On the one hand, we have the Obama administration’s grand plans for universal health care, investment in our infrastructure, reducing our atmospheric carbon output, and world-wide reduction in sea levels. On the other, we have the requirement to pay for it, assuming the Chinese would like to have some significant portion of their money returned to them. Currently, the administration seems to favor increased taxes (sorry, “contributions”) on those with the highest incomes. The problem is that there are not enough rich people to go around. Even at a tax rate of 100%, there is still not enough money to pay for all the urgently needed good stuff. What to do, what to do…
A possible remedy comes from the Internal Revenue Code, which starts with this:
§ 61. Gross income defined
(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(8) Alimony and separate maintenance payments;
(10) Income from life insurance and endowment contracts;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.
The definition is broad enough to encompass just about anything that could be construed as income; that is, anything that would result in the improvement in the economic situation of a person or entity. Cash need not be involved. Income can be recognized, and taxes must be paid, on the unrealized gains of certain derivatives (§ 1256, § 988), on bonds that do not pay anything at all until they mature (§ 1272), and even in some situations where you pay too little for something (§ 1274). This is a marvelously flexible idea, and suggests that we can close our budget deficits not by raising the tax rates, but by discovering and taxing previously undiscovered sources of income.