The Big Problem with Wealth Taxes | Hacker News Reader

The Big Problem with Wealth Taxes

nytimes.com

31 pointsBostonian110 comments

It's much easier to tax the poor, but you don't get anything. Marginal/progressive tax systems exist for a reason. The problem is rich people can afford to lobby (buy) politicians to make their taxes go away, which is why the IRS is continuously starved for budget. The IRS admits it cannot afford to audit wealthy people because it requires a lot of people and effort, so auditing poor and middle class people is the best they can do. Seems like the first thing would be to beef up the IRS budget.

increasing the IRS budget wouldn't cost money but would make money from tax cheats. political opposition to this has always been the most clear demonstration that congress is in the pockets of wealthy donors, in my opinion.

I totally agree. In its current state the IRS makes $4 for every $1 in its budget.

Why is that impressive? Those two numbers in a vacuum tell us nothing at all. Why isn't the IRS making $50 for every $1 in their budget?

Suppose we cut their budget by 50%, it's possible they've just been wasting money and now they'd make $8 for every $1 in their budget. Great! Suppose we double their budget. If they don't do anything differently they'll make only $2 for every $1 in their budget. etc etc.

There must be some component of their budget that is the part of the IRS that goes after potentially fraudulent tax returns, and presumably increasing or decreasing it will have a yield effect, but your figures have zero to suggest what that is or where the point of diminishing returns may be.

Broadly speaking, context-free numbers that don't actually imply anything (maybe more to the point cannot imply anything without more information) should be viewed with suspicion. :/

wat

more revenue from better enforcement is not only logical, it has been the conclusion of several reports from various agencies. the suggestion of twofold increase in revenue collection from half the budget is a farce.

Okay, but he didn't point to any reports from any agencies. He gave a stat that by itself backs no position on anything.

I don't have the kind of wealth that you're talking about, but after earning a high salary, I started using an accountant and somehow they managed to turn my tax return into >100 pages. As someone who used to do their own taxes, it's difficult for me to read.

I can't imagine how complicated a billionaire's tax returns are with an army of accountants.

Why don't they tax on purchase then? A differentiated sales tax based on the necessity of the item.

Morally and practically I think the best thing to do is implement a confiscatory estate tax.

I don’t think it’s immoral or particularly hazardous to democracy for individuals to amass a large amount of wealth in their life time.

The danger is when people then pass down these massive stores of wealth to their children and grandchildren who have done nothing to earn it, and yet will be able to use it to distort the political system for their personal gain or simply sit idle while accruing more wealth through rents and interest.

Wealthy people should be able to pass down no more wealth to their kids than would be needed for them to live a decent lifestyle without needing to work, or to continue a family business of reasonable size for another generation, but no more.

> I don’t think it’s immoral or particularly hazardous to democracy for individuals to amass a large amount of wealth in their life time.

It is when the political system runs entirely on money and one rich elderly person can have a huge influence on public opinion.

> It is when the political system runs entirely on money and one rich elderly person can have a huge influence on public opinion.

Then, I'd argue, the root problem is with the political system itself.

Let's pick an example that a lot of people think have a negative influence on politics -- the Koch brothers. They inherited their wealth from their father, Fred.

Recall that Warren Buffett has repeatedly called for higher taxes on the wealthy. Back around the GFC in 2019 he told the press "The 1% are at war with the 99%, and they're winning, big time".

I thought the same thing so I looked it up. Sander’s proposal to increase the estate tax to near Clinton era levels and recover some of the trust loophole would only recover about $300 billion over the next 10 years (about 1% of federal revenue).

Warren estimates her wealth tax will generate $2.75 trillion over the same time period. I’m skeptical she’ll hit that target but it’s still many times greater.

The Atlantic says Medicare for all would cost $34 trillion over 10 years.

yes but it also has the added benefit of preventing heirs of plutocrats from hijacking democracy.

There are so many loopholes involving trusts, corporate ownership, family foundations, and offshore assets that the effective tax rate is actually not that high.

The Walton family is a good case study.

So heirs are still gonna heir, for the most part.

