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Comment by ianburrell | Hacker News Reader

The wealth tax feels to me like "we've tried nothing and we're out of ideas". If we want to tax billionaires, we should start taxing their income. Undoing the tax changes since Reagan would go a long way. If it isn't possible to do that, then it won't be possible to tax wealth. If it doesn't work, then we can consider wealth tax.

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What income? Buy, Borrow, Die. Most of their income is not traditional income. They live in debt because debt isn't taxable.

Buy, borrow die relies on the step-up in basis upon death though; it's a bit of a loophole (albeit with some justifications) which could be closed. I tend to agree that the focus should be on closing loopholes before trying an entirely different tax.

Do billionaires make income? Don't most of them just have absurd quantities of stock in a valuable company that grows to an absurd value, and instead of selling it they just borrow against it? Stock (at least in the US) has traditionally not been taxed until sold.

EDIT:

Ah, I just saw that HumblyTossed made the same point I did; I should have read the other comments.

One way to stop that is to get rid of the step-up in basis on inheritance, or modify inheritance tax to be on a similar level to income tax.

Or make loans against stock value a taxable event.

Or even just saying "loans above $N are a taxable event", and make that value like $500,000. This would allow like 99% of the population to actually borrow against their stocks in the case of an emergency without having to liquidate their stocks or be punished for it, but $500,000 is nothing for a Bezos or a Musk.

This would only stop borrowing via loans that are collateralized by stock assets. These banks would presumably still offer uncollateralized loans to these folks (you have $X billion dollars, I'm confident you'll be able to pay off a loan for 2% of that, here you go, no collateral needed). Then, the end effect will be slightly riskier loans for the banks, and slightly higher interest rates for the billionaires.

And if you set the limit at $500k, you're going to block rich, but not super rich folks from taking out loans to start new businesses, etc. To me it seems this would hurt more than help.

Fair! What I don't know about this stuff is a lot. I'd actually like to see an economist break down what they think is the best way to approach this.

That would have a substantial cooling effect on the housing market as well. (I don't think that's a good thing, but some may.)

Billionaires seem to be quite skilled at avoiding inheritance tax. They have avenues for passing on generational wealth besides what most people imagine as passing it all directly via a will. For example, they can create a corporation that owns and manages their vast assets, and then transfer control of that corporation.

Undoing a lot of what Reagan did is needed.

Taxing Billionaires is tricky... they can manipulate data (like anyone else) to show their actual income as 0 dollars.

I'm more worried about what would happen to the money thus produced... the US government has been digging itself a large fiscal hole the last 3 years and shows no sign of stopping.

Problem with taxing income is that they take out debts, paying taxes on the minimum payments, and then pass the assets with stepped up basis to their heirs.

In theory, a wealth tax is a perfect tax because it's a tax that incurs minimal deadweight loss. This is why lots of economists are proponents of land value taxes. The problem is that any sort of wealth that isn't tied to land or a commodity is completely subjective, so the ultra rich will always be able to find some loophole to any practical application of a wealth tax.

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