Yves here. I’m surprised that Richard Murphy skips over a key shortcoming with the notion of taxing wealth: the difficulty of valuing non-actively-traded assets. What is that racehorse, or private business, or piece of lakeshore land worth? Having more than occasionally been asked to value private companies, I have seen instances of huge differences between a buyer’s and a seller’s valuation, in one case 10x. And in the 10x case, the difference wasn’t due to aggressive v. conservative assumptions about the business but the different situations of the buyer and seller (seller not pricing in FX risk, tax considerations the buyer faced, greater buyer constraints in dealing with unions, etc.).
That problem is made worse in the US by the fact that the IRS regularly loses tax case against the super-rich and would be therefore not inclined to dispute dodgy valuation.
Our Clive raised an additional issue: wealth taxes are (one assumes) meant to reduce inequality but there are retirees who are asset rich (often due to having been very lucky as to when and where they bought their house) but don’t have large incomes:
Yes, the big problem is definitely “define wealth”.
A few case-studies shows this is fraught with complications.
One of my relatives is by some measures wealthy. Let’s look at her balance sheet though and see what this means in practice.
Fixed Assets:
Residential Real Estate £700,000
Vehicle £20,000Investments:
Pension Fund £500,000 (cash equivalent value)
Exchange Traded Securities £100,000
Cash at Bank £50,000Total Net Worth: £1.37M
So, most people would consider that makes her a candidate for the Global Wealth Tax.
The snag is, her income is “only” (I know this is a relative judgment) £24,000 p.a. of which £18,000 is from the private pension on which she pays about £2,000 tax. The rest includes a state pension component of £6,000 (which is also taxable). Property taxes run to £3,000 a year. So the tax take is already £5,000, or around 20% of income — but this tax take equates, of course, to around 0.5% of “wealth”.
She ends up with around £1,700 free cash per month, which is enough to live comfortably but she lives in an expensive part of a very expensive country. Utilities are £300 a month (mainly natural gas for heating, although the climate is mild, cold-ish winters can generate high energy consumption as the house is 50+ years old and while energy saving retrofitting has been done, it has reached diminishing returns point to do any more, water charges are high here too). Food is another £300 a month, insurances are nearly £200 a month (pet cover is £50 a month alone), transport costs (car), modest clothing, makeup and haircare budgets are another £100 a month.
Of the £800 or thereabouts left over, this has to cover the cost of replacing the car every four or five years, property maintenance (a new furnace cost nearly £2,500 a couple of years ago), she has to have someone help with the garden, that’s £4-500 a year. And so on. The “wealth tax” would eat up a lot, if not all, of her disposable income. She does not live extravagantly. You’d be forcing her to make awful choices such as eating an inferior diet, not keeping the house that warm in winter, or not having a pet. Or not running a private car (public transport where she lives is patchy, at best).
No bank would lend to her at her age without security. The pension fund gets cancelled in her death so isn’t a realisable asset. So the proposal to use a bank loan to cover the costs of the wealth tax is, in effect, a mortgage. This sounds fine, but what if she needs to go into long term care? A decent facility (one I’d be happy to see her in) is £3,500 a month (call it £40,000 a year) without nursing, if nursing is needed, this is £5,000 a month. If neurological care (e.g. dementia) is called for, you’re looking at £6,000 a month. The house would have to be sold to pay for it, but worse-case, her entire fixed assets and investments would be gone in ten years. The income from her pension fund would need to be supplemented by a state-funded contribution to her care. The more mortgage was against the house, the less this would raise in any sale and the quicker the burn rate for any long term residential assisted living. So the sooner the state would have to step in, the assistance would run for longer and the quality of what care would be provided would almost inevitably be worse.
Of course, if my she didn’t need to go into a nursing home, her estate would be larger (worth more). So the beneficiaries get more of a free lunch. This is, to me, the real inequality. Random, capricious, unearned financial lottery winning through wealth inheritance is unjustified and is unfair. But the wealth tax might not prevent that (it would only chip away at it over a long, long period).
So why not — as Britain did in the early part of the twentieth century — strike a real blow against this pernicious problem (since sadly watered down through copious loopholes) by ramping up of death duties (inheritance tax)? If that was coordinated across tax jurisdictions, it would seem to me to be a far fairer (and easier) way of tacking the root causes of a lot of the inequality which arises through dynastic wealth.
