Arguments For and Against a Wealth Tax

#1

With talk of a wealth tax, we can expect a lot of demagoguery about how it will be the ruin of the nation. While not going that far, the WaPo editorial board has published an editorial advocating against a wealth tax that, to me, is entirely predictable in its content.

I’ll skip ahead to its best argument:

[A 2018 Organization Economic Cooperation and Development (OECD)] report suggested [that instead of a wealth tax] an optimal system would target capital income and inheritance of wealth, which could be done here by reducing the current code’s favorable treatment of capital gains and eliminating the huge break for profits on the sale of inherited stock, while putting some teeth back into the estate tax. That would discourage what’s most contrary to American ideals, dynastic wealth accumulation, while encouraging what’s most consistent, getting rich on the merits.

I suspect that’s correct – but I have to say, I have not seen much evidence that the WaPo or its editors have been advocating for those alternatives. Part of the reason we hear talk about a wealth tax is because there has been so little push-back when capital gains taxes are cut and estate taxes are slashed. Would it be unfair to paraphrase that paragraph as, “A much better solution than a wealth tax would be to go back to the tax structure the nation had before a series of cuts that our editorial board members mostly didn’t oppose and, in some cases, strongly supported.”

Moving to the board’s shakiest paragraph:

It is questionable, though, whether a flat annual tax on wealth is the best way to tackle the inequity and inefficiency associated with concentration of wealth.

It probably isn’t – but there are two issues that must be addressed. First, due to the manner in which the system has favored accumulation of wealth by the wealthy for decades, if not generations, we can see a massive accumulation of wealth in the hands of a relative few, and we can’t undo that history. Second, there are problems implementing other means of taxing the ultra-rich and, even if there were not, each alternative also has its advantages and disadvantages.

Problems of implementation abound, starting with pricing non-publicly traded assets such as land or rare antiques.

But we do that for other purposes, such as calculation of estate and inheritance taxes, or capital gains.

The tax would create a huge incentive for tax avoidance among a segment of society well able to afford accountants and lawyers.

And that distinguishes it from other taxes… not at all.

The authors of the proposed wealth tax would bolster enforcement by charging people worth more than $50 million to renounce their citizenship, which conveys a certain authoritarian odor.

Even if we pretend that it never happens under the present system, there is nothing “authoritarian” about ultra-wealthy people choosing to become citizens of tax havens. Nobody is forcing them to give up their citizenship in order to avoid contributing to the support of the nation that made them ultra-rich.

Further, who says that a wealth tax must be tied exclusively to citizenship? A wealth tax that extended to assets present within the U.S. and to shares of and interests in U.S. companies would sharply diminish any incentive to flee to a tax haven.

This country has prided itself as a destination for immigrants with great ideas for creating wealth, not as a place that bars the exits to anyone, rich or poor.

Did somebody propose imposing an additional tax on ultra-rich losers who would rather part with their citizenship than contribute to society?

https://www.washingtonpost.com/opinions/elizabeth-warren-wants-a-wealth-tax-it-might-backfire/2019/01/27/67a795e4-20c5-11e9-8b59-0a28f2191131_story.html

#2

Of course it might backfire. And every time we say something republicans don’t like, they might get mad at us. And, for that matter, we have wealth taxes in the US already, just not for really rich people. Real/tangible property is subject to tax in most states and smaller jurisdictions. Which hits the middle and upper middle class because that’s the form that the lion’s share of their assets take. Doesn’t hit the top owners so much because their assets are mostly securities or things that can be made to look like securities.

I think I am reluctantly for a wealth tax (in addition to a real estate tax, and a financial transaction tax) because it’s the only way we can get back to a situation where more outwardly sensible taxes on income can be applied in a meaningfuly fashion. Too many of the top bracket of owners have figured out ways to shelter too much of their income for the current structure to work well. (In any given year, a zillionaire doesn’t have to take any income at all – they can just borrow the amount they want to spend, write off the interest as an investment expense, and put off taxation to some indefinite future date. And that’s before the money laundering and other more obvious tax evasion methods.)

I’d rather see income taxes and swingeing short-term capital gains taxes (where long term is more like 5 years) but that’s unlikely in my lifetime.

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#3

There is a serious problem with a wealth tax - significant ongoing administrative expenses. Basically you would have to value hundred of thousands of close corporations each year to see who qualified and what tax they would pay.

Right now this is done once-a-lifetime for people subject to an estate tax and it is a big and expensive deal.

#4

Anyone thinking that a 90% tax on ultra wealthy people won’t stifle investments in businesses and cause massive loss of existing jobs is naive…stupidly naive.

#5

Some of you remember of story about goose. :wink:

#6

I would rather see every last Socialist dipped in honey and staked out over their own mound of fire ants.

There is nothing about their ideology that is proper, that I support or agree with. It is all filth. They are the dry rot in the nation’s bones.

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#7

Excuse me, might I remind you that inflation is effectively a wealth tax, and it’s well known that moderate inflation spurs investment.

Instead of the unpredictable and tumultuous process of inflation, instead go with a simple and direct tax. If you want to keep your money, you should have to invest it productively.

#8

Why tax productive labor, instead of unproductive savings?

#9

You don’t know how money works, do you? You’d cause massive inflation by doing that. Though, I agree, labor shouldn’t be taxed, one should not be taxed for exchanging one’s labor for the equivalent value of that labor on the open market. Tax capital gains, tax foreign and transnational business within our borders, tax vice, tariff foreign manufactured goods imported into our market.

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#10

Either one if done to extreme (90% is certainly extreme) would have the same effect. Why should a person be incentivized to earn wealth to either spend or save if it will return 10 cents on the dollar if he doesn’t invest it?

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#11

A lot of our tax problems would go away if we implemented the Fair Tax and taxed consumption rather than income. Everybody would pay taxes, including whores, pimps, drug dealers, yacht buyers, mansion buyers, existing tax evaders, …you buy something—anything—you pay tax.

#12

only those who are economically illiterate or on the bottom end of the economic scale advocates for a wealth tax

As if the wealth tax will lift them out of poverty or pay for their healthcare or free college.

#13

Why Tax either?

it is not the basic function of the People to fund their government nor is it a lawful function of the federal government to take care of the People.

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#14

That’s usually the lie that’s used to sell these things.

#15

Here’s my argument against:

Because it’s not your fucking money and thou shall not steal.

#16

Just like the “there oughta be a law” crowd that wants government to regulate everything the “there oughta be a program” crowd heaps power upon government and so pass the buck for what they should be doing themselves.

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#17

They are looters creating a looter state. Mooches.

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