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Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money. I shoul

Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money. I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist. I mean I don't have a tonne of sympathy for people with tens of millions of net worth, but it just seems wrong in principle. If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? Seems wrong to me, if you own something you should be allowed to keep it indefinitely. Property taxes are a bit of a grey area, but they make more sense because of all the infrastructure required for a house to be accessible. Or another example, I own a piece of art or a car passed down through my family that is worth 30 million dollars (maybe it's a mclaren f1 or something). Now the government is going to force me to sell my car? I disagree with that, obviously that's an extreme case, but laws should still handle cases like that.

GavinMcG 6y ago
I don't think they should be routine, but given the highly unbalanced taxing environment of the past few decades which allowed for such massive wealth to accumulate (and rapidly grow during the pandemic) I see them as a reasonable corrective. It also doesn't have to be ham-fisted. The concerns you bring up are legitimate and legislation is able to account for them.
tsimionescu 6y ago
> If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? How is the government forcing you to sell your company? They're forcing you to pay 0.4% of the money you own over those 30M dollars in tax, but that's it. Do you truly believe that there are people who make less than 0.4% per year profit on their >30M assets?
- DuskStar 6y ago
  This is startup land, where billion dollar companies lose money... So yes.
  - minitoar 6y ago
    How real are those billion dollar valuations? Seems to me like it’s primarily a bunch of VCs in a term sheet circle jerk.
    - limitedmage 6y ago
      They’re real enough for the IRS to want their cut when you vest stocks or exercise options that you can’t sell.
      - auspex 6y ago
        I’d like to see if the IRS would accept the startup’s private shares as payment. It’s funny to me because there isn’t an open market to liquidate them... yet they are taxed like they are cash.
    - xur17 6y ago
      It doesn't matter how "real" you think it is if the government insists on taxing you like it's real. In fact, that's part of the problem.
      - minitoar 6y ago
        Huh, maybe that’s what I was implying with my comment. Thanks for spelling it out.
- nthj 6y ago
  edit: as tsimionescu kindly pointed out below, I misunderstood the 30M threshold. My reasoning seems correct to me but a key premise was wrong, and I agree the proposal is much less onerous than I have painted below: I personally know multiple startup founders worth $10-$20M on paper who made $120K/year salary for years (or still are.) It’s hardly unusual, startup valuations are high these days, and VCs and the founders themselves want to reinvest in growth, not issuing distributions. A founder owning 40% at a $50M valuation would feasibly have to double his salary to $240K to afford the $80K/year wealth tax, after paying income taxes on the salary increase in California. That’s realistically one employee they no longer have the cash flow to hire. A $50M startup may have something like $2M ARR, so if they don’t want to burn investment funds, they could support maybe 8 employees at their ARR level. Knocking out one employee at that size is significant. Or you could say they should get VC to support hiring more employees. Now the wealth tax is indirectly impacting the founder's equity—forcing you to sell your company. We can argue whether they should be forced to liquidate a portion yearly for taxes, but let’s not pretend everyone worth $20M on paper can light $80K cash on fire yearly without consequences.
  - tsimionescu 6y ago
    First of all, if I understand correctly, if they are worth less than 30M$ they aren't affected by this tax at all. This alone I think invalidates some of your comment altogether. So the tax actually says that a founder owning 40% of a $100M valuation would have to $40k per year (0.4% of the 10M that they own over the base 30M0). By your calculation, they would have to pay themselves ~$200k per year to afford that, which would be ~0.5 employees for a company that can afford ~16 (simply doubling your numbers for employees and halving the increases because of the half tax). This doesn't seem like such a horrible onus on a corporation. Now, if the valuation is wildly off, then perhaps there will be bigger problems - but that would also mean that this law gives better incentives for correct valuations of companies, a win in itself.
rorykoehler 6y ago
I see it the opposite way around. We should only have a wealth tax and no income taxes. Capitalism means capital that earns for you while you sleep. Those who benefit the most from the system should pay for it. With only a wealth tax more people would have the means to amass wealth and there would be a greater incentive to spend rather than sit on money which would be good for the health and dynamism of the economy.
- whatthesmack 6y ago
  > Capitalism means capital that earns for you while you sleep. That's a big assumption. Not all capital earns for you while you sleep. > Those who benefit the most from the system should pay for it. That's also a big assumption. Just because one has capital does not mean they're benefiting from the regime they're currently under.
  - legolas2412 6y ago
    So people will be incentivized to spend in riskier investments, just like the zero interest rate policy nowadays.
- granzymes 6y ago
