Why? (I mostly agree but it's not a strong opinion)
- I think wealth can be created and isn't always a zero sum transfer
- I think we want to incentivize wealth creation
- I think economic growth constrained by protection for human rights and environmental destruction is the best way to improve the quality of life for the most people the fastest.
- I think wealth taxes disincentivize a lot of these things with knock on effects (forcing people to liquidate their company equity, etc.). It's also repeatedly taxing the same money every year eventually down to whatever the cap is.
I'd rather set taxes/caps at generational wealth transfer if you're going to try and incentivize something - might as well go after dynastic wealth and the children that benefit from it without creating anything. I think focusing on housing and land use/zoning would also directly benefit more people by fixing existing perverse incentives.
PG writes about some of this in essays, Tyler Cowen's book Stubborn Attachments was also interesting on the growth aspect (though wealth taxes aren't specifically mentioned).
Why do we think wealth will be better allocated by a government? This money is largely already taxed either via capital gains or income. I'd suspect a lot of our problems are problems of incentives and competing priorities, not of available cash flow for government programs.
That's my take anyway, I suspect a 'hate the rich' motivated reasoning position pushing the idea of a wealth tax more than any serious thinking about incentives and what it might do. It seems political.
(I am nowhere near the level where the proposed tax would start and probably never will be.)
Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset.
So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of equity in the company (so that you can control it) but no matter how loudly you proclaim that the market is overvaluing your stock the price keeps going up and now you have to sell lots of shares in order to pay the wealth tax assessed against your equity and you don't have a controlling vote anymore and your vision for your company just dies.
And maybe the hordes of people who think no single person should have a controlling share of a billion-dollar company are right - I don't know. But I'm pretty sure a large fraction of people who build companies (like Bezos or Musk) are doing it to build an enterprise, and not for the cash. Otherwise they'd just stop and have fun with their private jets at a certain point. So if a wealth tax were not going to let them keep control of their enterprise beyond the first decade, they probably would opt not to waste their time building it at all.
And maybe that's fine, but I'm not sure what society looks like in a world where people don't want to build companies.
I frankly think that the American model of free enterprise with reasonably few restrictions made most to improve the well-being of its population.
Arguably a wealth tax would create an incentive for everyone to do this which I would argue is probably bad since then the company controllers have less skin in the game.
Generally I think a wealth tax creates a ton of these perverse incentives with little true upside.
I'm a little confused about this though. If class A shares have all the votes (while most shares are class B shares), what prevents the market from valuing the class A shares at an extremely high value and the class B shares not at all? When the company finally gets big and stops growing, the source of its value to shareholders will be the dividends that it pays and it will be the voting class A shareholders that decide how dividends are allocated.
Basically they’ve thought of these things and controlled for them already.
Lots of people scream that we should tax the wealthy but I do not follow how you tax someone whose wealth comes from large ownership of a big company...?
Whether or not that is a good idea, I don’t know.
Fine, he pays some of that to the government, and maybe sells slightly more. I don't see the problem.
If, in fact, your wealth only comes from ownership in a company and you have no other source of wealth, then yes you would be encourages to sell your shares to pay the wealth tax.
I don't see why this is a problem. That's kinda the point of a wealth tax, that yes you do get taxed on your wealth.
[0]: https://www.reuters.com/article/us-space-bezos/bezos-is-sell...
And if I have my shares, I don't want to sell them. I currently own X number of shares of dozens of companies, I don't have IRS breathing down my neck to sell them, why should Bezos have them breathing down his?! I pay taxes when I sell my shares, not just due to the fact that I own them...
That's the point of a wealth tax, to in fact tax that checking account too. You seem to misunderstand how it would work and what the intent is. It doesn't treat your checking account differently from company ownership; both are wealth, a wealth tax suggests taxing both.
> I don't have IRS breathing down my neck to sell them, why should Bezos have them breathing down his?
You shouldn't if you're not wealthy (as in you have under 20 mil net worth). If you're wealthy, you can afford to pay a wealth tax, and your money will help those poorer.