> I don’t think it’s immoral or particularly hazardous to democracy for individuals to amass a large amount of wealth in their life time.

"Large" is hard to represent when it's multiple orders of magnitude more than the righest we can relate to. $27b in rolls of quarters put end-to-end is enough to go around the entire earth.

I think an Elephant is "large" compared to a human.

The size of any continent is already a lot more than "large" compared to a person.

Here, "large" is more like comparing the diameter of Jupiter to your own height (80 million times the average person). That adjective doesn't quite do it justice.

Morally and practically I think this point of view is repugnant. And it is easily defeated by a life insurance policy. Simply buy a life insurance policy equal to your entire net worth, die, give the payout to your heirs tax free. Thank you Warren Buffett.

Just want to point out that almost all Americans already pay a substantial wealth tax. Most of middle class wealth is in the value of their homes and that wealth is taxed as much as 2.4% per year by states and local government in the form of a wealth tax called a property tax.

And no, you don't get out of that wealth tax by renting. Renters are paying their landlords property taxes as part of each months rent check.

Given that, a 2% tax on billionaire wealth doesn't seem unreasonable. Shouldn't their wealth tax burden be the same as the middle class? Yes it would be complicated but not nearly as complicated as assessing the value of millions of homes in the US (and commercial property, vacate land, etc) and sending out a yearly property tax bill, handling appeals and then collecting.

The experience of the wealth tax in france is that it costs almost as much to collect than what it collects, plus creating unintended effects.

Turns out it is not straightforward to estimate what every asset in a country is worth.

That's why I think more appropriate way to think about wealth tax is not actual practical implementation, but more like a goal.

So no adding together all wealth, but tax the value of real estate instead of the rental income. Tax market cap of public corporations instead of their profit. Tax cars, boats and business jets. Tax bonds and other securities on their value instead of revenue. Etc. All these ibdividual taxes are going to have issues to be sorted out before implementing, bit I argue that as individual taxes, the issues are way easier to solve than for one generic wealth tax.

That does sound reasonable. People game the current system to the maximum. How would you expect people to game a system of taxing the obvious assets, and what could be done about it?

The way they would game it would be by building unpermitted structures. Read Hernando de Soto’s mystery of capital - he talks how this happens all over the world as a way to store wealth. The problem is it can’t be financed so the capital is stranded and it’s unsafe - many years ago there was a small earthquake (maybe a 6) in turkey and it leveled the region despite earthquake building codes that had been in place for decades. If you had an old structure it survived, the new ones were decimated. Why? The unpermitted buildings avoided the building code regulations. Anyone remember the last time LA had a six earthquake... that’s right you don’t because no one in LA cares about a six because we haven’t yet destroyed our economy through perverse taxing and over regulation.

Wouldn’t taxing wealth reduce the real value of properties?

Say you have a 100 acre farm[1] valued at $100 and produces $10 of goods annually. If you start taxing on the $100, no one is going to pay $100 for the farm once a wealth tax is implemented as now they are taking on tax liability that previously didn’t exist.

[1]for the sake of argument and illustration, were ignoring property taxes which are like wealth taxes.

Is that a problem (within reason)?

Depends entirely on what the tax rates are and what other conditions apply. Pay 1% tax of a dollar, collect $10 in agricultural subsidies?

Besides, for residential property, stemming the unsustainable increase in value is also a desireable goal to make it more affordable.

Alternatively, it could create incentives to develop and use existing property for higher productivity applications.

I see it being regressive and encouraging small farmers to sell out to large operators who can more economically scale production.

They already compete under the same parameters before, so this should be unchanged.

Not if the pressures pushes industry toward “higher productivity applications” as outlined by patent commenter.

Small farmers don't want higher productivity already?

How? They can’t leverage the same markets they can’t leverage economies of scale, etc. A conglomerate can find new markets when another one dries up. A grocery store closes, it’s not easy for s local farmer suddenly find a new buyer, for example.

