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The Big Escape: How the Ultra-Wealthy Avoid Paying Taxes and How to Fix It [pdf] (senate.gov)
71 points by mancy00 37 days ago | hide | past | favorite | 130 comments



> In 2018, Warren Buffett had a net worth of $84 billion. The effective tax rate on his mountain of wealth? 0.006%—orders of magnitude lower than the tax rates paid by most middle-class families.

What tax rate do middle-class families pay on their net worth? 0% I believe, since we don't have wealth taxes?


Yeah, this is written in extremely manipulative language. What was warren buffett's income in 2018? We have income tax, not wealth tax. Plus, a lot of that wealth is likely 'in' his company, which is really just fake money. I mean, I know accountants look at it and there is some overlap for taxes when doing things like options and share grants and FMV, but really, a company is worth zero until you sell it, like most assets.

EDIT: Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay.

This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.


> a company is worth zero until you sell it, like most assets.

I don’t think that’s quite true - I would say a better definition would be that a company is worth what someone will pay for it, regardless of if you actually sell it or not.

Stocks, piles of gold and cash are just different types of asset all of which have value.

And you have to really tax all of that, otherwise the wealthy will just avoid taxes by being paid in untaxable gold bricks and trade those for purchases rather than dollars.


> I would say a better definition would be that a company is worth what someone will pay for it, regardless of if you actually sell it or not.

this is a good definition for someone like me. if I had to liquidate all my assets today, I could easily figure out how much they are worth just by looking at existing bids.

while no less "true", this definition isn't very helpful at scale. warren buffet can't just sell all his berkshire stock by filling orders. depending on the circumstances of the sale, it could either be worth a lot more than n * last price or a lot less.


To clarify, if you were paid in gold, that's still income and you would still be taxed on the fair market value of that gold. It's income that's taxed, not USD.

Same as stock grants: if you're paid in stock, you pay income taxes when that stock is granted, at the market value of that stock.

You aren't taxed on the FMV increase of that stock until you sell it (at which point you're taxed on capital gains).


yes but billionaires never sell. They take out loans using their assets as collateral. That way they don't have to report income.


How are the loans paid back? I could never figure this one out. If they have to sell assets to pay for the loan, don’t they then get taxed at point of sale?


They either get terms where they have to make minimal payments if any, and refinance before the due date. Or they take out more loans to make the payments. Eventually they just die and the estate pays it off tax-free.


That definition works for things like gold bricks or stocks that are purely treated as assets, but it can create some odd outcomes.

In the 90s there were stories of a fan who caught a milestone home-run baseball and because of its sentimental value didn't want to sell it, but had to do so in order to pay the tax bill.

In the extreme case, if I have a child, does that constitute income equal to the price a human-trafficker would be willing to pay for him or her?


I mean do we need to sell Apple to know it’s worth money ? The existence of the stock market immediately makes it possible to convert assets into liquidity - something which firms do regularly.


I was an IB/PE financial analyst in another life and tax optimization by moving cash flows around is not only a thing, it’s the norm.

Plus if your argument were fair, we wouldn’t be seeing the kind of wealth concentration in the system.

It’s essentially a sign that financial engineering is an un-checked force multiplier which regulation has not kept up with.

Finally - asset appreciation is real, yes interest rates have been low and would typically be inflationary - however we’ve also had multiple massive disasters in a short span of time which have crushed demand and economic activity.


>Plus, a lot of that wealth is likely 'in' his company, which is really just fake money.

Then maybe we should give the poor some of this "fake money" since it's fake and doesn't matter anyway.

>EDIT: Repeat after me: net worth increases are not income. Net worth increases are not income. I mean, I "made" $250k last year in home appreciation, but that's just fake money. If they taxed me on it, it would come out of my much smaller take home pay.

>This is the big lie. Most of these asset prices are increased due to inflation anyway. In real terms, both the stock market and real estate have been stagnant for decades, but by inflating the currency, they can make people out to have 'increasing net worth' and then tax them.

This is an actual big lie, since you can borrow against assets like this with secured loans. And you can turn it into cash without moving out immediately with reverse mortgages. How are you able to get "free real money" from "fake money"? Maybe it's not as fake as you think.


We do. Most Americans own homes which means they're sitting on hundreds of thousands in fake money


> you can borrow against assets like this with secured loans

Okay, and how do you pay back these loans? That's right: with your income. You're just moving the problem around.


