As a business owner, when taxes are low, I see that as an incentive to pocket profits. But when taxes are high, I see that as an incentive to hide the profits by investing in the future.
I know this isn't always the case with everyone. And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them.
But this incentive is so blatantly obvious in other cases and so rarely understood. I can only assume that the vast majority of people think businesses are taxed like people. You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives.
This is so hidden in the debate that it is almost like a "secret". The more taxes you have on corporate income, the higher the incentive for corporations to invest in the company, so they can avoid paying taxes. This is good for the economy.
On the other hand, lowering corporate taxes also generates a cascade of tax avoidance, since you have higher profits that generate the need for more complex tax avoidance schemes to reduce taxation on that large amount of money.
With an extra hidden secret beneath it. That's true for effective taxes on corporate income - if loopholes exist to allow corporations to offshore their money easily and dodge those taxes they're going to do that so they can pull the money out (or, alternatively, temporarily stash their money abroad since the US has a tax holiday every decade).
Honestly, the tax holidays royally piss me off especially coming from a party that "embraces law and order" - it's essentially like pardoning a bunch of robbers - except the actual robbers stole far less money.
This is obviously fallacious, just consider the extreme case of 100% taxation. At the macro level the only source of investment funds is income that does not go to consumption. Lower the expected rate of return through taxation, and the result is inevitably a shift from investment to consumption. At the individual firm level it's obvious that taxation lowers the NPV of the firm's available projects - they are obviously not going to respond by investing more.
It is only good for the economy if the reinvested money is more productive than what the the owner of the company would have done with it. This encourages vanity projects.
This conversation makes me wonder about how tax breaks to incentivize certain types of investments are perceived in the board room, especially over the long term.
It sounds like if taxes are high, I invest and play for time, waiting for some administration to offer me a tax break so I can take money out. Is a targeted tax break then also a chance to extract profit?
Most of that is financial engineering, not actually investing in the company to many any progress.
A better option would be to remove corporate incomes taxes entirely. Only tax the outflow instead, which would be simpler to implement and easier to deal with at all levels.
The devil's in the detail though - there are other ways to reduce taxable corporate income other than sensible investing. Examples - pay the money out to the directors - use iffy transfer pricing to have the profits appear to be made in some Irish company (see msft, appl) - set the company up offshore owned by a trust (see news corp) - pay the profits out as consultant fees to a company owned by your daughter (no idea who that could be) etc.
Some people think it is good for the economy, its not objectively true. If a company invests in itself instead of giving out dividends it's making a choice upon the shareholder, which in turn could mean the company invests in something less efficient than the shareholder could find.
> n the other hand, lowering corporate taxes also generates a cascade of tax avoidance
Unless corporate taxes are 0, and you save all of this issues plus get to fire a lot of corporate layers.
> You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives.
It’d be insane to have it any other way for businesses. Whole swathes of low margin businesses would be impossible to operate. For example a super markets average margins are 3-5%.
Corporate tax is (generally) on profits because you can deduct costs. It allows for the flow of money to efficiently find a sub supplier for the parts of a good or service.
The real scam is when things like health insurance premiums are deductible for a company but not for an individual.
> The real scam is when things like health insurance premiums are deductible for a company but not for an individual.
To be fair, that this "scam" is still alive today is mostly by accident.
It stems from WWII times, when stateside laborers were uniquely low in supply and high in demand, and when labor had ridiculous bargaining power.
Laborers couldn't really ask for higher wages, because that was politically impossible (appearing to be extorting wartime needs for money was/is a faux pas).
So companies began competing on "benefits": health, accidental death and disability insurance among them.
To help ease the burden on employers and employees, the IRS allowed businesses to "temporarily" deduct insurance premiums. (This relief came against the backdrop of unprecedented wartime tax hikes).
Postwar, it was unfeasible to remove this measure, as the majority of Americans who had insurance got it through their employers: it would upset both businesses who have to pay more, and employees who lose insurance.
Later, some government (I forget which...) signed this stopgap measure into the tax code, making it permanent.
Regardless of the interesting history, I agree with you, it should be universally deductible.
Strange. Business owner friends of mine have taken the opposite approach over the years.
Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Maybe it is largely the type of business that behavior changes. Their last venture was starting up an aquaponics farm in a borderline urban / suburban area, though I haven't kept in touch and it appears to have been sold off to another family.
I think the OP is talking about investing within the business. The business is a separate legal entity with its own income, expenditures, and assets that is under the control of its owner. Assuming that you want to continue owning the business as a going concern, it makes sense to maximize expenditures (by investing in the future) and minimize profits when tax rates are high. But if you're happy entering and exiting the business as a whole, it makes sense to sell it (transferring money equal to its value to your personal balance sheet) when taxes are low and about to go up, and then just not work while taxes are high.
Inflation can put a bit of a wrinkle in this, since if you get $20M for your business and then you find that that's worth the equivalent of $2M in 5-10 years it can crimp your early retirement.
> Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Sure — if you're already wealthy enough to get by without any income, that might make sense. But for most business owners the alternative is "work for someone else", not "return to early retirement".
Disagree. Agree with 100% with OP. Taxes are high, reinvest in your company. Taxes are low, transfer wealth to yourself. As an aside, just to make some peoples blood flow perk up. In 2020, if you have paid any taxes in the last 5 years, you can expense up the wazoo, and carryback taxes. See cares act. In theory this nets out 5 years of no actual company taxes being paid.
If it's easy to sell the business off then there must be plenty of buyers. Which sounds to me like a good indicator that their response isn't a strong majority.
> Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Sure, they may feel that way. But the person who bought the business off them is still incentivized to behave in the way that the GP post describes.
I don't understand the logic. If corporate taxes are high but capital gains are low, that may make sense. In a general sense, you spend money to avoid showing profit.
That must be business specific. At first blush, selling when taxes go up sounds like a good way to maximize your losses. But I'm in the tech industry. So aquaponics must be significantly different.
I was posting a tangent. It resonated, but it's probably a mistake that this is the top comment since I'm not talking about the article specifically, just how wealth is taxed and a way in which the public debate is misinformed.
>And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them.
I know you aren't arguing against higher taxes, but my response to that is... and? Does Target benefit more from some random hedge fund buying up $20 million of their shares? Or from consumers buying $20 million in goods from them? Once a company has gone public, unless they're trying to do another round of funding, the share price is almost meaningless beyond the ghost of being taken over by another entity.
This belief that institutional investors mean more to the health of a business than ACTUAL SALES is baffling to me (not saying that's your stance).