  > Capitalism means capital that earns for you while you sleep. If it earns for you while you sleep then it is also taxed while you sleep. Income is income: the tax man doesn’t care where it comes from.
  - rorykoehler 6y ago
    Income taxation creates a bureaucratic burden with no discernible benefit. We also disproportionately tax the poor via point of sale taxes which is just mind boggling stupid.
    - GhostVII 6y ago
      Wouldn't wealth tax also create bureaucratic burden? I would imagine that it is much harder to determine the value of the assets of all Americans than it is to determine their income.
sdenton4 6y ago
/Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money./ I figure if we allow passive income, we should allow passive taxes...
- jstanley 6y ago
  You're already taxed on passive income.
- da_big_ghey 6y ago
  Capital gains taxes are already a thing. You just pay on liquidation instead of having to come up with cash every year.
  - sdenton4 6y ago
    First, let's recognize that this is a completely made-up criteria for when to apply the tax, then: there's no "natural" ethical principle for why it's ok to tax at liquidation vs tax continuously. The question, then, is whether one method is actually better than another under some set of criteria. The original comment's 'I don't feel like it' is insufficient in my mind. The reality of the current system is that we have absolutely enormous wealth bubbles hidden away basically forever. Once you're a billionaire, there's no REAL need to liquidate things on a regular basis. You'll tend to store the vast majority of that wealth in things that appreciate (because you have the choice, and no one needs that many cars, even you), so the bubble grows continuously. Then conversions will mostly happen at carefully judged points in time+method to minimize tax owed. A wealth tax puts some small check on the runaway growth of assets, and provides a more steady+predictable income stream for governments. Finally, I would like to reinforce that the 'you' used in all of these comments almost certainly include only "temporarily embarrassed" billionaires. Common sense household economics have near-zero relevance for thinking about wealth on the scales we should be concerned with here. Actual billionaires should have no trouble coming up with cash for a wealth tax: beyond some point, the wealth is a mostly undifferentiated mass of assets. If 'you' can project what 'you' owe for the tax, 'you' know how much you need to liquidate to pay it.
bradleyjg 6y ago
> passed down through my family I could go either way with wealth taxes—-there are efficiency and services arguments that go beyond just real property—-but I have zero problem with inheritance taxes. You want a Van Gogh or McLaren, you go create value just as your deceased would-be benefactor did.
curiousllama 6y ago
> why should the government be allowed to force me to sell my company If it’s your company, is there any particular reason you don’t pay it (or a loan against your equity) out of cash flow? Just like every other significant expense? If it’s a painting or a car, it’s already getting taxed as an inheritance, so this is just a .4% increase in a 40% tax, no? I happen to agree that wealth taxes are unwise, but it’s not because implementation is weird. We already have property taxes; we’ll figure it out. The main reason it’s bad is because wealth taxes compound, even when you take losses on investments. Retirement accounts will simply be ~20% smaller than without the tax.
disown 6y ago
> Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money. I used to as well, but now I flipped. I don't think you should be taxed for doing things, I think you should be taxed for wealth. I think there should be no tax for working ( income ), buying things ( sales tax ), etc. Activity which promotes economic growth shouldn't be taxed. But wealth should be taxed. House/assets/etc should be taxed. It's insane that you get taxed at 39% for work ( income ) but someone letting his money "do the work" gets taxed at 20% ( long term capital gains tax ). > I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist. But the government protects your ability to do so. So no. Though I'd be in favor of governments setting aside land internationally where people are allowed to live "in a state of nature". They are not allowed to form tribes/governments, but are allowed to live "free" as they wish untaxed without the help of society. > If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? Cause the company exists in a society governed/protected/etc by the government? It's the beneficiary of the environment. > Now the government is going to force me to sell my car? Nope. You could always go out and work to earn money to pay the wealth tax too and keep your car. I'd be in favor of removing all taxes for one wealth tax.
blovescoffee 6y ago
There are of course exceptions but in most cases that $30 million+ could only have been made because of the system that exists within California/USA. Paying taxes on that $30 million is just a way to support the stability of such a system that allowed an individual to make that much money. How many people with very little wealth actually inherit a $30 million car? Probably few enough that it would be more constructive to focus on the scenario most extremely wealthy people inhabit.
- stickfigure 6y ago
  This seems to be the Californian version of "American Exceptionalism". Yes, California has some great things going for it. But so does Washington and Oregon and Texas and Colorado. Relative tax rates matter, especially for people as mobile as the ultra-rich.
Straw 6y ago
