4 ms·

On a related (and more fundamental) note, why do we base tax rates on the first derivative of wealth (i.e. income) and not wealth itself? What would happen if

• perfmode 8y ago
  Wealth can be concealed. Income passes hands. You can “see” the transfer.
  • ball_of_lint 8y ago
    Except that you can be paid in cash and buy things with cash and leave no hard evidence of your income. Most illegal things are impossible to completely prevent but the punishments keep many from doing them anyways.
    • whamlastxmas 8y ago
      The incredible vast majority of major purchases cannot be done in an untraceable manner. Cars, yachts, planes, property, art. The businesses that sell these items necessitate a paper trail. And because you cannot spend more than the income you have been taxed on (minus legal gifting limits which again have a paper trail) it is extremely difficult to hide your income without leaving an obvious trail from the expensive things you buy
    • perfmode 8y ago
      I’m not arguing from absolutes. I’m saying that there is something inherent in income that makes it more visible than wealth.
  • hliyan 8y ago
    True. That is a practical issue. But would you say in ideal terms, wealth is a better measure than income? Also, if you can see transfer, why not take the differential between income and expenditure, which should be the retained wealth?
  • ardy42 8y ago
    > Wealth can be concealed. Income passes hands. You can “see” the transfer. Wealth is pretty useless when it's so concealed, and the use of concealed wealth would send detectable signals to tax authorities that there's something to investigate.
• jayd16 8y ago
  Besides the incredulous reasons of "it serves the bourgeoisie" I would say a legitimate issue with this is that it makes retirement planning difficult and hurts retirees.
• deleted 8y ago
  [deleted]
• harryh 8y ago
  People would be highly incentivized to save almost nothing (or if they did save, to work very hard to hide it). That seems bad.
  • pariahHN 8y ago
    Isn't that a common stimulus method though? Make debt cheap, drive down interest rates to encourage spending and not saving? Perhaps if we managed it partly via net worth taxes for the stimulus, we would have more wiggle room with regards to interest rates as a tool, as well as limiting the effectiveness of asset based methods of getting around income taxes.
    • roenxi 8y ago
      The common stimulus methods are have a negative impact on savers too. The impacts of high/low have a lag time measured in decades, so it is very difficult to debate what they are. Eg, memory suggests there is a pension crisis brewing in the states, but how does the lack of preparation interplay with demographics, government policy and savings rate? Complicated topic. Personally, I'd expect that any anti-savings policy has a net-negative effect but that very few people would successfully link cause, effect and magnitude. At some point, people should be putting their efforts into forming and preserving capital to set up for the future.
      • pariahHN 8y ago
        True, but putting a tax on net worth above, say, a million wouldn't affect most of the population - those who are in the most need of the ability to build up savings would still be able to do so. The key would be picking the point at which net worth is past the "financially independent" stage. Sort of like the thought behind the proof of stake system in Cardano - once a node gets past a certain threshold, the gains flatten out. This means that you wont have just a few nodes dominate the whole network, as once they reach a certain size it becomes more profitable for people to switch to a smaller node which encourages a more even distribution of power. If we implement a similar mechanism, sure maybe we won't have as many people becoming billionaires, but we could have a lot more people that aren't on the financial edge and are thus able to contribute more effectively. Sort of a damping effect for the power law. Individually you may not be able to accrue as much in terms of assets, but everyone in society benefits from having more people capable of contributing to research and development - I think that's largely why we have seen such rapid scientific advancement in the past century compared to the past two millennia.