> I agree that a wealth tax is not the way to go.
Why not? A tax on wealth, even a small one, is the only mechanism to avoid a long-term drift towards a feudal-like state of society.
Why not? A tax on wealth, even a small one, is the only mechanism to avoid a long-term drift towards a feudal-like state of society.
Make the owner declare its value, tax it at the value. But anyone can buy it at that price. If they want to keep it, they'll need to value it correctly, and thus it will get taxed correctly.
I don't think anyone would have much of a problem with the simplistic scheme applied to rare art though.
One can imagine that public charities or government assets for example are exempt from such a scheme (since they don't pay tax anyway usually).
How long until some rich art collector starts a charity to hold their art and protect it from being auctioned?
I'm not a lawyer - but it seems like one obvious factor would take into account where the artwork purchased by the charity resides. Is it in a private residence? A freeport? Probably not really a charity.
Is it hanging on the wall in the Art Institute of Chicago? Might be fine.
Then the question is what happens if the charity tries to sell it back to a private collector at some future point. Might be allowed as long as back taxes are paid assuming some appreciation schedule.
I think the more general point is that policy is _hard_, and to assume that something doesn't work because you've thought about it for 2.5 seconds is probably a bad assumption to make. Most of our existing laws/policies would be similarly easy to attack if distilled to one sentence. There's a reason actual policy and laws are really long.
You however, seem to think that because you can find a corner case in a two line proposal, the whole thing has no merit.
I have to choose a price for all of my assets and then anyone could just be like 'yeah, I'll buy at that price' and take it from me? What if I bought the assets for the hope of it maybe being worth something in 5-10 years? Do I prematurely announce 'yeah, it's worth the price in 5-10 years that I hope it will be', and pay an enormous tax on something that's not a guarantee it will ever go to that price, just to keep other people from buying it from me if I announced what the market value is now? (And also I'm not allowed to keep any assets at market value unless I announce it's worth more to me?)
Ugh. Never get in a position where you could feasibly propose this in government, please.
I wasn't proposing that this become policy for all assets. Would it allow you to accurately assess the price of rare high valued art for the purposes of a wealth tax -- yes. It would also allow you to value other assets as well, but there are drawbacks.
I don't think your example of speculation is particularly good example of a drawback though. If you need to set the price at X so that someone doesn't buy it from you now, then that means its value is indeed just below X (assuming you've set X correctly).
If you're the only person in the world you thinks that the value of your asset will be 10X in 10 years, then you can safely set the value at X now and nobody will buy it from you. If you aren't the only person in the world who thinks this and someone is willing to buy it from you now for 2X, then I guess the value of the asset right now is 2X.
My fridge? My dog? My shoes? My car? My bike? My boat? My model railroad set? My grandmothers ashes? My underwear? Oops I accidentally undervalued my gaming computer on my taxes and now people are knocking on my door.
You'd end up with a document 3 million pages long and vengeful neighbors and exes buying each others items to fuck with each other. You're calling it a strawman argument, but these are actual things that would have to be addressed.
No amount of "delving into 150 years of research" gets around all the massive, massive holes in your ridiculous idea.
For example, you could easily say that only assets that would be declared as having a value over X amount need to be declared in this way. Choose X to be somewhere in the neighborhood of a house, and you would get almost all the value of such a policy without any of the drawbacks you just listed.
Does my collection of rare coins count as one asset as a whole, or individual assets that are each under X amount? Who decides what my random painting is worth so I know if I have to declare it? What happens when my asset depreciates?
Also, once you go to X being "somewhere in the neighborhood of a house" you lose a TON of taxable income with this policy to the point where it's probably not worth it. You're not going to gain much money taxing a few mega-yachts and rare paintings, especially when you have to include the money spent dealing with more complicated taxes and audits.
We can just raise income and capital gains taxes instead and it's a whole lot easier. Wealth taxes that include assets are so fragile and complicated.
I also think you're making a poor estimate of what the distribution of wealth looks like. Yes, there are lots of small items, but the vast majority of wealth is stored in items/things/land/etc. of significant value. Perhaps more than anything it is stored as equity in companies. For income taxes the top 1 percent paid a greater share of individual income taxes (38.5 percent) than the bottom 90 percent combined (29.9 percent). For wealth the distribution is even more skewed.