I understand that. What I'm pointing out is that the small farmer already needs to cover all expenses through their sales price, which already is competing with conglomerates capable of much higher economies of scale. An expense increase for both parties won't affect the dynamic already in place.

You'd be surprised. They certainly want higher yields and returns, but many people can be resistant to making the kinds of changes or long term investments to actually realize those goals.

Corporate/bureaucratic governance is arguably more prone to doing the sorts of bloodless cost/benefit analysis that can push productivity, while smaller family farms might be more focused on just getting through the day-to-day work.

That plus a lot of productivity gains come from returns to scale and logistical capacity that you need to be at a certain size to realize. It's just out of reach for smaller entities.

None of these facts differ between a before/after of the discussed scenario.

The ship sailed on this decades ago. "Small farms" at this point are just sticking it out as a hobby instead of being able to make a livelihood out of it. They're mostly contracted out to BigAg now except in places where there is a strong farmer's union/Co-Op scene.

> Wouldn’t taxing wealth reduce the real value of properties?

Implementation dependent.

You may use "net worth": so if you have a $1,000,000 property but a $600,000 mortgage, your net worth $400K. Many of the proposals for the US start "higher" ($32M for Sanders, $50M for Warren) which probably would not hit a good portion of the population.

> Wouldn’t taxing wealth reduce the real value of properties?

Yes. That's almost like magic. You get cheaper properties, the property tax revenue is used to reduce your other taxes so your net income does not decrease (on average, of course). So you actually get more money to spend otherwise than into your mortgage. Almost like alchemy. Turning taxes to wealth...

You don't get reduced taxes though, so your net income does decrease. The wealth tax isn't going to take the place of any other tax, it is in addition to the taxes already in place. Whether you believe in the legitimacy of the wealth tax or not the people paying it won't be better off, nor will most of the people not paying it (disregarding benefits of the programs funded by the tax).

If the other taxes do not decrease, then that means you get some other benefit where the money is democratically being allocated. Tax money generally does not just disappear in a modern relatively free society.

(Of course you can argue that western democracies are kleptocracies by default and all taxes just disappear to the pockets of the thieves and you get no benefit from them, but I personally do not consider that as a feasible starting point for a reasonable discussion)

That's why I put a disclaimer in parentheses. I was responding to the claim that a wealth tax would result in unchanged or higher income, which is patently false. My answer to getting some sort of "benefit" is programs like corn subsidies, which are not democratic, and are one cause of the obesity epidemic in the US, because corn syrup is shoved into anything and everything, fed to animals, etc. Again, not arguing against the wealth tax, just the assumptions behind taxation that are being made.

Land value taxes, estate taxes, and capital gains all sort of approximate the effect while being easier to administer.

They don’t soak the rich in quite as targeted a fashion though (aside from the estate taxes).

Is that inherit in wealth taxes, or simply how France chose to implement it? Thomas Piketty is from France after all, and he is advocating a wealth tax.

Another French economist is 'consulting' for / advising Elizabeth Warren:

* https://www.newyorker.com/news/the-political-scene/the-frenc...

A review of the economics literature:

* https://eml.berkeley.edu/~saez/saez-zucman-wealthtaxobjectio...

It is important to note that business-related property (i.e. your firm, if you also work in it) was not taxed; primary residence value was 70% of the market value; art was not taxed; many investments in small companies or other investments that the Government encouraged were less taxed as well.

In the end, this loopholes and others lead to a very complex tax (thus high administrative costs) as well as a much lower tax base.

I think it was Planet Money that had an episode about wealth tax where someone had an interesting solution to the problem of the manpower involved in enforcing it: simply let the owners claim the value of their assets, but let the government reserve the right to purchase the item at whatever value is claimed. Theoretically this would lead to owners being as accurate as possible.

I know there are probably a lot of gotchas with that approach, but I really appreciate the elegance.

Wouldn't that just be a free long call for the government?

Valuations can change pretty fast. If you declare your s&p500 index fund portfolio with the most recent value and it goes up 10% over the next few month until the IRA reviews your wealth. Are they allowed to buy it at the declared value?

Yes; another one of the huge problems with this proposal is that it neglects that many assets have time value.