The problem is when you start making money and want to grow the business without funding. You need to build a war chest. Once you've burnt through any carried loss, which happened pretty quickly in our case, we are taxed on the profit we are retaining in order to build up a cash reserve.
That cash reserve is needed if we're to self fund big projects and in case of down-turn, lawsuit or other unforeseen event if we are to avoid immediately laying people off.
The alternative is to raise money which dilutes founders and employees who own stock or vested options.
You won't encounter this issue if you're early stage or if you are "going for growth" by running at a loss and raising money in successive rounds. But it is a huge problem if you are a self funding small or medium sized business.
That's actually an example of why wealth taxes aren't a great idea. If you invest money back into the business, that might reduce your profits, and therefore any corporate or income taxes. But that investment it will increase the long-term value of the company. Under a wealth tax, that would cause taxes for everyone who holds the stock to go up! In fact, if investing in say a new line of business causes the value of the stock to go up by more than just parking the money in the corporate treasury, a wealth tax creates a perverse incentive to not invest back in the company.
I generally agree with the opposition to wealth taxes (and no, I'm not wealthy), but I'll try to engage with this by providing what I believe is the strongest good-faith counterargument:
> a wealth tax creates a perverse incentive to not invest back in the company.
This is arguably a "good thing" because one could argue that it's "unfair" that large, high revenue / high income corporations allocate so much capital in our economy. It would arguably be better for them to pay the taxes and instead have that capital be allocated by a democratically accountable body: the government.
> But when taxes are high, I see that as an incentive to hide the profits by investing in the future.
That isn't really the societal win you're making it out to be though. If you "pocket" profits, i.e. pay them to investors, the investors just go out and invest them again in something else. Which is actually better, because it reduces concentration of wealth inside of corporations. Instead of one corporation growing ever larger because they have to invest internally or be subject to punitive taxes, you get many new independent companies being formed as investors seek out new opportunities for the money they receive as dividends.
The other problem is that there are many forms of investment that are taxed differently. Government bond interest typically isn't taxed. Real estate appreciation typically isn't taxed until sale, which means they can be deferred indefinitely. Investing in foreign corporations will be subject to the tax rates in those other countries. So if you increase the domestic corporate tax rate, investment moves from domestic companies to things like real estate speculation and foreign companies, which may not be desirable.
Moreover, multinational corporations arrange for profits to be declared in whichever jurisdiction has the lowest taxes, so increasing the tax rate on domestic corporations disadvantages them against multinationals that won't be paying those taxes.
So if you increase the domestic corporate tax rate, investment moves from domestic companies to things like real estate speculation and foreign companies, which may not be desirable.
The reverse is actually true. Historically, the lower the tax rate, the more investment you get in real estate speculation and other passive income streams because it's now more efficient to simply not invest in productive activities when you can just get effectively free money without doing any work.
The higher the tax rate, the more businesses invest in actual business activities, because they get more expenses they can use to offset income they may earn, and because passive activities generally don't generate enough of a return to be worth the investment compared to (re)investing in an actual business.
Yes. The op assumes that malinvestment / inefficient use of capital is not a thing.
You can only invest so much into a grocery store. The entire point of us having free markets is so that capital can move around. Locking it down into once place is the exact opposite of what you want to do.
This is something that I have not seen very much research about (not saying it doesn't exist.) When taxes are high, then "wealthy" people will search for a method to reduce their tax burden. For business owners and employers, there are two large options for reducing tax burden - increasing employee salary, and increasing re-investment (R&D, infrastructure, etc). Both of which are commonly cited as deficient in modern business practices.
For sufficiently large companies, a third option is to create a global corporate structure that minimizes the tax burden. If lawyers + accountants + other fees is considerably less than the tax (which is probably the case for most mid-sized or larger companies), becomes a no-brainer for them.
And also, if in an emergency you need to sell some of the equity you built up it is taxed as capital gains, which happens to be a lower tax rate then even middle income people pay on their wages. And, you can also avoid the capital gains by harvesting capital losses.
And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them.
A business that is not making a profit does not pay income taxes. I don't have a single client that has voluntarily turned down making a profit because they'd had to pay some income tax on it.
The only time business income tax rates make a difference is when the business is choosing between multiple profit-generating activities and wants to maximize the net (post-tax) income by minimizing its tax burden.
This depends a lot on the accounting and tax treatment though. In many industries, that "investment" would be accounted for as capex, and in many countries you don't get an immediate write off against tax for capex but you get it over some approximation of useful life of the assets you've invested in.
There is a strong case for allowing immediate, or faster, write-offs for capex spending in preference to lowering corporate tax rates because of this effect.
And Hawaii. See the general excise tax. Fun fact: it's a recursive tax on business revenue (not profit), so if you gross up prices to pass along the tax to customers on a transactional basis, you also need to pay GET on the gross up, ad infinitum. For example, on Oahu this results in a final grossup of approximately 4.7120% (starting from a base GET of 4.5%).
> I can only assume that the vast majority of people think businesses are taxed like people. You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives.
People are taxed the same way. There are all kinds of ways to spend your money before paying income tax on it. Most obviously, on health "insurance".
You're already a business owner. You're faced with decisions on what to do with an already existing business, not whether to start a new business, and in what state or country to do that.
But why invest instead of just taking the tax hit unless you’re waiting for a lower tax rate in the future? It seems this scheme of incentives is dependent on some future expectation of taxes dropping.
Let's say that I own a 5 million dollar business that makes 1 million per year in profit, and the corporate tax rate is 40%. I could take my profit and pay my taxes, leaving me with a 5 million dollar company and $600k cash. Alternatively I could "spend" that $600k to get 1 million dollars in cash interest free to invest in my company, raising its valuation to 6 million. Assuming with the investment that that the company continues to generate 20% profit, even if the tax rate stays the same, I make $720k per year after taxes. Considering I invested 1 million and I'm making an extra $120k per year, that's a 12% ROI/yr - not bad, not great. But since it only cost me $600k to make that investment, I'm really getting 20% ROI/yr. If taxes drop in the future, the ROI further increases, but they don't need to for it to be advantageous. Even if I never actually take profits, my net worth is still going up, and I can cash that in by selling the business or some of its assets at some future point.
The United States. Corporate tax rate dropped from 35 to 21 in 2016. There is talk of reraising them and so I'm mostly projecting my behavior if they do get raised.
In the US income tax rarely changes. But tax deductions are fair game and change year to year and administration to administration. Last year, Trump bragged about lowering taxes. He lowered it by increasing the standard deduction for some. But it increased for others, such as myself, who take advantage of other deductions that were cut back or removed.
I'm in favor of astronomical marginal tax rates. But that post of comically bad at making the argument.
