The proposed "Wealth Tax."

[TomSlick]

I spent a lot of time on the road today listening to MSNBC. I heard a lot of discussion about how we've never had a "Wealth Tax" in the U.S. That statement is, of course, incorrect.

What wealth most of us have is tied up in our homes which are taxed albeit by local government. What is being proposed is that the wealth of the really wealthy is also taxed. Seems fair to me.

[Honeycombe8]

1. I've also heard support for a capital gains tax increase and such.

Some people don't seem to realize that millions of middle class Americans own stocks & funds. An increase in capital gains tax rate would hit them hard, since many of them are investing for their senior years.

And how you determine the amount of one's wealth seems complicated to me. How do you determine one's "wealth"? Are we to expect our IRS people to do that? Do they have the time and expertise to do that?

[dumbcat]

3. Wealth is determined by

assets minus liabilities, also known as "net worth".

The IRS would have great difficulty determining that, just like they would if they tried to determine everyone's income. We do that for them on our 1040 forms and schedules. Yes, they get W-2s and 1099s and such, but the IRS would never be able to determine everyone's income from all sources if we didn't voluntarily report it ourselves.

I'm retired and a significant portion of my income comes from capital gains distributions and qualified dividends. I certainly don't want to see the tax on those increased.

[TomSlick]

9. I have no problems with a modification of the capital gains tax.

An argument can be made that an increase in the capital gains tax would suppress investment. This issue would need study.

[Honeycombe8]

11. Well, there you go. A lot of middle class won't support that.

It hits at the heart of middle class savings and investments, one of the few ways to save enough money for retirement, when added to Social Security, which is only a supplement.

[PETRUS]

19. It doesn't have to hit the middle class.

One idea that is frequently proposed is to tax capital progressively, like earned income.

[Honeycombe8]

20. From your mouth to someone's ears. I won't support a tax that hits my investment account.

I worked a helluva lot of O.T. and sacrificed a lot of things to save money over decades, so that I could have my taxable account to add to my Social Security.

It's not a lot of money to a rich person, but to me, it means paying for necessities for my fairly frugal lifestyle...for a lifetime that may well last into my 90's.

[brooklynite]

54. "Don't Tax Me; Don't Tax Thee; Tax that Feller behind the Tree"

[TexasBushwhacker]

39. So put limits on how much the capital gains rate can be used

No one wants to hit middle class senior citizens living on their investments, but should a trust fund kid who never has to work get to pay only the capital gains rate and no Social Security or Medicare taxes? Fuck that! Put a limit of $200K that can be taxed at the capital gains rate. After that, tax it like wages.

[Honeycombe8]

40. I'd go for that.

I wonder if it would hurt businesses, since rich people own most of the stock? I don't know.

[MarvinGardens]

51. Capital gains in retirement accounts are already tax sheltered.

This is true of traditional and Roth accounts. Traditional IRA and 401k are already taxed as ordinary income upon withdrawal. Roth funded with taxed income aren't taxed on withdrawal. Capital gains on primary residence are also tax sheltered for the middle class. Presumably a capital gains tax increase would not include retirement accounts. It seems unlikely that ordinary middle class savers would be hit by this.

Well, suppose a person maxes out their retirement accounts and starts socking the extra money in a taxable brokerage account. Yeah, then they would be impacted by a capital gains tax increase. It's not a bad problem to have, and I argue that someone in this situation is at least upper middle class.

Incidentally, interest on savings is taxed as ordinary income, which can be higher than even the short term capital gains tax, depending on your bracket. Middle class are more likely to have interest bearing savings outside tax shelters, before they have a brokerage account, yet they are exposed to possibly higher taxes? This seems unfair. Why not tax capital gains as ordinary income? This would also satisfy The Buffett Rule.

[TheFarseer]

2. We'd probably get a version

Of a wealth tax that excludes stocks investment property and overseas property. Homeowners and farmers get screwed only.

[TomSlick]

10. That would defeat the purpose,

and not what Sen. Warren has in mind.

[TheFarseer]

22. I know

I kind of went down my own rabbit hole and thought what would happen if Trump commandeered the idea. Did not mean to trash Senator Warren at all.