Unless the government has to buy the asset the instant you propose your valuation, you’re just being forced to write a free, ATM option to the government.

Illustrative example: The S&P 500 index is currently about 3092. An "at the money" (ATM) option is one where the strike price of the option is equal to the current price. A call option for SPX at 3095 expiring on 12/06/2019 is currently selling for $37.90 on the CBOE.

So basically you're giving away >1.2% of your investment by allowing the government to buy it at a price you quote today but a month later. Alternatively, you have to over-state the present value of the investment and pay more tax.

Easily defeated as an unfunded liability which is illegal. Otherwise the government would have to fund these purchases with budget allocations. The value of US real estate is ~$30t for example.... which by the way should give some sense of scale for the absurdity of trying to fund Medicare for all.

A wealth tax is rather similar to inflation...

A 2% annual tax on wealth causes my bank balance to go down by 2% each year. A 2% inflation causes my bank account to become 2% less valuable each year.

The only difference is property (land, cars, etc.). Thats super hard to value anyway, since without selling an item, you can't be sure what it would sell for.

Would you say that the majority of your wealth is in your bank account, as opposed to being in housing or a retirement portfolio of stocks and bonds?

I'm not following your last statement. Land is already taxed on its assessed value, which changes regularly, and things like cars have easy to find residual value estimates from third parties. You wouldn't necessarily get the true market value to tax, but getting some baseline value wouldn't be particularly difficult. The only exceptions I can think of are really intangible value stores like artwork.

> Thats super hard to value anyway, since without selling an item, you can't be sure what it would sell for.

Actually it's quite easy. For land, governments do it all the time:

* https://en.wikipedia.org/wiki/Land_value_tax

For many other type of property: what is the insured value?

Certainly not exact, but probably with-in an order of magnitude of accuracy, which may be 'good enough'.

This is a really good point actually, insurance firms are already licensed and regulated. You could effectively implement a wealth tax simply through added taxes on insurance policies.

The suggestion that I've heard to solve this problem is if the wealth tax applies to you, you have to offer to sell your property to the government (not all of it, but you could claim so much under a threshold that isn't being sold, this isn't the full idea).

If the government believes that it's worth more than that, they are allowed to purchase it for that price, and resell it at auction. If they think it is reasonably priced, or over priced, you have to pay the wealth tax on your proposed price.

This will drastically simplify the problem. There won't be a negotiation on the price, there would be two independent evaluations, rather than one complex one where there's a large amount of back and forth.

I don't know where I heard it, but it was mentioned offhandedly as a simple solution to valuations for a wealth tax.

That's assuming that a sufficiently detailed inventory to allow appraisal is reasonably possible; and then that the government will pay the costs associated with valuing all the assets.

And then don't asset owners end up paying a surtax on their emotional attachment to their property? i.e. the only way I can hold onto something I would never want to sell is by paying a "wealth tax" that is decoupled from its market value.

That seems fair to me because it results in a tax based on how much the property is worth to you specifically. The "value" may be inflated from real market value, but as long as that is true for everyone it doesn't matter.

Also if it's too much of a burden to value all these assets, you can list them publicly and let people bid. If you expect the government to protect your ownership rights, I think it's not too much to ask that you list your major assets.

>major assets.

Such a scheme could also require you to list a value of "all unlisted assets". If you try to hide a gold bar by lumping it in with all your trash, then the government can buy out and auction "all of razorunreal's unlisted assets" as a job jot. Companies would pop up specialising in identifying people with hidden assets to profit from them.

> And then don't asset owners end up paying a surtax on their emotional attachment to their property?

You always have the option of letting the government buy it from you for your declared value, and then buying it back at auction for actual market value, potentially making a profit if the government were wrong.

This was a problem for the federal income tax as well, which was solved.

Yes, but solved only by passing the 16th amendment, which specifically authorized the federal income tax.

The article is, in a round about way, arguing that a wealth tax would need just such a constitutional amendment as well. And in today's political environment it would be much easier to just hike the existing income tax rates than obtain the majorities necessary for passing a constitutional amendment.

