8 ms·

The Big Escape: How the Ultra-Wealthy Avoid Paying Taxes and How to Fix It [pdf]

71 points by mancy00 5y ago

anonymoushermit 5y ago
You can tell how close we are to complete collapse by how hard they agitate for outright wealth confiscation, and how sloppy they are with their attempts at intellectual sleight-of-hand. Like clockwork, from a historical perspective.
- freshpots 5y ago
  Care to elaborate? Some further reading/sources?
- evilos 5y ago
  A moment of silence for those poor millionaires/billionaires who will have to pay taxes like filthy plebs.
anderson1993 5y ago
Sigh... Wealth taxes don't work. Almost every single European country that had a wealth tax repealed theirs. The fact that Senator Warren is continuing to try to push a wealth tax shows how poor her policies are.
- vmception 5y ago
  The US also repealed its wealth tax promptly after introduction in the 90s.
- aantix 5y ago
  Why don't wealth taxes work? Which countries repealed?
  - lbriner 5y ago
    I guess they only work if everyone uses them, otherwise the danger is that a billionaire takes their business elsewhere.
  - baggy_trough 5y ago
    For example, that well known bastion of fascist right-wing policies, France. https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth
  - cscurmudgeon 5y ago
    https://www.npr.org/2019/03/01/699261950/why-a-wealth-tax-didnt-work-in-europe https://www.npr.org/2019/03/01/699261950/why-a-wealth-tax-di... > ROSALSKY: In 1990, there were 12 countries in Europe that had a wealth tax. Today there are only three. Perret says they didn't work for a lot of reasons. Among other things, it costs a lot to enforce. It pushed rich people out of the country, and the wealth taxes didn't raise a lot of revenue. But > ROSALSKY: But Warren says that her proposal, which has no exemptions, will play out differently in the United States. Greg Rosalsky, NPR News. Unfortunately, nothing in her proposal justifies that. Why can't companies and people just move out of the US to avoid this? Singapore or other countries will readily welcome them.
    - littlestymaar 5y ago
      > Perret says they didn't work for a lot of reasons. Among other things, it costs a lot to enforce. It pushed rich people out of the country, and the wealth taxes didn't raise a lot of revenue. In France at least, it has been a topic of political debate for decades before the recent abolition and what's clear at this point is that it costed much less than what it brought (both in terms of law enforcement, and in terms of rich people moving out of the country). > Unfortunately, nothing in her proposal justifies that. Why can't companies and people just move out of the US to avoid this? A wealth tax isn't a tax on a company, it's a tax on the owner of the company so moving the company won't help here. And the owner leaving the US won't help either, since they will still have to pay taxes as long as they remain a US citizen. Renouncing to US citizenship would still be an option of course, but I'd expect the opportunity cost would be much higher than the cost of the tax itself.
- nerbert 5y ago
  It's not because they repealed them that they don't work. It could also be a symptom of the current times in which wealthy people became extremely good at influencing politics to reinforce their position.
  - motives 5y ago
    This is a point worth emphasizing, a tax being repealed does not necessarily imply a lack of efficacy, due to the aforementioned reasons of political influence/corruption etc. Switzerland has done very well with a global wealth tax, arguably being the highest standard of living in Europe.
- javert 5y ago
  America forces people to renounce citizenship to avoid high taxes (unlike every other country in the world where you can just leave the country), so the people who flee Warren's wealth tax will not ever be coming back.
- soberpeach 5y ago
  It depends how the wealth tax is implemented. European wealth taxes were primarily on capital like stocks, which are extremely easy to move, even easier than income. A wealth tax on land (an LVT) is literally impossible to avoid however since you can't move the land.
  - umeshunni 5y ago
    > A wealth tax on land (an LVT) is literally impossible to avoid however since you can't move the land. Yeah, those are called property taxes and already exist.
    - soberpeach 5y ago
      Property taxes tax buildings as well, a Land Value Tax is purely a tax on the land and doesn't change whether you have a building on it or not.
- jsilence 5y ago
  Yeah, not taxing the rich also does not work. See the trillion Dollar tax break Pres. Trump and the GOP implemented. The savings were supposed to somehow trickle down to the "lower decks", but this has proven not to happen. Meanwhile the ultra rich are getting ultra richer and the rest is getting poorer. So lets globally coordinated tax the rich for a while in a way that they can not evade their net wealth to some other country and lets see how well that works.
  - dantheman 5y ago
    The rich already pay almost all of the taxes anyway. The government just needs to do less to balance the budget.
    - evilos 5y ago
      Well that is expected when they own most of the capital/money. That's not really a factor or surprising. What is important is how much a person is paying as a function of how rich they are. Rich people get to pay way less and it's not fair. They can get around tax laws because their cash flows don't look like the average citizen's tax flows.
  - dahfizz 5y ago
    > The savings were supposed to somehow trickle down to the "lower decks", but this has proven not to happen. Do you have more info on this? The middle class literally paid less in taxes due to Trump's cuts[1]. The rates were lowered across the board and the standard deduction (negligible to the 1%, a huge chunk of change to the middle class) was increased. [1] https://www.bloomberg.com/news/articles/2020-10-27/the-trump-tax-cut-wasn-t-just-for-the-rich https://www.bloomberg.com/news/articles/2020-10-27/the-trump...
    - jsilence 5y ago
      "...the Trump administration claimed that its corporate tax cuts would increase the average household income in the United States by $4,000. But two years later, there is little indication that the tax cut is even beginning to trickle down in the ways its proponents claimed." https://www.americanprogress.org/issues/economy/news/2019/09/26/475083/trumps-corporate-tax-cut-not-trickling/ https://www.americanprogress.org/issues/economy/news/2019/09... https://www.rollingstone.com/politics/politics-features/trump-covid-response-economy-jobs-taxes-inequality-1080345/ https://www.rollingstone.com/politics/politics-features/trum... https://www.salon.com/2020/12/27/50-year-study-of-tax-cuts-on-wealthy-shows-they-always-fail-to-trickle-down/ https://www.salon.com/2020/12/27/50-year-study-of-tax-cuts-o... https://www.motherjones.com/politics/2020/06/trumps-tax-cuts-were-a-disaster-naturally-republicans-want-even-more/ https://www.motherjones.com/politics/2020/06/trumps-tax-cuts...
