5 ms·

A wealth tax? Very bad idea. Is debt counted in? Is it a difference in wealth from one year to the next? What if someone has a reduction in wealth? What IS wea

A wealth tax? Very bad idea. Is debt counted in? Is it a difference in wealth from one year to the next? What if someone has a reduction in wealth? What IS wealth? Is thr same asset taxed multiple times? What if someone has to liquidate something because of such taxes?

ceejayoz 4y ago
> Is debt counted in? Typically, no. Assets minus liabilities. > Is it a difference in wealth from one year to the next? No. > What if someone has a reduction in wealth? They owe less the next year. > What IS wealth? Assets minus liabilities. > Is thr same asset taxed multiple times? It's taxed every year, to the person who owns it. If it changes hands mid-year, prorate. > What if someone has to liquidate something because of such taxes? Their asset becomes cash, they pay the tax with it, and their wealth is smaller next year. Hopefully they plan ahead better for it. Wealth taxes exist. Entire nations manage to get this all sorted out effectively.
- nightski 4y ago
  It would be interesting seeing just how difficult it is to value assets effectively.
- jedberg 4y ago
  Most countries that had a wealth tax repealed it or partially repealed it because it was too complicated. Namely, how do you value private assets? How much is a paining worth? Or your private company? Houses are easy to do because there is a ton of data and comparables (and even then wealthy people contest those assessments). Now imagine the government getting into the business of valuing private companies.
  - ceejayoz 4y ago
    Again, this is already done. Switzerland: (https://www.wealthandpolicy.com/wp/BP133_Countries_Switzerland.pdf https://www.wealthandpolicy.com/wp/BP133_Countries_Switzerla...) > The value of private companies is determined each year by the cantonal tax authorities based on an inter-cantonal administrative guideline agreed upon by the cantonal tax departments. Taxpayers may challenge the application of this guideline in court but appeals are rarely successful (cf. an example in section 0, below). In case the fair-market value of operational companies cannot easily be assessed (e.g. because of lack of recent sales between independent third parties), their value is determined according to the formulaic method, called the practitioner's method. A company's value is determined by calculating the weighted average of its ‘earnings value’ and its net asset value (i.e. fair market value of assets minus liabilities), thereby counting the earnings value twice. The earnings value is determined by capitalising the adjusted average net profit of the last two or three years with a capitalisation rate (of currently 7%), which applies uniformly to all industries. Holding companies or real-estate companies are valued based on the net asset value of the underlying assets. It won't be perfect, but it's predictably imperfect.
    - jedberg 4y ago
      The way they do it just kicks the the can down the road. The company is "net asset value", but how do you value of the software they have, or the data they hold, or the paintings the company holds, or all their other assets? When a company is sold the value of the assets is negotiated for sometimes years. And is different for every acquirer. How is the government going to do that for everyone every year?
      - ceejayoz 4y ago
        > The way they do it just kicks the the can down the road. No, it accepts that some wealth may require estimates, eventual corrections, and occasionally court resolution. (The doc cites an example of a $2M painting hung in a kitchen being deemed non-household goods.) The "there's an edge case, therefore it can't work" argument is hard to sustain when there are countries making it work. The Swiss handle paintings, private companies, and presumably IP (I can't find specific details in here) in their system.
        jedberg 4y ago
        I'm not saying it can't work because of an edge case. I'm saying the system has fundamental flaws and here are some examples. And I can turn the same logic around on you: Why do you think this will work when just one country is claiming to do it successfully? Especially after other countries tried it and then repealed or at least partially repealed their wealth taxes to exclude hard to value items?
        ceejayoz 4y ago
        Switzerland is not the only one with a wealth tax; I use it as an example here.
        jedberg 4y ago
        Yes, there are two other countries that have one. And 180 that don't.

ceejayoz 4y ago

> Is debt counted in? Typically, no. Assets minus liabilities. > Is it a difference in wealth from one year to the next? No. > What if someone has a reduction in wealth? They owe less the next year. > What IS wealth? Assets minus liabilities. > Is thr same asset taxed multiple times? It's taxed every year, to the person who owns it. If it changes hands mid-year, prorate. > What if someone has to liquidate something because of such taxes? Their asset becomes cash, they pay the tax with it, and their wealth is smaller next year. Hopefully they plan ahead better for it. Wealth taxes exist. Entire nations manage to get this all sorted out effectively.

nightski 4y ago
It would be interesting seeing just how difficult it is to value assets effectively.
jedberg 4y ago
Most countries that had a wealth tax repealed it or partially repealed it because it was too complicated. Namely, how do you value private assets? How much is a paining worth? Or your private company? Houses are easy to do because there is a ton of data and comparables (and even then wealthy people contest those assessments). Now imagine the government getting into the business of valuing private companies.
- ceejayoz 4y ago
  Again, this is already done. Switzerland: (https://www.wealthandpolicy.com/wp/BP133_Countries_Switzerland.pdf https://www.wealthandpolicy.com/wp/BP133_Countries_Switzerla...) > The value of private companies is determined each year by the cantonal tax authorities based on an inter-cantonal administrative guideline agreed upon by the cantonal tax departments. Taxpayers may challenge the application of this guideline in court but appeals are rarely successful (cf. an example in section 0, below). In case the fair-market value of operational companies cannot easily be assessed (e.g. because of lack of recent sales between independent third parties), their value is determined according to the formulaic method, called the practitioner's method. A company's value is determined by calculating the weighted average of its ‘earnings value’ and its net asset value (i.e. fair market value of assets minus liabilities), thereby counting the earnings value twice. The earnings value is determined by capitalising the adjusted average net profit of the last two or three years with a capitalisation rate (of currently 7%), which applies uniformly to all industries. Holding companies or real-estate companies are valued based on the net asset value of the underlying assets. It won't be perfect, but it's predictably imperfect.
  - jedberg 4y ago
    The way they do it just kicks the the can down the road. The company is "net asset value", but how do you value of the software they have, or the data they hold, or the paintings the company holds, or all their other assets? When a company is sold the value of the assets is negotiated for sometimes years. And is different for every acquirer. How is the government going to do that for everyone every year?
    - ceejayoz 4y ago
      > The way they do it just kicks the the can down the road. No, it accepts that some wealth may require estimates, eventual corrections, and occasionally court resolution. (The doc cites an example of a $2M painting hung in a kitchen being deemed non-household goods.) The "there's an edge case, therefore it can't work" argument is hard to sustain when there are countries making it work. The Swiss handle paintings, private companies, and presumably IP (I can't find specific details in here) in their system.
      - jedberg 4y ago
        I'm not saying it can't work because of an edge case. I'm saying the system has fundamental flaws and here are some examples. And I can turn the same logic around on you: Why do you think this will work when just one country is claiming to do it successfully? Especially after other countries tried it and then repealed or at least partially repealed their wealth taxes to exclude hard to value items?
        ceejayoz 4y ago
        Switzerland is not the only one with a wealth tax; I use it as an example here.
        jedberg 4y ago
        Yes, there are two other countries that have one. And 180 that don't.