That won't do much to combat wealth inequality though, because the ultra-wealthy typically do not have high incomes, at least relative to their overall wealth.

Just 13 states is enough to block it, with a population of 16 million, or less than 5% of the US population can block an amendment.

For the income tax, there was broad based support for a Federal income tax from both left and right, liberal and conservative, business and labor, rural and urban. Without an income tax, the government was still dependent on taxing alcohol, so the temperance movement backed it, as did those wanting a strong military, and business who didn't want excise taxes to pay for all spending backed it. Small states backed it. Big states backed it. Rural states backed it. The current system of trying to fund the entire government on sin and commerce taxes was hated by everyone.

Moreover at the time, the pro-income tax crowd could promise that only the top 1% would pay any income taxes, and so get the overwhelming support needed for a constitutional amendment.

Although Warren is trying to play the same game here, people are not gonna be fooled again by the "only billionaires will be taxed" line.

At least, as long as 5% are not fooled, it wont pass.

You're saying that reverting the 2017 federal tax cuts, which overwhelmingly benefitted rich people, valued at some trillion dollars, financed by borrowing (vs offset with spending cuts), is a bad idea because non-rich people will have to pay a few bucks more?

So you're saying that you have difficulty converting letters to words in your mind and so will just invent a comment and then proceed to come up with your own take about it?

Is this is a good use of your time?

In that case, Why did you say that dogs should be forced to eat cats? I think that's a terrible take, and pretty irresponsible for you to advocate for it.

I'll agree that I'm not smart enough to divine your meaning. Apologies.

Although Warren is trying to play the same game here, people are not gonna be fooled again by the "only billionaires will be taxed" line.

I'll only add that I remain baffled when people support tax cuts for other people.

A preferential tax cut for me is a tax increase for you.

Wow, there is a lot to unpack there.

Your assumption that opposing the introduction of a new type of tax is equivalent to advocating for a tax cut is false.

You assumption that the total tax base is constant over time and thus advocating a tax cut for you is equivalent to a tax increase for me is false. Easily dispelled by looking at historical data, which shows tax share of GDP is not constant.

Your assumption that the economy consists only of two people, you and the billionaire, so that a tax cut for one is a tax increase for you specifically is false.

Your assumption that it makes no matter whether something happens at the state or federal level is false.

Your belief that it doesn't matter whether a politician misrepresents a policy ('only Billionaires will get taxed to pay for my healthcare plan') as long as you agree with the policy is reprehensible. Truth is important in and of itself.

I could go on, but you are living in a completely different reality from me.

Still no answer about 2017 tax cuts.

Your "rebuttal" ignores debt over that time span.

You also add a lot of assumptions about assumptions. In the interests of discourse, we'll give you partial credit for participation.

I'm extremely skeptical of taxes that try to take a large amount of money from individuals for two reason.

One is psychological. I make a small amount of money relative to Jeff Bezos. If you root under my couch cushions you'll find nickles and dimes. Naturally if you do the same for Jeff you'll find $100 bills and stock certificates worth thousands of dollars. Except you don't. Because on some level if you ask Jeff if $1000 is a lot of money he'll say yes. People know that some amount is a percentage of their totally wealth but they also understand what an amount is worth in absolute terms. And they're jealous of it in those terms.

The other problem I have is that tax avoidance is a fixed cost. It's the price of a tax attorney or more cynically a congressman. All three of the groups - the taxed, the lawyers and the congress people - have an understanding on that. You don't pay %10 of the tax to avoid the tax - you pay a set amount to avoid it. As the tax grows larger the incentive to avoid ratchets up.

Yeah, I never liked the idea of a wealth tax because it seemed overly complicated and open to manipulation. You’re taxing an assessed value of things that people say they own? This seems like property taxes, but worse, and rich people fight property tax valuations more frequently.