Ultra-Wealthy secured loans don't work like mortgages you and I deal with. On a $1 billion dollar asset, they can borrow like 40% of that, with no monthly payments, just one big balloon payment at the end of the 10+ year term with a little bit of accrued interest. They simply refinance in 10 years, and now the asset is worth $3 billion and then they take out an even bigger loan. Because it's a loan, it's not considered taxable income. And the interest payments on this loan are tax deductible. And usually these assets (like real estate, or stocks) often pay out dividends or rental income. So they can borrow on these assets ad infinitum and use the proceeds to continue to reinvest in more hard assets and to fund their lavish lifestyle. They won't directly own a super-yacht, their company will own it and rent it back to them, with the maintenance expenses considered business expenses since it's a rental business. Same with their vacation houses. Along the way they may pay a modicum of capital gains taxes on the stock dividends, but it's usually offset by the tax-deductible interest on the loan itself. Rinse and repeat for a few decades.

At the end of it all, they have enough dividends/rental income, that's paying for lavish lifestyles, and they still own all of the hard assets that they can then pass down to their heirs with minimal taxable events.


No, you die. Your assets get liquidated. The estate pays the loans. No income involved, at least in tax terms.


Or you take out more loans to cover the interest until you die.


Everyone gets a free education for 12 years, and access to infinite knowledge (library with books and internet). Qualifying families also have access to dirt cheap internet (at&t offers internet for 10$ a month if you're poor).

Most anybody has the means to research how to set up an amazon store, a blog, or a youtube channel and start making business income. But instead of spending their time learning how to better their life, they waste it on social media, watching tv, etc.


> set up an amazon store, a blog, or a youtube channel and start making business income.

Those are barely above MLM scams in likelyhood of making money.

You're sort of proving the opposite of your point by giving those as examples to pull yourself out of poverty.


you can make money if you do your research. You won't make millions over night, but you have to start somewhere. Really though, if people learned how to properly budget their time and money, change their habits, and disassociate from groups that bring them down, they'll have positive changes in their life.

You can lead a horse to water but you can't make it drink though.


You can technically make money with Herbalife too. Hell, I wouldn't be surprised if a greater proportion of people made money on Herbalife versus a YouTube channel.


maybe, but can you say the same on blogging or online e-commerce. Or if somebody supplements their income doing uber/lyft or doordash/instacart?


I am saying the same thing about blogging and online commerce explicitly.

And the supplementing your income with Uber, etc. thing is slightly different in that you get compensated for each hour you put in starting with your first hour. The big issue I have is with schemes that take time and capital investments where you probably won't make a dime.


> In real terms, both the stock market and real estate have been stagnant for decades

What do you mean by this? Inflation over the past couple decades has come in around 2-3%. The stock market has appreciated by much more.


Real inflation as measured before the cpi methodology changes in the 90s is likely in the 7-15% range. The government manipulates the basket of goods to 'achieve' low rates.

http://www.shadowstats.com/alternate_data/inflation-charts

In this view, there has been no asset appreciation. It's a myth to quell the masses achieved by manipulating inflation rates.


Your home has a wealth tax, also known as property tax. These increase as the home appreciates.


We do have one kind of wealth taxes -- property tax.

They have many problems as well, but that's a wealth tax.


To be fair though, we do have property taxes, and many middle-class families have a substantial fraction of their net worth tied up in their house and other real property.


I would even go so far as to say the typical middle-class family has real property in an amount that exceeds their net-worth.


Median American net worth is $121k. Median home price is $380k. Typical real property taxes are .5% - 2%. Call it 1% and that makes the typical wealth tax on middle-class people roughly 3% per year.


>60% of homeowners are in debt on their house, though.

So they are getting appreciation on leverage.

I would argue the median homeowner is being subsidized, having a negative wealth tax.

The local government takes away 1%, but the Federal government pumps up your asset price by >2% - that's a -1% wealth tax (paid entirely through inflation by non-homeowners).


Yes, there are many exemptions in tax policy for real estate. We exempt the first $500k of gains from income taxes, for example. And our whole society is structured around "building equity" i.e. making housing cost more.


Since most middle-class families have the bulk of their wealth in their primary residence, the effective tax rate is however much they are paying in property taxes divided by the equity in the home. In many cases this can amount to a sizable percentage of net worth.


Around 1%, in the form of property taxes. That's a tough number, though, because property taxes apply even when people are under water on their mortgages or rent.

The only wealth taxes the US has are property taxes. We all just think of wealth as the stuff that doesn't get taxed. The richer you get, the less of your wealth is taxable. The poorer you get, the more you pay wealth taxes.