The founding fathers, including a handful of those quoted in the linked post, were highly critical of democracy and even of men who didn't own multiple house like they did.
We just narrowly missed out on having a constitution which only allowed land owners to vote. There were even years long debates on whether votes should be proportional to the amount of land owned.
Using the founding fathers to argue for state enforced equalization of outcomes is plainly absurd.
> I see that as an incentive to hide the profits by investing in the future.
Can it be also an incentive to work less, since most of the results of your hard work will be taken from you in form of taxes, or you would need to 'hide the profits' potentially forever?
That would be true if the owner of the business was doing most of the work. But in a large corporation the workers are doing the brunt of the work, so it makes no difference for the shareholders.
As a business owner, when taxes are low, I see that as an incentive to pocket profits. But when taxes are high, I see that as an incentive to hide the profits by investing in the future.
Let me introduce you to how private equity works. They have figured out how to hide the profits by buying out the original owners!
They buy companies by having them borrow heavily to "invest" in buying out the previous owners. And then try to keep the corpse of the company looking good enough that they can flip to someone else. The trick is that debt payments count against profits so the new owner saves on taxes.
The people who set up the deal get paid in a variety of ways. But in the end what they get paid tends to be roughly proportional to how much money no longer goes to Uncle Sam. So when you see someone who got rich in private equity, like Mitt Romney, it isn't a bad approximation that their personal wealth reflects how much money the US no longer receives in taxes due to the deals that they structured.
Note, if you're over 50 you may remember the "junk bond kinds" of the 1980s. That's the same thing as private equity. They just rebranded themselves after their actions gave them a bad name.
I'm not wealthy enough for a wealth tax to apply, but a wealth tax is a colossal privacy and administrative burden on _every single taxpayer_. Assets must be accounted for when calculating wealth, so the tax service will be required to track and value assets including vehicles, homes, and material good etc. for every citizen to see if the wealth tax would apply to them -- if we didn't report material goods, the wealthy could sock money away in expensive cars, artworks, jewelry and other material non-real-estate assets as they already do for investment.
This creates a surveillance society on every possession and purchase, and facilitates confiscation and intimidation, an encroachment on our liberty. In fact, that the IRS and the government have a view on every single financial transaction due to the Patriot Act already has a chilling effect on freedom (consider donations). A wealth tax would absolutely be a massive and unnecessary further encroachment upon liberty as the majority of Americans would ultimately have to detail and report their assets to show they do not qualify, while the wealthy would very likely be able to largely anyway cheat on their wealth tax by manipulating valuations of their assets.
One way to mitigate that is to not tax “wealth” arbitrarily. Instead imagine something more targeted like a land value tax. Property rights could be changed so that some assets that are in limited supply and posses capital value such as land, simply can’t just be owned, but are instead leased.
I mean wealth per se isn’t an issue. In the grand scheme of things what material goods you have matter little. It’s the unreasonable and unbalanced command over actual capital that create issues.
If property (land + building) taxes are significant, then property is already leased.
E.g. in NZ you buy property, but the local government taxes it, so you are essentially paying a small lease. Enough so that some retirees with no income have to downsize because the rates are a significant burden.
I love that you brought up the surveillance aspect; I have not seen that discussed much elsewhere.
A wealth tax seems impractical on many levels, including the increased burden of trying to document the value of your items for people of modest wealth levels. Unique or thinly traded luxury items have value that can't really be known until they are sold, which is why capital gains are taxed at the time of a sale. I'm thinking of a rare coin that might be $75,000 or $100,000.... you can't know the value until it goes up on the auction block. Same thing applies to real estate, antique cars, artwork, etc.
It is arguable whether wealth should be within right to privacy or not. As for items inheritably with illiquid market value, it is also arguable whether we should assess their ongoing market value at all. Real-estate on the other hand, would hardly be illiquid and the United States do have a reasonable assessment program for real-estate. The same cannot say for antique cars or artwork.
However, to combat the side-effect of wealth tax requires global governance, which in today's day and age, seems like a pipe dream.
Like another person said, you look at potential enforcement and assume perfect adherence to a philosophy, or that everyone will be audited the same. They will not.
Just like a small business is less regulated than a large one (often), or how smaller incomes are taxed simply while those with more money/more complex assets get audited more - the ultra-wealthy will certainly have more of their assets audited, and yes, they will have side channels to evade taxes. That doesn't mean we don't try to tax them.
When someone out in the open owns 75 cars, a private jet, and a $250,000,000 townhouse in Manhattan and another $5 billion in stock, it's pretty damned simple and not wholly intrusive to look at that and say "alright..."
I'm not defending the entire concept of a wealth tax, but I am saying it isn't as dire for _everybody_ that you say it is.
That's right. We had a wealth tax in France from 1989 until 2018. Most people by far never had to declare or justify anything related to this, because they were so obviously below the threshold. It didn't have any impact for the vast majority of taxpayers.
By the way it was replaced 2 years ago on a tax on real estate wealth only.
What about a startup enthusiast who's started my-hot-startup.com. No revenue yet but might be the next big thing. What's that worth? $0? $10bn? That sort of thing could get messy.
Another chilling effect may be in motivating barter rather than currency trade so that assets may undervalued. Consider real estate trades or corporate mergers instead of cash purchases that are executed at deflated valuations to lower wealth valuations of the underlying asset. This devalues the dollar in relation to assets.
This was my thought as well. If you discourage holding stocks and things over other assets as stores of value, I think that could have some deflationary effects. Not only that, but companies are then somewhat disincentivized from growing in valuation, but finding ways to grow in their reach/authority/power etc. The end result seems deflationary... i.e. companies worth more for less dollars.
One time wealth taxes on things like expensive cars, art, and houses can be levied at the time of purchase. That's just sales tax and already is recorded. Annual wealth tax on land/property is easy, we already do it it's just not done in a progressive manner. Again that's already recorded. Annual wealth taxes on things like securities, stocks, bonds, can be accounted easily by any broker and reported. Again this is already recorded and goes to the IRS. So there's not really any new privacy concern.
Your first proposal is just a standard luxury sales tax, which functions entirely differently from the recurring wealth taxes that are being discussed.
You'd be incentivizing the accumulation (and importation) of the sales-taxed goods as long term stores of wealth, and dis-incentivizing domestic investments in businesses and construction. I think that's a bad idea.
The majority of wealth are financial instruments, land and real estate, maybe vehicles, maybe precious metals/stones, for all of which this problem is already solved or mostly solved.
Really the only area of significance I can think of where the problem is not solved is having to report your artworks, I guess? Something that doesn't affect most people.