However, vlade did have a clever solution to another objection often raised to a wealth tax, that people will simply hide assets:
If I were to do a global wealth tax, I’d design it on “tax as proof of ownership” basis. I.e. the asset is owned by the person who can prove they paid the asset tax on it. VAT is a proof of ownership for small things, income tax on your salary money, inheritance tax on anything you inherit etc..
No tax paid, no ownership – and the first person who pays the tax can claim it.
By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK
his is a question raised at the Tax Justice Network conference yesterday, largely as it is an issue that is the focus of much of the work of Tax Justice UK. I am an adviser to Tax Justice UK.
The debate was in one part technical, focusing on whether we can tax wealth. The slightly frustrating element of the discussion on this issue was the failure to focus on why this is now possible, which is entirely down to the existence of automatic information exchange from the world’s tax havens to the world’s major countries. This process, which has only just begun, but which is already proving to have a real impact on tax collection rates from those using such places, is key to wealth taxation. Before automatic information exchange existed the possibility that wealth taxation could simply be evaded by relocating assets to tax havens was so significant that any proposal was undermined by it, and now it is not. Boltholes for wealth are now disappearing.
In that case the argument for or against wealth taxation is very much more about political will now. Helen Miller from the Institute for Fiscal Studies did, whether she intended it or not, present the case against that political will being created. I admit I found her arguments frustrating. To pretend that we cannot tax wealth is now wrong, for reasons I note above. And to suggest that it may be wrong in some instances to tax wealth because it is, as she suggested, just a second tax on labour where the benefit of consumption have simply been deferred is grossly inaccurate given the heavily skewed distribution of wealth within our society, plus the fact that the vast majority of the savings income of the vast majority of people in this country ( I use the term twice deliberately) has been exempted from any taxation by the simple expedient of exempting the first £1,000 of savings income from all tax liability in the UK, which should then have ended the need for ISAs, which did not happen.
So do we need a wealth tax? Some of the very wealthiest in the USA say that we do, although I am not sure that I agree with all their reasoning which certainly conflicts with modern monetary theory.
I also do so. I explained how this could be done through the income tax and NIC systems here, a while ago.
But we could also align income tax and CGT rates, as Nigel Lawson did in the 80s.
And we could substantially abolish the observed capital gains tax annual allowance which is a peculiar feature of the UK tax system in the sense that few other countries replicate it, but which provides those with wealth with the absurd entitlement to what is, in effect, a second personal allowance which is denied to those who have to work for a living. The injustice of the UK tax system and its inherent bias is obvious.
That is also the case when the absurdity of capital gains not being charged on death is considered: many of the problems with inheritance tax could be addressed if this exemption was removed, including on houses unless passed to a surviving partner or carer.
But so too is it by another simple fact. Over 80% of UK personal wealth is made up of tax incentivised assets, either in the form of people’s homes or pension funds or ISAs. That is a staggering fact that makes clear it is the UK tax system that does help create the wealth inequality that we suffer in this country. In that case to tax the resulting imbalances in society makes complete sense.
I am not saying we need start with a tax on wealth as such, although I see little reason why we should not on the wealth of the top 0.1%, with the sole justification being that they are exceptionally wealthy and that the imbalance this creates society requires redress for no other reason than that. We should start by addressing the issues I note in my paper, here, and those other obvious issues relating to capital gains tax noted above. We can have seriously big impact doing these things before ever getting near the politically charged case of inheritance tax.
The time for wealth tax reform has arrived.
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Tax wealth? Ask Harris at next debate.
Mnuchin knows her views on holding the powerful accountable: don’t.
I think a hefty estate tax and a Georgist land tax would solve most of the inequality problem, albeit slowly. Both are hard to evade.
Attack the capitalists, bankers and rentiers more directly, before they do the damage.
To do either of those you must first fix the democracy problem by preventing billionaires from owning politicians and the media. But to do that you must first fix the democracy problem…
The estate tax and land tax are necessary, but insufficient in the absence of capital controls.
I would also counsel a return to “credit guidance” (effectively differentiated interest rates across industrial sectors)
Nah. I would completely eliminate the corporate tax and the estate tax…… and then *permanently* set capital gains tax at 3x the labor rate. That way you completely remove the Rght’s 2 favorite complaints, while still delivering a kick where it belongs.
Did you mean “labor” or “libor”?
Labor, being the greater rate
I agree that we must put teeth back into estate taxes (a.k.a “death taxes”) for estates exceeding some very large threshold (perhaps $100M).