Interestingly the paper they cite for more-constitutional alternatives to a wealth tax actually includes a wealth tax in its suite of options and argues in favor of the constitutionality of a wealth tax (p 25)

E: I should add it disagrees with the central argument that this would be a “direct tax” and mentions ways the wealth tax could itself be structured to give the Supreme Court less of a leg to stand on. Personally I’d rather run a candidate that would even bring this fight in the first place. Maybe if it’s on the news then the >99% of viewers will realize that the <1% are able to beat them down easily in any legal fight imaginable despite their incredible small numbers and harmful distribution preferences.

Instead of taxing individual wealth, far easier and constitutionally sound to impose a corporate tax as a percentage of total stock value.

Let the markets determine the value of the stock, then calculating the tax is a few minutes' work.

Most people who get really rich do so by owning stock or shares in a corporation, partnership or LLC.

What about privately-held stocks?

Sounds like it would be a big incentive for companies to stay private as long as possible.

While not a viable way to actually do things, it is fun to imagine crazy unicorns like WeWork being taxed on their outrageous valuations.

Many privately-held companies sell stock, and their value can thus be calculated.

For those that do no stock trades, a gross income tax would be a simple alternative.

Seems like a strategy could emerge to do private sales at well below estimated value, in order to game this system. You could make it illegal, but it would be incredibly hard to prove (and harder still to detect).

Seems like such a strategy would already be illegal as a means of avoiding capital gains taxes.

It would also have the side-effect of destroying the company's valuation and thus its credit rating.

Interesting proposal, but LLCs do not always have shares of stock in the normal way. Trusts, which are another common vehicle of the wealthy, would also be immune from this. You would get a pretty good take from the richest ~10% of people, though [1].

[1] http://money.com/money/5054009/stock-ownership-10-percent-ri...

LLCs have membership shares, and large LLCs and partnerships generally have well-defined buy-in and cash-out values.

Clickbait from academics makes me sad. My issue is with the headline.

The probability of something making it through Congress and getting rejected by the court seems pretty low given the historical precedents.

That's not fair. The authors probably have little to no say in the headline. I thought the content of this op ed was among the best I've read in the paper for a long time.

> The problem, alas, is the Constitution.

It’s not much of a stretch to think the title was their idea. I’d grant that the paper may have added the word “big”. It has their name on it.

Sounds like FUD to me

Politicians' pronouncements and promises on the campaign trail are the actual FUD (or its positive equivalent) IMHO.

Exactly. We write our own laws. If need be, we'll write this into law.

And after the Supreme Court strikes down your law as an affront to the law of the Constitution, perhaps you'll pack the court with flunkies who will rubber-stamp those laws as well, and try again.

Why couldn't we just increase the sales tax especially on the goods that are consumed by the upper/upper-middle class?

Likewise, let's eliminate as many of a tax shelters used by the 1%, as well as add luxury taxes to the financial planning services only the uber wealthy can afford.

As a member of the 1%, please tell me more about the tax shelters that I'm using? The vast majority of salaried employees have essentially no options at all for sheltering from tax.

Right... but you wouldn’t know that until all the deductions you used to have are wiped out because you make too much... and then you get AMT’s for added insult. And it’s not 1%... I don’t know the % you’d have to be the but the deduction wind down around $175k in w2 income. That’s hardly bezo’s territory. So let’s say you make $175k and have been thrifty and done a ton of saving and own your home... so now on top of that you’re getting wealth taxed? You know what will happen- this will decimate the white collar servant class in states like NJ where property taxes already exceed 50% of ones mortgage payment AND you can no longer deduct local taxes from your federal return... ever notice the people complaining the tax cuts unfairly benefitted the rich are the ones who already made too much to benefit from the doubling of the standard deduction (ie >80k) but too little that the removal of the state tax deduction really hurt (<$175k)... and yet these same folks somehow think the wealth tax won’t be for them. Dream on... dream on..

Curious that you're the first to mention an obvious first step in the right direction: Heavy tax on non-productive consumption and assets, a/k/a luxuries.

Nobody "needs" a penthouse suite in Vegas, a 100 foot yacht, or a Ferrari. Why not start there?

