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Originally Posted by Tyrone Slothrop
That's an interesting way of looking at it, one I hadn't considered. Maybe the way to sell this to expand property taxes to include other kinds of wealth.
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The biggest problem with wealth taxes is that they can lead to capital flight when the asset involved is intangible or mobile (including assets in corporate solution). It's easy to levy wealth taxes on real estate because you can't take your skyscraper and leave the country. So set your wealth tax too high, and your wealthy all relocate to somewhere else. Florida had a wealth tax on stock for many years, made possible because people wanted to have their stock in Florida to avoid higher income taxes elsewhere, but the tax ultimately became filled with so many loopholes it was silly.
There is a theory that if the wall is big enough, in the form of expatriation taxes, the capital drain can be minimized, but there is probably not a wall that solid or that large.
I don't know where the break point is on a wealth tax before you get too much capital flight; it may well be in the vicinity of that 2% number. But it might make sense to replace the estate tax with a wealth tax. The estate tax has a lot of irrationality to it, it is a big but occasional hit, where a smaller and more predictable wealth tax might get more total revenue with less economic dislocation.