When we talk about taxes and wealth, we tend to apply a narrative of “new money” earned by innovators and titans of industry. The narratives against estate taxes or wealth taxes typically center around the negative consequences of penalizing innovators for succeeding; stifling their ability to create positive change; and, preventing their right to make a better life for their children. For example, many of these themes are common in books like Atlas Shrugged. These points are central because they have a strong ring of truth to them, and I would agree that it is mostly best for society to let the superstars of innovation grow their wealth and better enable them, and to serve as a reward for their contributions to society. However, the dirty little secret of wealth is that most wealthy people are so because of “old money.” To ironically paraphrase the John Houseman Smith Barney commercial “they make their money the old fashioned way… They inherit it.”
I would argue that multigenerational billions are toxic to society. They create dynasties, monopolies, and stimulate the worst tendencies of the rentier class. The argument against estate and wealth taxes holds up for new money. Why shouldn’t the fruits of the successful parents be handed down to their direct descendants? But, the merit of the argument quickly breaks down as generational distance grows. I don’t understand how society benefits when a child comes into the world empowered by a billion dollar trust or estate funded by a great-great-great grandparent that they have never met, likely barely knew, and typically bear no substantive resemblance. The term Trust Fund Baby is a well known pejorative term that implies the worst examples of what can result from ignorant, selfish, and empowered children of distant wealth.
Remember after all that “you can’t take it with you”, so death is a good time to consider how to pass on upward mobility from contributors to their children, while preventing the establishment of dynastic monopolies of power that can stagnate future innovation, or worse, enable tyranny. Perhaps all the wealth of data that exists on personal information can be somehow leveraged to identify wealth with excessive temporal and causal distance from its origins in orde to force reinvestment into back into society at large for the broadest benefit to future innovators, and to raise the boats of the disadvantaged.
One exception that I believe is more complicated is land ownership and specifically family farms. Farming in particular is a very long term endeavor involving great risks and often narrow profits. Plus, I see much value in enabling families to hold on to land or homes down many generations without being forced to break them up. I sense the solution there may be to focus less on the increase in monetary value than the increase in the number of acres or percentage of total land or resources in the area from one generation or another.
Thoughts?
“…the negative consequences of penalizing innovators for succeeding; stifling their ability to create positive change; and, preventing their right to make a better life for their children.”
Don’t you think that say, $100,000,000 would still be enough to “create positive change” and to “make a better life for their children”? Or do they need a billion+ dollars to do these things?
It is simply not true that most wealthy people are so because of ‘old money’. The majority of the members of the Forbes Four Hundred earned their fortunes. It is very difficult to hang on to money, especially for Americans. To hang onto it, one first has to have the intent of doing that. Second, one must maintain that intent over your life time, and make sure your children have it too. It’s just hard, and far more people fail in its attempt than succeed. ‘Inflation, taxes, and bad decisions..’ one must guard against all three.
Europeans are better at it. There are still very rich Fuggers, after seven hundred years.
Rothschilds and Medicis come to mind… they are still out there, albeit extremely low-key
Tax as proof of ownership, heck I would like to see it just for the stir it would cause amongst various camps and their rhetoric.
+1
A heavy real estate tax would also ruin farmers.
Transaction taxes are the best approach. Special tax on the purchase of luxury goods, and a GIANT tax on stock and bond trades after initial purchase from the corporation. 100% on stocks, 100 trillion percent on derivatives, enforced at gunpoint. Essentially force people to buy and hold shares forever, to restore the original purpose of investment.
Honest conservatives should support this, since the original Constitution required luxury taxes and tariffs as the sole source of federal revenue. They won’t, of course, because tax evasion is the only thing that counts for conservatives.
Amen!
Can you spell T-O-B-I-N? [Although apparently it’s incorrect to refer to stock transactions as such.]
“A heavy real estate tax would also ruin farmers. ”
amen.
and the shortcuts used to figure property tax are a source of constant frustration, too.
some New Rich moron buys 500 acres across the highway for 3 times what it’s worth, and my taxes go up accrdingly…which necessitates me taking pictures of the holes in the floor of the trailer house and pleading with the “review board”…which is always made up of (relatively) wealthy citizens, and their smugness and bootstrap mentality.
when i finally got on SSI to get my hip, the last hurdle was assets….namely, the trailerhouse had been evaluated at $16K. the actual tax i had been paying was absurdly low($25 or so per year) so i had not bothered to challenge it.