Why shouldn't we be taking money from the rich and helping the entire country? Why should our country continue to have a wider and wider economic divide?
Anyway, the IRS absolutely would breath down your neck to give them money if you owed them taxes. If all your assets were stock, and you somehow triggered a large tax liability, you'd have to sell some stock to pay the IRS. That's already true. It's perfectly possible to trigger a tax liability larger than your liquid assets now, and have to sell stock to cover it.
But that's rare now. And with a wealth tax that would still be rare. Most people with 20MM+ net worth have liquid assets, or the ability to easily liquidate assets.
You're arguing about an edge case that almost certainly doesn't effect you in any way.
Yes, I would expect that if I had 100k shares of amzn (300 million dollars of net worth), and we implemented a wealth tax, the IRS would tell me "You have to pay us $300k or so" each year on that wealth. If that means I sell some stock, then sure. That means, btw, if I live 60 more years and gain zero more dollars of wealth, I still have 280 million dollars left of my original 300 mil. I still have plenty of shares left.
You clearly don't understand the point of a wealth tax or how the rate rises progressively with wealth it is if you don't understand why we'd be taxing ownership of wealth, and why this wouldn't negatively impact most people.
> If that is the case no one would ever buy any shares of any company...
I currently don't have over 50M of net worth. A wealth tax would not impact me, so I'd still buy stock just as I do now, with no difference. If my stocks did so well that I had millions of dollars, I'd now be able to pay a wealth tax, and have on problem with that. I'd also keep buying stocks if they got me from a net worth of almost nothing to $50M, and all I had to do was pay a small percentage each year along the way.
I used that number since that was the number the parent comment saw as being obviously too much already, so I didn't need to use a higher number.
I do think 0.1% would already be pretty appreciable. That's already several 10s of billions a year. The current budget for all of the IRS is on the order of 10s of billions now, so I really doubt adding that new tax would be a net-loss.
And, of course, once you have a wealth tax and the sky doesn't fall, tweaking the number up over time is easier.
To some degree, wealth taxes break down the idea of private property ownership. "Your right of ownership is secured by law, but if you own too much, we'll take some of it away." I know that's not the way it's sold. But that is one aspect of the reality of it. I am in favor of the continued existence of private property rights, and for that reason I don't like a wealth tax.
Also, such things tend to grow with time. You're going to tax those with more than a billion dollars? Seems OK, no relevance to me, and those people can afford it. You need more money this year, and you're going to tax those with more than 10 million? Well, I don't have that, either, but it's getting closer. Need still more money, and so you're moving it to a million? I might, by then, especially if inflation kicks back up.
On the other hand, you could make a reasonable case that the existence of a wealth disparity of the magnitude that exists today is a threat to our society, especially if it can be inherited.
So I lean against a wealth tax, but I can also see reasons for it...
Not easily convertible to cash.
Doesn't fix the government's spending pattern or plug its budget hole unless it resorts to full on expropriation.
Not competitive.
So if you try to game the system by not claiming a vacation home, it just becomes public property.
Thoughts?
The LLC with the innocuous name of 123 Main St LLC which is the owner of the property at 123 Main St definitely has an owner, and it might not be a tax resident because the LLC is owned by 123 Main St Limited in the Cayman Islands and the ultimate beneficial owner, who is still unknown at this point, may not be an American to begin with.
So just applying heuristics to "hey that house doesn't appear in our tax records get it boys" would create more problems than you think.
And this also circles back to "not competitive". If your country has problems with expropriation people will stop coming there, and others will leave.
But also note, the US constitution does protect against expropriation in the 5th amendment. When rich people start being the subject of civil asset forfeiture the 5th amendment will suddenly start applying again.
3 and 4 are the real problems with a wealth tax.
The fundamental issue is that the government spends too much money. The politicians and the voters who support them refuse to support cuts in the magnitudes necessary to bring that situation back in hand. Many don't even believe it is a problem. On top of all that, the programs they refuse to cut, at every governmental level, are exactly the programs that suck up the most money. Medicare, Military, Police and Fire, on and on.
