“”Many developed countries have repealed their net wealth taxes in recent years,” Cristina Enache wrote for the Tax Foundation in a June report on such levies around the world. “They raise little revenue, create high administrative costs, and induce an outflow of wealthy individuals and their money. Many policymakers have also recognized that high taxes on capital and wealth damage economic growth.”
Depending on how high the tax is set, Enache cautioned, it can erase any gains people might make on their investments. “For safe investments like bonds or bank deposits, a wealth tax of 2 or 3 percent may confiscate all interest earnings, leaving no increase in savings over time.”
Worse, wealth taxes depend on government officials’ ability to accurately assess the value of fluctuating holdings in stocks, property, businesses, and the like. That’s a big ask even if you pretend that tax officials are likely to be honest in such efforts.
“The Amsterdam stock market fell by around 13pc in 2022 as inflation soared – but the tax office assumed investors generated returns of 5.5pc, and taxed them accordingly,” Charlotte Gifford wrote for The Telegraph about the administration of the Dutch wealth tax.
The Supreme Court in the Netherlands ruled that the wealth tax hits people excessively hard relative to actual earnings and that it’s unacceptably discriminatory while also violating rights to property ownership. Just weeks ago, the Dutch court revisited its ruling and found legislative efforts to fix the wealth tax inadequate. Hundreds of thousands of people are now owed refunds.
Enache examines several arguments for wealth taxes, including claims that they encourage more productive use of assets or their transfer to entrepreneurs who are better at producing value. But wealth taxes can also encourage consumption among those who fear they might as well enjoy assets now rather than have them confiscated later. They also incentivize businesses to pay large dividends while discouraging growth.”
https://reason.com/2024/07/12/supreme-court-left-the-door-open-for-a-wealth-tax-but-its-still-a-terrible-idea/
“If your net wealth is approximately $135,000 or more and you live in Norway, you’ve long been subject to a 0.85 percent wealth tax. That rate has, as of this year, been hiked to 1.1 percent by the center-left government, and even more gobs of cash will be taken from rich people worth roughly $1.8 million, who will be taxed at a rate of 1.3 percent.
Unfortunately for the Norwegian lefties—and their American counterparts who argue for similar taxes to be instituted here—this wealth tax hasn’t really generated the revenue they’d expected. It has instead resulted in rich people boarding their superyachts and leaving those fjords behind forevermore.
Per the Norwegian newspaper Dagens Næringsliv, 30 of the country’s multimillionaires and billionaires left the country last year in advance of the wealth tax hike. “This was more than the total number of super-rich people who left the country during the previous 13 years, it added,” noted The Guardian. “Even more super-rich individuals are expected to leave this year because of the increase in wealth tax in November, costing the government tens of millions in lost tax receipts.””
How could changing capital gains taxes more revenue? Grace Enda and William G. Gale. 2020 1 14. Brookings. The rich benefit as Democrats retreat from tax on unrealized capital gains Greg Iacurci. CNBC. 2021 12 29. https://www.cnbc.com/2021/12/29/the-rich-benefit-as-democrats-forgo-tax-on-unrealized-capital-gains.html The Many Problems With Taxing
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“Biden isn’t calling his proposal a wealth tax, of course. It’s the “Billionaire Minimum Income Tax,” and it imposes a minimum 20 percent tax on the income of households with more than—oddly—$100 million in wealth. Biden’s proposal is smaller and more pragmatic than the earlier variants from Sens. Bernie Sanders (I–Vt.) and Elizabeth Warren (D–Mass.)—par for the course with Biden. Most notable is that even with implausibly optimistic estimates of the federal government’s ability to collect, the whole mess is supposed to raise an average of a mere $36 billion per year over the next 10 years.
The University of California, Berkeley, economist and Warren adviser Gabriel Zucman estimated what several billionaires would pay under the plan’s 20 percent tax on unrealized gains in illiquid assets, pinning Jeff Bezos’ bill at $35 billion, Warren Buffett’s at $26 billion, and Jim Walton’s at $7 billion.
Anyone who has been paying the slightest bit of attention to federal spending over the last several years knows that figures that begin with b instead of t are now considered rounding errors. The point of this wealth tax is not to raise revenue. It has two rather different aims.
The first is pure political calculus. A floundering, unpopular president seeks to demonstrate a willingness to punish a small, unpopular class of people. A Reuters/Ipsos poll last year found that nearly two-thirds of respondents agree that the very rich should pay more taxes: 64 percent either strongly or somewhat agreed that “the very rich should contribute an extra share of their total wealth each year to support public programs.””
…
“The second aim, which has more far-reaching consequences, is to establish the principle that the U.S. government can tax based on wealth at all. If such a tax were to be put into law—and found constitutional by the Supreme Court, which would be no mean feat—it would be the thin end of a very large wedge. Biden’s proposal will spin up the huge bureaucratic, legal, and accounting support systems, public and private, necessary to support the formal tracking of wealth alongside income.
The utility of permitting individuals to accumulate large amounts of money varies from person to person, of course. There are many billionaires whose fortunes are extractive or confiscatory—that is, they have seized a larger slice of an unchanged pie. But in the U.S. in particular, we specialize in billionaires whose fortunes are clearly related to value creation—that is, they have taken a healthy slice of a pie that they also made much larger.
Sanders and others seem determined to conflate these two groups, applying the term oligarchs to, among others, people whose houses have an excessive number of bathrooms, people who build rockets, and people who own Major League Baseball teams.
People do not need to have been wholly self-made to somehow deserve to keep their money. No billionaire is an island, even if many of them own one. In fact, vanishingly few of us have fates that are wholly self-determined.
As a moral matter, if not a legal one, we might ask what the very rich do with their money as a way of evaluating whether they should keep it. As famously rich person Elon Musk recently tweeted: “Working hard to make useful products & services for your fellow humans is deeply morally good.” Many who support wealth taxes seem to hold the belief that the government would use the resources that the very wealthy command toward more valuable ends. Of course, most of the fortunes of billionaires such as the Waltons, or Musk, or Bezos are tied up in the large and extremely productive firms that made them rich in the first place.”
“Despite ProPublica’s best efforts to make the information enclosed within seem damning, the data tell us little we didn’t already know. For the 2018 tax year, the last year for which we have data, the top 1 percent paid over 40 percent of federal income taxes, despite earning just under 21 percent of total adjusted gross income (AGI). The bottom 50 percent of taxpayers earned 11.6 percent of total AGI, but paid less than 3 percent of income taxes. The same story holds when looking at all revenue sources too, so it’s not just the income tax that is progressive.
ProPublica, however, tries to make the case that the wealthy are getting away with murder through the tax code, so they “do a calculation that has never been done before,” comparing growth in wealth over the course of a year to taxable income. They use this to calculate an individual’s “true tax rate,” which is sort of like handing out wins in a baseball game in the middle of the early innings and calling it the “true outcome” of the contest.
It’s hard to overstate how nonsensical this comparison is (which is perhaps why it’s never been done before). Our tax system rightly does not tax growth in one’s wealth until it is realized as income. After all, the alternative is a monstrously complex and unfair system of wealth taxation that developed countries have avoided.
The reason that wealth isn’t taxable is fairly straightforward: You aren’t directly benefiting from it until it’s turned into income (at which point it is taxable). Wealthy Americans may not pay taxes on the growth that their net worth sees, but should they wish to sell assets that have appreciated in value, they would be liable for capital gains taxes on that growth.”
https://www.nbcnews.com/think/opinion/understanding-wealth-tax-gabriel-zucman-podcast-transcript-ncna1115646