(OW Holmes:”I like paying taxes…”)
cows and sheep(and bees) get you tax relief….geese, chickens, grapes, a large garden and apple trees do not.
over 20 acres gets you benefits as well(we’re 1/4 acre under this)
all things being (globally) equal, I lean toward Henry George…but we’d need to get a little closer to the predicate “all things being(globally) equal”, first.
currently, most of our place is exempt due to my stepdad being a disabled veteran…when him and mom exit, property taxes will be about $5k per year, which is around 1/8 of our income.
only doable because we’re frugal….and then just barely.
meanwhile, i see references to bezos, et alia not paying taxes at all.
surely there’s some method of doing this fairly.
similarly to labor arbitrage….since Capital is borderless and free, taxing and regulation must be, too…with all the problems(sovereignty, etc) that entails.
Henry George’s land tax idea was to tax away most or all of the rentable value of the unimproved land. This would be less than the income that land would deliver (or no-one would rent it) and much less than the income possible by improving it with agriculture or development.
This would encourage landowners to improve their land or sell it. It would discourage speculative hoarding (“investment”) and keep prices down. It would recapture for the community any increase in value due to community action like building infrastructure nearby.
I suspect that under this regime most actual farmers would pay less property tax than they do now. Perhaps one of our farmers can run some numbers for us.
How exactly would you distinguish between agricultural land (including pasture, wetlands that should not be “improved”), riparian strips, etc from “unimproved “ land? As I understand your distinction, you are proposing an economic incentive for a 21st century dust bowl that would put the 1930s to shame.
Local communities can set zoning laws for that kind of thing if you don’t want to rely on the wisdom of the farmers. If it’s a reserve don’t tax it. If its rentable value is zero so is the tax.
Farmers already have every incentive to maximise their yield. Are they not being taxed on those marginal holdings already, at a higher rate than I propose? So far they seem to have avoided causing another dustbowl.
We need to change our attitude to property in land. It should be considered community property which has been leased to those we call ‘owners’. It’s not a tax, it’s a rent.
I say ‘change our attitude’ because functionally and legally this is how it is already, pretty much, we just need to realise it and understand the implications.
But agricultural land is not improved real estate unless it has buildings on it. It sounds like you are saying that planting land with crops is improving the land, but I don’t know how you determine that. What about prevented planting, alfalfa rotations, etc? And that still raises the question of the rest of ag land. Regulating it out of existence is not very realistic.
What exactly constitutes ‘improved’ is not really material since the tax is based on the rentable value of the unimproved ie. natural state land.
If Donald Trump built a casino in the middle of an isolated desert it would not affect his tax bill. If he knocked it down and planted alfalfa it would not affect his tax bill.
If the Desert Council built a highway a railroad and an airport near it then its rentable value would increase and so would his tax bill, even if he had not touched a grain of its sand.
Didn’t Henry George propose to do away with land ownership and substitute stake-holding. You had it until you stopped using it whereafter someone else could take it.
Not exactly, no. He noted that was the way it was before the idea of ‘ownership’ was invented. He thought it would be too radical and impractical to try to go back to that. His tax was intended to regain the benefits of that idea with minimal disruption to the current system.
The argument was made that the wealthy have earned their money; they shouldn’t be taxed too much.
It is an idea with merit.
What we need to ensure is the next generation do the same, and don’t inherit too much of that money. If the wealthy spend that money and don’t hoard it for the future generations, everyone will benefit.
Inherited family wealth accumulates to levels where they can use it to corrupt politicians, as we have seen in the US.
Earned wealth is good, inherited wealth is not.
Trump inherited a lot of wealth.
That’s what I am talking about
Any idiot can become a billionaire with inherited wealth.
Show me one wealthy person who does not believe their wealth is “good,” and that they “earned” it.
OK. Abigail Disney. The Google will take you there. The Financial Times piece is good if you can get past the paywall.
And as our fellow NC-ers point out below regarding the “death tax”: Start at the top and work down until you get to about $10M per person in the family. Problem solved, for the 99.9%. The 0.1% can then decide: Brownstone on the Upper West Side or pre-war duplex on the Upper East Side plus the (relatively modest) house in the Hamptons or the condo in Palm Beach? Pick one of the auxiliary houses, not both.
You know the old saying: how do you make a million dollars farming? Start with three million dollars.
