We are all Slave now.

[Adder]

Originally Posted by Greedy,Greedy,Greedy

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.

Interesting to think about alternatives to holding one's wealth in the world's only reserve currency, but I suppose one can speculate in international real estate or something.

[Greedy,Greedy,Greedy]

Originally Posted by Adder

Interesting to think about alternatives to holding one's wealth in the world's only reserve currency, but I suppose one can speculate in international real estate or something.

It's possible to hold US securities without being taxed in the US.

[sebastian_dangerfield]

Originally Posted by Greedy,Greedy,Greedy

Really? I find that surprising - it's the quintessential wealth tax. What do other folks think?

If we're looking to reform the current system, simply making the existing wealth taxes less regressive would be good - include all forms of wealth and all types of taxpayers and allow the gross to be reduced by debt (because the banks will pay the wealth tax on the value of the debt anyways).

I actually really like that concept. The problem is fighting the argument that the policy punishes saving. You’d have to build in carve outs for the non-crazy rich savers who accrue significant wealth by simply spending less than they earn and investing wisely. That’s doable, but would be a complex calculation.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

I think you misread him. This is from that chain:

I understand that comparison. I agree with it. My disagreement was based on an assumption of where he was going. I read into his points, perhaps unfairly, a setup for an argument that the US economy was fine, but we assume otherwise based on negative outliers, such as the furniture industry’s impact on a town in NC.

[Greedy,Greedy,Greedy]

Originally Posted by sebastian_dangerfield

I actually really like that concept. The problem is fighting the argument that the policy punishes saving. You’d have to build in carve outs for the non-crazy rich savers who accrue significant wealth by simply spending less than they earn and investing wisely. That’s doable, but would be a complex calculation.

Just exclude 401ks and you'll cover most middle class savers. But really there doesn't need to be an exception for people investing reasonably, they can still pay their fair share.

There are also a lot of investment incentives you could undo as both costing revenue and distorting the economy. Just delete the oil and gas and insurance subsections of the Tax Code. And get rid of capital gains / ordinary income differentials. You will have a similar effect as the wealth tax - you'll make investing more sector-neutral and less tax driven, while taking revenue from the broadest possible tax base.

Traditionally, there was also a class coming up by their bootstrap who invested in two-flats or farmland, but the farmland investors are now only of historical interest and the two flatters are becoming rarer and rarer.

[Greedy,Greedy,Greedy]

Originally Posted by Tyrone Slothrop

I'm not saying you're wrong, I'm saying you're pointing out something which is true but very much underappreciated.

I understand.

Having begun practice as a tax lawyer, my blinders make it hard for me to comprehend that most people haven't fully internalized the basics of the major schools of tax theory. It's interesting to me to see what smart, well educated people without that immersion think or are aware of in the area.

[sebastian_dangerfield]

Originally Posted by Greedy,Greedy,Greedy

Just exclude 401ks and you'll cover most middle class savers. But really there doesn't need to be an exception for people investing reasonably, they can still pay their fair share.

There are also a lot of investment incentives you could undo as both costing revenue and distorting the economy. Just delete the oil and gas and insurance subsections of the Tax Code. And get rid of capital gains / ordinary income differentials. You will have a similar effect as the wealth tax - you'll make investing more sector-neutral and less tax driven, while taking revenue from the broadest possible tax base.

Traditionally, there was also a class coming up by their bootstrap who invested in two-flats or farmland, but the farmland investors are now only of historical interest and the two flatters are becoming rarer and rarer.

I rarely agree with you entirely on anything, but this is an exception. This should be a Democratic candidate’s tax policy. Wall St would have a complete freak out about something like this, but their opposition would be a benefit to a candidate.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

I don't think many people see property taxes as a subset of wealth taxes, but it is true that for the middle class, their home is often their biggest investment.

I don’t think people see them as a wealth tax because they are washed by two things:

1. The more you pay of them, usually, the better your school district, which protects and often increases home value;
2. Until Trump’s bizarre tax bill of last year, whatever you paid in those taxes was repaid to you in the form of a fed tax deduction.

I wonder what effect the SALT limitations of Trump’s bill will have on school districts in states with high property taxes. I suspect a lot of school board members are going to really wish they hadn’t run. Can’t imagine it will be easy to raise property taxes anymore. On the positive side, it’ll probably cause boards to examine budgets more closely and spend with more of an eye toward value. As opposed to just building massive new facilities (subsidies for their builder and engineer constituents) and doing little to attract and keep talented teachers and upgrade courses.

