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Very few people would consider taxation based on "wealth" to be a fair system. Most people accept income taxes fair enough, but a taxation system based on weal

Very few people would consider taxation based on "wealth" to be a fair system. Most people accept income taxes fair enough, but a taxation system based on wealth feels like (and is) simple confiscation. You hold $100. I hold $1. We live the same life, live the same services, make the same income, and you pay 100x the taxes, if you base it on wealth. Does this really feel fair? Even better, if you subtract out debt (as you suggest), this gives me an incentive to spend my money, rake up debt, and pay nothing -- wealth is now a liability, didn't you hear?

modeless 10y ago
On the contrary, taxation based on wealth would be much fairer than taxation based on income. Unfortunately a wealth tax is pretty much impossible to implement. The closest thing we have is property taxes. > You hold $100. I hold $1. We live the same life, live the same services, make the same income, and you pay 100x the taxes, if you base it on wealth. Does this really feel fair? Yes, that is fair! How about this scenario instead: I hold $100,000, but suddenly make $300,000 this year because I sold my startup. Trump holds $1,000,000,000, spends $1,000,000, and loses money on a stupid investment so his net income is negative. I pay $120,000 tax, over a quarter of my net worth, while he pays nothing. Is that fair?
- dpark 10y ago
  You think it's fair that the government should punish the frugal for not spending every dime they make? If you and I earn the same but I spend all of my money on alcohol and pot, while you set aside to pay for your kids' college, how is it fair that you pay more tax?
  - orbitingpluto 10y ago
    There is an argument wherein you could say that those who merely sit on their wealth are causing economic stagnation. Taxing wealth becomes an incentive for the wealthy to have their money make more wealth, instead of just sitting on a mountain of gold coins and interests rates could again rise.
    - dpark 10y ago
      You could make that argument and I might even listen. It's in no sense fair even if it makes economic sense though.
- pcardh0 10y ago
  Your retire with 100K, that year you lose 20K in the stock market, you pay no taxes. Next year you make 20K in the stock market. Is it fair for that entire 20K to be taxed?
  - dogma1138 10y ago
    No, and because of that you don't pay next year since you are allowed to carry loss forward. :)
    - twblalock 10y ago
      Only $3000 per year can be carried forward.
      - dogma1138 10y ago
        This is not true.
        twblalock 10y ago
        Yes, it is true. > If your capital losses exceed your capital gains, the amount of the excess loss that you can claim on line 13 of Form 1040 to lower your income is the lesser of $3,000, ($1,500 if you are married filing separately) or your total net loss shown on line 16 of the Form 1040, Schedule D (PDF), Capital Gains and Losses. If your net capital loss is more than this limit, you can carry the loss forward to later years. https://www.irs.gov/taxtopics/tc409.html https://www.irs.gov/taxtopics/tc409.html The losses that people like Donald Trump can carry forward are not capital losses, which is what we are talking about in this thread, and which apply to the situation pcardh0 described in his comment. The losses Trump took are net operating losses, which he was able to take advantage of because he is in the real estate business.
        dogma1138 10y ago
        If your net capital loss is more than this limit, you can carry the loss forward to later years. You may use the Capital Loss Carryover Worksheet found in Publication 550, Investment Income and Expenses, or in the Form 1040, Schedule D Instructions (PDF), to figure the amount you can carry forward. The 3000 is the deductible limit per year based on a loss, this isn't the limit to carry over. https://www.irs.gov/publications/p536/ar02.html https://www.irs.gov/publications/p536/ar02.html https://www.irs.gov/publications/p550/ch01.html#en_US_2015_publink100010154 https://www.irs.gov/publications/p550/ch01.html#en_US_2015_p...
- ericd 10y ago