You have more faith in idiots than I, as well as a foolish need to underestimate Trump’s ability. Admitting the man is not an idiot doesn’t have to mean you like or approve of the guy, you know.
The problems in applying a wealth tax a the low end of weath, as
the article and discussion make clear, is fraught with problems. But, billionaires? Let’s start at the top end and work down. There is no justification for billionaires that I can see. We eliminate billionaires. Then work down to $900 million. No justification there. And so on. Of course, the evaluation problem may still come into play, but we can work on this. Then, we need a package of taxes and social provision for health care, housing, and pensions which would make a more equal society.
Now that the “boltholes for wealth are disappearing” we have a good opportunity to do some constructive taxing. Think about how neglected society and the planet have become. Instead of deferred spending for the rich it’s more like deferred maintenance of social obligations. For people who have saved for retirement it is a different story – they are just planning ahead. And if there were a balance sheet of the current social inequality it would show that the excessive wealth of the richest matches the excessive need of society. If estates were taxed at at higher rate it would funnel money away from asset accumulation which has a tendency to cause price inflation (Wray’s idea of MMT includes taxing the rich down to a level that doesn’t allow their wealth to create fiscal disturbances – so some MMTers advocate taxing the rich.) So prevention of wealth inequality in the first place is a good goal. If it is time to define “assets” we can use it to provide an “asset” for the wealthy to invest in that promotes the well being of the planet and society. That might feel less punitive.
Regarding wealth in the form of real estate it has been proposed different tax rates depending on whereas the house is inhabited or not. I don’t know in the UK where municipal taxes on houses are, to my knowledge much higher than in Spain. The cost of maintaining an empty house in Spain is relatively low for this reason. It occurs that family houses inherited may become empty for several years when inheritors disagree on something as stupid as a selling price on the ownership. I know of a case with a dozen properties inherited in various cities where inheritors simply do not agree on how to divide them up.
Many houses remain unoccupied, ruining and with unpaid contributions. Conservatives reduced tax on unherited wealth to a 1% rate in some but not all regions in Spain (it depends on where the beneficiary lives, not the deceased. Thus, there are at least two wealth taxes that should be reconsidered: inheritance and 2nd house ownership which, if not permanently occupied shoud be taxed sky high.
One possible solution to the valuation of non-actively-traded assets might be to give the owner of the asset the right to sell the asset to the tax authorities at their valuation? It would discourage excessively high valuations. Excessively low valuations I fear one would just have to live with if there really was no way of estimating the value sensibly.
I am with Paul P – go for the very rich. People like Clive’s relative are not the problem so should not be subject to a wealth tax. But other taxes? – inheritance taxes work too slowly for the problem which exists now. I would support a land tax but that would not affect many of the modern billionaires whose fortunes are not based on real estate.
Posner and Weyl have proposed a similar (or perhaps opposite) idea here. An asset owner must declare the value of their asset for tax purposes. Anyone can then come along and buy that asset for the declared price. If the owner doesn’t want that to happen they have to declare a high value.
These guys are arch Neoliberals so there is probably a catch I haven’t spotted.
The catch is that anyone richer than you can have your stuff even if it isn’t for sale, or force your tax bill to be higher. Lots of room for the malevolent rich to cause even greater harm.
One might argue her income is higher because it includes the imputed rent on her home. The benefit/utility of living in her home might be considered as reasonable to tax although she would have to transform assets into income to do so.
An alternative would be to accrue a tax liability which would be payable upon death. This would allow people to make a decision as to how much of their wealth they wish to be taxable without shielding real estate assets from wealth taxes, and without giving arbitrage minded folk like me an incentive to consume more tax advantaged real estate.
Yes, the avoidance of having to pay rent is definitely “hidden” income. But if you only own one property which is your primary residence then you’ve already paid for that out of taxed income. So that’s (assuming the equivalent rent should be classed as additional income) arguably double taxation. And the property taxes are not trivial, either.
“Imputed rent” was taxed in Britain until 1963.
The key political problem with wealth taxes of any kind is that the electorate would suspect that politicians would have no intention of replacing some of the tax on income by a tax on wealth but would, in fact, intend to add a wealth tax onto the existing taxes on income. The population would be wise in that suspicion.
A better idea might be to replace income taxes by consumption taxes. It might be possible to co-ordinate the process to reduce the electorate’s reservations. Personally I’d be tempted to start with consumption taxes of a sumptuary nature – on German motor cars, Champagne, fashions and cosmetics, those sorts of things. See how it goes before introducing wider reforms.