In theory, we tax rich people when they convert their wealth to income. In practice, they all convert their wealth to income by borrowing against it, then dying, then having their estate pay their debts tax free.


Property taxes are a form of wealth tax


How is this the top comment? It does nothing to move the discourse forward. You are trying to slam the brakes by homing in on some tricky terminology. I wish this kind of comment would get downvoted into oblivion anytime the topic of a wealth tax comes up, whether or not you agree with it.

The difficulty you are having in parsing out the comparison here is because the comparison is difficult to make (and possibly you are just trolling). How would you word this sentence to make it more clear? It is clear from the rest of the document that what is being compared is not the "wealth tax" on families, because as you said we don't have wealth taxes.

The comparison is what percentage of wealth do families already give to the government through taxes in general. Nowhere does it mention an existing "wealth tax". Most middle-class families build their wealth from a paycheck, while ultra-rich families can do so through other means that aren't taxed. Whether or not you agree that a wealth tax would be of benefit here, it's hard to argue against that point. And that is what your referenced quote is trying to elucidate.


>> Nowhere does it mention an existing "wealth tax"

Well of course not. There isn't one. And the Senate can't pass one because the Constitution (happy birthday) doesn't allow them. Elizabeth Warren knows that a wealth tax is unconstitutional. She swore to support and defend the Constitution. And she is championing a wealth tax.


This is something I have always been curious about but really not talked about in any of these studies.

(I am purposefully ignoring the companies not paying taxes since that I think is a valid issue if we are talking about income).

So Warren Buffet may have $84 billion in stocks and assets, but how much did he actually sell? How much money went from selling stocks to his bank account?

I think that number if far more important.

Yes it is true that we have excise taxes on cars and property taxes on homes, I feel like a just plain "wealth" tax is not the right solution.

I don't like the idea that the government can say, "you have X amount in stocks, you must sell a certain perfect so you can pay us in taxes". Which is what this sounds like to me? Or am I majorly missing something here. Taking the Warren Buffet example, he would have to come up with 2.5 billion in taxes


You're not really missing anything, but there's a giant loophole.

If you have $84 billion (or even $20 million) in stocks and assets, you can borrow against them without converting them to income. Then you can die. Then your estate pays off the debt without paying income taxes. Thus, 0 income taxes over a lifetime of converting wealth to income.


but the investments generate tax's. If I invest 1 million dollars to hire 10 people at 100,000 $ each, they all pay income tax's. That income tax wouldn't be collected if it weren't for the investment.

* round nubmers ** you'd pay 150,000 usd on a 1 million dollar investment cashout

federal income tax on a salary of 100,000 USD times 10 is 151,040

So the government still gets their tax's (and more if you countother ancillary tax's) AND 10 people have a job


Very few business pay salaries out of investment money. And even when they do, it's temporary. If salaries were paid with investments, the investments wouldn't ever become more valuable.

When you buy stock, you're not paying salaries. You're buying ownership of something that has value, generates income, and mostly intends to use that income to pay salaries.

The argument you're making is an argument against corporate income taxes. That's different.


> you can borrow against them without converting them to income. Then you can die.

But surely you have to make payments on those loans before then... interest payments at least. You're either making those payments with the money you were loaned or from your regular income (that was taxed in the first place). At that point you might as well just pay the capital gains taxes because you're losing the same money to interest payments anyway.


Rich people get access to astonishingly favorable loans. And they never have to make interest payments.

> Merrill Lynch recently quoted an interest rate of 3.2% to clients with at least $1 million in assets. Those with $100 million or more can get a rate as low as 0.87%.

These are loss leaders for banks. They want to entice incredibly wealthy people to do business with them and have their companies do business with them.

Wealthfront has a product for the merely rich: https://www.wealthfront.com/portfolio-line-of-credit

> Because your line of credit is secured by your diversified investment portfolio, we can keep the rates low for you. Depending on account size, current rates are 2.40% - 3.65%. Using a line of credit is generally cheaper than carrying a balance on a credit card or taking out a personal loan.

> Borrow up to 30% of your account whenever you need it, for whatever you need. Pay back what you borrow and the interest payment on your own schedule.


The rich invest in hard assets that produce income. Whether that's dividend from stocks, or rental income from commercial buildings. That recurring income is usually enough to service the loan.