[Honeycombe8]

46. What Warren has in mind...

is, I think, getting at inherited wealth. The American aristocracy. I think.

One way to do that is through the inheritance tax.

[Honeycombe8]

13. Millions of middle class have stock investments. Some don't know it.

That's what their mutual funds consist of.

SS is a supplement to income in the senior years. Investing in responsible funds and stocks is one of the few ways to save enough money for a person's retirement. Millions of middle class Americans own stocks, either individually or in mutual funds. They are stock accounts like the wealthy have, of course. But it's critical to the middle class. A tax on selling a few shares can be the amount of money needed to pay for this month's medical deductible.

[TomSlick]

35. Yeah but,

Sen. Warren's plan is very progressive - in the taxing sense. It only begins to apply to persons with worth of Fifty Million (2% tax) and goes up with worth of Billion (3% tax). The tax would not apply to the middle class. The tax would apply to only the top 80,000 households in the US.

[TexasBushwhacker]

43. 84% of all stocks are owned by the top 10% of Americans n/t

[Honeycombe8]

47. True. But half of American households own stock.

The percentage for the rich is so high because what they own is worth so much more.

But any person who has a pension, an IRA, a 401k, a personal taxable account, a college investment account, etc., probably owns stocks, either individually or in mutual funds.

[edhopper]

18. You do know

it's proposed on assets of over $50 million don't you?

Home owners and farmers?

[TheFarseer]

24. Well that would be good

I’m just saying I hope it doesn’t get riddled with loopholes and bastardized like our income tax

[edhopper]

27. It will be

but at least the rich fucks will pay something.

[Honeycombe8]

48. There is no bill. There are several people talking about wanting to do this.

Warren. Kamala Harris.

But if it IS $50,000,000, I'm safe! My little account isn't doing THAT good!

But why not just raise the inheritance tax?

[edhopper]

52. That too

but this will be on everyone who is filthy rich. Not just after a death. And there are work arounds on the Estate Tax.

[dlk]

4. Another Venue for Tax Revenue is a Tax on High Frequency Trades

The rich and connect get a pass in so many areas of taxes, thanks to the GOP. They have pushed our country toward a Russian-style oligarchy, by design. The middle class already pays a "wealth tax" in the form of property tax. The rich are long overdue to pay their own "wealth tax." A tax on all wealth is a great idea.

[Leith]

5. There was some talk about this a few years ago

I tried googling it, but I couldn't find much.

The whole idea was that there would be some miniscule amount (like 1/4 of one cent) per trade transaction. Those whose jobs were stock trading were vehemently against it and if fell from the news.

Does anyone else remember that?

[TomSlick]

36. See the New Yorker article

[link:https://www.newyorker.com/news/our-columnists/elizabeth-warrens-wealth-tax-is-an-old-idea-and-its-time-has-come|

[Honeycombe8]

16. Maybe. Do you have any stats on how many middle class people do day trading?

Or do you mean those mega trades that computers make with algorithms and such?

I'm definitely middle class. Mid-level female (i.e., underpaid) worker for 40 years. The money I didn't spend on luxuries (vacations, nicer clothes, electronics, cell phones) I put into my savings account...until I transferred some to an investment account and taught myself how to invest. I have on occasion done a bit of day trading. Not often, and not a large monetary amount.

I expect quite a few middle class people do that.

Rich people don't day trade. They have "people" to handle their investments, which are for the most part huge sums in mutual funds that aren't bought and sold often, but mainly in real estate and other types of property that appreciate, separate from the stock market. They also do a lot of things to get deductions from taxes.

[PETRUS]

23. Lots of info here:

http://cepr.net/issues/ftt

[Honeycombe8]

26. I don't see stats there as to wealth of those who own mutual funds or stocks. ??? nt

[PETRUS]

32. I know those links will answer your question.

It's been a while since I've read any of the publications, but I have gone over several at those links. The gist of the research that the impact on the average person saving for retirement will be neutral. And the overall impact will be beneficial; I mention that because your future isn't simply your retirement account - you will be existing with the economy and society as a whole.