- jrsdav 5y ago
  Can you point me in the right direction for more info on this? I'm curious about what some of the problems were, and why they needed to be repealed. I'm also curious what you think a sound tax policy would look like as an alternative to what Warren is proposing.
- aldanor 5y ago
  Except Switzerland?
- littlestymaar 5y ago
  I can't talk about other countries, but in my country (France) it didn't get repealed because it “didn't work”, it got repealed because it worked too well and it pissed off the billionaires who lobbied all they could to get it repealed (and even with such intensive lobby it lasted more than 30 years and survived several conservative majorities).
- einpoklum 5y ago
  Yeah, peace doesn't work too, every single European country that's tried it has reneged on it at least once in the past century, except maybe Switzerland and the Vatican. More seriously though, issues like wealth taxation, capital gains taxation, inheritance taxes etc. are I would say more of a reflection of the relative strength of large property owners (a.k.a. "Capitalists" or "The 1%" to use other colloquial terms) versus the rest of the populace, to set economic-cultural norms and influence legislation. Certainly, if such a tax is put in effect, many of the wealthy would make an effort to hide their assets away, possibly even abroad. But if the (federal) state wanted to cope with or overcome this potential tendency - which it really does not in the ultra-bought-off US political system, including Ms. Warren - there are many ways it could do so, both on the national and international levels. Not to mention how US corporations already employ asset and activity off-shoring to evade taxation.
- X6S1x6Okd1st 5y ago
  Germany: Discontinued Finland: Discontinued Luxembourg: Discontinued Sweden: Discontinued France: Discontinued* Spain: Current Netherlands: Current Norway: Current Switzerland: Current Italy: Current, but excludes assets held within the country Belgium: Current So 5 discontinued & 6 current? That doesn't seem like "Almost every single" https://en.wikipedia.org/wiki/Wealth_tax#Current_examples https://en.wikipedia.org/wiki/Wealth_tax#Current_examples Do you have a better source for what countries had it an discontinued it? For what it's worth I am here considering Financial property exclusively, France still has it's property tax which can be considered a wealth tax. I am struggling to find write ups that don't just echo "they all repealed it" but list the specific countries.
  - RandomLensman 5y ago
    Germany discontinued it after it was struck down by the supreme court because it only taxed liquid/easy to measure wealth. Any new wealth tax would have to extend to all forms of wealth and would therefore be very costly to administrate. Successive governments have so far refrained from creating a new version. In fairness, the "old" wealth tax did not bring a lot of revenue.
  - vonmoltke 5y ago
    From the article you cited (just above the examples): > In 1990, about a dozen European countries had a wealth tax, but by 2019, all but four had eliminated the tax because of the difficulties and costs associated with both design and enforcement. Belgium, Norway, Spain, and Switzerland are the countries that raised revenue from net wealth taxes on individuals in 2019 with net wealth taxes accounting for 1.1% of overall tax revenues in Norway, 0.55% in Spain, and 3.6% in Switzerland for 2017. The citation for those statements links back to the OECD, so they apparently don't count the Italian and Dutch taxes as "wealth taxes". The NPR transcript linked elsewhere says only three countries have it, so that interviewee may not be counting Belgium either (since the tax is solely on financial instruments and not total wealth).
    - X6S1x6Okd1st 5y ago
      Yeah I'm finding it hard to get a coherent count.
csallen 5y ago
> In 2018, Warren Buffett had a net worth of $84 billion. The effective tax rate on his mountain of wealth? 0.006%—orders of magnitude lower than the tax rates paid by most middle-class families. What tax rate do middle-class families pay on their net worth? 0% I believe, since we don't have wealth taxes?
- iammisc 5y ago
  Yeah, this is written in extremely manipulative language. What was warren buffett's income in 2018? We have income tax, not wealth tax. Plus, a lot of that wealth is likely 'in' his company, which is really just fake money. I mean, I know accountants look at it and there is some overlap for taxes when doing things like options and share grants and FMV, but really, a company is worth zero until you sell it, like most assets. EDIT: Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay. This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.
  - Closi 5y ago
    > a company is worth zero until you sell it, like most assets. I don’t think that’s quite true - I would say a better definition would be that a company is worth what someone will pay for it, regardless of if you actually sell it or not. Stocks, piles of gold and cash are just different types of asset all of which have value. And you have to really tax all of that, otherwise the wealthy will just avoid taxes by being paid in untaxable gold bricks and trade those for purchases rather than dollars.
    - intended 5y ago
      I mean do we need to sell Apple to know it’s worth money ? The existence of the stock market immediately makes it possible to convert assets into liquidity - something which firms do regularly.
cscurmudgeon 5y ago
Somehow any new measures will end up penalizing the middle class either directly or indirectly and not touching the ultra wealthy despite the politicians claiming loudly otherwise.
sna1l 5y ago
It is interesting that everyone says that the wealth tax is hard to implement, yet it seems to be working well in Switzerland? https://www.bloomberg.com/news/articles/2021-02-16/swiss-wealth-tax-rakes-in-cash-as-covid-revives-global-debate https://www.bloomberg.com/news/articles/2021-02-16/swiss-wea...
- trutannus 5y ago