I still don't even see how it works. I can understand with something that is fairly liquid like stocks, but if you own a farm it's not like you could always easily sell off 3% of your farm every year to keep the government happy. Aren't property taxes enough? They're relatively low compared to 3% a year that various democrats call for. Land really doesn't "make" money for you like say a physical factory unless you're using it. I imagine these types of issues happen with other sorts of businesses. I mean I don't have a problem with higher taxes on "annual wealth increase" or profit, but to continuously tax the same thing over and over and over is ludicrous in my opinion at least not at these levels. Property taxes are already high in most states.
> wealth tax is a colossal privacy and administrative burden on _every single taxpayer_
I have not seen a single wealth tax proposal that doesn't have a gigantic cutoff where it would do nothing for 99%+ of the taxpayer base. Most proposals have a floor in the tens of millions.
You could've read the very next sentence, which makes the point the first sentence set up:
> Assets must be accounted for when calculating wealth, so the tax service will be required to track and value assets including vehicles, homes, and material good etc. for every citizen to see if the wealth tax would apply to them -- if we didn't report material goods, the wealthy could sock money away in expensive cars, artworks, jewelry and other material non-real-estate assets as they already do for investment.
The burden is showing that you have under $XM in assets. You'll need to show your net worth somehow, so that the IRS (or equivalent) knows not to tax you. Otherwise I could assure you that I totally only have $1M in assets, with definitely no Swiss bank account or yachts.
I will admit to not knowing much about a wealth tax, so maybe there is an established solution here. But it seems like the default would be a privacy and administrative burden even on those people not paying the tax.
You stopped reading...and missed the whole point. The idea was, to say if a tax doesn't apply to someone you still need to do a deep valuation of their assets. Someone could hide 10M in a painting and live in a regular house, have regular "income".
I don't think that matches reality. Wealth tax is supposedly for the rich, people with high assets already -- not the everyday taxpayer. Getting Joe or Susan to itemize their assets and report it yearly (including depreciation) seems like a lot of extra work -- albeit perhaps you already have to do this for insurance purposes for some house items, not sure, I am Canadian.
I just did some quick research and it looks like the tax failed in Europe [0]. Thousands of millionaires in France just left the country and eventually it was just axed and declared a failure.
Which seems interesting -- the measure of success of a wealth tax seems to be how many rich people stay.
What frustrates me about this whole argument over wealth taxes is that the arguments aren't grounded in facts. The reality is that we "pay" for inequality with reduced productivity. A great example of this is "single family home neighborhoods" in urban areas. They have no societal benefit, they are essentially subsidized land use patterns for the well off, and it makes it harder for less well of folks to move to areas where they can get a better job/improve their lot in life and grow the economy. There is a very strong case that one reason for sluggish economic growth is the concentration of assets and wealth in so few hands, and the continuing stagnation/decline in wealth/living standards/etc of bottom 40% of the US when measured in things like "healthcare", "education" etc. A redistributive wealth tax that was well structured could be a huge boon to GDP growth.
> What frustrates me about this whole argument over wealth taxes is that the arguments aren't grounded in facts.
You say this, yet you don't provide a single citation for any of your arguments.
> There is a very strong case that one reason for sluggish economic growth is the concentration of assets and wealth in so few hands, and the continuing stagnation/decline in wealth/living standards/etc of bottom 40% of the US when measured in things like "healthcare", "education" etc. A redistributive wealth tax that was well structured could be a huge boon to GDP growth.
This seems plausible, but not self-evident. Give us evidence.
Not the OP, but the most recent meta-analysis suggests that there is a negative correlation between inequality and growth[1]. Wealth inequality is more negatively correlated with growth than income inequality.
> A great example of this is "single family home neighborhoods" in urban areas. They have no societal benefit, they are essentially subsidized land use patterns for the well off, and it makes it harder for less well of folks to move to areas where they can get a better job/improve their lot in life and grow the economy.
I've seen this talking point twice now this week. What's the alternative? We all live in crowded multi-family buildings? We all live in squalor for the sake of a few saved acres in a country with vast amounts of land?
Center City Philly is squalor now? I'll take that over a SFH in Conshohocken with > 45 mins commute on the Schuylkill Expressway each way any day of the week!
It's frightening that many people cannot imagine proper city planning when other countries (the Netherlands come to mind) demonstrate that it can be done and improves quality of life immensely.
It sounds like you've never been in an apartment building. Some are crappy, sure, but plenty are pretty nice or at least decent (the building, the apartments will be what the residents make of them).
Alternative is to not subsidize inefficient suburban land use. That doesn't mean everyone lives in apartment buildings. It doesn't mean "ban the suburbs". It just means, if you want to live in a subdivision, you'll have to pay your share of the cost to maintain it (which is more than what you're paying now).
If the wealthy want to live in a big detached house that's cool, but those types of lots/structures shouldn't be in dense space-limited urban areas. They want to have both the big house and the proximity to urban centers.
The alternative is that we remove most zoning and let the free market decide. We can even allow covenant-based zoning, but if your neighbors don't want to join and sell to a developer, tough luck.
It's not about taking single family homes away from people who really want one, but fighting the perception that it's the default. People in most countries (even most rich countries) live happily in multi-family buildings with much less space than the average American home. Most of those who believe their family needs 2000 square feet to be comfortable are simply mistaken - and we could build much higher-quality neighborhoods without the degree of suburban sprawl that mistake causes.
If you're talking about single family homes - that's a property tax, which is not what people are normally talking about when they discuss a wealth tax
Wealth taxes that are too high in relation to peers (other countries/states) will often lead to brain drain, capital flight and others. From an individual's perspective, many will see it as a disincentive in starting something new, you may also be incentivized to borrow more money to ensure the leverage is high enough to limit taxation and optimize current quality of life. Your decision to leave assets for your next of kin can also become distorted and you may feel encouraged to spend the money now (on them and otherwise) as opposed to getting tax fleeced.
Many other things need to be in place and fully functional for a high wealth tax to work and even then, it is likely to work for a 10 to 30 year period, only to serve as a dragging anchor at a later stage. I would argue that many of the challenges in Europe from a technological innovation standpoint, can be partially derived in high taxation.
It is also difficult to determine what is the right amount of taxation while taking into account the importance of incentive mechanisms. Also, at what point do tax hikes stop?
Some of the key real solutions to many of societies challenges is to have its populace be more active in all of its inner working, helping them to better understand the constraints and opportunities as opposed to being a bunch of people getting of top of their little soap box. There is also a major need for strong reforms to tackle nepotism, corruption and laziness at all levels of society.
