The Dutch economy shows that taxes can't reduce wealth inequality [video] | Hacker News Reader

The Dutch economy shows that taxes can't reduce wealth inequality [video]

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6 pointsgpvos9 comments

Clickbait title. "Taxes" refers only to income taxes. Obviously, income taxes do nothing to huge, accumulated, generational wealth.

Edit: especially when you have individual families that haven't had an "income" in 200 years.

Interesting video. It mentions that family wealth isn't split up evenly among heirs. One (the oldest male?) gets the vast majority.

I'd like to learn more about this dynamic, especially in terms of what happens to the rest of the family. Anyone familiar with how this tends to work in Europe?

Isn't the solution to this to just mandate that a single person cannot inherit more than $100 million for their entire lifetime? Sure, you can keep your wealth, but you will have to split it among your family.

I wasn’t really looking for a “solution” so much as understanding the history. Imagine a family with multiple children and an amount of money below what you would consider problematic ($50 million? $10 million? $1 million?).

The video seemed to imply that it is a “tradition” (maybe that is not the right word) in Europe, going back many hundreds of years or more, that one of the children is chosen to get the vast majority of the estate and is raised and trained so that he or she is ready to take it on when the time comes.

I did a little bit of web searching and came up empty. My focus is on the point of view of the children that do not inherit and what becomes of them.

What can?

Wealth taxes, social safety nets, high quality education, programmes to combat anti-educational aspects of different cultures

The Netherlands has a substantial wealth tax though. About 1.6% of all assets, anywhere in the world.

It's a lot more complex than this, wealth taxes works similar to income tax[0]. The more you have, the higher the assumed return on investment. You only pay 31% of this. Only past 100k do you have to worry about a tax of 1.4%, and past 1mil this becomes 1.76%.

Additionally, even 1.76% is peanuts. Passive gains far outweigh 1.76%. The Dutch do not pay a wealth gain tax, either. This, together with loopholes to avoid paying taxes, shows why the Dutch are so unequal in terms of wealth, despite being fairly equal in terms of income.

[0]: https://www.financieelonafhankelijkblog.nl/vermogensbelastin.... (NB: Dutch source)

How is 1.76% a year peanuts? Isn't the assumption of "FIRE" that drawing 4% of your total wealth can last a life time?

1.76% would be paying 44% of your annual draw to the government. This would substantially alter the calculations of how much wealth you need in order to retire off of your wealth.

This also seems to encourage people with large net worth to constantly find gains above 2%, which is not easy if one wants to be conservative. With inflation at about 2% a year, the real loss to your wealth is getting close to 4% a year.

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