Personally, I disagree with the whole idea of income taxes. You should be taxed for owning things, because the government enforces your property rights, not just for labor, for which the government doesn't directly contribute at all. I should be able to earn money for my labor without the government taking a fraction every time it moves around. Even if you move to the woods, you're still taking military protection from the surrounding government- even if you somehow avoid using any other service like roads, public education, etc. I don't understand this widespread belief that you have a right to permanent ownership. Someone has to enforce that ownership, and that has costs. What does seem wrong in principle is taxing transfers of money, which are virtually free with modern computer systems, not to mention the increased economic friction in the labor market. You raise a good point with liquidity. Personally, I wonder, how could we set up a system of fractional ownership that delays repossession in such cases? Of course, if you never pay tax on that heirloom, then you'll eventually lose a controlling interest- and I think this makes sense, especially for fundamentally limited resources like land.
- apta 6y ago
  Exactly. Islam took a similar route with Zakat (a form of "charity tax" if you will, over 1400 years ago, and it's proven to work. When you look at history, there was a period of time, when everyone paid their share of Zakat, and when there were no poor people left to take it! It's not that much either, only 2.5% for currencies like gold and silver over a minimum threshold (so the poor/lower class are exempted anyway). However, as I explain in my other post, there is no forcing to liquidate a fixed portion of any holdings you have. For example, if you own property and rent it out, the property value itself is not taxed, only the money you make out of rent if you hold on to it for over a year (and it's above a minimum threshold). Similarly if you owe shares in a company, the taxation is not a direct percentage of that ownership, it depends on things like debt and the amount of produce or products the company owns each year. Income tax is unethical and predatory as far as I'm concerned, not to mention continues to fail even at absurdly high taxation rates.
  - selimthegrim 6y ago
    Which period was this? Because when I see what people with bank accounts in PK do now when Zakat is levied...
geofft 6y ago
> Or another example, I own a piece of art or a car passed down through my family that is worth 30 million dollars (maybe it's a mclaren f1 or something). There is no meaningful reason that a society should want you to inherit a piece of art or a car from your ancestors. (The only practical one is that the sorts of families who can pass down expensive art also control society.) You didn't work for that art or car; you simply had the fortune to be born into a family with one. Every single reason why it is unjust for someone to inherit a government role applies here. If you don't think King James the Nth should rule simply because King James the N-1st did, why do you think James Jr. should have 30 million dollars in financial power simply because James Sr. did? Just like hereditary rule, hereditary property breaks the fundamental relationship between work and reward that is common to any functional society. If you work hard and get a spare $30M to buy a car, sure, whatever, we can say you were incentivized to work hard and produce $30M of value. But if you work hard and give your kid $30M, how is your kid incentivized to do anything? And the argument that well-off parents have an inherent right to make their kids' lives easier leads directly to the correlation between class and race/caste. If it's moral for me to make my children better off than others' children, who is to say it's immoral for me to make my nieces and nephews several times removed better off, too? Who is to say it's immoral to make all the people in this town who came from a certain ancestral lineage better off? And on top of all that, it usually doesn't even work. We associate "nepotism" with waste and corruption, not just distasteful behavior, because we understand those who are chosen because of their family relationships generally aren't more qualified than the rest of the candidates. Even at the smallest scales, when you hear stories of the CEO's college-age kid getting an internship, it's almost always the case that the child has not inherited any particular talent, and in fact is probably less talented than would be needed for the job. Parents should be allowed to provide for their children to set them up for adulthood - they should be able to pay for housing and food and clothing and education. When they can't, society should step in to help them, and we're almost there: we have welfare programs and private charities for basic needs, free public education, and (at least among private colleges with sufficient endowments) full need-based financial aid. Parents should not be able to do more than that, in a society that prizes democracy and equality over the natural superiority of certain families.
mmcconnell1618 6y ago
I've got several concerns with wealth taxes in general too: 1) They are difficult to enforce. How to measure the value of a famous painting? What if the value does down? Is there a refund of wealth taxes? 2) They are an entirely new class of taxes that will give politicians the ability to increase the overall tax burden over time. At first, they will only impact the very wealthy, but it is much easier to adjust the threshold down a little than create a whole new tax. The history of income tax in the US is a guide. At first, it was temporary. Then only impacted a few people, now it is a progressive system that reaches large swaths of the population. https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_States#:~:text=In%20order%20to%20help%20pay,%24800%3B%20rescinded%20in%201872).&text=A%20new%20income%20tax%20statute,of%20the%201894%20Tariff%20Act https://en.wikipedia.org/wiki/History_of_taxation_in_the_Uni....