If a wealth tax is to be experimented with I’d start with people who own lovely little villas in Umbria, boats parked in Monaco, that sort of thing.
We live in exciting time as many are intent on killing the golden goose that’s led to so many poor having flat screen televisions and cars. I wish I could peer 500 years into the future to see if we’ll have returned to serfs and landowners. Will tugging the forelock be a thing once again?
Its a Movie called Idiocracy. Worth a watch.
+1
A cult favorite.
Although I’m not too certain that humanity will still be around in 500 years’ time if we don’t get serious about climate change immediately.
The golden goose is cheap energy, not any particular system for distributing or exploiting it.
All the flat screen televisions and cars do nothing for a poor person when they go the hospital for help and end up with a $50,000 bill for getting three stitches.
Is it even possible for “the poor” (or anyone else) to buy a TV these days that isn’t a flat screen? I thought CRTs were pretty much passe in these modern times.
I suppose if they have the sense to stay huddled in an inner-city tenement they might be able to do without a car. I think here in SF a monthly Muni pass is up to about $80, hopefully they can squeeze that into their budget if they don’t live within easy walking distance of where they work.
Be very very careful when the truly wealthy allow a ‘debate’ about a ‘wealth tax.’ Odds are overwhelming, that it will turn out to be a tax on the upper middle class (doctors, small business owners), and that magically the truly wealthy (Bill Gates, Zuckerberg, the Koch Brothers) will somehow escape Scott-free. Count on it.
Previously I’ve seen a lot of so-called liberal proposals to tax “the wealthy” which only includes wage income, and ignores capital gains. Think about that for a bit.
I mean, with most of the working class pretty much drained dry, the only real non-elite source of funds to steal is the upper-middle class. The sharks sense a new source of blood.
But the real solution is of course to stop forcing population growth ever higher, to create a tight market for all classes of labor, which will automatically suck money away from rents and into wages. But that would be racist, so let’s argue about a ‘wealth tax’ that either won’t happen, or will not be what was advertised.
One for the Meme Department.
I remember the rolling out of the Conservative “Talking Point” of the “Death Taxes.”
Why not turn that one on it’s head? Make them real ‘Death Taxes.’ Either the inheritor pays the tax or the State puts the the inheritor to death. If the inheritor flees the country, seize all remaining assets of the inheritor. Revolutionary? Absolutely! We have reached that level of inequality. Serious remedies are needed.
A modern “Social Justice Fatwa.”
It’s time to replace politically charged wealth, consumption and estate taxes with a “rake” off electronic money transfers. It greatly expands the tax base and costs little to administer:
https://en.wikipedia.org/wiki/Automated_Payment_Transaction_tax
The idea that we can control social mores by taxes bothers me. Mostly because the rich will hire people to avoid those taxes and the rest of us have to make up that difference. So I just want the government to collect what it needs in the most effective way possible. To me that seems to be property taxes. The county appraises the value, and send you a bill. How easy is that? The protests can be a burden but it’s got to be less than other methods.
The prelude to the article reveals a disturbing future for many. An apparent net worth of over a million pounds Sterling offers a retired woman only a modest lifestyle. And only without experiencing unforeseen/difficult circumstances (fire, earthquake, flood, medical distress,etc).
How rich is rich? To a middle-aged Brit like me a million pounds still sounds like a lot, and compared to most people’s wages it is. But the average worker who happened to buy an average semi in the London suburbs in the 1980s is now sitting on half a million pounds. If they swapped their government pension for a private one as well they are millionaires. But low interest rates and high property taxes mean their retirement income is not much better than the average worker who rented their whole life and has a government pension. It’s the heirs who will notice the difference.
My rule of thumb is if you can afford to retire to a modest middle-class lifestyle tomorrow then you are (too) rich, unless you are of pensionable age in which case fair enough.
The real issue is not the ‘market value’ of your assets but what you are using them for. Funding a non-extravagant retirement is fine. Undermining democracy and despoiling the Earth is not.
I like your line of thinking… IMHO there is a world of difference between a guy at the top wanting more, and a guy at the bottom wanting more — a fact which partisan hacks will never admit to.
I have always thought Tom Paine’s proposal for tax to be the most sensible and he builds it from basics. Starting with the indisputable declaration that a man’s rights are extinguished by death, he says the state should seize the estates of the dead. This thing about wills and codicils is based on dodgy logic.
