I believe the idea is to make society more equal (reduce imbalance of living standards)?
You make some bold statements like
In my opinion (NOT sure) 1% of total money in the bank will be 30%
I work as a risk manager for a reasonably large internationally operating bank. I have a good understanding of what percentage of money our clients hold in bank accounts and what their income is. Obviously I cannot share that data but
here are some official figures that aren't that different.
- Peter G. Peterson Foundation
2019 US white, not Hispanic median household income was \$77,007
2019 US white, not Hispanic median household wealth (that figure takes all assets into consideration, not simply money in a bank account) was \$181,440
That is only 2.35x the income. For other ethnicities these figures are even lower according to this source.
- Wikipedia using data from Credit Suisse's Global Wealth Databook shows similarly low numbers for regions and countries.
For example money in a savings account is treated differently than in
a loan account. My point is this distinction is artificial? Both
should be treated as the same.
A loan is fundamentally different from a savings account, in any measure I can think of (accounting, balance sheet, cashflows, net wealth, taxation,...). Moreover, large corporations would almost surely not use loans at all anymore (they can deduct interest expenses and therefore pay less tax now, as opposed to pay tax on them). Since you exclude all other assets, they would simply issue bonds.
While we (the bank I work for) do have some accounts where we charge negative interest rates (mainly wholesale, a few retail), many account holders tend to switch to alternatives (bonds, stocks, art, collectibles, structured products.. ). There was a bit of an exception in the months after COVID 19 started, potentially because savings rates went up so much due to lack of alternatives (many places were closed and people couldn't spend their money). Also it is not even legally applicable in all jurisdictions - e.g. in Austria, there was a supreme court ruling that made it illegal to charge interest on bank deposits for retail clients because (original German ruling)
... den elementaren und gesetzlich angelegten Zwecken einer
Spareinlage (Gewinn- und Vermögensbildungsfunktion) diametral
which essentially means that
"(negative interest) ... diametrically contradicts the elementary and
statutory purposes of a savings deposit (profit and capital formation
The ruling was originally for zero interest, but naturally encompasses negative interest as well.
Leaving aside legal obstacles (in some countries), the by far biggest problem (based on my banking experience only) is that you would predominantly charge this tax for low income people.
@Alex Did you think who is entitled for a loan? The person who already
you completely ignore that most people can in fact afford a house. You can look at home ownership rates. So you either only care for the very poor (who anyhow do not pay taxes apart from some taxes like VAT that apply to everyone who can buy stuff - but than again, they must have money to buy stuff after all).
In reality, your proposal would make renting a lot more attractive for most people because if you had say \$20,000 (assume in a bank account for simplicity) and take out a loan of \$380,000 (borrowing a conventional loan — one available through or guaranteed by a private lender or either of two government-sponsored entities, Fannie Mae or Freddie Mac — requires a down payment of 5 percent or higher) your tax basis would all of a sudden increase to \$380,000 if you paid \$400,000 for a house based on your proposed scheme. Add a student loan, a car loan and a few other things the average John and Jane Doe have, and you end up paying a lot of tax, despite being highly indebted.
The people or firms that would remain to be home owners will be the more wealthy fraction of society. However, hardly any wealthy person has considerable amounts of their wealth as money in a bank account. In a simply example, if they had the \$400,000 in a bank account and would have bought a house for it, they would in fact no longer pay taxes (as opposed to the unfortunate individual that needed to take out loans, and now not only pays interest on the loans but also taxes on top of it) You can have a look at the current composition of wealth in the US. Combined with my simple example of buying a house, it should be clear that the wealthy will pay very little tax under your proposed scheme (even if you assume they would not change the composition - in reality they would avoid holding money in bank accounts). If you want to tax assets (everything from houses, cars stock ownership, art,..) you actually are proposing a wealth tax.
@1muflon1 interest is money to money mapping, is not ir?
@erik Here work and money is replaceable and a kind of one-to-one
bijection and reversible mapping. The present tax system replaces work
with money, my question is can we replace money with money.
I guess you think of mathematical maps, but that statement simply makes no sense and no one working in finance, banking or law firms would understand what you mean in my humble opinion. Also, taxing income is taxing money because income is paid in "hard earned dollars" (that directly go into your bank account, after it was taxed - at least in most circumstances - in some cases taxation may happen afterwards).
Here, saving is not encouraging as the present crisis is related to an
imbalance of money in people's accounts.
I am not sure what crisis you are referring to? Also, what is an imbalance of money in people's accounts? From an accounting perspective, a balance sheet always balances, because for every debit, there is an equal and opposite credit. Lastly, discouraging saving is economically troublesome as well because lower savings rates lower the level of output (you can look at any growth model really). That unfortunate character needing a loan for his / her house may in fact not get a loan if no one saves. Taken to the extreme, all machinery and investment will also go to zero and we will end up as hunter-gatherers again.
If money to money was the system, the objection to the present system
would have, been "people won't work". Where the money will disappear
with the proposed system if govt restricts cash transactions? Present
Govt forcing the beggers to pay tax, (they beg as pay is not
compatible to price for all jobs).
I read this several times, and I still have no clue what you really mean to be completely honest. People will work, even if taxed because it is the only way to earn a living (apart from the relatively few who decided that long term unemployment benefits are enough to get by). If you beg and earn more than the tax free allowance, why should you not pay tax? What makes income from begging different from any other income? Since you write that pay is not compatible to price for all jobs, I assume you think the beggars chose their "profession" over a lousy alternative. If so, it makes even more sense to tax them, as they do something that is deemed more worthy than the alternative sources of income and are hence better off that way.
At least one statement is actually correct (for some countries)
if Govt restricts cash transactions like many these days?
It depends a lot on the country you are from though. Many countries do not have restrictions and the reason for these restrictions is to fight black markets and underground / illicit activities.
I have no idea how you can think this would have the potential to reduce inequality.
Wealth, ultimately comes from income earned. It is harder than you think to maintain wealth across generations. It seem that 70% lost their wealth by the end of the second generation, and 90% by the end of the third. The research is from a wealth consultancy The Williams Group and may not be 100% accurate but there are other studies, like from the top 1%, less than 15% comes from wealth transfers (mainly inheritances, but also including gifts).