  They have no capital gains tax. Overall the wealth tax is a lower cost to individuals than the style of wealth taxes en-vogue in a lot of places now. Wealth taxes require liquidation of assets to pay, given the nature of wealth. When you liquidate assets, you pay cap gains tax and then have to pay the wealth tax. In Switzerland, you just pay the wealth tax. Basically, you have to be taxed to pay the tax in most places, where in Switzerland you just pay the tax without being 'double taxed'. Liquidating assets to cover that tax works out to a lower overall tax burden on the individual than capital gains tax. Most nations that are mulling wealth taxes are considering them as an added tax layer, as opposed to the Swiss who use it as an indirect means to tax investments, rather than asking for a per-transaction gain payment. Nations that have done the approach that's opposite to Switzerland tend to reverse their wealth taxes, or see little benefit (France, for instance).
  - sna1l 5y ago
    France is an interesting example. I believe their wealth tax targeted more than just the super rich and it led to a heavy exodus of millionaires from France. Also by not having an exit tax, it was easy enough for people to leave France to avoid this.
    - trutannus 5y ago
      If I'm not mistaken, Switzerland the wealth tax hits everyone as well. The starting is something like 200K CHF. That said, the actual percentage is very low, like 0.2%. Having read a few bits of the Swiss tax code, I'd actually prefer to have this wealth tax like that over a cap-gains tax, since it would overall be a lower percentage of my capital asset appreciation than a CGT.
vmception 5y ago
Okay I read this. It gives no details on what loopholes would be closed, and then conflated that with tax cheats and that a well funded IRS will solve both. A well funded IRS will just be rubber stamping the compliant tax reducing methods faster. Although most constituent's experience with the IRS is retroactive and adversarial, wealthier people's experience with the IRS is pre-emptive and collaborative. It is a totally different experience. I don't get the impression that the people and organizations identified here would ever be subject to these taxes, even if the law was passed without any debate.
- ch33zer 5y ago
  I believe most of this is based on public reporting by propublica: https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax https://www.propublica.org/article/the-secret-irs-files-trov...
  - vmception 5y ago
    Okay, I don't agree with the "true tax rate" terminology or methodology. Not necessarily in response to you, just that article and for anyone passing by. Changing values of assets are not income. Taxing net assets would require so much extra liquidity that may not exist, and if people wanted to be compliant with a wealth tax they will have to avoid illiquid assets which would be the most counterproductive fiscal and monetary policy for the economy. You want to get more people to go into illiquid assets to make them liquid, big yikes. It is disingenuous trying to equate "$1 added to their net worth" to a wage worker adding $1 to their net worth, even if it was purely for explanation purposes. But here it is intentionally made to seem like something else. Its would make more sense to add a sales/excise tax to the buyers that push up the price of assets as they are the only ones moving liquid value around. Like a new uptick rule. Makes more sense to tax appraisers for illiquid assets if they uptick. I don't think any of these make real sense, but makes more sense than taxes people subject to the whims of the market.
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avalys 5y ago
Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from? It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.
- evilos 5y ago
  Couldn't the shares just be transferred instead of sold?
  - avalys 5y ago
    Ok, and the government is going to do what with them? The point is to raise tax revenue.
- tablespoon 5y ago
  > Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from? The stock market. > It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors. Without domestic ownership requirements, that will happen anyway, for instance: https://www.marketwatch.com/story/jeff-bezos-just-sold-nearly-2-5-billion-in-amazon-shares-11620264680 https://www.marketwatch.com/story/jeff-bezos-just-sold-nearl... ("Jeff Bezos has sold $6.7 billion in Amazon shares over the past week"). I reckon that's about 3% of his wealth. And frankly, the wealthy have been expatriating US national assets for a long time, just not the paper financial ones. I don't see why we should be especially concerned with those, since what they mean is controlled entirely by US law.
Bhilai 5y ago
> Name: Elon Musk, Net Worth: $19.9 billion, Federal Income Tax Paid: $8,410 How is this possible? Why does Elon Musk pay less taxes than an average person who works in Tech?
- lvl100 5y ago
  Because our society and govt think the only way to get innovation is to incentivize the rich. That and war.
- deleted 5y ago
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- monocasa 5y ago
  A tiny salary, and not realizing capital gains on the stock but instead taking out margin loans using his stock as collateral.
- fairity 5y ago
  His net worth is stored in company shares, which doesn't get taxed until it's sold.
- bmitc 5y ago
  My understanding is that these ultra rich people have their wealth tied up in investments, so they never "see" any income despite their investments' massive growth. To get cash and buy things, they simply take out loans at super low interest rates using their investments as collateral. Basically, it's cheat codes. It's probably why CEOs also like to take super low salaries. What I don't understand is how their stock gifts or dividends don't trigger more taxes or why their taxes are indeed so damn low.
lbriner 5y ago
In the UK (and I'm sure elsewhere), inheritance tax is the main vehicle to try and avoid dynasties being created once one person has accumulated massive wealth. As others have said, it is income that is taxed, there will be plenty of people who own capital (e.g. inherited a large country house) and who don't have the cash to pay a tax on it and presumably it would seem unfair to force them to sell it (and hope they get decent money for it) in order to pay a tax on it.
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ninja3925 5y ago
I have noticed that politicians always use extremes (many standard deviations away from the average) to illustrate a population.For example, Warren Buffet wealth is in the top 10. Yet, Warren's policies target the top 1% (top 10 is the top 0.00033% of the top 1%). He is not representative of the top 1% in any way!! Show me the median and let's talk. I am surprised people bite at this manipulative narrative. It seems to me that it discredits their arguments right away. In that sense, voter education would go a long way.
- ulkram 5y ago
  False. The Ultra-Millionaire Tax Act would impose a tax on the wealth of the top 0.05 % of Americans (people with > 50 million in wealth).
- X6S1x6Okd1st 5y ago