99.999% of all voters are like the family in the financial advisor's office who are willing to cut the trips to Starbuck's or go to a cheaper gym. So they feel they are being responsible. But they tell the financial advisor that the kids' private school tuition and the $50,000 cars they drive are not up for discussion. (Lord help you if you have the temerity to bring up the biggest issue of all, the $500,000 house they live in. You better have you kevlar on for that discussion.)
What can you do with people like that?
Plus, there's other reasons to be skeptical of wealth taxes, capital flight is a real thing.
BTW, have you seen how expensive it is for high net worth individuals to renounce US citizenship?
Just on the face of it, sure if you're wealthier you have greater ability to move but that also means you probably like where you are because you chose to be there. Most of my high school friends dispersed around the country solely for job opportunities, not because they wanted to be somewhere.
[1] https://minnesota.publicradio.org/features/2011/02/documents...
> The New Jersey millionaire tax experiment offers a potent testing ground, given the magnitude of the policy change and the relative ease of relocating to a different state tax regime without leaving the New York or Philadelphia metropolitan areas. Using a difference-in-difference estimator, we find minimal effect of the new tax on the migration of millionaires.
God I hope not. How empty would we all be if we all wanted to have more money than the next guy.
Yep, that's why all of the rich people have left New York and California.
Judging by the amount of wealth in New York and California: obviously yes.
> Why wouldn't they leave if this wealth tax were suddenly imposed upon them?
Because they want what the taxes get them.
Can anyone provide some examples of it happening in an economy like ours?
[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1268381
[1] https://www.forbes.com/sites/jonhartley/2015/02/02/frances-7...
It's possible for someone to think that it's unfair for some people to pay a huge amount of taxes unfairly, without they themselves thinking "one day I'll be rich".
And fairness aside, there's the purely pragmatic concern that multi-generational wealth concentration is bad for almost everything— bad for democracy, bad for fairness in media, bad for civil unrest, etc etc. Is taxing wealth an effective way to manage this? Maybe, maybe not. But anyone who wants to critique it should probably be willing to support _some_ plan for controlling wealth inequality over the long term.
I think the picture looks quite different if you look at things like quality of life indicators— and then it's (surprise!) nations like Denmark and Switzerland which top the list. I suspect it would be even more stark if you were able to measure class mobility— the number of people who have at least +x% inflation adjusted net worth over their parents at the same age.
So yeah, it's a little bizarre (and a very US-centric view) to just assume that "success" on a national level and socialist policies are mutually exclusive.
So sure, the wealth tax would only be on "the rich" when it first starts out but I guarantee you the middle class will be hit by it eventually.
The thing is, that money which comes from the upper levels is extremely subject to the whims of those governments; it can fluctuate wildly depending who comes into power and what their priorities are. So without some guarantees around it, I can understand the municipalities wanting a stable source of income over which they have some agency, and out of which they can reap immediate benefit from growing the local economy.
Anyway, I'd love to hear from someone in Germany how this is resolved there; but I'd assume there'd need to be some pretty structured, long-term agreements around minimum amounts, percentages of new growth, and so on.
For the taxes, it's complicated, because there are some taxes for which the cities and states can decide the amount, and others (for example VAT), from which they get a certain fraction, but the amount is decided on the federal level.
Edit: Let me add: Property taxes are very strangely regressive. You pay it whether you rent or own, and there is a minimum apartment cost, so you'll always pay, while a low income might not be taxed at all. Then, often, there is a sudden jump from apartment complex to SFH.
I hope to be wealthy and not pull up the ladder behind me.
If you want to raise money or reduce inequality there are better ways to do it. Income tax, capital gains, inheritance, etc...
That's not evidence. We have right-wing parties in Europe too. They introduce right-wing policies when they have power, such as the above.
Is having saved 200.000$ in 30 years (not so bonkers) being rich?
I believe the problem is this: we hardly ever describe the end state. We don't define a metric that we look to achieve and then what we change about the policy when we've achieved it. So what happens is bloated bureaucracies become established and fight for self preservation, even if the mission they were on is complete.