  Yes, your Trump scenario is fair, because he already paid taxes on that $1B that he holds, but you have not paid taxes on that $300k yet. You should not penalize people for being frugal and saving by taxing accumulated wealth. There's already a strong incentive to pump money back into the economy via investment - interest/yield, to counteract the constant erosion caused by inflation.
lobster_johnson 10y ago
Wealth tax exists in other countries, though. In Norway, there's a (controversial!) wealth tax of 0.7% for amounts exceeding $170k. This tax considers liquid assets, property assets and other personal property such as cars. It is, however, controversial; it means your income is subject to being taxed twice. As far as I know, the US only has property tax, and it's mostly taxed on real estate.
- dogma1138 10y ago
  There is already tax on wealth in every country it's called capital gains tax. It's taxed at any time when the gain is actually realized e.g when you sell something that has increased in value. There is no point of taxing wealth at an arbitrary time and this is actually destructive to the middle class and not the wealthiest ones.
danieltillett 10y ago
The solution is to tax assets directly (i.e. the asset owes the tax) in combination with large consumption/VAT/GST tax and not tax income at all. These two taxes would be very difficult to avoid and not bias against investment verses consumption (provided you got the mix right).
- dogma1138 10y ago
  These would affect lowest classes more than the rich and would kill social mobility. Look at the old money problem in Europe.
  - danieltillett 10y ago
    Why would it affect the lowest classes more? You can apply any per person payment you like to change the effective rate of any consumption tax. For example you could give everyone a $10,000 cash payment/ tax credit / call-it-what-you-like every year. This would fix any regressive consequences of a large consumption tax. As for taxing assets directly, it is impossible to hide most of them (land and buildings are very hard to hide). Even things like shares and bonds are near impossible to hide. About the only thing that could be hidden are things like diamonds, but these are such a tiny amount of all assets that it would not be important. Lets get away from taxing productive activities (i.e. income) and start taxing consumption and hoarding.
    - dogma1138 10y ago
      You can't hide anything as we speak, when you sell your house you pay capital gains taxes on it if it increased in value. Same goes for any other item. Taxing "wealth" would means that the wealthy would keep being wealthy but the poor can never gain any wealth, this is what is effectively has been going in Europe since WW2 with the exception that there is a subclass of the "wealthy poor" in Europe, those who have inherited property and titles but effectively have no cash to uphold them. Under this system you would penalize people who have savings, people who invest, and more importantly people who need to consume "more" such as people who are having kids because they need to buy a bigger house or a bigger car. Under your system you also encourage grey and black market trading, and secondary economies that bypass the taxation system. Taxing income is fair because it taxes what you get, taxing wealth is abysmal because it taxes what you have. Wealth taxation would mean that any financial crisis where people lose their job would be 1000 times worse, it means that getting sick or wanting to leave work to raise children or to help parents would be impossible, it pushes people to effectively be slaves because you don't tax what they actively receive but have a regressive exponential tax on what they've accumulated in their entire lifetime effectively you tell people do not save, do not buy something which is too big, do not retire and work all your life otherwise you won't be able to afford what you already own. You can't strip people off property they have already own, I can't even understand how would people come to think this system of taxation is reasonable, to the point of which I am beginning to question where people who post on HN live and how do they make their money. We already live in a society where you effectively taxed for well over 50% of your income, where to buy a house you have to be endured to a bank for decades and you want to make this worse?