- sdfin 6y ago
  2 is what happens in Argentina.
  - marcosdumay 6y ago
    In Brazil the government just inflates the values away, and keeps the levels the same :) Anyway, I am very friendly to the idea of a wealth tax. At a minimum it's more progressive than an income one. What I don't like is all the attrition that comes from the government having to put price on things, and mandating liquidity. I also dislike government initiatives that increase the fragility of a society. So, if one gets a proposal that doesn't suffer from those problems, I'm all for it. Until there I do think it's a great academic subject, but not viable on practice.
- remote_phone 6y ago
  Even worse is AMT. it was supposed to be a way to prevent rich people from hiding from taxes but now it just gets regular middle class people, and rich people avoid taxes other ways.
- em500 6y ago
  > 1) They are difficult to enforce. How to measure the value of a famous painting? What if the value does down? Is there a refund of wealth taxes? The Netherlands has had a general wealth tax since 2001 and there have not been many practical issues AFAIK. There are separate regimes for (1) primary residence (which get yearly assessments based on comparable sales/house price indices), (2) significant (>5%) business ownership (businesses need balance sheets/valuations anyway) and (3) all other assets taxed at around 1.2% of net asset value, first 30k exempt. There are no capital gains taxes. The value is assessed on 1 Jan every year. Whatever happens during the year is ignored. For bucket (3) the vast majority are in practice held in financial assets (stocks, bonds, savings, loans) and non-primary residence) real estate, most of these are pretty straightforward to value. There are explicit exemptions for art and science artifacts, pension investments (401k), movable property for personal use (cars, furniture) [1]. There's a good degree of pragmatism is most of this. The tax authorities realize that trying to squeeze some drops of people with Picasso's in their basements is largely a waste of time and effort. Rich people typically don't hold a large part of their wealth in illiquid, difficult-to-appraise assets for obvious reasons. [1] Here's a list in Dutch: https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/vermogen_en_aanmerkelijk_belang/vermogen/wat_zijn_uw_bezittingen_en_schulden/uw_bezittingen/welke_bezittingen_geeft_u_niet_aan_in_box_3/welke_bezittingen_zijn_vrijgesteld https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/...
Maarten88 6y ago
> If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? I don't know the specifics of this proposal. But I live in a country that has a similar wealth tax, and it doesn't work that way here. When you found a company, its shares remain valued at nominal value for tax purposes, until you sell or transfer them. Only after that they'll be taxed as wealth.
- monocularvision 6y ago
  That is capital gains tax. Not a wealth tax.
  - Maarten88 6y ago
    No, it's wealth tax. I know what taxes I'm paying. Maybe my wording is not very precise, and I'm not a tax lawyer, but I do know founder shares remain valued nominally and you are not forced to sell anything even when your company gets very valuable. https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#Wealth_tax https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#We...
Dumblydorr 6y ago
The problems here are fairness, but also time. Wealth tax gathers funds from past and future actions, income tax only from future actions. If you believe laws were totally fair in the past, then a wealth tax should be unfair now. Is that your stance? Has taxation been fair? My stance is that the notion of private property is ingrained, we went to civil war due to private property of slaves, the french revolution was fomented due to financial problems due to untaxed private holdings of the church and wealthy people. Does having private property from the past mean it's ours and no one can touch it? History has shown that oligarchies and massive wealth disparities lead to negative societal outcomes. IMO, Taxes should generate revenue for public works and lower negative societal outcomes due to negative externalities, therefore wealth tax is fine with me in principle.
apta 6y ago
Look at the route Islam took with Zakat. It's a form of "charity tax" that depends on wealth. However, your scenario does not hold, the government will not force you to sell your company or any shares it in, because those are not subject to Zakat (at least not directly). Gold and silver over a minimum amount are taxed at 2.5% per Hijri year, while produce is taxed at a different percentage. Taxation of company shares depends on many things, such as the debt ratio and value of products the company owns. It's very possible to owe only a tiny amount, or none at all, while still doing business and making money. This is the superior approach which has proven to work if you look at history.
xtiansimon 6y ago
> “ I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist.” Reminds me of stories about people losing their homes for unpaid property taxes. I recall a story about some paultry amount of unpaid tax (<$100), but because the debt was neglected, the (a few) state's laws permitted the home to be siezed and sold to pay the unpaid amount, and the state gets to keep the balance. Even owning a home in the woods isn’t safe.
deleted 6y ago
[deleted]
confidantlake 6y ago
Why should you be taxed when you do things? That seems arbitrary.

