been shown in studies of countries where a wealth tax is in place. One Swiss study found that a 1% drop in the wealth tax rate raises reported wealth by 43%, implying that a higher wealth tax encourages evasion.
It’s mostly for this reason that Dimon (claims he) prefers higher income taxes. Yet income taxes are also hardly immune from evasion, with roughly one out of every six dollars owed in federal taxes remaining unpaid. Research from the Inland Revenue Service even shows that higher income individuals misreport a greater proportion of their income.
So what would Jamie Dimon do? Scrap income tax as well, because it’s “almost impossible” to do in a way that results in 100% accurate reporting? Then why not get rid of all taxes?
A Wealth Tax Can Work
All taxes come with pros and cons. While a wealth tax may be trickier than most, evidence suggests it can bring in a non-significant amount of revenue, if done right.
In Switzerland, the wealth tax provides around 3.62% of total tax revenue. The tax is administered at the municipal level, with individual cantons setting their own rates. In Zug (aka “Crypto Valley”), the wealth tax is levied at a rate of only 0.3%, but it accounts for around a fifth of the canton’s tax takings from personal taxation.
This shows that it may be more prudent to have a modest wealth tax, at around 0.5%, rather than the 2% or 3% championed by some Democrats. This may be only a small percentage, but it would deter underreporting.
And at a time when the U.S. federal debt will soon pass 100% of America’s total GDP, the country needs all the tax revenue it can get.