It could not be done at present with the trickery, lies and deceit of the wealthy and the professionals who serve them for reward but in time, as humanity grew up, it could become the sole source of government revenue and the rest of the incomprehensible tax code could be thrown away.
These kind of discussions are important for any successful, productive, and peaceful reforms. I just wonder if we have the time needed to do it.
The average American worker makes less than $50,000 a year, or a whole household $62,000, has less than $500 cash to pay for an emergency and the average Californian renter/wage-slave pays half or more of their income on rent, concerns about unjust actions just seems to me about important as wondering if Hell is freezing over.
With my own constant struggles it feels like a kind of nitpicking pettifoggering or pettifactoring; intellectually, I understand the very real problems of poorly thought and done reforms as the cliche “the road to Hell is paved with good intentions” is an apt warning. Emotionally, I am starting to want to have things burn. Things are getting so bad that any moderation will be impossible if we do not start successfully doing things right now. Big things like an election of someone like a Bernie Sanders.
So how do we get the American Ancien Regime to stop being so, so concerned with maintaining their privileges, including freedom from taxation, and of getting even more well paid sinecures and wealth, while we also stop some 21st century example of the Tennis Courts at Versailles from happening? At the least, how do we push them out of power in time for it to matter?
If the aging college dude that is me is thinking bonfires (and I have read a lot of history showing how This is a Bad Idea) what about those who are truly desperate, foolish, or just politically ambitious and ruthless enough to be very happy to get the gasoline and the matches?
I have way better ideas than the ones presented on this thread.
1) If someone has a load of money, how about if they’ve illegally screwed someone over, their money goes back to that person or their immediate heirs, and otherwise they get left alone? Envious uninvolveds can go drown themselves in either case.
2) There should be no corporate taxation because that would be double taxation. Allowing taxation more than once just means that in principle taxation can be repeated as many times as desired until a target has no money, even if he deservedly earned it all, and has more right to it than anyone else. (Need /= a claim, remember.) Or, are you people proposing that any income derived from already-taxed corporate sources should be tax-free at any level of income? Pick one.
3) If there is a tax on wealth (besides property and some smaller business property taxes already in place), watch capital either leave the country or get converted into things that need no bending of the knee to any government to keep them because they’re unconfiscatable or close to it. Improving one’s (or one’s family member’s) health or education, gold, guns, etc., all qualify for this.
Per your #1, perhaps a universal asset forfeiture program could be done, and then everyone gets to go to court to file suit to prove their seized assets weren’t the fruit of ill-gotten gains. There could be a $500K or so lower limit to the seizures to give everyone a level starting point on some retainable assets.
What could go wrong? :-)
re (2): I understand that corporations just pass their tax bills along to their customers. That is why countries offer tax deductions to corporations that reinvest their profits in their home country. Those corporations that do not invest locally then bear the full brunt of the taxation, and they price themselves out of existence when they pass those full taxes along to customers. And good riddance.
If you dont like corporate taxes, dont create a corporation.
Corporations reduce the risk to the owner by shidting some of the risk to Society at large.
If i am to assume some of your risk, i insist on being compesated for soing so.
If your corporation is successful, you can assume some of my tax burden.
If it fails, i assume some of the shareholders risk.
Aeems fair
Sweden has no inheritance tax, part of the reasoning behind was that the ones paying it would never be among the really rich – the really rich would spend money on accountants and tax-lawyers to avoid paying it.
Some research (from economists so therefore probably with a neo-liberal bias):
http://www.ifn.se/wfiles/wp/wp1032.pdf
& when property-taxes were removed then many hid behind the old retired widows who had the ‘mis-fortune’ of owning expensive properties they’d be forced to sell at a huge profit. A question not asked often: Where was/is the concern for the ones retiring without owning a property?
It is entirely possible that the concern for the old retired property owners isn’t really a concern about the old retired.
The removal of the property tax did reduce the cost of owning a property which then made it possible for banks to lend more for the purchase of the house. A definite win for the banks, more interest payments going to them instead of the money going to property taxes. Interesting to see how the lending increased since the removal of the property taxes…
This article crystallised a floating thought that I had after reading most of the NC articles and commentaries: What is worrying all of us is not the inequality per se – we all accept a bit of inequality – but the lack of creative destruction that will enable the big things in life to adapt to new times and redistribute the accumulated wealth to better purposes.