And remember the ultra-rich themselves own the bank. Warren Buffet has huge multi-billion dollar positions in Goldman Sachs and Wells Fargo, in addition to owning the real-estate arm of Berkshire Hathaway itself. And the ones that don't own the banks, still get favorable personal treatment from banks in order to get their M&A or underwriting business.


I never realized that...

Wouldn't that loophole be the better thing to try to address then?

Instead of just focusing on their wealth, instead focus on the loopholes.


There is tremendous resistance to addressing that loophole. A wealth tax is one way to address it. An estate tax is another. So far a "wealth tax" seems more popular, because most people like the idea of a tax free inheritance but don't have untaxed wealth. Most people actually pay wealth taxes already when they buy cars or houses or a boat or an RV.


It should have said: the effective tax rate on the revenue he derived from his mountain of wealth.


If Buffet earned an average 1% return across his net assets, then he paid 0.6% tax on his returns.


Is inflation kind of wealth tax?


Depends if you consider property tax to be a wealth tax.


It is interesting that everyone says that the wealth tax is hard to implement, yet it seems to be working well in Switzerland?

https://www.bloomberg.com/news/articles/2021-02-16/swiss-wea...


They have no capital gains tax. Overall the wealth tax is a lower cost to individuals than the style of wealth taxes en-vogue in a lot of places now. Wealth taxes require liquidation of assets to pay, given the nature of wealth. When you liquidate assets, you pay cap gains tax and then have to pay the wealth tax. In Switzerland, you just pay the wealth tax. Basically, you have to be taxed to pay the tax in most places, where in Switzerland you just pay the tax without being 'double taxed'.

Liquidating assets to cover that tax works out to a lower overall tax burden on the individual than capital gains tax. Most nations that are mulling wealth taxes are considering them as an added tax layer, as opposed to the Swiss who use it as an indirect means to tax investments, rather than asking for a per-transaction gain payment. Nations that have done the approach that's opposite to Switzerland tend to reverse their wealth taxes, or see little benefit (France, for instance).


France is an interesting example. I believe their wealth tax targeted more than just the super rich and it led to a heavy exodus of millionaires from France. Also by not having an exit tax, it was easy enough for people to leave France to avoid this.


> France is an interesting example. I believe their wealth tax targeted more than just the super rich and it led to a heavy exodus of millionaires from France. Also by not having an exit tax, it was easy enough for people to leave France to avoid this.

It probably wouldn't work that way in the US, since it has an exit tax and it also taxes income globally regardless of where you currently reside (and I'd imagine any wealth tax would work similarly).


If I'm not mistaken, Switzerland the wealth tax hits everyone as well. The starting is something like 200K CHF. That said, the actual percentage is very low, like 0.2%. Having read a few bits of the Swiss tax code, I'd actually prefer to have this wealth tax like that over a cap-gains tax, since it would overall be a lower percentage of my capital asset appreciation than a CGT.


Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from?

It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.


> Most of the “ultra-wealthy” have their wealth in the form of stock in public companies. This is certainly true for the examples she lists. If they’re all going to have to sell 2% of their holdings each year to pay for this wealth tax, who are they going to sell to and where is the money going to come from?

The stock market.

> It seems like this is a recipe to generate some temporary funding for the US government by selling off our national assets (e.g. ownership of major US companies) to foreign investors.

Without domestic ownership requirements, that will happen anyway, for instance: https://www.marketwatch.com/story/jeff-bezos-just-sold-nearl... ("Jeff Bezos has sold $6.7 billion in Amazon shares over the past week"). I reckon that's about 3% of his wealth.

And frankly, the wealthy have been expatriating US national assets for a long time, just not the paper financial ones. I don't see why we should be especially concerned with those, since what they mean is controlled entirely by US law.


Couldn't the shares just be transferred instead of sold?


Ok, and the government is going to do what with them? The point is to raise tax revenue.


I have noticed that politicians always use extremes (many standard deviations away from the average) to illustrate a population.For example, Warren Buffet wealth is in the top 10. Yet, Warren's policies target the top 1% (top 10 is the top 0.00033% of the top 1%). He is not representative of the top 1% in any way!! Show me the median and let's talk.

I am surprised people bite at this manipulative narrative. It seems to me that it discredits their arguments right away. In that sense, voter education would go a long way.


To be top 1% in 2020, a household needed a net worth of $11,099,166. $10,374,030 was the 1% threshold in 2017.

To be top .5% in 2020, a household needed a net worth of $17,557,208. The top .1% bracket started around $43,207,732.