If you're after specific data points, you'll probably have do to some digging yourself. I provided a good starting point.

[Honeycombe8]

33. I found it.

Another site. About half of households own stocks (either directly or indirectly in funds or pensions). That would include me. So that would be a lot of middle class households. But only 27% of stocks are owned by the middle class (which includes me), the rest being owned by the rich.

So I guess that means that whatever stocks the middle class own, the value of them is so much less than what the rich own. Which makes sense, I guess.

Maybe the middle class won't care if the stock investment taxes (which are income taxes) go up, because I would guess that much of their stock investments are in IRAs.

I did read that the bulk of their fortunes is tied up in equities, OR owning parts of businesses directly. The houses & yachts & such are a much smaller % of their estates. That surprises me.

But because I don't have much in stocks, compared to a wealthy person, any tax increase in that would be more significant to me, since it's not play money to buy luxury items with. It's for necessities, and it's already taxed.

[TomSlick]

37. See Post 35 above.

The proposed tax would only apply to the top less than 1% - not the middle class.

[procon]

31. Define "middle class", I suspect it's somewhat

different than mine, and most of my family and friends.

Before retirement, I considered myself comfortably middle class, earning $60 - $70K. I built my home, bought a car and drove it to near death before the buying the next one. Never could afford a vacation longer week (including a 3day weekend). A few modest 401ks along the way, but that wasn't the industry standard back in the day. There was any left over discretionary funds to risk gambling in the stock market.

[Honeycombe8]

34. It may vary, depending on where you live, don't you think?

People in a high cost of living area would have a net worth much higher than a low cost area, but the high COL person would not be wealthy in that area.

I read that the average household in America earns about $55,000. So maybe middle class is $45,000 to $80,000? And it makes a difference if the income is one person's or a two-person household.

The stock market isn't risky. It's risky not to invest in the stock market, since that is one of the few ways for saved money to keep up with inflation (you lose spending value over the years, if the $100 you saved doesn't increase with inflation). Then, it has to grow more than inflation, to get a profit, especially after it's taxed. It's also one of the few ways to grow money, when you only have a little bit. It's hard to ignore the ups and downs, though. Very hard. But if I had bought 10 shares of Apple 15 years ago (total cost $15.70), those 10 shares would be worth about $1,660 today. And it pays a 1.87% dividend. A nice little stash of cash for a waitress or office clerk to have for her senior years.

But it's not something we're taught in school, so it's foreign to many people. I used part of my savings account to start a small taxable account years ago. I had to read some books on stocks and investing. When I started, I didn't even know what "securities" meant.

I wish I could do what this guy did!:

https://www.cnbc.com/2016/08/29/janitor-secretly-amassed-an-8-million-fortune.html

[TheFarseer]

25. I actually wrote a paper on this in grad school

High frequency arbitrage trading is not really a big thing anymore because everyone started doing it and there wasn’t any money in it anymore. The firms that made this famous are out of business or had to merge with a more traditional firm to survive. Not saying there aren’t still problems with computer trading.

[Calista241]

6. We're already losing this battle.

Billionaires today, I would expect, are moving assets offshore, investing money, and hiding everything they can from any future tax increases, which probably won't occur anyway.

Any tax increases and new programs or expansions will have to get 60 votes in the Senate, and we are not going to pick up 14 Senate seats in 2020. Also, we won't be able to use the reconciliation process to pass the vast increases to Medicare we want. I get the feeling all of this is going to resemble what we saw Republicans doing with the Obamacare repeals in the House a few years ago.

[TomSlick]

12. Nevertheless, the idea warrants discussion.

Such a big change in tax law would take time - more than one legislative session.

[DeminPennswoods]

41. Tax bills can be passed via the Senate's reconcilliation procedure

That only needs 51 votes or 50 + VP tie-breaker. It's how McConnell got last year's tax giveaway to the rich through.

The ACA was also passed via Reconcilliation under Obama and Harry Reid.

[Lurker Deluxe]

7. It really is simple

The thing is no one wants to pay it. The conversation is about creating a tax that no one will pay, and that is just dumb.