We do not have creative destruction via bankruptcies anymore – be it for student loans or the Too Big to Fail companies – Banks or Boeing – we do not have creative destruction via taxes, nor via death/estate taxes. We do not have creative destruction through elections anymore, or debt jubilees.
It extends even to country level, as Greece knows very well.
Nothing much in terms of significant creative destruction comes to mind – the commentariat please help me here if I missed something.
There is just the inexorable neoliberal march to better rent extraction.
enjoying the discussion and agreeing with almost everything here. I want to thank Yves Smith for her point about the older lady and wealth, i hadn’t thought of that. some of the few remaining black and brown homeowners in this part of Oakland would succumb to taxation of the asset rich/income poor and complete the gentrification if we were assessed in that manner. good knowledge drop, thank you
shouldn’t it read “should we tax the wealthy……again”?
SHORT ANSWER: YES
Inheritance tax of 100% over $5m for an individual or $10m for a couple. Inherited status is aristocracy.
MichaelSF
July 7, 2019 at 5:30 pm
“Per your #1, perhaps a universal asset forfeiture program could be done, and then everyone gets to go to court to file suit to prove their seized assets weren’t the fruit of ill-gotten gains. There could be a $500K or so lower limit to the seizures to give everyone a level starting point on some retainable assets.
What could go wrong? :-)”
Hi, Michael. One of the first principles in law is that it is commonly impossible to prove a negative, so any expectation of that is likely to be an unreasonable expectation to place upon anyone. Second, the person who makes an assertion (in this case, that someone has money that is illegally obtained, and within any reasonable statute of limitations) is the one that has the duty to prove it. Those would go most of the way towards taking care of your concerns.
Have you been watching the asset forfeit laws in action these past years (decades now?). It is pretty common for the police to seize assets whereupon the person who owned them must go to court to rebut the presumption that the assets are involved in a crime.
https://en.wikipedia.org/wiki/Asset_forfeiture#United_States
It may be an unreasonable expectation to prove that negative (a lack of criminality) but it seems to be legal in practice. I’m certainly not an advocate, perhaps a /snark tag would not have been overlooked like the :-) smiley face.
Michael, you are exactly correct on the asset forfeiture issue. That is wrong, counterproductive, and unConstitutional (and thus illegal, no matter what lower levels of gov’t may say). It is the best argument there is IMO against continuing the drug war.
That is also a pretty good counterargument, and one I’ll have to think about. The best response I have right now is there there is substantial, and very possibly growing, pushback against AF. There are IIRC multiple states where it’s outlawed, and probably more to come.
Nevermind
I happened to watch two videos on YouTube today that are relevant to this conversation: the first one was a two and a half hour interview with a money manager/philosopher, Tony Deden, who struck me as being a cross, in his thinking, between Warren Buffett’s former colleague, the late Walter Schloss, and Nassim Taleb. He looks at the foundation of things. In any case, he thinks that in our world of fiat currencies–though he doesn’t use that phrase–people are interested in consuming a lot more than they are interested in providing for their posterity. He, however, is interested in working with clients who want to preserve their wealth across generations. He also likes to buy stock–or as he calls it, participation–in family companies that have existed for one or two hundred years. He thinks that words like ‘sustainability’ and ‘transparency’ have become more common as the world has become less sustainable and transparent. These words are meant to put our critical faculties to sleep.
Most of the people on this thread want to tax wealth to the nub, apparently because, unlike Tony Deder, they don’t see the value in the continuity of intention that cross generational wealth represents.
https://www.youtube.com/watch?v=a4_U6bS-cU4
The second video was from ‘Blue Collar Logic.’ I’ve seen this fellow Dave’s videos before. I thought he was pretty articulate and straight forward. This particular one is about white male privilege, and where he thinks it exists and doesn’t exist. What is relevant to this discussion is that he tells a bit of his history growing up in California. He is a house painter, who has been involved in the music industry. His parents–he has two or three older brothers–worked normal blue collar jobs. They had little education. His parents gradually saved and did better, invested in a rental property and a home, and had something to leave their kids. It was their intention to leave their kids something. This, in my view, is changing. People aren’t thinking about the next generation.
It’s a good thing for him that his parents had this idea, as Dave needed the help at various points in his life. He’s a guy who apparently knows how to work hard, but sometimes hard work isn’t enough, whatever societal myths you subscribe to.
https://www.youtube.com/watch?v=lTYKrOgazz0