This wealth tax doesn't kick in until 50M USD.

https://dqydj.com/average-median-top-net-worth-percentiles/


> The Ultra-Millionaire Tax would apply to the wealthiest 100,000 households in America and generate at least $3 trillion in revenue over the next decade—all without raising taxes on 99.95% of American households.

Huh? 0.05% is 20x smaller than 1%


False. The Ultra-Millionaire Tax Act would impose a tax on the wealth of the top 0.05 % of Americans (people with > 50 million in wealth).


> I am surprised people bite at this manipulative narrative.

I suspect it's people believing what they want to believe. When Elizabeth Warren comes along and says, "you can have everything you need: healthcare, food, clothing, housing, all without having to work at a job you hate, and all we have to do is agree to take a little bit from a few people who won't even miss it", a lot of people who do work at a job they hate and stress about how much healthcare, food, clothing and housing they have or might have in the future don't really see much downside in saying, "yeah, sure, let's try it".


What if we mandate that all workers must get part of their compensation in the form of company shares so that if the company explodes in value, it's not just the executives that become billionaires and the workers are just still going paycheck to paycheck? This seems common in the tech world but not so much in other companies.


I don't think this would actually be better for the workers? ceteris paribus, it's better to be paid in cash than stock. stock can be better if it enables a higher TC, or the number of shares is locked in before a major jump in valuation, but at the low end of pay I think most people would prefer to minimize variance over maximizing EV.


So government-forced wealth redistribution?

I wonder if that’s been tried before. Maybe there’s some point of reference for the outcomes of that approach. Maybe it could be tried on a local basis and then evaluated before a complete overhaul of the largest single nation economy?

If I had to guess, I don’t think it would work out very well. Unless you imprison the wealthy. Then their wealth wouldn’t be mobile.

This would be a great idea to apply lean startup methodology. If it works, we’ll, that’d just be…unprecedented!


Perhaps it could be a form of distributism? Basically we could rather promote legal entitlements to workers in the share of wealth generated by companies and labor.

There's an interesting google talk on this from long ago. https://www.youtube.com/watch?v=X1PtStipIsc


It's always interesting that this issue keeps coming up, whereas Islam solved it over 1400 years ago through the Zakat system.

An extremely reasonable 2.5% would be owed on money sitting in the bank for one lunar year (it's a form of "wealth tax" if you will). It has been documented that in Iraq during the Ummayad period where everyone paid their share of Zakat, there were no more poor people left to accept it.

And that's it, no income tax or messing around with it. It works.

Livestock and produce have a separate calculation, but most of us here are not in that business.


The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws.


> The ultra wealthy, if not breaking the tax law, are paying what the government believes they should pay and are not avoiding anything. Congress wrote, voted on, and passed the tax laws.

What would if the winning team always ended up writing the rules in such a way to where they were always winners and only winners could write next years rules?


Yeah and this is an initiative to change the law.


In the UK (and I'm sure elsewhere), inheritance tax is the main vehicle to try and avoid dynasties being created once one person has accumulated massive wealth.

As others have said, it is income that is taxed, there will be plenty of people who own capital (e.g. inherited a large country house) and who don't have the cash to pay a tax on it and presumably it would seem unfair to force them to sell it (and hope they get decent money for it) in order to pay a tax on it.


One answer would be a federal sales tax, combined with a Universal Basic Income.

The UBI would be equal to the amount of the tax on up to some minimum income level (say, 50k / year). In other words, everyone gets a monthly check that is essentially a rebate on their sales tax up to the income threshold.

That's simple, loophole-free, and avoids the privacy invasion that accurate income tax collections require.


This would also have the benefit that all money you save and don't spend is tax free. Normally you have to jump through hoops to save and invest pre-tax money.


In theory, a 3% wealth tax makes the life of a billionaire difficult. You have like a 60% tax rate for fed/state/local. You make maybe 8% by being safe in your investments. If you pay taxes on your income, get that 8% reduced to 6% by 2% inflation and then your left with a 3.6% YoY gain (6% * 60%) before a 3% wealth tax wipes you out down to 0.6%.

But you still don't have to pay taxes on your gains with this bill. You can take out a loan on your new assets at a 2-3% rate and its reduced to around 1% with inflation. Now you don't have to pay taxes because a loan on the principal value doesn't cause a taxable event with the step up in value. You just sell enough to cover your interest liabilities and pay taxes on that.