  > The Ultra-Millionaire Tax would apply to the wealthiest 100,000 households in America and generate at least $3 trillion in revenue over the next decade—all without raising taxes on 99.95% of American households. Huh? 0.05% is 20x smaller than 1%
- evilos 5y ago
  To be top 1% in 2020, a household needed a net worth of $11,099,166. $10,374,030 was the 1% threshold in 2017. To be top .5% in 2020, a household needed a net worth of $17,557,208. The top .1% bracket started around $43,207,732. This wealth tax doesn't kick in until 50M USD. https://dqydj.com/average-median-top-net-worth-percentiles/ https://dqydj.com/average-median-top-net-worth-percentiles/
- commandlinefan 5y ago
  > I am surprised people bite at this manipulative narrative. I suspect it's people believing what they want to believe. When Elizabeth Warren comes along and says, "you can have everything you need: healthcare, food, clothing, housing, all without having to work at a job you hate, and all we have to do is agree to take a little bit from a few people who won't even miss it", a lot of people who do work at a job they hate and stress about how much healthcare, food, clothing and housing they have or might have in the future don't really see much downside in saying, "yeah, sure, let's try it".
lvl100 5y ago
There’s a simpler way to fix this. Crypto. Sorry I couldn’t help myself.
- puchatek 5y ago
  I think you forgot the sarcasm sign
- figers 5y ago
  SHIB is the way to go, bull millions of coins and hope it goes up a ton some day…
kogus 5y ago
One answer would be a federal sales tax, combined with a Universal Basic Income. The UBI would be equal to the amount of the tax on up to some minimum income level (say, 50k / year). In other words, everyone gets a monthly check that is essentially a rebate on their sales tax up to the income threshold. That's simple, loophole-free, and avoids the privacy invasion that accurate income tax collections require.
- dahfizz 5y ago
  This would also have the benefit that all money you save and don't spend is tax free. Normally you have to jump through hoops to save and invest pre-tax money.
outlace 5y ago
What if we mandate that all workers must get part of their compensation in the form of company shares so that if the company explodes in value, it's not just the executives that become billionaires and the workers are just still going paycheck to paycheck? This seems common in the tech world but not so much in other companies.
- vnchr 5y ago
  So government-forced wealth redistribution? I wonder if that’s been tried before. Maybe there’s some point of reference for the outcomes of that approach. Maybe it could be tried on a local basis and then evaluated before a complete overhaul of the largest single nation economy? If I had to guess, I don’t think it would work out very well. Unless you imprison the wealthy. Then their wealth wouldn’t be mobile. This would be a great idea to apply lean startup methodology. If it works, we’ll, that’d just be…unprecedented!
  - convivialdingo 5y ago
    Perhaps it could be a form of distributism? Basically we could rather promote legal entitlements to workers in the share of wealth generated by companies and labor. There's an interesting google talk on this from long ago. https://www.youtube.com/watch?v=X1PtStipIsc https://www.youtube.com/watch?v=X1PtStipIsc
- leetcrew 5y ago
  I don't think this would actually be better for the workers? ceteris paribus, it's better to be paid in cash than stock. stock can be better if it enables a higher TC, or the number of shares is locked in before a major jump in valuation, but at the low end of pay I think most people would prefer to minimize variance over maximizing EV.
exabrial 5y ago
I don't think "escaping taxes" is a bad thing. I'm only upset these instruments aren't available to the common person. This money belongs in people's pockets, not in pockets of senators and their golf buddies.
rednerrus 5y ago
Do we want to tax money that's working? Money that's actively building things? I would argue we don't.
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useful 5y ago
In theory, a 3% wealth tax makes the life of a billionaire difficult. You have like a 60% tax rate for fed/state/local. You make maybe 8% by being safe in your investments. If you pay taxes on your income, get that 8% reduced to 6% by 2% inflation and then your left with a 3.6% YoY gain (6% * 60%) before a 3% wealth tax wipes you out down to 0.6%. But you still don't have to pay taxes on your gains with this bill. You can take out a loan on your new assets at a 2-3% rate and its reduced to around 1% with inflation. Now you don't have to pay taxes because a loan on the principal value doesn't cause a taxable event with the step up in value. You just sell enough to cover your interest liabilities and pay taxes on that. I wish they'd address WHY these rates are so low by attacking people and companies that aren't being productive with their capital by building things people want. Why attack a people or a company with a wealth tax if they are paying low rates because they spend most of their revenue on building the business. Capitalism is about rewarding good allocators of capital.
- bradlys 5y ago
  Why would it be 60% for stocks? It’s not regular income. It’s capital gains. You’re looking at much lower rates for ltcg. These rules also only apply to people with $50M+ and only to amounts over that $50M. I don’t think almost anyone should have that level of wealth in the world - it’s clearly created at the cost of others.
  - useful 5y ago
    I figure if you are actively managing your account, then most of it is short term.
rlewkov 5y ago
The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws.
- X6S1x6Okd1st 5y ago
  Yeah and this is an initiative to change the law.
- bradlys 5y ago
  > The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws. What would if the winning team always ended up writing the rules in such a way to where they were always winners and only winners could write next years rules?
bassman9000 5y ago
Why "less spending" is never an option? Why do we need more and more trillions in taxes?
azth 5y ago
It's always interesting that this issue keeps coming up, whereas Islam solved it over 1400 years ago through the Zakat system. An extremely reasonable 2.5% would be owed on money sitting in the bank for one lunar year (it's a form of "wealth tax" if you will). It has been documented that in Iraq during the Ummayad period where everyone paid their share of Zakat, there were no more poor people left to accept it. And that's it, no income tax or messing around with it. It works. Livestock and produce have a separate calculation, but most of us here are not in that business.

