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Taxing wealth is a deeply invasive bureaucratic nightmare. Having individuals be legally required to produce a balance sheet of all their assets for the governm

by TimPC 9y ago

Taxing wealth is a deeply invasive bureaucratic nightmare. Having individuals be legally required to produce a balance sheet of all their assets for the government every year seems quite problematic. This would get into issues of having people be required to re-establish the fair price of all their collectables, etc. It's also a deeply dangerous attack on retirement. Instead of being taxed on the gains from your wealth, being taxed on the wealth itself requires much larger returns to live off the income from an investment. I think it might make sense to have a higher inheritance tax with fewer loopholes to resolve the issues of intergenerational wealth. It's probably very important to protect the mechanisms of retirement.

jordanb 9y ago
This is basically the point of the estate tax: people are already producing a balance sheet of all the wealth for the purpose of distrusting it to the heirs. So tax the wealth when the estate changes hands and all the accounting is going to be done anyway.
- TimPC 9y ago
  Not once per year. The ongoing balance sheet is highly problematic. Any assets that don't need to be updated would represent giant loopholes and potentially areas where bubbles would be inflated as capital moves into assets that grow whose growth isn't adequately accounted for.
- sokoloff 9y ago
  My parents are going through updating their will. They have a collector car. It might be worth $50K, probably worth $70K, maybe worth $90K. They have a house. Might be worth $350K, probably $450K, maybe $500K. Provided their estate will not hit the federal exemption (it will clearly not) or state exemption amount (ditto), there is nothing to compel them to prepare a balance sheet with fair market values.
  - TimPC 9y ago
    But how do you make a wealth tax fair if there is no need to prepare a reasonably accurate balance sheet? If it's a yearly tax the loopholes allowed without an accurate balance sheet are so extraordinary that it's reasonable to assume they will cause more problems than the tax fixes.
    - sokoloff 9y ago
      (I'm agreeing with you, by the way.) My response above was addressing/objecting to a claim that accurate balance sheets are already being prepared upon death. There are huge practical issues with valuing illiquid assets. Much wealth, though is held in relatively liquid assets or in illiquid assets with valuation processes already established in a lot of cases (real estate valuation for property tax assessment as an example). You won't be able to get perfect values on artwork, collector cars, and other one-of-kind collectibles. That doesn't make a wealth tax entirely unworkable, though, in my estimation.
      - TimPC 9y ago
        I think if a loophole exists for a collectible asset class wealth will accumulate there as part of tax planning. This can easily lead to bubbles and unfairness through asymmetric tax avoidance. I think it does pose deep foundational challenges for a wealth tax. Tracking income is far easier and many of the most common abuses defer tax rather than permanently avoid it. Under reporting of a hard to track quantity would result in less taxes permanently in the new system and measures to avoid it would represent a new level of reporting to government that many would find deeply invasive. Given all these flaws are the benefits large enough?

by TimPC 9y ago

jordanb 9y ago

This is basically the point of the estate tax: people are already producing a balance sheet of all the wealth for the purpose of distrusting it to the heirs. So tax the wealth when the estate changes hands and all the accounting is going to be done anyway.

TimPC 9y ago
Not once per year. The ongoing balance sheet is highly problematic. Any assets that don't need to be updated would represent giant loopholes and potentially areas where bubbles would be inflated as capital moves into assets that grow whose growth isn't adequately accounted for.
sokoloff 9y ago
My parents are going through updating their will. They have a collector car. It might be worth $50K, probably worth $70K, maybe worth $90K. They have a house. Might be worth $350K, probably $450K, maybe $500K. Provided their estate will not hit the federal exemption (it will clearly not) or state exemption amount (ditto), there is nothing to compel them to prepare a balance sheet with fair market values.
- TimPC 9y ago
  But how do you make a wealth tax fair if there is no need to prepare a reasonably accurate balance sheet? If it's a yearly tax the loopholes allowed without an accurate balance sheet are so extraordinary that it's reasonable to assume they will cause more problems than the tax fixes.
  - sokoloff 9y ago
    (I'm agreeing with you, by the way.) My response above was addressing/objecting to a claim that accurate balance sheets are already being prepared upon death. There are huge practical issues with valuing illiquid assets. Much wealth, though is held in relatively liquid assets or in illiquid assets with valuation processes already established in a lot of cases (real estate valuation for property tax assessment as an example). You won't be able to get perfect values on artwork, collector cars, and other one-of-kind collectibles. That doesn't make a wealth tax entirely unworkable, though, in my estimation.
    - TimPC 9y ago
      I think if a loophole exists for a collectible asset class wealth will accumulate there as part of tax planning. This can easily lead to bubbles and unfairness through asymmetric tax avoidance. I think it does pose deep foundational challenges for a wealth tax. Tracking income is far easier and many of the most common abuses defer tax rather than permanently avoid it. Under reporting of a hard to track quantity would result in less taxes permanently in the new system and measures to avoid it would represent a new level of reporting to government that many would find deeply invasive. Given all these flaws are the benefits large enough?