ML-Implode News - Soak Wealth, Not Income?

Bruce writes:

There is no combination of cutting expenses and raising income taxes that would actually be effective. There is an additional option.
The only alternative is a wealth tax. Anyone who has a net worth over $5m (or $20m, or chose a number) has to pay 1% (or 2%) of that amount, every year. It would be like a death tax, except you paid it while you were alive. Think - pre-paid estate taxes.

Warren Buffett is always complaining that he doesn't pay enough in taxes. The guy has a net worth of about $40b. If there was a 2% wealth tax he would have to cough up an extra $800m a year. That would shut him up quick; it would also solve all the fiscal problems.
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If a 2% wealth tax was applied to everyone who had a net worth in excess of $5m it would add up to about $700B a year. That's just about the right amount to get the budget to where it starts to make sense. This tax increase would not come out of current income, therefore the consequences to the economy would be muted versus a similar sized income tax increase.

One slight problem, Bruce. Since this "heavy lifting" would then primarily come out of the financial markets (stocks, bonds), we would most likely immediately see a crash in both (but especially stocks). Remember this "wealth" for most of the extremely-rich is in the form of paper securities, not actual cash-in-the-bank sitting around. So a wealth tax of this sort would invoke a large draw-down on stocks and bonds.

Now, we don't so much mind that. We think we need such a rebalancing (though would rather see it done via shift to a sound money system, not having the federal government hoover up even more of the private sector to mismanage). But the problem is, the powers-that-be (who are IN the class you suggest wealth-taxing) don't want to see the stock and bond markets crash. And make no mistake, even a credible threat of such a tax would crash financial markets, as the impact gets priced in -- to say nothing of the long-run "drawdown" effect that would be inflicted on financial markets.

With a Fed that has admitted a major (top?) priority is to goose stock prices, we don't see TPTB seriously entertaining such an idea.

Relevant:

Soak Wealth, Not Income? - Bruce Krasting