- I think wealth can be created and isn't always a zero sum transfer
- I think we want to incentivize wealth creation
- I think economic growth constrained by protection for human rights and environmental destruction is the best way to improve the quality of life for the most people the fastest.
- I think wealth taxes disincentivize a lot of these things with knock on effects (forcing people to liquidate their company equity, etc.). It's also repeatedly taxing the same money every year eventually down to whatever the cap is.
I'd rather set taxes/caps at generational wealth transfer if you're going to try and incentivize something - might as well go after dynastic wealth and the children that benefit from it without creating anything. I think focusing on housing and land use/zoning would also directly benefit more people by fixing existing perverse incentives.
PG writes about some of this in essays, Tyler Cowen's book Stubborn Attachments was also interesting on the growth aspect (though wealth taxes aren't specifically mentioned).
Why do we think wealth will be better allocated by a government? This money is largely already taxed either via capital gains or income. I'd suspect a lot of our problems are problems of incentives and competing priorities, not of available cash flow for government programs.
That's my take anyway, I suspect a 'hate the rich' motivated reasoning position pushing the idea of a wealth tax more than any serious thinking about incentives and what it might do. It seems political.
(I am nowhere near the level where the proposed tax would start and probably never will be.)
I don't have a super-well formed opinion about this but I think a wealth tax has some issues that don't get enough attention.
Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset.
So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of equity in the company (so that you can control it) but no matter how loudly you proclaim that the market is overvaluing your stock the price keeps going up and now you have to sell lots of shares in order to pay the wealth tax assessed against your equity and you don't have a controlling vote anymore and your vision for your company just dies.
And maybe the hordes of people who think no single person should have a controlling share of a billion-dollar company are right - I don't know. But I'm pretty sure a large fraction of people who build companies (like Bezos or Musk) are doing it to build an enterprise, and not for the cash. Otherwise they'd just stop and have fun with their private jets at a certain point. So if a wealth tax were not going to let them keep control of their enterprise beyond the first decade, they probably would opt not to waste their time building it at all.
And maybe that's fine, but I'm not sure what society looks like in a world where people don't want to build companies.
If my wealth comes from owning a percentage of a company (say I own 30% of AMZN) what is the way to tax me other than taking my shares, i.e. the Gov would take certain percentage of my shares? And if we go that route how many years would it go by before Gov owned majority of shares of most companies?
Lots of people scream that we should tax the wealthy but I do not follow how you tax someone whose wealth comes from large ownership of a big company...?
I'm not the one you're asking. But here's my take:
To some degree, wealth taxes break down the idea of private property ownership. "Your right of ownership is secured by law, but if you own too much, we'll take some of it away." I know that's not the way it's sold. But that is one aspect of the reality of it. I am in favor of the continued existence of private property rights, and for that reason I don't like a wealth tax.
Also, such things tend to grow with time. You're going to tax those with more than a billion dollars? Seems OK, no relevance to me, and those people can afford it. You need more money this year, and you're going to tax those with more than 10 million? Well, I don't have that, either, but it's getting closer. Need still more money, and so you're moving it to a million? I might, by then, especially if inflation kicks back up.
On the other hand, you could make a reasonable case that the existence of a wealth disparity of the magnitude that exists today is a threat to our society, especially if it can be inherited.
So I lean against a wealth tax, but I can also see reasons for it...
Possibly not what you mean but I very strongly believe tax rates should he a minimum where you can set your own (and displayed publicly) tax rate above a certain level for your income.
Both physically and online, as someone who grew up not poor but far far from rich i.e. I've still only been abroad from the UK twice in my (so far short) life, I am absolutely sick of rich people saying "I'd pay more tax if I could" as a throwaway gesture. I increasingly think an underlying motive of why I study fairly intensely is just to end up better than those who were born better than me.
If you really believe that, put your money where your mouth is.
No one has mentioned that wealth taxes that have been tried before in other developed countries have not gone well, so based on that alone I'm skeptical. And I heard about this from Planet Money (NPR) so I don't think this is some idea planted in my head by "media owned by wealthy".
I think you raise a good point. Why have so many developed countries abandoned wealth taxes? According to wikipedia
> Some other European countries have discontinued this kind of tax in recent years: Austria, Denmark (1995), Germany (1997), Finland (2006), Luxembourg (2006) and Sweden (2007).
I think the main argument is that the French billionaires are much more mobile - they were able to simply relocate a few hours away to a nearby French-speaking country.
Any sensible wealth tax proposal in the U.S. would probably have to pair it with a similar tax on the transfer of assets abroad.
Wealth taxes are a bad idea because they target everyone with wealth, regardless of the actual views they hold, regardless of the degree to which they have personally contributed to the collapse we are facing.
The real inequality we have today is being perpetuated by outdated regulations, primarily from the 1930s. It's also being perpetuated by people that invest in Warren Buffet-style "value" stocks, which extract actual rents from people, while delivering no technological improvements. Housing is 80% of the inequality problem, and if we are going to fix that, we have to stop making it illegal to build enough homes for people that need them. And to do it cheaply enough, we have to turn to automated custom home manufacturing, which means overcoming the objections of labor unions.
For example, I just saw this in the LA Times - "Labor unions, environmentalists are biggest opponents of Gov. Brown’s affordable housing plan":
NB: I think we need new, distributed structures to replace labor unions, because the goal they serve is an important one. The existing ones concentrate power at the top, and have become just another corrupt institution.
Of course not. I'm merely saying that many people that support the wealth tax are looking at it from the perspective of getting back at the boomers. They are onto something, insofar as that generation did support policies that really did effect a huge wealth transfer that benefitted the boomers, at the expense of basically everyone else.
The thing I'm trying to call out is that they might not want to wipe out GenX-ers like me, who invested their personal savings into TSLA, and are working to use the wealth to actually help people rather than to buy fancy clothes, condos and yachts.
> we have to stop making it illegal to build enough homes for people that need them
There's already enough homes (in the USA, at least) to house all the homeless people in the country. Unfortunately, giving homes away wouldn't be profitable, and profit is all that seems to matter.
What about the fact that those homes are not equally distributed geographically? There are reasons people prefer to live near their families, workplaces, places with good weather, etc.
Its not making the argument that wealth taxes are good because wealthy people oppose them, only that their point of view on the topic is deeply self serving and masquerading as an objective analysis.
If we grant that this argument is valid, do the same implications apply to the contrapositive case? E.g. people who aren't wealthy that support wealth taxes (or higher taxes on people who earn more than them).
Fair, but that's a weak stance. We should debate the consequences, implementation, and rationale of wealth taxes, not ascribe motivations to their supporters/dissenters.