71 points by mancy00 5y ago

You can tell how close we are to complete collapse by how hard they agitate for outright wealth confiscation, and how sloppy they are with their attempts at intellectual sleight-of-hand. Like clockwork, from a historical perspective.

freshpots 5y ago
Care to elaborate? Some further reading/sources?
evilos 5y ago
A moment of silence for those poor millionaires/billionaires who will have to pay taxes like filthy plebs.

anderson1993 5y ago

Sigh... Wealth taxes don't work. Almost every single European country that had a wealth tax repealed theirs. The fact that Senator Warren is continuing to try to push a wealth tax shows how poor her policies are.

vmception 5y ago
The US also repealed its wealth tax promptly after introduction in the 90s.
aantix 5y ago
Why don't wealth taxes work? Which countries repealed?
- lbriner 5y ago
  I guess they only work if everyone uses them, otherwise the danger is that a billionaire takes their business elsewhere.
- baggy_trough 5y ago
  For example, that well known bastion of fascist right-wing policies, France. https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth
- cscurmudgeon 5y ago
  https://www.npr.org/2019/03/01/699261950/why-a-wealth-tax-didnt-work-in-europe https://www.npr.org/2019/03/01/699261950/why-a-wealth-tax-di... > ROSALSKY: In 1990, there were 12 countries in Europe that had a wealth tax. Today there are only three. Perret says they didn't work for a lot of reasons. Among other things, it costs a lot to enforce. It pushed rich people out of the country, and the wealth taxes didn't raise a lot of revenue. But > ROSALSKY: But Warren says that her proposal, which has no exemptions, will play out differently in the United States. Greg Rosalsky, NPR News. Unfortunately, nothing in her proposal justifies that. Why can't companies and people just move out of the US to avoid this? Singapore or other countries will readily welcome them.
  - littlestymaar 5y ago
    > Perret says they didn't work for a lot of reasons. Among other things, it costs a lot to enforce. It pushed rich people out of the country, and the wealth taxes didn't raise a lot of revenue. In France at least, it has been a topic of political debate for decades before the recent abolition and what's clear at this point is that it costed much less than what it brought (both in terms of law enforcement, and in terms of rich people moving out of the country). > Unfortunately, nothing in her proposal justifies that. Why can't companies and people just move out of the US to avoid this? A wealth tax isn't a tax on a company, it's a tax on the owner of the company so moving the company won't help here. And the owner leaving the US won't help either, since they will still have to pay taxes as long as they remain a US citizen. Renouncing to US citizenship would still be an option of course, but I'd expect the opportunity cost would be much higher than the cost of the tax itself.
nerbert 5y ago
It's not because they repealed them that they don't work. It could also be a symptom of the current times in which wealthy people became extremely good at influencing politics to reinforce their position.
- motives 5y ago
  This is a point worth emphasizing, a tax being repealed does not necessarily imply a lack of efficacy, due to the aforementioned reasons of political influence/corruption etc. Switzerland has done very well with a global wealth tax, arguably being the highest standard of living in Europe.
javert 5y ago
America forces people to renounce citizenship to avoid high taxes (unlike every other country in the world where you can just leave the country), so the people who flee Warren's wealth tax will not ever be coming back.
soberpeach 5y ago
It depends how the wealth tax is implemented. European wealth taxes were primarily on capital like stocks, which are extremely easy to move, even easier than income. A wealth tax on land (an LVT) is literally impossible to avoid however since you can't move the land.
- umeshunni 5y ago
  > A wealth tax on land (an LVT) is literally impossible to avoid however since you can't move the land. Yeah, those are called property taxes and already exist.
  - soberpeach 5y ago
    Property taxes tax buildings as well, a Land Value Tax is purely a tax on the land and doesn't change whether you have a building on it or not.
jsilence 5y ago
Yeah, not taxing the rich also does not work. See the trillion Dollar tax break Pres. Trump and the GOP implemented. The savings were supposed to somehow trickle down to the "lower decks", but this has proven not to happen. Meanwhile the ultra rich are getting ultra richer and the rest is getting poorer. So lets globally coordinated tax the rich for a while in a way that they can not evade their net wealth to some other country and lets see how well that works.
- dantheman 5y ago
  The rich already pay almost all of the taxes anyway. The government just needs to do less to balance the budget.
  - evilos 5y ago
    Well that is expected when they own most of the capital/money. That's not really a factor or surprising. What is important is how much a person is paying as a function of how rich they are. Rich people get to pay way less and it's not fair. They can get around tax laws because their cash flows don't look like the average citizen's tax flows.
- dahfizz 5y ago
  > The savings were supposed to somehow trickle down to the "lower decks", but this has proven not to happen. Do you have more info on this? The middle class literally paid less in taxes due to Trump's cuts[1]. The rates were lowered across the board and the standard deduction (negligible to the 1%, a huge chunk of change to the middle class) was increased. [1] https://www.bloomberg.com/news/articles/2020-10-27/the-trump-tax-cut-wasn-t-just-for-the-rich https://www.bloomberg.com/news/articles/2020-10-27/the-trump...
  - jsilence 5y ago
    "...the Trump administration claimed that its corporate tax cuts would increase the average household income in the United States by $4,000. But two years later, there is little indication that the tax cut is even beginning to trickle down in the ways its proponents claimed." https://www.americanprogress.org/issues/economy/news/2019/09/26/475083/trumps-corporate-tax-cut-not-trickling/ https://www.americanprogress.org/issues/economy/news/2019/09... https://www.rollingstone.com/politics/politics-features/trump-covid-response-economy-jobs-taxes-inequality-1080345/ https://www.rollingstone.com/politics/politics-features/trum... https://www.salon.com/2020/12/27/50-year-study-of-tax-cuts-on-wealthy-shows-they-always-fail-to-trickle-down/ https://www.salon.com/2020/12/27/50-year-study-of-tax-cuts-o... https://www.motherjones.com/politics/2020/06/trumps-tax-cuts-were-a-disaster-naturally-republicans-want-even-more/ https://www.motherjones.com/politics/2020/06/trumps-tax-cuts...
jrsdav 5y ago
Can you point me in the right direction for more info on this? I'm curious about what some of the problems were, and why they needed to be repealed. I'm also curious what you think a sound tax policy would look like as an alternative to what Warren is proposing.
aldanor 5y ago
Except Switzerland?
littlestymaar 5y ago
I can't talk about other countries, but in my country (France) it didn't get repealed because it “didn't work”, it got repealed because it worked too well and it pissed off the billionaires who lobbied all they could to get it repealed (and even with such intensive lobby it lasted more than 30 years and survived several conservative majorities).
einpoklum 5y ago
Yeah, peace doesn't work too, every single European country that's tried it has reneged on it at least once in the past century, except maybe Switzerland and the Vatican. More seriously though, issues like wealth taxation, capital gains taxation, inheritance taxes etc. are I would say more of a reflection of the relative strength of large property owners (a.k.a. "Capitalists" or "The 1%" to use other colloquial terms) versus the rest of the populace, to set economic-cultural norms and influence legislation. Certainly, if such a tax is put in effect, many of the wealthy would make an effort to hide their assets away, possibly even abroad. But if the (federal) state wanted to cope with or overcome this potential tendency - which it really does not in the ultra-bought-off US political system, including Ms. Warren - there are many ways it could do so, both on the national and international levels. Not to mention how US corporations already employ asset and activity off-shoring to evade taxation.
X6S1x6Okd1st 5y ago
Germany: Discontinued Finland: Discontinued Luxembourg: Discontinued Sweden: Discontinued France: Discontinued* Spain: Current Netherlands: Current Norway: Current Switzerland: Current Italy: Current, but excludes assets held within the country Belgium: Current So 5 discontinued & 6 current? That doesn't seem like "Almost every single" https://en.wikipedia.org/wiki/Wealth_tax#Current_examples https://en.wikipedia.org/wiki/Wealth_tax#Current_examples Do you have a better source for what countries had it an discontinued it? For what it's worth I am here considering Financial property exclusively, France still has it's property tax which can be considered a wealth tax. I am struggling to find write ups that don't just echo "they all repealed it" but list the specific countries.
- RandomLensman 5y ago
  Germany discontinued it after it was struck down by the supreme court because it only taxed liquid/easy to measure wealth. Any new wealth tax would have to extend to all forms of wealth and would therefore be very costly to administrate. Successive governments have so far refrained from creating a new version. In fairness, the "old" wealth tax did not bring a lot of revenue.
- vonmoltke 5y ago
  From the article you cited (just above the examples): > In 1990, about a dozen European countries had a wealth tax, but by 2019, all but four had eliminated the tax because of the difficulties and costs associated with both design and enforcement. Belgium, Norway, Spain, and Switzerland are the countries that raised revenue from net wealth taxes on individuals in 2019 with net wealth taxes accounting for 1.1% of overall tax revenues in Norway, 0.55% in Spain, and 3.6% in Switzerland for 2017. The citation for those statements links back to the OECD, so they apparently don't count the Italian and Dutch taxes as "wealth taxes". The NPR transcript linked elsewhere says only three countries have it, so that interviewee may not be counting Belgium either (since the tax is solely on financial instruments and not total wealth).
  - X6S1x6Okd1st 5y ago
    Yeah I'm finding it hard to get a coherent count.