I wish they'd address WHY these rates are so low by attacking people and companies that aren't being productive with their capital by building things people want. Why attack a people or a company with a wealth tax if they are paying low rates because they spend most of their revenue on building the business. Capitalism is about rewarding good allocators of capital.


Why would it be 60% for stocks? It’s not regular income. It’s capital gains. You’re looking at much lower rates for ltcg.

These rules also only apply to people with $50M+ and only to amounts over that $50M. I don’t think almost anyone should have that level of wealth in the world - it’s clearly created at the cost of others.


I figure if you are actively managing your account, then most of it is short term.


Okay I read this.

It gives no details on what loopholes would be closed, and then conflated that with tax cheats and that a well funded IRS will solve both.

A well funded IRS will just be rubber stamping the compliant tax reducing methods faster. Although most constituent's experience with the IRS is retroactive and adversarial, wealthier people's experience with the IRS is pre-emptive and collaborative. It is a totally different experience.

I don't get the impression that the people and organizations identified here would ever be subject to these taxes, even if the law was passed without any debate.


I believe most of this is based on public reporting by propublica: https://www.propublica.org/article/the-secret-irs-files-trov...


Okay, I don't agree with the "true tax rate" terminology or methodology. Not necessarily in response to you, just that article and for anyone passing by.

Changing values of assets are not income. Taxing net assets would require so much extra liquidity that may not exist, and if people wanted to be compliant with a wealth tax they will have to avoid illiquid assets which would be the most counterproductive fiscal and monetary policy for the economy. You want to get more people to go into illiquid assets to make them liquid, big yikes.

It is disingenuous trying to equate "$1 added to their net worth" to a wage worker adding $1 to their net worth, even if it was purely for explanation purposes. But here it is intentionally made to seem like something else. Its would make more sense to add a sales/excise tax to the buyers that push up the price of assets as they are the only ones moving liquid value around. Like a new uptick rule. Makes more sense to tax appraisers for illiquid assets if they uptick. I don't think any of these make real sense, but makes more sense than taxes people subject to the whims of the market.


There’s a simpler way to fix this.

Crypto.

Sorry I couldn’t help myself.


SHIB is the way to go, bull millions of coins and hope it goes up a ton some day…


I think you forgot the sarcasm sign


Sigh... Wealth taxes don't work. Almost every single European country that had a wealth tax repealed theirs. The fact that Senator Warren is continuing to try to push a wealth tax shows how poor her policies are.


Germany: Discontinued

Finland: Discontinued

Luxembourg: Discontinued

Sweden: Discontinued

France: Discontinued*

Spain: Current

Netherlands: Current

Norway: Current

Switzerland: Current

Italy: Current, but excludes assets held within the country

Belgium: Current

So 5 discontinued & 6 current? That doesn't seem like "Almost every single"

https://en.wikipedia.org/wiki/Wealth_tax#Current_examples

Do you have a better source for what countries had it an discontinued it? For what it's worth I am here considering Financial property exclusively, France still has it's property tax which can be considered a wealth tax.

I am struggling to find write ups that don't just echo "they all repealed it" but list the specific countries.


From the article you cited (just above the examples):

> In 1990, about a dozen European countries had a wealth tax, but by 2019, all but four had eliminated the tax because of the difficulties and costs associated with both design and enforcement. Belgium, Norway, Spain, and Switzerland are the countries that raised revenue from net wealth taxes on individuals in 2019 with net wealth taxes accounting for 1.1% of overall tax revenues in Norway, 0.55% in Spain, and 3.6% in Switzerland for 2017.

The citation for those statements links back to the OECD, so they apparently don't count the Italian and Dutch taxes as "wealth taxes". The NPR transcript linked elsewhere says only three countries have it, so that interviewee may not be counting Belgium either (since the tax is solely on financial instruments and not total wealth).


Yeah I'm finding it hard to get a coherent count.


Germany discontinued it after it was struck down by the supreme court because it only taxed liquid/easy to measure wealth. Any new wealth tax would have to extend to all forms of wealth and would therefore be very costly to administrate. Successive governments have so far refrained from creating a new version.

In fairness, the "old" wealth tax did not bring a lot of revenue.


In Spain

The exact amount varies between regions.

Wealthy regions like Madrid have abolished it. Non coincidentally, the regions that are economically doing better, and more contributing, per capita, to the central State.

https://www.businessinsider.es/impuesto-patrimonio-son-difer...


Interesting! Do you know of a good write up that captures nuances like this? Also be careful with the causality :)


It's been studied over and over. Lower taxes mean more economic activity, and less tax evasion.

