3 ms·

A different idea: why tax based on the first derivative of wealth (income over time) and not wealth itself? Why not base tax rates on total wealth/assets of the

by hliyan 9y ago

A different idea: why tax based on the first derivative of wealth (income over time) and not wealth itself? Why not base tax rates on total wealth/assets of the payer? +$10,000 for a broke person is entirely different from +$10,000 for a billionaire...

throwaway1748 9y ago
One big reason is liquidity. Many 100MM+ net worth individuals have their fortune tied to one corporation of which they're a founder or officer. Forcing those people to liquidate pieces of their business to pay taxes on their own fortune could very directly harm the company.
- OscarCunningham 9y ago
  They can pay in shares.
  - mamon 9y ago
    So, sooner or later we end up with all companies being owned by the government. That has been proven to end up badly (by Soviet Union and rest of the communist countries).
    - OscarCunningham 9y ago
      The government can sell the shares to the public. Or the taxed individuals can can sell shares to the public and pay the government with the money. My point is that the company's illiquid assets needn't be used to pay the tax; they can be used to back liquid assets that pay the tax.
- hliyan 9y ago
  Asking honestly, is "I don't have money because it's all tied up in illiquid assets" a valid excuse? That's a personal financial planning choice, is it not?
  - forapurpose 9y ago
    It's certainly not an excuse for failing to pay income tax. Also, using a wealth tax, tax liability could be much more reliably predicted years into the future.
forapurpose 9y ago
> why tax based on the first derivative of wealth (income over time) and not wealth itself? I strongly agree, if it could be implemented effectively. My completely uneducated guess is that it would be difficult to obtain reliable reporting of all wealth, and that income is easier to obtain information about because it involves financial transactions, often involving banks or large corporate entities. Taxing wealth would have other advantages. For example, a wealthy person could predict their tax liability years in advance and integrate that into financial planning. Also, I think it might avoid the claimed disincentive of high income tax rates for wealthy people: Your incentive to earn is undiminished because you'll keep 90% of the money. In the U.S., as far as I know, there is around $85 trillion in wealth and total government budgets are around $4 trillion. On that basis, the average wealth tax rate would be under 5% per year.

by hliyan 9y ago

throwaway1748 9y ago

One big reason is liquidity. Many 100MM+ net worth individuals have their fortune tied to one corporation of which they're a founder or officer. Forcing those people to liquidate pieces of their business to pay taxes on their own fortune could very directly harm the company.

OscarCunningham 9y ago
They can pay in shares.
- mamon 9y ago
  So, sooner or later we end up with all companies being owned by the government. That has been proven to end up badly (by Soviet Union and rest of the communist countries).
  - OscarCunningham 9y ago
    The government can sell the shares to the public. Or the taxed individuals can can sell shares to the public and pay the government with the money. My point is that the company's illiquid assets needn't be used to pay the tax; they can be used to back liquid assets that pay the tax.
hliyan 9y ago
Asking honestly, is "I don't have money because it's all tied up in illiquid assets" a valid excuse? That's a personal financial planning choice, is it not?
- forapurpose 9y ago
  It's certainly not an excuse for failing to pay income tax. Also, using a wealth tax, tax liability could be much more reliably predicted years into the future.

forapurpose 9y ago

> why tax based on the first derivative of wealth (income over time) and not wealth itself? I strongly agree, if it could be implemented effectively. My completely uneducated guess is that it would be difficult to obtain reliable reporting of all wealth, and that income is easier to obtain information about because it involves financial transactions, often involving banks or large corporate entities. Taxing wealth would have other advantages. For example, a wealthy person could predict their tax liability years in advance and integrate that into financial planning. Also, I think it might avoid the claimed disincentive of high income tax rates for wealthy people: Your incentive to earn is undiminished because you'll keep 90% of the money. In the U.S., as far as I know, there is around $85 trillion in wealth and total government budgets are around $4 trillion. On that basis, the average wealth tax rate would be under 5% per year.