It's definitely a useless argument for a fairly lazy article. I don't disagree that the articles they link have weak arguments, but why not actually cite economic policy experts and economists that agree with wealth inequality? The lack of attention to such viewpoints, if their claim holds true, would better indicate media bias than them publishing weak op-eds.
Agree that FAIR.org does not live up to its name. After skimming some, their story choices and language used seem to lean away from center and unbiased. Was really hopeful for a new news source from the domain name, such a disappointment
Readit News
I know this isn't always the case with everyone. And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them.
But this incentive is so blatantly obvious in other cases and so rarely understood. I can only assume that the vast majority of people think businesses are taxed like people. You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives.
On the other hand, lowering corporate taxes also generates a cascade of tax avoidance, since you have higher profits that generate the need for more complex tax avoidance schemes to reduce taxation on that large amount of money.
Tax evasion breaks this system. Profit is taken out of the system and stores offshore, where it doesn't create any value.
Tax evasion is bad. Investing is good.
Honestly, the tax holidays royally piss me off especially coming from a party that "embraces law and order" - it's essentially like pardoning a bunch of robbers - except the actual robbers stole far less money.
It sounds like if taxes are high, I invest and play for time, waiting for some administration to offer me a tax break so I can take money out. Is a targeted tax break then also a chance to extract profit?
A better option would be to remove corporate incomes taxes entirely. Only tax the outflow instead, which would be simpler to implement and easier to deal with at all levels.
And the lower the incentive to make new investments.
And the higher the incentive to engage in socially wasteful tax-avoidance accounting.
Some people think it is good for the economy, its not objectively true. If a company invests in itself instead of giving out dividends it's making a choice upon the shareholder, which in turn could mean the company invests in something less efficient than the shareholder could find.
> n the other hand, lowering corporate taxes also generates a cascade of tax avoidance
Unless corporate taxes are 0, and you save all of this issues plus get to fire a lot of corporate layers.
Not at all clear to me this is the case.
It’d be insane to have it any other way for businesses. Whole swathes of low margin businesses would be impossible to operate. For example a super markets average margins are 3-5%.
Corporate tax is (generally) on profits because you can deduct costs. It allows for the flow of money to efficiently find a sub supplier for the parts of a good or service.
The real scam is when things like health insurance premiums are deductible for a company but not for an individual.
To be fair, that this "scam" is still alive today is mostly by accident.
It stems from WWII times, when stateside laborers were uniquely low in supply and high in demand, and when labor had ridiculous bargaining power.
Laborers couldn't really ask for higher wages, because that was politically impossible (appearing to be extorting wartime needs for money was/is a faux pas).
So companies began competing on "benefits": health, accidental death and disability insurance among them.
To help ease the burden on employers and employees, the IRS allowed businesses to "temporarily" deduct insurance premiums. (This relief came against the backdrop of unprecedented wartime tax hikes).
Postwar, it was unfeasible to remove this measure, as the majority of Americans who had insurance got it through their employers: it would upset both businesses who have to pay more, and employees who lose insurance.
Later, some government (I forget which...) signed this stopgap measure into the tax code, making it permanent.
Regardless of the interesting history, I agree with you, it should be universally deductible.
Taxes low? Start up something new, get it going. Taxes go up again? Sell it off (if they haven't already) and go back to early retirement doing whatever.
Maybe it is largely the type of business that behavior changes. Their last venture was starting up an aquaponics farm in a borderline urban / suburban area, though I haven't kept in touch and it appears to have been sold off to another family.
Inflation can put a bit of a wrinkle in this, since if you get $20M for your business and then you find that that's worth the equivalent of $2M in 5-10 years it can crimp your early retirement.
Sure — if you're already wealthy enough to get by without any income, that might make sense. But for most business owners the alternative is "work for someone else", not "return to early retirement".
Sure, they may feel that way. But the person who bought the business off them is still incentivized to behave in the way that the GP post describes.
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I know you aren't arguing against higher taxes, but my response to that is... and? Does Target benefit more from some random hedge fund buying up $20 million of their shares? Or from consumers buying $20 million in goods from them? Once a company has gone public, unless they're trying to do another round of funding, the share price is almost meaningless beyond the ghost of being taken over by another entity.
This belief that institutional investors mean more to the health of a business than ACTUAL SALES is baffling to me (not saying that's your stance).
Investors making money means more money to invest, which creates more companies and services.
That cash reserve is needed if we're to self fund big projects and in case of down-turn, lawsuit or other unforeseen event if we are to avoid immediately laying people off.
The alternative is to raise money which dilutes founders and employees who own stock or vested options.
You won't encounter this issue if you're early stage or if you are "going for growth" by running at a loss and raising money in successive rounds. But it is a huge problem if you are a self funding small or medium sized business.
> a wealth tax creates a perverse incentive to not invest back in the company.
This is arguably a "good thing" because one could argue that it's "unfair" that large, high revenue / high income corporations allocate so much capital in our economy. It would arguably be better for them to pay the taxes and instead have that capital be allocated by a democratically accountable body: the government.
That isn't really the societal win you're making it out to be though. If you "pocket" profits, i.e. pay them to investors, the investors just go out and invest them again in something else. Which is actually better, because it reduces concentration of wealth inside of corporations. Instead of one corporation growing ever larger because they have to invest internally or be subject to punitive taxes, you get many new independent companies being formed as investors seek out new opportunities for the money they receive as dividends.
The other problem is that there are many forms of investment that are taxed differently. Government bond interest typically isn't taxed. Real estate appreciation typically isn't taxed until sale, which means they can be deferred indefinitely. Investing in foreign corporations will be subject to the tax rates in those other countries. So if you increase the domestic corporate tax rate, investment moves from domestic companies to things like real estate speculation and foreign companies, which may not be desirable.
Moreover, multinational corporations arrange for profits to be declared in whichever jurisdiction has the lowest taxes, so increasing the tax rate on domestic corporations disadvantages them against multinationals that won't be paying those taxes.
The reverse is actually true. Historically, the lower the tax rate, the more investment you get in real estate speculation and other passive income streams because it's now more efficient to simply not invest in productive activities when you can just get effectively free money without doing any work.
The higher the tax rate, the more businesses invest in actual business activities, because they get more expenses they can use to offset income they may earn, and because passive activities generally don't generate enough of a return to be worth the investment compared to (re)investing in an actual business.
You can only invest so much into a grocery store. The entire point of us having free markets is so that capital can move around. Locking it down into once place is the exact opposite of what you want to do.
See https://en.wikipedia.org/wiki/Double_Irish_arrangement for a historic example.
Why buy a stock if Biden will take 1% of it annually? May as well just buy rapidly depreciating status symbols instead.