csallen 5y ago

> In 2018, Warren Buffett had a net worth of $84 billion. The effective tax rate on his mountain of wealth? 0.006%—orders of magnitude lower than the tax rates paid by most middle-class families. What tax rate do middle-class families pay on their net worth? 0% I believe, since we don't have wealth taxes?

iammisc 5y ago
Yeah, this is written in extremely manipulative language. What was warren buffett's income in 2018? We have income tax, not wealth tax. Plus, a lot of that wealth is likely 'in' his company, which is really just fake money. I mean, I know accountants look at it and there is some overlap for taxes when doing things like options and share grants and FMV, but really, a company is worth zero until you sell it, like most assets. EDIT: Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay. This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.
- Closi 5y ago
  > a company is worth zero until you sell it, like most assets. I don’t think that’s quite true - I would say a better definition would be that a company is worth what someone will pay for it, regardless of if you actually sell it or not. Stocks, piles of gold and cash are just different types of asset all of which have value. And you have to really tax all of that, otherwise the wealthy will just avoid taxes by being paid in untaxable gold bricks and trade those for purchases rather than dollars.
  - intended 5y ago
    I mean do we need to sell Apple to know it’s worth money ? The existence of the stock market immediately makes it possible to convert assets into liquidity - something which firms do regularly.

cscurmudgeon 5y ago

Somehow any new measures will end up penalizing the middle class either directly or indirectly and not touching the ultra wealthy despite the politicians claiming loudly otherwise.

sna1l 5y ago

It is interesting that everyone says that the wealth tax is hard to implement, yet it seems to be working well in Switzerland? https://www.bloomberg.com/news/articles/2021-02-16/swiss-wealth-tax-rakes-in-cash-as-covid-revives-global-debate https://www.bloomberg.com/news/articles/2021-02-16/swiss-wea...

