What's The Big Deal With A Wealth Tax?

[sophie]

Two words.

Physical gold.

[I Shrugged]

Proposals seem to be 2% above 20MM. Is it about raising money, or vengeance on rich people?
I think it would be doa because it would hit the big left donors. If it happens, I think many would give up their citizenship.

I read that there’s a proposal to tax unrealized gains.
I think that would tank the stock market bigly.

[boglerdude]

How do you propose to stop bribery of politicians

[I Shrugged]

Here was the 2019 Liz Warren proposal. Was it serious, or just pandering, who knows.

Zero additional tax on any household with a net worth of less than $50 million (99.9% of American households)

2% annual tax on household net worth between $50 million and $1 billion

4% annual Billionaire Surtax (6% tax overall) on household net worth above $1 billion

10-Year revenue total of $3.75 trillion

Now I have to say, if I had 100 million and had to pay an ANNUAL wealth tax of 1 million, I'd be pissed. Enough to leave the country, it's just a hypothetical so I don't know. But over 20 years, and with some growth of the nest egg over time, maybe I'd have paid 30 million in wealth taxes. So yeah, strong motivation to bail. A person can do a lot with 30 million. (You can quote me on that.)

I suppose the other unintended result would be a lot more money being put into foundations.

They had to pass a constitutional amendment to implement an income tax. I wonder if a wealth tax would face the same hurdle. Probably not in today's Supreme Court.

[glennds]

Proposals seem to be 2% above 20MM. Is it about raising money, or vengeance on rich people?
I think it would be doa because it would hit the big left donors. If it happens, I think many would give up their citizenship.

Oh good point, we need to make the law be retroactive, so even if selfish wealthy people try to leave, they are required to pay their fair share.

The exit tax which you describe already exists, and has existed since 1966. Plus it gets worse, there is a 10 year expat tax on US sources of income from the date of loss of US citizenship. This applies to estate tax too. I think the idea behind the expat tax is to cut off people who renounce citizenship in an effort to dodge tax associated with a known future transaction.

On the estate side there is a famous example involving Ted Arison, founder of Carnival Cruises. The multi-billionaire renounced his US Citizenship in 1990 and expatriated to Israel where there is no estate tax. He died in 1999 thus missing the safe harbor by a few months, so his estate was indeed subject to US estate tax, but it is not publicly known how much.

*Added - I should clarify that the exit tax and expat tax rules apply to only those taxpayers that meet one of three tests, one of which is assets over $2MM, one of which is meeting or exceeding a minimum average income tax liability, and one of which has to do with failure to comply with filing and paying tax for prior periods. People who do not meet these tests would not be subject to the exit tax.