A business that is not making a profit does not pay income taxes. I don't have a single client that has voluntarily turned down making a profit because they'd had to pay some income tax on it.
The only time business income tax rates make a difference is when the business is choosing between multiple profit-generating activities and wants to maximize the net (post-tax) income by minimizing its tax burden.
There is a strong case for allowing immediate, or faster, write-offs for capex spending in preference to lowering corporate tax rates because of this effect.
Except in Washington State.
I could imagine some reasonable arguments for having a low tax like that around.
People are taxed the same way. There are all kinds of ways to spend your money before paying income tax on it. Most obviously, on health "insurance".
You're already a business owner. You're faced with decisions on what to do with an already existing business, not whether to start a new business, and in what state or country to do that.
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Where do you live that taxes are as volatile as petrol prices? Taxes change in Ireland but in terms of decades.
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There is simply no other way to align interests of the wealthy.
https://anacyclosis.org/2020/05/25/how-do-we-save-democracy
The founding fathers, including a handful of those quoted in the linked post, were highly critical of democracy and even of men who didn't own multiple house like they did.
We just narrowly missed out on having a constitution which only allowed land owners to vote. There were even years long debates on whether votes should be proportional to the amount of land owned.
Using the founding fathers to argue for state enforced equalization of outcomes is plainly absurd.
Can it be also an incentive to work less, since most of the results of your hard work will be taken from you in form of taxes, or you would need to 'hide the profits' potentially forever?
Let me introduce you to how private equity works. They have figured out how to hide the profits by buying out the original owners!
They buy companies by having them borrow heavily to "invest" in buying out the previous owners. And then try to keep the corpse of the company looking good enough that they can flip to someone else. The trick is that debt payments count against profits so the new owner saves on taxes.
The people who set up the deal get paid in a variety of ways. But in the end what they get paid tends to be roughly proportional to how much money no longer goes to Uncle Sam. So when you see someone who got rich in private equity, like Mitt Romney, it isn't a bad approximation that their personal wealth reflects how much money the US no longer receives in taxes due to the deals that they structured.
Note, if you're over 50 you may remember the "junk bond kinds" of the 1980s. That's the same thing as private equity. They just rebranded themselves after their actions gave them a bad name.
This creates a surveillance society on every possession and purchase, and facilitates confiscation and intimidation, an encroachment on our liberty. In fact, that the IRS and the government have a view on every single financial transaction due to the Patriot Act already has a chilling effect on freedom (consider donations). A wealth tax would absolutely be a massive and unnecessary further encroachment upon liberty as the majority of Americans would ultimately have to detail and report their assets to show they do not qualify, while the wealthy would very likely be able to largely anyway cheat on their wealth tax by manipulating valuations of their assets.
I mean wealth per se isn’t an issue. In the grand scheme of things what material goods you have matter little. It’s the unreasonable and unbalanced command over actual capital that create issues.
E.g. in NZ you buy property, but the local government taxes it, so you are essentially paying a small lease. Enough so that some retirees with no income have to downsize because the rates are a significant burden.
A wealth tax seems impractical on many levels, including the increased burden of trying to document the value of your items for people of modest wealth levels. Unique or thinly traded luxury items have value that can't really be known until they are sold, which is why capital gains are taxed at the time of a sale. I'm thinking of a rare coin that might be $75,000 or $100,000.... you can't know the value until it goes up on the auction block. Same thing applies to real estate, antique cars, artwork, etc.
However, to combat the side-effect of wealth tax requires global governance, which in today's day and age, seems like a pipe dream.
Just like a small business is less regulated than a large one (often), or how smaller incomes are taxed simply while those with more money/more complex assets get audited more - the ultra-wealthy will certainly have more of their assets audited, and yes, they will have side channels to evade taxes. That doesn't mean we don't try to tax them.
When someone out in the open owns 75 cars, a private jet, and a $250,000,000 townhouse in Manhattan and another $5 billion in stock, it's pretty damned simple and not wholly intrusive to look at that and say "alright..."
I'm not defending the entire concept of a wealth tax, but I am saying it isn't as dire for _everybody_ that you say it is.
By the way it was replaced 2 years ago on a tax on real estate wealth only.
Really the only area of significance I can think of where the problem is not solved is having to report your artworks, I guess? Something that doesn't affect most people.
> wealth tax is a colossal privacy and administrative burden on _every single taxpayer_
I have not seen a single wealth tax proposal that doesn't have a gigantic cutoff where it would do nothing for 99%+ of the taxpayer base. Most proposals have a floor in the tens of millions.
> Assets must be accounted for when calculating wealth, so the tax service will be required to track and value assets including vehicles, homes, and material good etc. for every citizen to see if the wealth tax would apply to them -- if we didn't report material goods, the wealthy could sock money away in expensive cars, artworks, jewelry and other material non-real-estate assets as they already do for investment.
I will admit to not knowing much about a wealth tax, so maybe there is an established solution here. But it seems like the default would be a privacy and administrative burden even on those people not paying the tax.
It doesn’t matter what the floor is, you still have to report all your assets to the IRS to prove you don’t meet it.
Income tax is already an administrative burden on every single taxpayer, and it works fine.
Do you imagine that people don't already track and value their vehicles and homes and other high value material wealth? That strikes me as unusual.
I just did some quick research and it looks like the tax failed in Europe [0]. Thousands of millionaires in France just left the country and eventually it was just axed and declared a failure.
Which seems interesting -- the measure of success of a wealth tax seems to be how many rich people stay.
[0] https://www.npr.org/sections/money/2019/02/26/698057356/if-a...
Only in the US would non-wealthy people actively and aggressively advocate on behalf of the ultra-wealthy.
You say this, yet you don't provide a single citation for any of your arguments.
> There is a very strong case that one reason for sluggish economic growth is the concentration of assets and wealth in so few hands, and the continuing stagnation/decline in wealth/living standards/etc of bottom 40% of the US when measured in things like "healthcare", "education" etc. A redistributive wealth tax that was well structured could be a huge boon to GDP growth.
This seems plausible, but not self-evident. Give us evidence.
[1] https://www.sciencedirect.com/science/article/abs/pii/S03057...
I've seen this talking point twice now this week. What's the alternative? We all live in crowded multi-family buildings? We all live in squalor for the sake of a few saved acres in a country with vast amounts of land?
It's frightening that many people cannot imagine proper city planning when other countries (the Netherlands come to mind) demonstrate that it can be done and improves quality of life immensely.
It sounds like you've never been in an apartment building. Some are crappy, sure, but plenty are pretty nice or at least decent (the building, the apartments will be what the residents make of them).