[Adder]

Originally Posted by sebastian_dangerfield

I don’t think people see them as a wealth tax because they are washed by two things:

1. The more you pay of them, usually, the better your school district, which protects and often increases home value;
2. Until Trump’s bizarre tax bill of last year, whatever you paid in those taxes was repaid to you in the form of a fed tax deduction.

I wonder what effect the SALT limitations of Trump’s bill will have on school districts in states with high property taxes. I suspect a lot of school board members are going to really wish they hadn’t run. Can’t imagine it will be easy to raise property taxes anymore. On the positive side, it’ll probably cause boards to examine budgets more closely and spend with more of an eye toward value. As opposed to just building massive new facilities (subsidies for their builder and engineer constituents) and doing little to attract and keep talented teachers and upgrade courses.

Property taxes are a terrible, inequitable and, ultimately, racist way to fund schools so if it causes a move to different forms of funding, that might be a silver lining in otherwise bad policy.

[Greedy,Greedy,Greedy]

Originally Posted by sebastian_dangerfield

I rarely agree with you entirely on anything, but this is an exception. This should be a Democratic candidate’s tax policy. Wall St would have a complete freak out about something like this, but their opposition would be a benefit to a candidate.

What you're looking at in my view is really pretty close to what Bill Clinton pushed on income taxes with a dash of the current progressive thinking on wealth taxes.

Bill equalized cap gains and ordinary income, and he pared back investment incentives for the most part (though he had his favorites). And it really worked for the economy.

But, glad you agree. And, congratulations, you are now a Liz Warren fan!

I'm unlikely to support Liz, but she is very smart on this stuff and needs to be listened to.

[Greedy,Greedy,Greedy]

Originally Posted by Adder

Property taxes are a terrible, inequitable and, ultimately, racist way to fund schools so if it causes a move to different forms of funding, that might be a silver lining in otherwise bad policy.

Local taxes are terrible, they'd be terrible if based on property, income, consumption, or anything else. It's not the property tax that is at fault, it's the levying of taxes based on small enclaves.

[Adder]

Originally Posted by Greedy,Greedy,Greedy

Local taxes are terrible, they'd be terrible if based on property, income, consumption, or anything else. It's not the property tax that is at fault, it's the levying of taxes based on small enclaves.

True, but most places the only local tax is on property, no? Minnesota law does not allow local income or sales/consumption taxes (unless approved by the legislature).

But yes, the problem with school funding on property taxes is that they're local, not that it's on property.

[Greedy,Greedy,Greedy]

Originally Posted by Adder

True, but most places the only local tax is on property, no? Minnesota law does not allow local income or sales/consumption taxes (unless approved by the legislature).

But yes, the problem with school funding on property taxes is that they're local, not that it's on property.

There are a number of cities that tax income as a way of reaching suburbanites who earn income in the city but don't live there, and there are many, many places, especially in red states, that allow local surtaxes on a state sales tax. There are also a few places, like NH, with statewide property taxes.

On a couple of occasions I have had to answer the question of where some rich person with 8 houses should establish residency. Income taxes get all the press, but wealth taxes play just as big a role. The answer, in case you are curious, is that rich people should try to locate in places where services are modest and taxes heavily paid by outsiders, by consumption taxes, or through subsidies, like Nevada, Alaska, and South Dakota. Most rich people hear the answer and decide it's not worth it to live in those places.

[sebastian_dangerfield]

Originally Posted by Greedy,Greedy,Greedy

What you're looking at in my view is really pretty close to what Bill Clinton pushed on income taxes with a dash of the current progressive thinking on wealth taxes.

Bill equalized cap gains and ordinary income, and he pared back investment incentives for the most part (though he had his favorites). And it really worked for the economy.

But, glad you agree. And, congratulations, you are now a Liz Warren fan!

I'm unlikely to support Liz, but she is very smart on this stuff and needs to be listened to.

I thought Warren’s plan was only a wealth tax on those with over $50mil. If these policies are also part of her plan, well I guess I support Warren.

And I think she’ll do even better in an election with a more defensible plan like that.

[Greedy,Greedy,Greedy]

Originally Posted by sebastian_dangerfield

I thought Warren’s plan was only a wealth tax on those with over $50mil. If these policies are also part of her plan, well I guess I support Warren.

And I think she’ll do even better in an election with a more defensible plan like that.

Her initial proposal was an over $50M 2% tax, but I view it as a start to get talking about wealth taxes in general.

So I'm talking.