GavinMcG 6y ago

I don't think they should be routine, but given the highly unbalanced taxing environment of the past few decades which allowed for such massive wealth to accumulate (and rapidly grow during the pandemic) I see them as a reasonable corrective. It also doesn't have to be ham-fisted. The concerns you bring up are legitimate and legislation is able to account for them.

tsimionescu 6y ago

> If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? How is the government forcing you to sell your company? They're forcing you to pay 0.4% of the money you own over those 30M dollars in tax, but that's it. Do you truly believe that there are people who make less than 0.4% per year profit on their >30M assets?

DuskStar 6y ago
This is startup land, where billion dollar companies lose money... So yes.
- minitoar 6y ago
  How real are those billion dollar valuations? Seems to me like it’s primarily a bunch of VCs in a term sheet circle jerk.
  - limitedmage 6y ago
    They’re real enough for the IRS to want their cut when you vest stocks or exercise options that you can’t sell.
    - auspex 6y ago
      I’d like to see if the IRS would accept the startup’s private shares as payment. It’s funny to me because there isn’t an open market to liquidate them... yet they are taxed like they are cash.
  - xur17 6y ago
    It doesn't matter how "real" you think it is if the government insists on taxing you like it's real. In fact, that's part of the problem.
    - minitoar 6y ago
      Huh, maybe that’s what I was implying with my comment. Thanks for spelling it out.
nthj 6y ago
edit: as tsimionescu kindly pointed out below, I misunderstood the 30M threshold. My reasoning seems correct to me but a key premise was wrong, and I agree the proposal is much less onerous than I have painted below: I personally know multiple startup founders worth $10-$20M on paper who made $120K/year salary for years (or still are.) It’s hardly unusual, startup valuations are high these days, and VCs and the founders themselves want to reinvest in growth, not issuing distributions. A founder owning 40% at a $50M valuation would feasibly have to double his salary to $240K to afford the $80K/year wealth tax, after paying income taxes on the salary increase in California. That’s realistically one employee they no longer have the cash flow to hire. A $50M startup may have something like $2M ARR, so if they don’t want to burn investment funds, they could support maybe 8 employees at their ARR level. Knocking out one employee at that size is significant. Or you could say they should get VC to support hiring more employees. Now the wealth tax is indirectly impacting the founder's equity—forcing you to sell your company. We can argue whether they should be forced to liquidate a portion yearly for taxes, but let’s not pretend everyone worth $20M on paper can light $80K cash on fire yearly without consequences.
- tsimionescu 6y ago
  First of all, if I understand correctly, if they are worth less than 30M$ they aren't affected by this tax at all. This alone I think invalidates some of your comment altogether. So the tax actually says that a founder owning 40% of a $100M valuation would have to $40k per year (0.4% of the 10M that they own over the base 30M0). By your calculation, they would have to pay themselves ~$200k per year to afford that, which would be ~0.5 employees for a company that can afford ~16 (simply doubling your numbers for employees and halving the increases because of the half tax). This doesn't seem like such a horrible onus on a corporation. Now, if the valuation is wildly off, then perhaps there will be bigger problems - but that would also mean that this law gives better incentives for correct valuations of companies, a win in itself.

rorykoehler 6y ago

I see it the opposite way around. We should only have a wealth tax and no income taxes. Capitalism means capital that earns for you while you sleep. Those who benefit the most from the system should pay for it. With only a wealth tax more people would have the means to amass wealth and there would be a greater incentive to spend rather than sit on money which would be good for the health and dynamism of the economy.

whatthesmack 6y ago
> Capitalism means capital that earns for you while you sleep. That's a big assumption. Not all capital earns for you while you sleep. > Those who benefit the most from the system should pay for it. That's also a big assumption. Just because one has capital does not mean they're benefiting from the regime they're currently under.
- legolas2412 6y ago
  So people will be incentivized to spend in riskier investments, just like the zero interest rate policy nowadays.
granzymes 6y ago
> Capitalism means capital that earns for you while you sleep. If it earns for you while you sleep then it is also taxed while you sleep. Income is income: the tax man doesn’t care where it comes from.
- rorykoehler 6y ago
  Income taxation creates a bureaucratic burden with no discernible benefit. We also disproportionately tax the poor via point of sale taxes which is just mind boggling stupid.
  - GhostVII 6y ago
    Wouldn't wealth tax also create bureaucratic burden? I would imagine that it is much harder to determine the value of the assets of all Americans than it is to determine their income.