modeless 10y ago

On the contrary, taxation based on wealth would be much fairer than taxation based on income. Unfortunately a wealth tax is pretty much impossible to implement. The closest thing we have is property taxes. > You hold $100. I hold $1. We live the same life, live the same services, make the same income, and you pay 100x the taxes, if you base it on wealth. Does this really feel fair? Yes, that is fair! How about this scenario instead: I hold $100,000, but suddenly make $300,000 this year because I sold my startup. Trump holds $1,000,000,000, spends $1,000,000, and loses money on a stupid investment so his net income is negative. I pay $120,000 tax, over a quarter of my net worth, while he pays nothing. Is that fair?

dpark 10y ago
You think it's fair that the government should punish the frugal for not spending every dime they make? If you and I earn the same but I spend all of my money on alcohol and pot, while you set aside to pay for your kids' college, how is it fair that you pay more tax?
- orbitingpluto 10y ago
  There is an argument wherein you could say that those who merely sit on their wealth are causing economic stagnation. Taxing wealth becomes an incentive for the wealthy to have their money make more wealth, instead of just sitting on a mountain of gold coins and interests rates could again rise.
  - dpark 10y ago
    You could make that argument and I might even listen. It's in no sense fair even if it makes economic sense though.
pcardh0 10y ago
Your retire with 100K, that year you lose 20K in the stock market, you pay no taxes. Next year you make 20K in the stock market. Is it fair for that entire 20K to be taxed?
- dogma1138 10y ago
  No, and because of that you don't pay next year since you are allowed to carry loss forward. :)
  - twblalock 10y ago
    Only $3000 per year can be carried forward.
    - dogma1138 10y ago
      This is not true.
      - twblalock 10y ago
        Yes, it is true. > If your capital losses exceed your capital gains, the amount of the excess loss that you can claim on line 13 of Form 1040 to lower your income is the lesser of $3,000, ($1,500 if you are married filing separately) or your total net loss shown on line 16 of the Form 1040, Schedule D (PDF), Capital Gains and Losses. If your net capital loss is more than this limit, you can carry the loss forward to later years. https://www.irs.gov/taxtopics/tc409.html https://www.irs.gov/taxtopics/tc409.html The losses that people like Donald Trump can carry forward are not capital losses, which is what we are talking about in this thread, and which apply to the situation pcardh0 described in his comment. The losses Trump took are net operating losses, which he was able to take advantage of because he is in the real estate business.
        dogma1138 10y ago
        If your net capital loss is more than this limit, you can carry the loss forward to later years. You may use the Capital Loss Carryover Worksheet found in Publication 550, Investment Income and Expenses, or in the Form 1040, Schedule D Instructions (PDF), to figure the amount you can carry forward. The 3000 is the deductible limit per year based on a loss, this isn't the limit to carry over. https://www.irs.gov/publications/p536/ar02.html https://www.irs.gov/publications/p536/ar02.html https://www.irs.gov/publications/p550/ch01.html#en_US_2015_publink100010154 https://www.irs.gov/publications/p550/ch01.html#en_US_2015_p...
ericd 10y ago
Yes, your Trump scenario is fair, because he already paid taxes on that $1B that he holds, but you have not paid taxes on that $300k yet. You should not penalize people for being frugal and saving by taxing accumulated wealth. There's already a strong incentive to pump money back into the economy via investment - interest/yield, to counteract the constant erosion caused by inflation.

lobster_johnson 10y ago

Wealth tax exists in other countries, though. In Norway, there's a (controversial!) wealth tax of 0.7% for amounts exceeding $170k. This tax considers liquid assets, property assets and other personal property such as cars. It is, however, controversial; it means your income is subject to being taxed twice. As far as I know, the US only has property tax, and it's mostly taxed on real estate.

dogma1138 10y ago
There is already tax on wealth in every country it's called capital gains tax. It's taxed at any time when the gain is actually realized e.g when you sell something that has increased in value. There is no point of taxing wealth at an arbitrary time and this is actually destructive to the middle class and not the wealthiest ones.

danieltillett 10y ago

The solution is to tax assets directly (i.e. the asset owes the tax) in combination with large consumption/VAT/GST tax and not tax income at all. These two taxes would be very difficult to avoid and not bias against investment verses consumption (provided you got the mix right).

dogma1138 10y ago
These would affect lowest classes more than the rich and would kill social mobility. Look at the old money problem in Europe.
- danieltillett 10y ago
  Why would it affect the lowest classes more? You can apply any per person payment you like to change the effective rate of any consumption tax. For example you could give everyone a $10,000 cash payment/ tax credit / call-it-what-you-like every year. This would fix any regressive consequences of a large consumption tax. As for taxing assets directly, it is impossible to hide most of them (land and buildings are very hard to hide). Even things like shares and bonds are near impossible to hide. About the only thing that could be hidden are things like diamonds, but these are such a tiny amount of all assets that it would not be important. Lets get away from taxing productive activities (i.e. income) and start taxing consumption and hoarding.
  - dogma1138 10y ago
    You can't hide anything as we speak, when you sell your house you pay capital gains taxes on it if it increased in value. Same goes for any other item. Taxing "wealth" would means that the wealthy would keep being wealthy but the poor can never gain any wealth, this is what is effectively has been going in Europe since WW2 with the exception that there is a subclass of the "wealthy poor" in Europe, those who have inherited property and titles but effectively have no cash to uphold them. Under this system you would penalize people who have savings, people who invest, and more importantly people who need to consume "more" such as people who are having kids because they need to buy a bigger house or a bigger car. Under your system you also encourage grey and black market trading, and secondary economies that bypass the taxation system. Taxing income is fair because it taxes what you get, taxing wealth is abysmal because it taxes what you have. Wealth taxation would mean that any financial crisis where people lose their job would be 1000 times worse, it means that getting sick or wanting to leave work to raise children or to help parents would be impossible, it pushes people to effectively be slaves because you don't tax what they actively receive but have a regressive exponential tax on what they've accumulated in their entire lifetime effectively you tell people do not save, do not buy something which is too big, do not retire and work all your life otherwise you won't be able to afford what you already own. You can't strip people off property they have already own, I can't even understand how would people come to think this system of taxation is reasonable, to the point of which I am beginning to question where people who post on HN live and how do they make their money. We already live in a society where you effectively taxed for well over 50% of your income, where to buy a house you have to be endured to a bank for decades and you want to make this worse?