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You really don’t. Even setting aside income tax vs property tax, people misunderstand property taxes in the US considerably. A budget is normally set and it is

You really don’t. Even setting aside income tax vs property tax, people misunderstand property taxes in the US considerably. A budget is normally set and it is funded by property taxes as a ratio of the asset value compared to all other asset values in the county. If your home didn’t increase in value nor did anyone else’s you’d pay the same amount because that budget has to be realized one way or the other. Some jurisdictions make this less transparent by taxing at a flat rate (x% of assessed home value) but that’s misleading because they determined that rate to set their budget to begin with. If there were a downturn in property values across the board that didn’t happen at the same time as a recession somehow such that the monetary outflow remained high (high employment for the local government, high costs, no deflation, etc) then there would be a budget crisis and they’d revisit that percentage.

abdullahkhalids 2y ago
Could the same work for financial assets, in principle? Ignoring second order effects on the economy. The federal government sets a budget. Then taxes everyone's financial holdings in the same way as you describe (in the second paragraph) to meet that budget? If I understand you correctly, the way it would work is that federal government sets a budget of $100. Alice has $1000 of stocks and Bob has $500 dollars of bonds. So Alice pays $66 of taxes and Bob $33. If next year Alice has $2000 dollars of stocks and Bob has $500 dollars of bonds. Then Alice pays $80 and Bob $20.
- ComputerGuru 2y ago
  Theoretically? Sure. In practice? You really have to bear in mind second order ramifications. People will be disincentivized from holding a stock, especially one that has unrealized loss (theyll lose money AND pay for the privilege of doing so!). You’ll hurt long term stock holders but not tax day traders and wall street bros dealing in options. You’ll tax retirement portfolios more than the normal wealthy. If stocks take a haircut every year, holding onto cash and eating the inflation might become more attractive. P/Es will come crashing down, tanking the GDP as they go.

abdullahkhalids 2y ago

Could the same work for financial assets, in principle? Ignoring second order effects on the economy. The federal government sets a budget. Then taxes everyone's financial holdings in the same way as you describe (in the second paragraph) to meet that budget? If I understand you correctly, the way it would work is that federal government sets a budget of $100. Alice has $1000 of stocks and Bob has $500 dollars of bonds. So Alice pays $66 of taxes and Bob $33. If next year Alice has $2000 dollars of stocks and Bob has $500 dollars of bonds. Then Alice pays $80 and Bob $20.

ComputerGuru 2y ago
Theoretically? Sure. In practice? You really have to bear in mind second order ramifications. People will be disincentivized from holding a stock, especially one that has unrealized loss (theyll lose money AND pay for the privilege of doing so!). You’ll hurt long term stock holders but not tax day traders and wall street bros dealing in options. You’ll tax retirement portfolios more than the normal wealthy. If stocks take a haircut every year, holding onto cash and eating the inflation might become more attractive. P/Es will come crashing down, tanking the GDP as they go.