An article in Spanish

https://www.elindependiente.com/economia/2021/04/25/madrid-d...

Another one

https://www.libremercado.com/2021-08-03/el-efecto-laffer-de-...

En concreto, la región de Díaz Ayuso recibió de la caja común apenas el 23% de lo que ingresó en 2019.

Meaning that Madrid out of the 100% taxes it collects for the State, only 23% end up in Madrid. But that's still fine, because of the higher economic activity.

Madrid has been accused of "tax dumping", by having way lower taxes than other regions, and still:

Tanto es así, que Madrid aporta en torno al 68% del sistema de solidaridad interterritorial (más de 4.000 millones) frente al 25,5% de Cataluña o el 6,6% de Baleares.

Meaning that, even with low taxes, Madrid funds 68% (+4 billion Euro) of the inter-region fund system.

https://en.wikipedia.org/wiki/Laffer_curve


It depends how the wealth tax is implemented. European wealth taxes were primarily on capital like stocks, which are extremely easy to move, even easier than income.

A wealth tax on land (an LVT) is literally impossible to avoid however since you can't move the land.


> A wealth tax on land (an LVT) is literally impossible to avoid however since you can't move the land.

Yeah, those are called property taxes and already exist.


Property taxes tax buildings as well, a Land Value Tax is purely a tax on the land and doesn't change whether you have a building on it or not.


It's not because they repealed them that they don't work. It could also be a symptom of the current times in which wealthy people became extremely good at influencing politics to reinforce their position.


This is a point worth emphasizing, a tax being repealed does not necessarily imply a lack of efficacy, due to the aforementioned reasons of political influence/corruption etc. Switzerland has done very well with a global wealth tax, arguably being the highest standard of living in Europe.


I can't talk about other countries, but in my country (France) it didn't get repealed because it “didn't work”, it got repealed because it worked too well and it pissed off the billionaires who lobbied all they could to get it repealed (and even with such intensive lobby it lasted more than 30 years and survived several conservative majorities).


Can you point me in the right direction for more info on this? I'm curious about what some of the problems were, and why they needed to be repealed.

I'm also curious what you think a sound tax policy would look like as an alternative to what Warren is proposing.


Why don't wealth taxes work? Which countries repealed?


I guess they only work if everyone uses them, otherwise the danger is that a billionaire takes their business elsewhere.


Germany suspended it's wealth tax and some parties are now contemplating whether to reactivate it. Might be just pre-election noise but who knows


For example, that well known bastion of fascist right-wing policies, France.

https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth


https://www.npr.org/2019/03/01/699261950/why-a-wealth-tax-di...

> ROSALSKY: In 1990, there were 12 countries in Europe that had a wealth tax. Today there are only three. Perret says they didn't work for a lot of reasons. Among other things, it costs a lot to enforce. It pushed rich people out of the country, and the wealth taxes didn't raise a lot of revenue.

But

> ROSALSKY: But Warren says that her proposal, which has no exemptions, will play out differently in the United States. Greg Rosalsky, NPR News.

Unfortunately, nothing in her proposal justifies that. Why can't companies and people just move out of the US to avoid this? Singapore or other countries will readily welcome them.


> Perret says they didn't work for a lot of reasons. Among other things, it costs a lot to enforce. It pushed rich people out of the country, and the wealth taxes didn't raise a lot of revenue.

In France at least, it has been a topic of political debate for decades before the recent abolition and what's clear at this point is that it costed much less than what it brought (both in terms of law enforcement, and in terms of rich people moving out of the country).

> Unfortunately, nothing in her proposal justifies that. Why can't companies and people just move out of the US to avoid this?

A wealth tax isn't a tax on a company, it's a tax on the owner of the company so moving the company won't help here. And the owner leaving the US won't help either, since they will still have to pay taxes as long as they remain a US citizen. Renouncing to US citizenship would still be an option of course, but I'd expect the opportunity cost would be much higher than the cost of the tax itself.


> . Renouncing to US citizenship would still be an option of course, but I'd expect the opportunity cost would be much higher than the cost of the tax itself.

Why? In 2021, a lot of countries have US levels or better infrastructure. The owner can reside outside the US and still make products for the US and the world.

> Americans Gave Up Citizenship in Record Numbers in 2020, Up Triple From 2019, Reports Tax Specialists Americans Overseas

https://www.prnewswire.com/news-releases/americans-gave-up-c...


not an expert, but I thought the US is unique in that you can't escape taxes unless you renounce citizenship. and even then, there's an exit tax


Renounce, pay the tax once and live free?