trutannus 5y ago
They have no capital gains tax. Overall the wealth tax is a lower cost to individuals than the style of wealth taxes en-vogue in a lot of places now. Wealth taxes require liquidation of assets to pay, given the nature of wealth. When you liquidate assets, you pay cap gains tax and then have to pay the wealth tax. In Switzerland, you just pay the wealth tax. Basically, you have to be taxed to pay the tax in most places, where in Switzerland you just pay the tax without being 'double taxed'. Liquidating assets to cover that tax works out to a lower overall tax burden on the individual than capital gains tax. Most nations that are mulling wealth taxes are considering them as an added tax layer, as opposed to the Swiss who use it as an indirect means to tax investments, rather than asking for a per-transaction gain payment. Nations that have done the approach that's opposite to Switzerland tend to reverse their wealth taxes, or see little benefit (France, for instance).
- sna1l 5y ago
  France is an interesting example. I believe their wealth tax targeted more than just the super rich and it led to a heavy exodus of millionaires from France. Also by not having an exit tax, it was easy enough for people to leave France to avoid this.
  - trutannus 5y ago
    If I'm not mistaken, Switzerland the wealth tax hits everyone as well. The starting is something like 200K CHF. That said, the actual percentage is very low, like 0.2%. Having read a few bits of the Swiss tax code, I'd actually prefer to have this wealth tax like that over a cap-gains tax, since it would overall be a lower percentage of my capital asset appreciation than a CGT.

vmception 5y ago

Okay I read this. It gives no details on what loopholes would be closed, and then conflated that with tax cheats and that a well funded IRS will solve both. A well funded IRS will just be rubber stamping the compliant tax reducing methods faster. Although most constituent's experience with the IRS is retroactive and adversarial, wealthier people's experience with the IRS is pre-emptive and collaborative. It is a totally different experience. I don't get the impression that the people and organizations identified here would ever be subject to these taxes, even if the law was passed without any debate.

ch33zer 5y ago
I believe most of this is based on public reporting by propublica: https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax https://www.propublica.org/article/the-secret-irs-files-trov...
- vmception 5y ago
  Okay, I don't agree with the "true tax rate" terminology or methodology. Not necessarily in response to you, just that article and for anyone passing by. Changing values of assets are not income. Taxing net assets would require so much extra liquidity that may not exist, and if people wanted to be compliant with a wealth tax they will have to avoid illiquid assets which would be the most counterproductive fiscal and monetary policy for the economy. You want to get more people to go into illiquid assets to make them liquid, big yikes. It is disingenuous trying to equate "$1 added to their net worth" to a wage worker adding $1 to their net worth, even if it was purely for explanation purposes. But here it is intentionally made to seem like something else. Its would make more sense to add a sales/excise tax to the buyers that push up the price of assets as they are the only ones moving liquid value around. Like a new uptick rule. Makes more sense to tax appraisers for illiquid assets if they uptick. I don't think any of these make real sense, but makes more sense than taxes people subject to the whims of the market.

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avalys 5y ago

Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from? It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.

evilos 5y ago
Couldn't the shares just be transferred instead of sold?
- avalys 5y ago
  Ok, and the government is going to do what with them? The point is to raise tax revenue.
tablespoon 5y ago
> Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from? The stock market. > It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors. Without domestic ownership requirements, that will happen anyway, for instance: https://www.marketwatch.com/story/jeff-bezos-just-sold-nearly-2-5-billion-in-amazon-shares-11620264680 https://www.marketwatch.com/story/jeff-bezos-just-sold-nearl... ("Jeff Bezos has sold $6.7 billion in Amazon shares over the past week"). I reckon that's about 3% of his wealth. And frankly, the wealthy have been expatriating US national assets for a long time, just not the paper financial ones. I don't see why we should be especially concerned with those, since what they mean is controlled entirely by US law.

Bhilai 5y ago

> Name: Elon Musk, Net Worth: $19.9 billion, Federal Income Tax Paid: $8,410 How is this possible? Why does Elon Musk pay less taxes than an average person who works in Tech?

lvl100 5y ago
Because our society and govt think the only way to get innovation is to incentivize the rich. That and war.
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monocasa 5y ago
A tiny salary, and not realizing capital gains on the stock but instead taking out margin loans using his stock as collateral.
fairity 5y ago
His net worth is stored in company shares, which doesn't get taxed until it's sold.
bmitc 5y ago
My understanding is that these ultra rich people have their wealth tied up in investments, so they never "see" any income despite their investments' massive growth. To get cash and buy things, they simply take out loans at super low interest rates using their investments as collateral. Basically, it's cheat codes. It's probably why CEOs also like to take super low salaries. What I don't understand is how their stock gifts or dividends don't trigger more taxes or why their taxes are indeed so damn low.

lbriner 5y ago

In the UK (and I'm sure elsewhere), inheritance tax is the main vehicle to try and avoid dynasties being created once one person has accumulated massive wealth. As others have said, it is income that is taxed, there will be plenty of people who own capital (e.g. inherited a large country house) and who don't have the cash to pay a tax on it and presumably it would seem unfair to force them to sell it (and hope they get decent money for it) in order to pay a tax on it.