sdenton4 6y ago

/Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money./ I figure if we allow passive income, we should allow passive taxes...

jstanley 6y ago
You're already taxed on passive income.
da_big_ghey 6y ago
Capital gains taxes are already a thing. You just pay on liquidation instead of having to come up with cash every year.
- sdenton4 6y ago
  First, let's recognize that this is a completely made-up criteria for when to apply the tax, then: there's no "natural" ethical principle for why it's ok to tax at liquidation vs tax continuously. The question, then, is whether one method is actually better than another under some set of criteria. The original comment's 'I don't feel like it' is insufficient in my mind. The reality of the current system is that we have absolutely enormous wealth bubbles hidden away basically forever. Once you're a billionaire, there's no REAL need to liquidate things on a regular basis. You'll tend to store the vast majority of that wealth in things that appreciate (because you have the choice, and no one needs that many cars, even you), so the bubble grows continuously. Then conversions will mostly happen at carefully judged points in time+method to minimize tax owed. A wealth tax puts some small check on the runaway growth of assets, and provides a more steady+predictable income stream for governments. Finally, I would like to reinforce that the 'you' used in all of these comments almost certainly include only "temporarily embarrassed" billionaires. Common sense household economics have near-zero relevance for thinking about wealth on the scales we should be concerned with here. Actual billionaires should have no trouble coming up with cash for a wealth tax: beyond some point, the wealth is a mostly undifferentiated mass of assets. If 'you' can project what 'you' owe for the tax, 'you' know how much you need to liquidate to pay it.

bradleyjg 6y ago

> passed down through my family I could go either way with wealth taxes—-there are efficiency and services arguments that go beyond just real property—-but I have zero problem with inheritance taxes. You want a Van Gogh or McLaren, you go create value just as your deceased would-be benefactor did.

curiousllama 6y ago

> why should the government be allowed to force me to sell my company If it’s your company, is there any particular reason you don’t pay it (or a loan against your equity) out of cash flow? Just like every other significant expense? If it’s a painting or a car, it’s already getting taxed as an inheritance, so this is just a .4% increase in a 40% tax, no? I happen to agree that wealth taxes are unwise, but it’s not because implementation is weird. We already have property taxes; we’ll figure it out. The main reason it’s bad is because wealth taxes compound, even when you take losses on investments. Retirement accounts will simply be ~20% smaller than without the tax.

disown 6y ago

> Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money. I used to as well, but now I flipped. I don't think you should be taxed for doing things, I think you should be taxed for wealth. I think there should be no tax for working ( income ), buying things ( sales tax ), etc. Activity which promotes economic growth shouldn't be taxed. But wealth should be taxed. House/assets/etc should be taxed. It's insane that you get taxed at 39% for work ( income ) but someone letting his money "do the work" gets taxed at 20% ( long term capital gains tax ). > I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist. But the government protects your ability to do so. So no. Though I'd be in favor of governments setting aside land internationally where people are allowed to live "in a state of nature". They are not allowed to form tribes/governments, but are allowed to live "free" as they wish untaxed without the help of society. > If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? Cause the company exists in a society governed/protected/etc by the government? It's the beneficiary of the environment. > Now the government is going to force me to sell my car? Nope. You could always go out and work to earn money to pay the wealth tax too and keep your car. I'd be in favor of removing all taxes for one wealth tax.

blovescoffee 6y ago

There are of course exceptions but in most cases that $30 million+ could only have been made because of the system that exists within California/USA. Paying taxes on that $30 million is just a way to support the stability of such a system that allowed an individual to make that much money. How many people with very little wealth actually inherit a $30 million car? Probably few enough that it would be more constructive to focus on the scenario most extremely wealthy people inhabit.

stickfigure 6y ago
This seems to be the Californian version of "American Exceptionalism". Yes, California has some great things going for it. But so does Washington and Oregon and Texas and Colorado. Relative tax rates matter, especially for people as mobile as the ultra-rich.

