5 ms·

> Taxing wealth is much harder on a practical and algorithmic level than taxing income. I find this argument somewhat unconvincing. Where is most of the wealth

by nairboon 10mo ago

> Taxing wealth is much harder on a practical and algorithmic level than taxing income. I find this argument somewhat unconvincing. Where is most of the wealth? In hard assets, such as real estate and financial assets, such as stocks and bonds. The former are very difficult to hide, for obvious reasons. As for the latter, the ownership of every single share is recorded in large databases (e.g. DTCC, Clearstream and Euroclear). In that sense, the "physical location" of most of the wealth is well known, so in theory it should really not be difficult to tax it.

darkwater 10mo ago
But financial assets do not need physical space, so they can be tied to smaller countries which will be very happy to tax them at a lower rate so they can "steal them" from the original country where they were generated.
- gunalx 10mo ago
  You can still tax based on the persons residence or citizenship. In the end someone can be attributed to wealth, and if they want to stay where they are physically, they should also tax like it.
- dns_snek 10mo ago
  You can take your financial assets with you but they're ultimately worthless, they're just a construct that represents something which has real value, like shares of a company: its real estate, inventory, employees, institutional knowledge, and future productive output have real value, your piece of paper doesn't. Distribution of wealth is about the distribution of real resources, especially control over human labor. And that underlying thing can always be taxed, optimized, or even repurposed to better serve the needs of society.
TheOtherHobbes 10mo ago
Financial assets are extremely easy to hide. Set up an international chain of shell companies, foundations, and trusts, install a fake beneficial owner or trustee or two at various points, carve out deductibles for IP and "services", and the ownership becomes completely opaque. And that's just the legal version. I know someone who used to work as a business lawyer. She spent years trying to track down the true owners in various cases. At the very least it's an expensive business. And sometimes it just couldn't be done. Of course governments can cut the knot with physical assets, walk into a building with troops and/or police, and say "This is ours now." Or they can order banks to hand over the money in accounts. But before they can do that, there has to be some certainty about the owner. And even getting part way there can take a while and cost a lot.
- snovv_crash 10mo ago
  A flat tax on wealth would be extremely easy to enforce. Basically if the bill for an asset doesn't get paid it goes to the government, and the bill is trivial to calculate because it doesn't need the rest of the entity.
  - bluecalm 10mo ago
    If you apply automatic tax on bonds people will just not buy them unless you also increase their returns. It's a pointless exercise. Same goes for stocks, it's just a bit bigger circle in this case. Capital gain tax is just a bad tax that distorts decisions and make things less efficient for no reason. It's much better to tax resources (mainly land but also infrastructure usage) and charge for enforcement of IP/patents.
  - Terr_ 10mo ago
    > A flat tax on wealth would be extremely easy to enforce. The real problem has always been measuring "current wealth" with accuracy, fairness, and not spending more than you collect on an army of auditors. I don't see how "flat" makes anything easier, since it's a downstream calculation.
etothepii 10mo ago
It really comes down to valuation. The unit of account for tax is the currency of the relevant sovereign. Most contracts for income are denominated in that unit of account, even if it is not there is often a highly liquid market (FX) between units of account. Most wealth is not stored in assets where the unit of account is that of the sovereign. This counts double for assets with a physical location. This isn't something that can be easily hand-waived away.
- integralid 10mo ago
  I don't get it. Can you explain in simpler terms? My understanding is that you say that taxing things denominated in a foreign currency is difficult? But why? I already pay taxes on my capital gains denominated in a foreign currency (for example dollars). There are official government exchange rates for tax reasons, published daily. I don't see anything to hand wave here, because there's no problem.
  - etothepii 10mo ago
    Apologies, in an attempt to be precise I have used convoluted language. The point I'm trying to make is that assets such as land are not denominated in any currency and typically end up being held for such large amounts of time with such substantial transaction costs that's there would be a large cost involved in knowing what the value of the thing being taxed is. If I pay you $100k, £100k or ¥100k we can use spot rates to work out how many € that is within much less than 1%. If I own a piece of land how would you answer the question, "what should the value for taxation be?" If you go with the last transaction price then this will have a substantial impact on properties that haven't been sold for a long time and encourage people to enter into transactions that look like sales but aren't (such a 999-year lease). Leave it up to a government agency to decide and this agency will come under huge pressure to favour one type of activity over another. How do you value land owned by the government? What if that land is privatised? The UK's attempts to deal with this when it privatised BT completely destroyed the fibre to the premises industry in the UK for years.
    - 10mo ago

darkwater 10mo ago

But financial assets do not need physical space, so they can be tied to smaller countries which will be very happy to tax them at a lower rate so they can "steal them" from the original country where they were generated.