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ninja3925 5y ago

I have noticed that politicians always use extremes (many standard deviations away from the average) to illustrate a population.For example, Warren Buffet wealth is in the top 10. Yet, Warren's policies target the top 1% (top 10 is the top 0.00033% of the top 1%). He is not representative of the top 1% in any way!! Show me the median and let's talk. I am surprised people bite at this manipulative narrative. It seems to me that it discredits their arguments right away. In that sense, voter education would go a long way.

ulkram 5y ago
False. The Ultra-Millionaire Tax Act would impose a tax on the wealth of the top 0.05 % of Americans (people with > 50 million in wealth).
X6S1x6Okd1st 5y ago
> The Ultra-Millionaire Tax would apply to the wealthiest 100,000 households in America and generate at least $3 trillion in revenue over the next decade—all without raising taxes on 99.95% of American households. Huh? 0.05% is 20x smaller than 1%
evilos 5y ago
To be top 1% in 2020, a household needed a net worth of $11,099,166. $10,374,030 was the 1% threshold in 2017. To be top .5% in 2020, a household needed a net worth of $17,557,208. The top .1% bracket started around $43,207,732. This wealth tax doesn't kick in until 50M USD. https://dqydj.com/average-median-top-net-worth-percentiles/ https://dqydj.com/average-median-top-net-worth-percentiles/
commandlinefan 5y ago
> I am surprised people bite at this manipulative narrative. I suspect it's people believing what they want to believe. When Elizabeth Warren comes along and says, "you can have everything you need: healthcare, food, clothing, housing, all without having to work at a job you hate, and all we have to do is agree to take a little bit from a few people who won't even miss it", a lot of people who do work at a job they hate and stress about how much healthcare, food, clothing and housing they have or might have in the future don't really see much downside in saying, "yeah, sure, let's try it".

lvl100 5y ago

There’s a simpler way to fix this. Crypto. Sorry I couldn’t help myself.

puchatek 5y ago
I think you forgot the sarcasm sign
figers 5y ago
SHIB is the way to go, bull millions of coins and hope it goes up a ton some day…

kogus 5y ago

One answer would be a federal sales tax, combined with a Universal Basic Income. The UBI would be equal to the amount of the tax on up to some minimum income level (say, 50k / year). In other words, everyone gets a monthly check that is essentially a rebate on their sales tax up to the income threshold. That's simple, loophole-free, and avoids the privacy invasion that accurate income tax collections require.

dahfizz 5y ago
This would also have the benefit that all money you save and don't spend is tax free. Normally you have to jump through hoops to save and invest pre-tax money.

outlace 5y ago

What if we mandate that all workers must get part of their compensation in the form of company shares so that if the company explodes in value, it's not just the executives that become billionaires and the workers are just still going paycheck to paycheck? This seems common in the tech world but not so much in other companies.

vnchr 5y ago
So government-forced wealth redistribution? I wonder if that’s been tried before. Maybe there’s some point of reference for the outcomes of that approach. Maybe it could be tried on a local basis and then evaluated before a complete overhaul of the largest single nation economy? If I had to guess, I don’t think it would work out very well. Unless you imprison the wealthy. Then their wealth wouldn’t be mobile. This would be a great idea to apply lean startup methodology. If it works, we’ll, that’d just be…unprecedented!
- convivialdingo 5y ago
  Perhaps it could be a form of distributism? Basically we could rather promote legal entitlements to workers in the share of wealth generated by companies and labor. There's an interesting google talk on this from long ago. https://www.youtube.com/watch?v=X1PtStipIsc https://www.youtube.com/watch?v=X1PtStipIsc
leetcrew 5y ago
I don't think this would actually be better for the workers? ceteris paribus, it's better to be paid in cash than stock. stock can be better if it enables a higher TC, or the number of shares is locked in before a major jump in valuation, but at the low end of pay I think most people would prefer to minimize variance over maximizing EV.

exabrial 5y ago

I don't think "escaping taxes" is a bad thing. I'm only upset these instruments aren't available to the common person. This money belongs in people's pockets, not in pockets of senators and their golf buddies.

rednerrus 5y ago

Do we want to tax money that's working? Money that's actively building things? I would argue we don't.

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useful 5y ago

In theory, a 3% wealth tax makes the life of a billionaire difficult. You have like a 60% tax rate for fed/state/local. You make maybe 8% by being safe in your investments. If you pay taxes on your income, get that 8% reduced to 6% by 2% inflation and then your left with a 3.6% YoY gain (6% * 60%) before a 3% wealth tax wipes you out down to 0.6%. But you still don't have to pay taxes on your gains with this bill. You can take out a loan on your new assets at a 2-3% rate and its reduced to around 1% with inflation. Now you don't have to pay taxes because a loan on the principal value doesn't cause a taxable event with the step up in value. You just sell enough to cover your interest liabilities and pay taxes on that. I wish they'd address WHY these rates are so low by attacking people and companies that aren't being productive with their capital by building things people want. Why attack a people or a company with a wealth tax if they are paying low rates because they spend most of their revenue on building the business. Capitalism is about rewarding good allocators of capital.

bradlys 5y ago
Why would it be 60% for stocks? It’s not regular income. It’s capital gains. You’re looking at much lower rates for ltcg. These rules also only apply to people with $50M+ and only to amounts over that $50M. I don’t think almost anyone should have that level of wealth in the world - it’s clearly created at the cost of others.
- useful 5y ago
  I figure if you are actively managing your account, then most of it is short term.

rlewkov 5y ago

The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws.

X6S1x6Okd1st 5y ago
Yeah and this is an initiative to change the law.
bradlys 5y ago
> The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws. What would if the winning team always ended up writing the rules in such a way to where they were always winners and only winners could write next years rules?

bassman9000 5y ago

Why "less spending" is never an option? Why do we need more and more trillions in taxes?

azth 5y ago

It's always interesting that this issue keeps coming up, whereas Islam solved it over 1400 years ago through the Zakat system. An extremely reasonable 2.5% would be owed on money sitting in the bank for one lunar year (it's a form of "wealth tax" if you will). It has been documented that in Iraq during the Ummayad period where everyone paid their share of Zakat, there were no more poor people left to accept it. And that's it, no income tax or messing around with it. It works. Livestock and produce have a separate calculation, but most of us here are not in that business.