Straw 6y ago

Personally, I disagree with the whole idea of income taxes. You should be taxed for owning things, because the government enforces your property rights, not just for labor, for which the government doesn't directly contribute at all. I should be able to earn money for my labor without the government taking a fraction every time it moves around. Even if you move to the woods, you're still taking military protection from the surrounding government- even if you somehow avoid using any other service like roads, public education, etc. I don't understand this widespread belief that you have a right to permanent ownership. Someone has to enforce that ownership, and that has costs. What does seem wrong in principle is taxing transfers of money, which are virtually free with modern computer systems, not to mention the increased economic friction in the labor market. You raise a good point with liquidity. Personally, I wonder, how could we set up a system of fractional ownership that delays repossession in such cases? Of course, if you never pay tax on that heirloom, then you'll eventually lose a controlling interest- and I think this makes sense, especially for fundamentally limited resources like land.

apta 6y ago
Exactly. Islam took a similar route with Zakat (a form of "charity tax" if you will, over 1400 years ago, and it's proven to work. When you look at history, there was a period of time, when everyone paid their share of Zakat, and when there were no poor people left to take it! It's not that much either, only 2.5% for currencies like gold and silver over a minimum threshold (so the poor/lower class are exempted anyway). However, as I explain in my other post, there is no forcing to liquidate a fixed portion of any holdings you have. For example, if you own property and rent it out, the property value itself is not taxed, only the money you make out of rent if you hold on to it for over a year (and it's above a minimum threshold). Similarly if you owe shares in a company, the taxation is not a direct percentage of that ownership, it depends on things like debt and the amount of produce or products the company owns each year. Income tax is unethical and predatory as far as I'm concerned, not to mention continues to fail even at absurdly high taxation rates.
- selimthegrim 6y ago
  Which period was this? Because when I see what people with bank accounts in PK do now when Zakat is levied...

geofft 6y ago

> Or another example, I own a piece of art or a car passed down through my family that is worth 30 million dollars (maybe it's a mclaren f1 or something). There is no meaningful reason that a society should want you to inherit a piece of art or a car from your ancestors. (The only practical one is that the sorts of families who can pass down expensive art also control society.) You didn't work for that art or car; you simply had the fortune to be born into a family with one. Every single reason why it is unjust for someone to inherit a government role applies here. If you don't think King James the Nth should rule simply because King James the N-1st did, why do you think James Jr. should have 30 million dollars in financial power simply because James Sr. did? Just like hereditary rule, hereditary property breaks the fundamental relationship between work and reward that is common to any functional society. If you work hard and get a spare $30M to buy a car, sure, whatever, we can say you were incentivized to work hard and produce $30M of value. But if you work hard and give your kid $30M, how is your kid incentivized to do anything? And the argument that well-off parents have an inherent right to make their kids' lives easier leads directly to the correlation between class and race/caste. If it's moral for me to make my children better off than others' children, who is to say it's immoral for me to make my nieces and nephews several times removed better off, too? Who is to say it's immoral to make all the people in this town who came from a certain ancestral lineage better off? And on top of all that, it usually doesn't even work. We associate "nepotism" with waste and corruption, not just distasteful behavior, because we understand those who are chosen because of their family relationships generally aren't more qualified than the rest of the candidates. Even at the smallest scales, when you hear stories of the CEO's college-age kid getting an internship, it's almost always the case that the child has not inherited any particular talent, and in fact is probably less talented than would be needed for the job. Parents should be allowed to provide for their children to set them up for adulthood - they should be able to pay for housing and food and clothing and education. When they can't, society should step in to help them, and we're almost there: we have welfare programs and private charities for basic needs, free public education, and (at least among private colleges with sufficient endowments) full need-based financial aid. Parents should not be able to do more than that, in a society that prizes democracy and equality over the natural superiority of certain families.

mmcconnell1618 6y ago

I've got several concerns with wealth taxes in general too: 1) They are difficult to enforce. How to measure the value of a famous painting? What if the value does down? Is there a refund of wealth taxes? 2) They are an entirely new class of taxes that will give politicians the ability to increase the overall tax burden over time. At first, they will only impact the very wealthy, but it is much easier to adjust the threshold down a little than create a whole new tax. The history of income tax in the US is a guide. At first, it was temporary. Then only impacted a few people, now it is a progressive system that reaches large swaths of the population. https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_States#:~:text=In%20order%20to%20help%20pay,%24800%3B%20rescinded%20in%201872).&text=A%20new%20income%20tax%20statute,of%20the%201894%20Tariff%20Act https://en.wikipedia.org/wiki/History_of_taxation_in_the_Uni....