Many other things need to be in place and fully functional for a high wealth tax to work and even then, it is likely to work for a 10 to 30 year period, only to serve as a dragging anchor at a later stage. I would argue that many of the challenges in Europe from a technological innovation standpoint, can be partially derived in high taxation.
It is also difficult to determine what is the right amount of taxation while taking into account the importance of incentive mechanisms. Also, at what point do tax hikes stop?
Some of the key real solutions to many of societies challenges is to have its populace be more active in all of its inner working, helping them to better understand the constraints and opportunities as opposed to being a bunch of people getting of top of their little soap box. There is also a major need for strong reforms to tackle nepotism, corruption and laziness at all levels of society.
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- I think wealth can be created and isn't always a zero sum transfer
- I think we want to incentivize wealth creation
- I think economic growth constrained by protection for human rights and environmental destruction is the best way to improve the quality of life for the most people the fastest.
- I think wealth taxes disincentivize a lot of these things with knock on effects (forcing people to liquidate their company equity, etc.). It's also repeatedly taxing the same money every year eventually down to whatever the cap is.
I'd rather set taxes/caps at generational wealth transfer if you're going to try and incentivize something - might as well go after dynastic wealth and the children that benefit from it without creating anything. I think focusing on housing and land use/zoning would also directly benefit more people by fixing existing perverse incentives.
PG writes about some of this in essays, Tyler Cowen's book Stubborn Attachments was also interesting on the growth aspect (though wealth taxes aren't specifically mentioned).
Why do we think wealth will be better allocated by a government? This money is largely already taxed either via capital gains or income. I'd suspect a lot of our problems are problems of incentives and competing priorities, not of available cash flow for government programs.
That's my take anyway, I suspect a 'hate the rich' motivated reasoning position pushing the idea of a wealth tax more than any serious thinking about incentives and what it might do. It seems political.
(I am nowhere near the level where the proposed tax would start and probably never will be.)
Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset.
So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of equity in the company (so that you can control it) but no matter how loudly you proclaim that the market is overvaluing your stock the price keeps going up and now you have to sell lots of shares in order to pay the wealth tax assessed against your equity and you don't have a controlling vote anymore and your vision for your company just dies.
And maybe the hordes of people who think no single person should have a controlling share of a billion-dollar company are right - I don't know. But I'm pretty sure a large fraction of people who build companies (like Bezos or Musk) are doing it to build an enterprise, and not for the cash. Otherwise they'd just stop and have fun with their private jets at a certain point. So if a wealth tax were not going to let them keep control of their enterprise beyond the first decade, they probably would opt not to waste their time building it at all.
And maybe that's fine, but I'm not sure what society looks like in a world where people don't want to build companies.
Lots of people scream that we should tax the wealthy but I do not follow how you tax someone whose wealth comes from large ownership of a big company...?
To some degree, wealth taxes break down the idea of private property ownership. "Your right of ownership is secured by law, but if you own too much, we'll take some of it away." I know that's not the way it's sold. But that is one aspect of the reality of it. I am in favor of the continued existence of private property rights, and for that reason I don't like a wealth tax.
Also, such things tend to grow with time. You're going to tax those with more than a billion dollars? Seems OK, no relevance to me, and those people can afford it. You need more money this year, and you're going to tax those with more than 10 million? Well, I don't have that, either, but it's getting closer. Need still more money, and so you're moving it to a million? I might, by then, especially if inflation kicks back up.
On the other hand, you could make a reasonable case that the existence of a wealth disparity of the magnitude that exists today is a threat to our society, especially if it can be inherited.
So I lean against a wealth tax, but I can also see reasons for it...
Not easily convertible to cash.
Doesn't fix the government's spending pattern or plug its budget hole unless it resorts to full on expropriation.
Not competitive.
Both physically and online, as someone who grew up not poor but far far from rich i.e. I've still only been abroad from the UK twice in my (so far short) life, I am absolutely sick of rich people saying "I'd pay more tax if I could" as a throwaway gesture. I increasingly think an underlying motive of why I study fairly intensely is just to end up better than those who were born better than me.
If you really believe that, put your money where your mouth is.
This data is sourced from the federal reserve's survey [1].
[0]: https://dqydj.com/average-median-top-net-worth-percentiles/
[1]: https://www.federalreserve.gov/econres/scfindex.htm
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> Some other European countries have discontinued this kind of tax in recent years: Austria, Denmark (1995), Germany (1997), Finland (2006), Luxembourg (2006) and Sweden (2007).
source: https://en.wikipedia.org/wiki/Wealth_tax#Historical_examples
The WSJ has their take https://www.wsj.com/articles/where-wealth-taxes-failed-11572.... Criticisms within the same wiki article can probably shed extra light into why https://en.wikipedia.org/wiki/Wealth_tax#Criticisms
Any sensible wealth tax proposal in the U.S. would probably have to pair it with a similar tax on the transfer of assets abroad.
The real inequality we have today is being perpetuated by outdated regulations, primarily from the 1930s. It's also being perpetuated by people that invest in Warren Buffet-style "value" stocks, which extract actual rents from people, while delivering no technological improvements. Housing is 80% of the inequality problem, and if we are going to fix that, we have to stop making it illegal to build enough homes for people that need them. And to do it cheaply enough, we have to turn to automated custom home manufacturing, which means overcoming the objections of labor unions.
For example, I just saw this in the LA Times - "Labor unions, environmentalists are biggest opponents of Gov. Brown’s affordable housing plan":
https://www.latimes.com/politics/la-pol-sac-labor-enviro-hou...
NB: I think we need new, distributed structures to replace labor unions, because the goal they serve is an important one. The existing ones concentrate power at the top, and have become just another corrupt institution.
Are you really suggesting that taxing someone based on their views is a good idea.
The thing I'm trying to call out is that they might not want to wipe out GenX-ers like me, who invested their personal savings into TSLA, and are working to use the wealth to actually help people rather than to buy fancy clothes, condos and yachts.
https://www.youtube.com/watch?v=rIAZJNe7YtE
(Something to understand here is Weinstein's argument about WWII, embedded growth obligations and institutional decline...)
There's already enough homes (in the USA, at least) to house all the homeless people in the country. Unfortunately, giving homes away wouldn't be profitable, and profit is all that seems to matter.
Or is it an ad hominem even if the "hominem" is a class (wealthy people) instead of a person?
To the extent that they do it for themselves alone, which is making an assumption about intent.
Many wealthy people honestly believe that low taxes drive economic growth that is good for all.
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This organization is not living up to it's name if it's only taking the easiest potshots imaginable at one side of the issue.
Those two things are not the same, nor even necessarily correlated.
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