
If Wealth Is Justified, So Is a Wealth Tax - howard941
https://www.project-syndicate.org/commentary/wealth-tax-rebutting-billionares-arguments-by-katharina-pistor-2019-12?
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systemtest
The problem I have with a wealth tax is that most implementations only target
the middle class.

The most recent proposal for the Netherlands is a 1.75% tax on your invested
net worth on January 1st of the year. Even when the market went -10% in the
year before. But even at the market average of 5% per year that is a big hit.
If your average Joe puts €200 a month in index funds for 40 years, the end sum
is €304,000 without wealth tax or €198,000 with wealth tax. That is a big
difference on the type of additional pension a person can build. We have tax
deferred accounts but those have very low limits for the average earner.

But the upper class don't care about it. They have the means to put their
money in a shelter or company and let it grow against a much lower tax rate.

* €200 a month, 5% market average and 1.75% wealth tax

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kaffee
I'd like to understand this better. My understanding is that the Netherlands
has had a wealth tax on assets which are not financial assets for some time.
And income from financial assets is taxed at 25%.

[https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#We...](https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#Wealth_tax)

~~~
systemtest
For the 2022 tax proposal: You take your invested net worth at January 1st.
That is everything besides your saving account and first home. So the value of
your second home, artwork you bought as an investment, stocks, bonds, money
loaned out, money in the HOA. A 5.33% gain on your investments is assumed
which is taxed at 33%. So effectively 1.75% of your invested net worth has to
be paid as a tax.

Debt such as a mortgage can be subtracted but not at the full 5.33%. So if you
have a mortgage of €200,000 and a second home that is worth €200,000 then you
owe about €1400 in tax each year, despite not having any net worth at all.

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motohagiography
The understanding of wealth that leads to conclusions like these is based on a
misapprehension.

You don't "have," wealth, you are responsible for it, and in particular, for
growing it by investment in productive assets. If you don't, it literally
evaporates.

The wealth tax argument is like seeing a transport truck and saying, "look at
all the metal, rubber, and fuel that person has, surely they would not be
harmed if we made them contribute some of it to give to our supporters!"
without thought to what it carries, the purpose it serves, or whether it's
still useful after being hobbled.

There are some people who seem to think being rich is like Scrooge McDuck
swimming in a pool full of coins and treasure.

If you want to know what wealth taxes look like in practice, we have wealth
taxes today, cities impose them, and they are called property taxes, and they
have a huge impact on the viability of businesses and the lives of seniors,
families, and renters. They are complex dynamics.

If progressives want to recapture money from wealthy people they could capture
it indirectly on a greater scale through reducing the impact of globalization
by enforcing tariffs in national economic zones, favouring domestic industry,
and facilitating regional growth instead of scavenging it. Modest luxury taxes
that are not distorting or prohibitive, or designed to engineer culture
captures the most via a progressive federal sales tax (VAT).

People who say this won't sufficiently deprive billionaires of their privilege
would be tipping their hand, as if that's the true goal, why bother to use the
legalisms of a wealth tax as a pretext at all?

~~~
saas_sam
Plus a large proportion of the top <whatever>% of rich people are only in that
category for the one year due to some kind of event like selling a house or
business or cashing out a lifetime of investments.

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chrisbennet
"When a man tells you he got rich through hard work, ask him: Whose?" Don
Marquis

Very few people make wealth through individual effort (musicians, football
players, Buffet?, etc). Most everyone makes by:

\- The sweat of others (factory workers, etc)

\- Skimming money from a business

It boggles my mind that investments in which you get money while you sleep/sit
on your ass get taxed _less_ than income for actually working.

~~~
loco5niner
> Buffet

Nothing against Buffet, seems to be a great guy, and he worked hard, but I
wouldn't call his efforts "individual". He is the epitome of making money on
investments.

> It boggles my mind that investments in which you get money while you
> sleep/sit on your ass get taxed less than income for actually working.

This is probably because it takes more discipline to initially accumulate the
assets to invest than it takes to simply show up to work.

~~~
chrisbennet
You're right. (Hence the question mark.)

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perceptronas
Unrelated to article content, but related to the question: Wealth is justified
by the fact that it is okay to pursue what's best for you. Wealth tax (if
worked as intended) would incentivize the opposite - don't save and invest.
You can only pursue what is best for you only if its to the level your
government decided its okay

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Pigo
Maybe I would be more on board if I felt the government could properly manage
the additional funds this would generate. It's not like they have a great
track record with what they already have.

DC has something like half of the 10 wealthiest counties in the whole country.
Why is that?