gunalx 10mo ago
You can still tax based on the persons residence or citizenship. In the end someone can be attributed to wealth, and if they want to stay where they are physically, they should also tax like it.
dns_snek 10mo ago
You can take your financial assets with you but they're ultimately worthless, they're just a construct that represents something which has real value, like shares of a company: its real estate, inventory, employees, institutional knowledge, and future productive output have real value, your piece of paper doesn't. Distribution of wealth is about the distribution of real resources, especially control over human labor. And that underlying thing can always be taxed, optimized, or even repurposed to better serve the needs of society.

TheOtherHobbes 10mo ago

Financial assets are extremely easy to hide. Set up an international chain of shell companies, foundations, and trusts, install a fake beneficial owner or trustee or two at various points, carve out deductibles for IP and "services", and the ownership becomes completely opaque. And that's just the legal version. I know someone who used to work as a business lawyer. She spent years trying to track down the true owners in various cases. At the very least it's an expensive business. And sometimes it just couldn't be done. Of course governments can cut the knot with physical assets, walk into a building with troops and/or police, and say "This is ours now." Or they can order banks to hand over the money in accounts. But before they can do that, there has to be some certainty about the owner. And even getting part way there can take a while and cost a lot.

snovv_crash 10mo ago
A flat tax on wealth would be extremely easy to enforce. Basically if the bill for an asset doesn't get paid it goes to the government, and the bill is trivial to calculate because it doesn't need the rest of the entity.
- bluecalm 10mo ago
  If you apply automatic tax on bonds people will just not buy them unless you also increase their returns. It's a pointless exercise. Same goes for stocks, it's just a bit bigger circle in this case. Capital gain tax is just a bad tax that distorts decisions and make things less efficient for no reason. It's much better to tax resources (mainly land but also infrastructure usage) and charge for enforcement of IP/patents.
- Terr_ 10mo ago
  > A flat tax on wealth would be extremely easy to enforce. The real problem has always been measuring "current wealth" with accuracy, fairness, and not spending more than you collect on an army of auditors. I don't see how "flat" makes anything easier, since it's a downstream calculation.

etothepii 10mo ago

It really comes down to valuation. The unit of account for tax is the currency of the relevant sovereign. Most contracts for income are denominated in that unit of account, even if it is not there is often a highly liquid market (FX) between units of account. Most wealth is not stored in assets where the unit of account is that of the sovereign. This counts double for assets with a physical location. This isn't something that can be easily hand-waived away.

integralid 10mo ago
I don't get it. Can you explain in simpler terms? My understanding is that you say that taxing things denominated in a foreign currency is difficult? But why? I already pay taxes on my capital gains denominated in a foreign currency (for example dollars). There are official government exchange rates for tax reasons, published daily. I don't see anything to hand wave here, because there's no problem.
- etothepii 10mo ago
  Apologies, in an attempt to be precise I have used convoluted language. The point I'm trying to make is that assets such as land are not denominated in any currency and typically end up being held for such large amounts of time with such substantial transaction costs that's there would be a large cost involved in knowing what the value of the thing being taxed is. If I pay you $100k, £100k or ¥100k we can use spot rates to work out how many € that is within much less than 1%. If I own a piece of land how would you answer the question, "what should the value for taxation be?" If you go with the last transaction price then this will have a substantial impact on properties that haven't been sold for a long time and encourage people to enter into transactions that look like sales but aren't (such a 999-year lease). Leave it up to a government agency to decide and this agency will come under huge pressure to favour one type of activity over another. How do you value land owned by the government? What if that land is privatised? The UK's attempts to deal with this when it privatised BT completely destroyed the fibre to the premises industry in the UK for years.
  - 10mo ago