Of course any reasonable opposition gets downvoted and responses get ignored.


Except Switzerland?


America forces people to renounce citizenship to avoid high taxes (unlike every other country in the world where you can just leave the country), so the people who flee Warren's wealth tax will not ever be coming back.


Yeah, not taxing the rich also does not work. See the trillion Dollar tax break Pres. Trump and the GOP implemented. The savings were supposed to somehow trickle down to the "lower decks", but this has proven not to happen.

Meanwhile the ultra rich are getting ultra richer and the rest is getting poorer.

So lets globally coordinated tax the rich for a while in a way that they can not evade their net wealth to some other country and lets see how well that works.


> The savings were supposed to somehow trickle down to the "lower decks", but this has proven not to happen.

Do you have more info on this? The middle class literally paid less in taxes due to Trump's cuts[1]. The rates were lowered across the board and the standard deduction (negligible to the 1%, a huge chunk of change to the middle class) was increased.

[1] https://www.bloomberg.com/news/articles/2020-10-27/the-trump...


"...the Trump administration claimed that its corporate tax cuts would increase the average household income in the United States by $4,000. But two years later, there is little indication that the tax cut is even beginning to trickle down in the ways its proponents claimed."

https://www.americanprogress.org/issues/economy/news/2019/09...

https://www.rollingstone.com/politics/politics-features/trum...

https://www.salon.com/2020/12/27/50-year-study-of-tax-cuts-o...

https://www.motherjones.com/politics/2020/06/trumps-tax-cuts...


The rich already pay almost all of the taxes anyway. The government just needs to do less to balance the budget.


Well that is expected when they own most of the capital/money. That's not really a factor or surprising.

What is important is how much a person is paying as a function of how rich they are. Rich people get to pay way less and it's not fair. They can get around tax laws because their cash flows don't look like the average citizen's tax flows.


The US also repealed its wealth tax promptly after introduction in the 90s.


Yeah, peace doesn't work too, every single European country that's tried it has reneged on it at least once in the past century, except maybe Switzerland and the Vatican.

More seriously though, issues like wealth taxation, capital gains taxation, inheritance taxes etc. are I would say more of a reflection of the relative strength of large property owners (a.k.a. "Capitalists" or "The 1%" to use other colloquial terms) versus the rest of the populace, to set economic-cultural norms and influence legislation.

Certainly, if such a tax is put in effect, many of the wealthy would make an effort to hide their assets away, possibly even abroad. But if the (federal) state wanted to cope with or overcome this potential tendency - which it really does not in the ultra-bought-off US political system, including Ms. Warren - there are many ways it could do so, both on the national and international levels. Not to mention how US corporations already employ asset and activity off-shoring to evade taxation.


> Name: Elon Musk, Net Worth: $19.9 billion, Federal Income Tax Paid: $8,410

How is this possible? Why does Elon Musk pay less taxes than an average person who works in Tech?


My understanding is that these ultra rich people have their wealth tied up in investments, so they never "see" any income despite their investments' massive growth. To get cash and buy things, they simply take out loans at super low interest rates using their investments as collateral. Basically, it's cheat codes.

It's probably why CEOs also like to take super low salaries.

What I don't understand is how their stock gifts or dividends don't trigger more taxes or why their taxes are indeed so damn low.


Because our society and govt think the only way to get innovation is to incentivize the rich. That and war.


A tiny salary, and not realizing capital gains on the stock but instead taking out margin loans using his stock as collateral.


His net worth is stored in company shares, which doesn't get taxed until it's sold.


Why "less spending" is never an option? Why do we need more and more trillions in taxes?


Do we want to tax money that's working? Money that's actively building things? I would argue we don't.


Somehow any new measures will end up penalizing the middle class either directly or indirectly and not touching the ultra wealthy despite the politicians claiming loudly otherwise.


I don't think "escaping taxes" is a bad thing. I'm only upset these instruments aren't available to the common person.

This money belongs in people's pockets, not in pockets of senators and their golf buddies.


You can tell how close we are to complete collapse by how hard they agitate for outright wealth confiscation, and how sloppy they are with their attempts at intellectual sleight-of-hand.

Like clockwork, from a historical perspective.


A moment of silence for those poor millionaires/billionaires who will have to pay taxes like filthy plebs.


Care to elaborate? Some further reading/sources?




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