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A Tax the Wealthy Can Get Behind

NEW YORK ( TheStreet) -- Trapped in a bitter conflict the wider public tunes out, politicians have lost sight of one key to unlocking a "Grand Bargain" in America's long-smoldering budget fight.

This country's small yet powerful investing class might now enthusiastically support an "extraordinary" one-time tax on net worth, if it's accompanied by profound reform in the way our government spends money, monitors its finances, and treats those seeking to create, preserve and protect wealth.

Implemented consensually and not via populist-inspired confiscation, a new compact toward shared prosperity just might work fast enough to convince frightened global investors that the U.S. can regain economic sanity.

A Case for a Tax on America's Wealth Mountain

The U.S. continues to operate out of fiscal and monetary control.

If America were deemed a "developing" nation and were no longer able to create securities accorded value on global markets, the International Monetary Fund long ago would have screamed at Washington politicians.

Even with benefit of global support for blank checks written by the Federal Reserve, there is no credible way of paying off the U.S.'s enormous debt if we rely on increased income taxes alone.

The table below shows how much total collections of personal income taxes would have to increase to close the Federal Government deficit for each of the years from 2002 through 2012.

Figure 1: Absolute Value of the Federal Deficit as a Percentage of Personal Income Tax Receipts

Source: Bureau of Economic Analysis National Income and Product Account Table 3.2 Federal Government Current Receipts and Expenditures. Note that figures used in calculating the Federal deficit are total expenditures and total revenues shown in the Addenda section of the table.

Yes, from the depths of fiscal depravity in 2009, politicians made "progress" reducing the federal deficit. Still, America remains far away from proving we manage our own government finances using a semblance of prudence.

Even with goodwill in Washington, no set of politicians now will vote for doubling personal income tax collection to close a $1.1 trillion gap between the 2012 run-rate for federal expenditures and federal receipts.
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