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ne0flex
>Maybe I would be more on board if I felt the government could properly manage
the additional funds this would generate. It's not like they have a great
track record with what they already have.

Whenever I hear someone saying we need to increase taxes, I always refute
their point with something along these lines. A lot of people seem to be under
the impression that simply throwing money at a problem may solve it.

A few weeks ago there was another story posted on HN that related to
multinationals shifting profits to tax havens. Someone commented about how
they don't mind paying their taxes as they got public services in return, and
that if someone doesn't like paying taxes they should stop and forgo the use
of said services. I responded saying that most people probably don't mind
paying taxes however they are getting angry that they aren't getting the bang
for their buck. The person's response was that we should give fund the IRS to
collect MORE tax revenue.

I'm willing to bet that the government is receiving enough in taxes already.
Unless we solve the root problems of gross misspending, unaccountability, etc.
giving them more money won't solve anything and instead anger more people, and
leave many others with mediocre public services and claim they can't function
properly because they're 'underfunded'.

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Pigo
I couldn't agree with you more. People seem to forget that the power to tax
someone comes from the barrel of a gun or the threat of prison. Maybe everyone
should work for some part of the government for a short time in their life, so
they can see how horribly inefficient they are.

It would be much more courageous to propose legislation that held their feet
to the fire financially, than just finding more places to take money from.

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pwinnski
The article's thesis seems to be that concentrated ultra-wealth is largely the
"product of law" on the one hand, so lacking corresponding laws on the other
end is unbalanced.

Up to a certain point, one can try to make a case that one's accumulated
wealth is the product of their own work. This is a simplification, and usually
wrong, but let's go with it. Let's say that your first ten million is because
you work hard. Let's say your next ten million is because you were in the
right place at the right time. Let's say your next ten million is do to good
choices you made before you realized how important the choices would be. Now
let's say your next ten million is due to... uh... more hard work. And the
next ten million too!

At some point, one has to admit there's more going on here than hard work or a
good idea. The article lays out that above a certain point--call it the fifty
million I laid out above, or go twenty times that and call it a billion--a
large part of your accumulated wealth is the direct result of laws and legal
protections, and that set of laws is currently unbalanced.

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whatitdobooboo
I think people would be better served focusing on waste in government. If I
were a billionaire why would I want my taxes just to go to the countless big
consulting firms incentivized to work slowly to get the most billing hours?

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ericns
Because the billionaire owns (at least a share) in said consulting firms, and
isn't constrained by tax laws and borders in the same way that the
underclasses are?

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whatitdobooboo
I think I see what you are saying - maybe I shouldnt have restricted it to
billionaires. Everyone should aware of where and how effectively their tax
dollars are being use.

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tengbretson
Wouldn't a wealth tax result in only the ultra rich being able to afford to
own large, illiquid assets like farm land, etc?

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defertoreptar
The law protects that property, but isn't that the justification for the
progressive tax scheme that we already have? If someone has ownership in a
business that is earning them millions in income, then they are paying a much
higher effective tax rate.

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AnimalMuppet
By that argument (the argument of the headline, at least), then if voting is
justified, so is a poll tax.

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pfortuny
Are those millions taxed once or every year. How many times can you tax the
same dollar bank note.

~~~
notacoward
> How many times can you tax the same dollar bank note.

As fast as it can be used for transactions that are subject to tax - sales,
payroll, inheritance, etc. In a world where High Frequency Trading exists,
that number's almost infinite. The whole "double taxation" argument has always
been stupid because every dollar already gets taxed many times throughout it's
lifetime. I'd love to hear an argument for why taxing money at rest is worse
than taxing it in motion, considering the principle of "tax bads not goods"
and the fact that hoarded money is worse for the economy. Want to try and make
one?

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lucozade
> I'd love to hear an argument for why taxing money at rest is worse than
> taxing it in motion

One argument is that money in motion has a reasonably high level of liquidity,
more or less by definition, and, in many cases, a reasonably high level of
divisibility.

If the wealth that you're taxing has similar attributes then fine. But a
significant amount of wealth doesn't have those attributes. Wealth taxes that
affect illiquid and/or indivisible assets can have an effect well beyond what
they intend.

You see this in inheritance taxes. The tax may be reasonable but may also lead
to the forced selling of family homes if sufficient disposable assets aren't
available.

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notacoward
> One argument is that money in motion has a reasonably high level of
> liquidity

Fair enough. I believe that's outweighed by other concerns, but it's a
reasonable argument made in good faith. Thank you.