I agree there are a lot of things to figure out. That was and is true of our current system too. At one point the rules for all its loop-holes didn't exist and they had to be created and that didn't happen overnight.
If your asset depreciates, then you say its worth less next year. You decide what your random painting is worth. If you don't report an asset that should be reported, I can see multiple mechanisms:
(1) You sell it for more than X. At this point it becomes clear it should have been reported and back taxes are owed. (2) You bought it for X. If you don't report, questions would be asked. (3) There is no record of purchase and you never sell it. You might avoid paying taxes. I'm not sure what assets of significant value (over $500K) would fall into this category.
I don't have a great answer completely off the cuff about how to deal with things like a collection of rare coins. Perhaps the best answer is the easiest answer: they are just treated separately.
Sorry, what? Taxes should always be about raising money for various projects that benefit the country. If we can't see eye-to-eye on that I don't think we'll find common ground here. I'm not looking to punish rich people for being too rich. I'm looking to fund public projects like healthcare, infrastructure, and education.
I think raising money through the tax is important, but I think a more important long-term function of a wealth tax is to ensure that large fortunes eventually revert to the mean rather than sustaining in perpetuity for generations. (Unless they continue to be invested with above average returns for generations.)
Also - there are many taxes that exist not for the purpose of raising revenue, but for the purpose of a policy goal. To deny this would be to deny how a great deal of how modern public policy works.
But I'm willing to read more about the idea, if you have an article or two that makes a good case for your proposal, please post and I'll give it a look.
I saw in another comment someone called it the Harberger tax, and linked to a 66 page paper that I'm just not going to read for the sake of an internet post.
I could have been less antagonistic in my reply, I apologize for that.
I do think you're overestimating how well people can judge, individually, what something is worth accurately on declaration, both now and in the future, especially if it's an asset they don't ever want to part with.
But again, I'd be happy to read articles from experts that make a case for this.
Also a video here: https://www.youtube.com/watch?v=uj186urDU8c
Neither of these is particularly short and still don't address all (or even many) of the practical issues. As with most real policy and law, I don't think something can be both short and cover all the real world cases. There's unfortunately a reason most laws are really long.
I believe the chapter of the book addresses the issue of how will people know what values to set. In addition to the solution proposed in the book, another alternative (of mine), is to allow people to pay some amount of retroactive tax. Let's say someone tries to buy the asset from you for your set price, but you don't want to sell. You can raise the price to some amount the buyer no longer wants to pay, but since you were underpaying taxes on the asset, you need to make them up.
Would such a proposal probably mean people set lower prices than are correct -- yes; would it still make sense for things like homes -- yes.
Also specifically for houses, at what point are you expected to make such a declaration? You don't really own the house until you've completely paid off the mortgage on it. Until then it really belongs to the bank or mortgage lender. So does that mean you're free to not make such a declaration until your 30 year mortgage is up? And what if you take out a second mortgage on the property during that time?
In a case where you have a collateralized loan to purchase the asset, I imagine the lender could require the value you set to be at least the value left on the loan. (But the lender probably shouldn't be allowed to set the value beyond that stipulation.)
I also want to say that I definitely do not have all the answers for all the possible policy issues that might or will come up. I enjoy trying to think them through, so the first attempt might have problems and the cycle of finding those problems and fixing them will eventually lead to something that hopefully works well.
Maybe someone knocks on your door and says "I just bought your house. Get out." That would be pretty unpleasant.
Or, more on topic for this site: maybe they do that with your startup.
One thing I want to point out, the reason why 'wealth taxes have always failed' is because it's against the interests of the wealthy, and the wealthy are powerful. Look how scared republicans are of grover norquist and the billionaires that back him. It's hard not to argue the same thing is happening in the EU as well.
I especially love how the Koch brothers effectively funded an astroturf campaign that hijacked the republican party, to get blue collar folks to argue against taxes on the 1%. That is some rich irony.
If there is no form of weath + inheritance tax, a feudal society is unavoidable.
Even if difficult, we'd better try.