sdfin 6y ago
2 is what happens in Argentina.
- marcosdumay 6y ago
  In Brazil the government just inflates the values away, and keeps the levels the same :) Anyway, I am very friendly to the idea of a wealth tax. At a minimum it's more progressive than an income one. What I don't like is all the attrition that comes from the government having to put price on things, and mandating liquidity. I also dislike government initiatives that increase the fragility of a society. So, if one gets a proposal that doesn't suffer from those problems, I'm all for it. Until there I do think it's a great academic subject, but not viable on practice.
remote_phone 6y ago
Even worse is AMT. it was supposed to be a way to prevent rich people from hiding from taxes but now it just gets regular middle class people, and rich people avoid taxes other ways.
em500 6y ago
> 1) They are difficult to enforce. How to measure the value of a famous painting? What if the value does down? Is there a refund of wealth taxes? The Netherlands has had a general wealth tax since 2001 and there have not been many practical issues AFAIK. There are separate regimes for (1) primary residence (which get yearly assessments based on comparable sales/house price indices), (2) significant (>5%) business ownership (businesses need balance sheets/valuations anyway) and (3) all other assets taxed at around 1.2% of net asset value, first 30k exempt. There are no capital gains taxes. The value is assessed on 1 Jan every year. Whatever happens during the year is ignored. For bucket (3) the vast majority are in practice held in financial assets (stocks, bonds, savings, loans) and non-primary residence) real estate, most of these are pretty straightforward to value. There are explicit exemptions for art and science artifacts, pension investments (401k), movable property for personal use (cars, furniture) [1]. There's a good degree of pragmatism is most of this. The tax authorities realize that trying to squeeze some drops of people with Picasso's in their basements is largely a waste of time and effort. Rich people typically don't hold a large part of their wealth in illiquid, difficult-to-appraise assets for obvious reasons. [1] Here's a list in Dutch: https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/vermogen_en_aanmerkelijk_belang/vermogen/wat_zijn_uw_bezittingen_en_schulden/uw_bezittingen/welke_bezittingen_geeft_u_niet_aan_in_box_3/welke_bezittingen_zijn_vrijgesteld https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/...

Maarten88 6y ago

> If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? I don't know the specifics of this proposal. But I live in a country that has a similar wealth tax, and it doesn't work that way here. When you found a company, its shares remain valued at nominal value for tax purposes, until you sell or transfer them. Only after that they'll be taxed as wealth.

monocularvision 6y ago
That is capital gains tax. Not a wealth tax.
- Maarten88 6y ago
  No, it's wealth tax. I know what taxes I'm paying. Maybe my wording is not very precise, and I'm not a tax lawyer, but I do know founder shares remain valued nominally and you are not forced to sell anything even when your company gets very valuable. https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#Wealth_tax https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#We...

Dumblydorr 6y ago

The problems here are fairness, but also time. Wealth tax gathers funds from past and future actions, income tax only from future actions. If you believe laws were totally fair in the past, then a wealth tax should be unfair now. Is that your stance? Has taxation been fair? My stance is that the notion of private property is ingrained, we went to civil war due to private property of slaves, the french revolution was fomented due to financial problems due to untaxed private holdings of the church and wealthy people. Does having private property from the past mean it's ours and no one can touch it? History has shown that oligarchies and massive wealth disparities lead to negative societal outcomes. IMO, Taxes should generate revenue for public works and lower negative societal outcomes due to negative externalities, therefore wealth tax is fine with me in principle.

apta 6y ago

Look at the route Islam took with Zakat. It's a form of "charity tax" that depends on wealth. However, your scenario does not hold, the government will not force you to sell your company or any shares it in, because those are not subject to Zakat (at least not directly). Gold and silver over a minimum amount are taxed at 2.5% per Hijri year, while produce is taxed at a different percentage. Taxation of company shares depends on many things, such as the debt ratio and value of products the company owns. It's very possible to owe only a tiny amount, or none at all, while still doing business and making money. This is the superior approach which has proven to work if you look at history.

xtiansimon 6y ago

> “ I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist.” Reminds me of stories about people losing their homes for unpaid property taxes. I recall a story about some paultry amount of unpaid tax (<$100), but because the debt was neglected, the (a few) state's laws permitted the home to be siezed and sold to pay the unpaid amount, and the state gets to keep the balance. Even owning a home in the woods isn’t safe.

deleted 6y ago

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confidantlake 6y ago

Why should you be taxed when you do things? That seems arbitrary.