It's been tried. You wind up putting all the people who provide those goods and services out of work.

https://www.washingtonpost.com/archive/business/1993/07/16/h...

... because (almost by definition) the vast majority amount of concentrated wealth is never spent, and if you really want to raise a lot of money how is that going to work?

10,000% tax on mega-yachts and private jets?

First of all all wealthy buy expensive land/real estate. We can start by that. They buy a lot of luxury goods as well. It does not even have to be aimed at uber wealthy. We can start taxing gas more for example.

Because millionaires don’t eat a thousand times more food than “thousandaires.” Rich people don’t spend their money in general, they invest it, and then their children inherit it.

Fine if you want to levy a huge tax on yachts, but very few people who could afford one have the inclination. And from what I gather, those who do want a yacht buy it in Italy, not the US.

If you really want to tax the things rich people buy, then start with a land value tax. Rich people buy huge amounts of real estate. Taxing it at its fair, unimproved value would be ideal [1].

[1] https://en.wikipedia.org/wiki/Land_value_tax

Wealthy people also like to buy up large amounts of undeveloped land for conservation purposes. I’m not sure why they don’t just say they are jacking up income & capital gains taxes, and getting rid of tax-free asset transfers to non-profits.

I still haven’t seen anyone estimate how much Amazon’s value would drop if Jeff Bezos has to liquidate 6%+ of his Amazon shares every year. Who is even buying those shares? One could claim, well the existing trading volume would support it, but these predicted, yearly fire sales are going to be happening across all asset classes by the ultra wealthy. We may just be switching from paying for current consumption with IOUs (Treasury bonds) to transferring ownership of American assets to foreigners and thus future income.

I don't know why you start buy giving an irrelevant example and then give another that agrees with my point but yeah we can be creative about what type of transactions we want to tax.

Put sales tax on political donations over a certain amount. After all, you're buying a politician.

As if there were only one "big problem"

  - incentive effects
  - investment effects
  - asset flight
  - valuation
  - avoidance
  - breaking up going concerns (small business/family farm)
  - the fact that it hasn't worked anywhere

Oh, yeah, and as they said, it's illegal.

The other problem with wealth taxes is that they don’t work. If we tax wealth beginning at 50mil suddenly we will have tons of 49millionaires. Just imagine if the wealth tax began at 50k rather than 50mil. The hottest growth job would be tax lawyers.

Only a poorly designed wealth tax would have that property. This is exactly why progressive tax systems use marginal rates. People wouldn't stop saving at 49 million when they had to pay tax of 1% on the money above 50 million. they wouldn't stop at 99 million if they had to pay 2% on the parts above 100 million.

A lot of people don't understand marginal tax rates. If the population you are taxing doesn't understand the tax system, they will behave according to their understanding of it, rather than reality.

I have met plenty of people who say "don't give me a pay rise, I don't want to hit the 40% tax rate", even with a marginal tax scheme with no discontinuities.

Someone with a net worth of $50 million should understand marginal tax rates, or at the very least be able to hire someone who does.

You can offer to take the bullet for them. Win-win!

That's not totally illogical.

Generally pay raises come with an expectation of effort and commitment. Maybe the people saying no don't think the after tax amount covers the increases in those things.

The issue isn’t that people wouldn’t try getting richer above 50 mln, the issue is that they would try to make it look like they have less than that to avoid extra taxes. Most obviously, a couple worth 98 million can get divorced and, voila, each of them is worth 49 million and they completely avoid the tax. These effects make it difficult to rely on the supposed revenue wealth tax is designed to collect.

Wealth tax starts well below 100k in most Swiss cantons and it doesn't cause any particular issue.

However there are no capital gains taxes and rates are mostly around 0.4%. There is an equivalent to property taxes where a virtual income of your own home is taxed. It would probably be equal to a 0.7% property tax.

That’s because of all the non-Swiss who domicile in Switzerland but earn income outside of Switzerland. But this example does serve to illustrate that a wealth tax in US won’t be restricted to the “rich” forever... eventually almost everyone will pay it.

Lump sum tax deals for foreigners have nothing to do with wealth tax really.

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