What exactly do you mean by this? Holding wealth in bars of gold doesnt need to employee anyone (if you have enough of them, you might want security personnel, but you could also just own a Gold ETF or something).
We also don’t need to make perfect the enemy of the good. We don’t need to account for absolutely every piece of wealth if we cover the big ones. We can also continue to revise these tax policies as new loopholes are discovered and exploited.
Oh bless your heart.
Major components of the economy are not valued regularly, e.g. private businesses. Sure, if a buyer paid $10MM last week for a private business, we might say it's worth $10MM today. But what about a business that was started from scratch by the founder? Or one that was last sold 30 years ago? Or one in a very niche industry?
Put simply, valuation is not only a science, but an art... and it's an expensive art. The cost and difficulty of administration alone would be reason enough to steer clear of a wealth tax.
Lastly, although I'm not a fan of higher taxes on anyone, even simply a more progressive income tax would make more sense than a wealth tax.
I'm not a fan of taxes on most stocks (eg wealth) rather than flows (eg income). But if you held a gun to my head and said "design a wealth tax!", I'd set the minimum wealth far above the $32MM proposed by Bernie Sanders or $50MM proposed by Elizabeth Warren.
And keep in mind, even if there are actually only 1,200 billionaires in the US, a number of people slightly below the threshold will still have to be analyzed; I might not know if I'm worth $800MM and owe no wealth tax or $1.2B and owe tax on $200B of wealth.
One might suspect the wealthy are just dropping turds in the punchbowl.
Seems roughly fair
Do you have a source for this? People keep repeating this over and over, but I have never seen a shred of evidence for it. It seems some people have just decided that they hate inheritance and thats just it, no evidence required.
I would encourage you to look at the most unequal countries in the world by wealth. You may find it surprising that none of them are "feudal".
https://en.wikipedia.org/wiki/List_of_countries_by_wealth_in...
Edit: I don't mean to be snarky, apologies if it comes off that way. Unfounded ideas just bother me, and I would love to gain new perspective forming info.
Take a look at the current housing market craze where wealthy/institutional buyers are taking advantage of low interest rates to buy properties with all-cash, inspection-waived offers above asking price, in some cases whole neighborhoods at a time, so as to rent them out. This is a privilege unavailable even to the upper middle class, and could very well turn into a sort of neo-feudalism if left unchecked.
It's also not unprecedented for companies to own entire towns and pay employees in company "scrip" that was only redeemable at company stores, a practice which lasted well into the 1950s and (after some googling) apparently was tried by the Mexican subsidiary of Walmart as recently as 2008.
Looking at the broader state of the economy, wages have been stagnant for decades; property, healthcare & childcare (at least in the US) and education are more expensive than ever. With the exception of food, everything that matters in life is more unattainable for the average person, and everything that doesn't matter is super-cheap, with no signs of those trends reversing. How does that not turn into a form of neo-feudalism if left unchecked?
The last time we "checked" it (in the US) it took decades of labor protests/riots that often turned bloody and the effects of a couple of world wars. Historically plagues (that actually kill a lot of people indiscriminately) and wars are just about the only re-distributive methods that have proven successful in the long term. Unless we want a repeat of some real nasty history, we need a historically unprecedented way to redistribute wealth.
The Netherlands topping the list has average house prices at EUR 400k(massive spike in prices in the last year), while average annual income(pre tax) is EUR 60k.
Feudal economies were actually powered by wealth taxes. So putting in a wealth tax won't do anything to avoid it becoming a feudal society. Further, confiscatory taxes[0] (of which wealth taxes are but one type) are favored by dictatorial regimes throughout history. I don't think we want to go down that road.
Wikipedia has a great summary on feudal taxes[1], and they are based on wealth (usually land and hides). It's actually a pretty good summary of a long period of time, and a complex topic to begin with.
[0] - https://www.merriam-webster.com/dictionary/confiscate [1] - https://en.wikipedia.org/wiki/Taxation_in_medieval_England
So please let’s not hot-take it to the extreme
In the mid-term we’re looking at some sort of weird hybrid plutocrat/government hybrid with an American flavor and a Chinese flavor. Everyone else is in the middle with the scraps.