So simple, property is already appraised and assigned a value, property worth more that set number, say 2.5M, pays a federal property tax, ag exemption applies to fed tax and it does local, single home owners get a % discount. This is already in place and would be able to be implemented in days.

Raise capital gains taxes progressively. Less than $25K - no tax, $25-50K - 10%, $50K-$250K - 25%, $250K+ - 50%. Single deduction every decade for $1M to cover sales of home/business to offset small business getting popped for creating.

Problem solved.

[TomSlick]

14. Sen. Warren's plan includes - and is dependent upon -

a high level of auditing. I agree that enforcement would be difficult but given sufficient auditing, the risk of tax evasion would be high.

[Greybnk48]

8. So can we now call all other taxes "Poor Taxes"

since the only people paying taxes these days are the working poor and the elderly?

Edit: This is meant as sarcasm. I know it's not entirely true.

[TomSlick]

15. I appreciate the sarcasm.

Sen. Warren's proposal is a wealth tax - not a wealthy tax.

[Mariana]

17. Is it Constitutional, on the federal level?

We needed an Amendment for the income tax. Would we need one for a wealth tax?

[TomSlick]

38. That's an interesting question that hadn't occurred to me.

Article I, Sec. 9 of the Constitution provides "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken."

The income tax required the Sixteenth Amendment which provides "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

By way of analogy (lawyers love analogies), the estate tax is a "direct tax" and is not based on income - it is based on the value of the estate - i.e. wealth. My gut reaction is that the proposed tax would be constitutional but the question would bear serious legal research.

[JustABozoOnThisBus]

44. Property tax is only "sort of" related to value of the estate.

My home is worth X, and I pay property tax on it. But my estate is worth X, minus whatever I still owe the bank. So the tax is much larger, relative to the estate value.

The estate value is all guesswork, until my executor sells the home and pays off the mortgage. Then the value is certain.

[csziggy]

21. Some states have intangible property tax

That taxes assets that cannot be touched such as stocks and other investments.

Florida used to have such a tax but it was repealed:

Florida History of Intangible Tax

Taxation of Florida’s intangible personal property dates back to 1924 when local municipalities began imposing taxes on it. However, the state took over administering the tax in 1972. Each year, Florida taxpayers were required to determine the market value of items like certificates of deposits, trusts, retirement plans, franchises and real estate mortgage investment conduits, then pay a tax based on that value. At the time the tax was repealed, it had reached 50 cents per $1,000 of valuation, which was actually a reduction from the $1 per $1,000 taxpayers had paid before. Single filers could claim an exemption of up to $250,000, while the exemption rose to $500,000 for married filing jointly.

One of the biggest problems with the intangible tax was that the state’s residents were able to easily avoid paying it. They simply directed their personal property into one of two types of irrevocable trusts, known as Florida intangible tax trusts or Florida intangible tax-exempt trusts, each of which were sanctioned by the state’s department of revenue. Additionally, since the exemption rates were set so high, only Florida’s wealthiest residents were responsible for paying the tax each year, making collections a minuscule part of the overall tax base for the state.
More: https://finance.zacks.com/summary-florida-intangible-personal-property-tax-8267.html

Taxing the intangible property might be a path to take, but as in the Florida example, the ultra wealthy would simply come up with ways to avoid it.

[Hoyt]

28. Just taxing billion- or millionaires isn't going to get the education, healthcare, retirement,

etc., we need. Problem is, no politician will get elected telling the truth.

So we talk about taxing filthy rich folks, that even if you took every penny from them, wouldn’t reduce our debt and provide enough money for healthcare, better education, retirement needs, etc.

Taxing the rich is a start, and sure won’t directly impact me, but somebody has to start thinking bigger and somehow not get bashed for it. Obama made a modest attempt at it, and darn near got lynched by so-called progressives.

[DFW]

49. This is the elephant in the room everyone prefers not to notice.

No matter how many jealousy taxes are enacted, balancing the budget will have to come from more drastic overhauls of the economy. We can risk some inflation and put too many small businesses out of existence, but with a universal minimum wage of $15 or more, taxable income would rise dramatically, and so would the amount of money in general circulation, i.e. a boost in commerce at the local level.

