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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

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/...
- rufus_foreman 6y ago
  >> The value is assessed on 1 Jan every year. Whatever happens during the year is ignored. Oh, the games they will play!
  - em500 6y ago
    Care to elaborate? I hope it's something more sophisticated than swap your normal financial portfolio in Dec for paper money / gold bars / bitcoins / Picassos, report nothing, and repurchase the portfolio in Jan.
tylerhou 6y ago
1) For assets hard to value, the owner would have to declare the value of the painting. They would pay taxes on that declared value. To prevent the value from being too low, anyone would also have the ability to purchase that asset at the declared value.
- jandrewrogers 6y ago
  You clearly haven’t thought through the implications of that policy. It is literally forcing the owner to write a call option against their asset that anyone can exercise and without the owner receiving a risk premium. Speculators and arbitrageurs would make a fortune acquiring these assets if the call option was written at fair market value. It would be like r/wallstreetbets but with everyone’s private property. That will end well.
  - throwaway2245 6y ago
    > if the call option was written at fair market value. There are several solutions to this hypothetical problem. The parent said the owner decides the value of their premium item. The owner is claiming indifference as to whether it is sold at their chosen value or not. If that's only fair market value (in the rest of the market), the owner is indifferent to owning the asset at all and is just inadvertently hoarding it. The economy works better for everyone if the owner is encouraged to sell to whoever values it most highly. If the call option is called in (above the owner's valuation plus costs), an auction could be triggered, avoiding the arbitrage of first dibs. Overall, this is a hair on the back of a nit. The law should be that you pay tax on your global wealth - avoiding and evading tax is already a choice that people make. It's nothing new.
  - tylerhou 6y ago
    > You clearly haven’t thought through the implications of that policy. This isn't my idea; this is an idea proposed by an economist and a lawyer, who have both thought through the implications of such a policy. https://press.princeton.edu/books/hardcover/9780691177502/radical-markets https://press.princeton.edu/books/hardcover/9780691177502/ra...

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/...

rufus_foreman 6y ago
>> The value is assessed on 1 Jan every year. Whatever happens during the year is ignored. Oh, the games they will play!
- em500 6y ago
  Care to elaborate? I hope it's something more sophisticated than swap your normal financial portfolio in Dec for paper money / gold bars / bitcoins / Picassos, report nothing, and repurchase the portfolio in Jan.

tylerhou 6y ago

1) For assets hard to value, the owner would have to declare the value of the painting. They would pay taxes on that declared value. To prevent the value from being too low, anyone would also have the ability to purchase that asset at the declared value.

jandrewrogers 6y ago
You clearly haven’t thought through the implications of that policy. It is literally forcing the owner to write a call option against their asset that anyone can exercise and without the owner receiving a risk premium. Speculators and arbitrageurs would make a fortune acquiring these assets if the call option was written at fair market value. It would be like r/wallstreetbets but with everyone’s private property. That will end well.
- throwaway2245 6y ago
  > if the call option was written at fair market value. There are several solutions to this hypothetical problem. The parent said the owner decides the value of their premium item. The owner is claiming indifference as to whether it is sold at their chosen value or not. If that's only fair market value (in the rest of the market), the owner is indifferent to owning the asset at all and is just inadvertently hoarding it. The economy works better for everyone if the owner is encouraged to sell to whoever values it most highly. If the call option is called in (above the owner's valuation plus costs), an auction could be triggered, avoiding the arbitrage of first dibs. Overall, this is a hair on the back of a nit. The law should be that you pay tax on your global wealth - avoiding and evading tax is already a choice that people make. It's nothing new.
- tylerhou 6y ago
  > You clearly haven’t thought through the implications of that policy. This isn't my idea; this is an idea proposed by an economist and a lawyer, who have both thought through the implications of such a policy. https://press.princeton.edu/books/hardcover/9780691177502/radical-markets https://press.princeton.edu/books/hardcover/9780691177502/ra...