As for taxing "wealth," several regimes here in Europe over the course of the 20th century had schemes to go around "evaluating (their figure, of course)" things that they decided were too much for people to own, and confiscated them. I've been asked to evaluate parts of Ceaușescu's stash of gold coins he "taxed (it later became illegal to possess them)" from his population. It was an endless supply of sacks that I never even saw the end of, and Romania is a relatively poor nation. He was such a busy socialist, in 40 years in power, he never found the time to distribute the wealth to his impoverished population. Thus has it always been.

You're only too right about Obama. I had the honor of discussing this (among other things) with him in person during the 2012 re-election campaign. He wanted at least half of his deficit reduction plan to come from cutting inflated heath care costs. He knew that I had had two operations of similar severity and hospital stay the year before, one in Germany and one in the USA, and the one in Germany cost about 35% of the one in Dallas (not 35% less, but just over a third), and the quality of care was nearly identical. He got shot down from all sides of the spectrum, of course. Feel-good solutions are always preferable to ones that include cold reality. When they don't work, it's always someone else's fault, right? Just ask the Republicans. Their trickle-down theory didn't work only because those dastardly "libbruls" foiled it. Somehow. Or something.

[Hoyt]

53. Interesting perspective. Thanks.

[procon]

29. It was an effective policy up until Reagan axed it.

It fueled the US economy and created a thriving working class because the mega rich had to pay the public for the enormous benefits they received from the infrastructure and policies that taxpayers funded.

Now they don't.

[TexasBushwhacker]

42. We also taxed corporations more

Corporations used to provide 30% of all federal revenue. Now it's down to 10%. If corporations were passing on those savings to their employees, the proverbial "trickle down economics", we might be okay, but they aren't. Middle class wages have been stagnant for 40 years while worker productivity and corporate profits have soared. All to feed the Wall
Street beast that will never be satisfied.

What the 99% needs is a FUCKING RAISE. A big one. Not just at the bottom, although raising the minimum wage to $15 an hour would make a huge difference in the lives of 10s of millions of Americans. We need a raise in the middle too. Can you imagine what would happen to the economy if most Americans weren't living paycheck to paycheck? They could buy homes and cars and vacations. They could save for retirement. They could put their kids through college instead of young people graduating with a debt literally as big as a house (or at least a car).

[Turbineguy]

30. There could be a phase-in

at a certain level (pick a number: $10 million). European countries have a wealth tax and there are plenty of wealthy people.

Above a certain amount only would be taxed. And the rate could gradually increase. You want to be careful that you don't harm family farms or small businesses.

As Senator Warren said: "balance"

[DFW]

50. Not all European countries have it.

The German Supreme Court nixed it when proposed here. Due to Nazi confiscation practices, they enshrined forbidding double taxation into their Constitution. When a wealth tax was proposed here, the German Supreme Court said "you want to tax that which has already been taxed once. That is illegal under our Constitution."

[Roland99]

45. Has anyone read Thomas Piketty's Capital in the 21st Century?

History shows that a tax on capital (how the wealthy *earn* more) is really needed now

[workinclasszero]

55. Eisenhower's Tax Policies.....marginal tax rate of 91 percent

His Administration's Push For High Taxes and High Public Investment Helped Build the Mid-Century Middle Class

by DAVID GOLDFIELD | DECEMBER 19, 2017

During the administration of President Dwight D. Eisenhower, from 1953 to 1961, the top income bracket in the United States climbed to a marginal tax rate of 91 percent. Taxes on corporate profits were two times as great as they are in 2017, and that’s before the current proposal to cut that rate to 21 percent. The tax on large estates rose to more than 70 percent. Businesses operated under a relatively high tax burden, and they employed a labor force in which one-third of the workers were unionized and bargained with executives as equals. Corporations served a diversity of stakeholders as opposed to stockholders. The result was a booming economy that benefited most Americans.

http://www.zocalopublicsquare.org/2017/12/19/eisenhowers-tax-policies-invested-future-not/ideas/essay/