Posted on 12/12/2019 5:38:01 PM PST by karpov
Elizabeth Warren’s proposed wealth tax—an annual levy on the total value of one’s assets, not income—has drawn a lot of attention. The senator’s claim that her proposal would cost “ultramillionaires” only an annual 2% and billionaires an annual 6% wildly understates the truth. Wealthy people don’t maintain bank accounts with millions or billions of dollars of liquid cash; they invest their assets. Those hit with the wealth tax would have to sell assets each year to pay it, subjecting them to income tax as well. The actual cost would often be several times greater than 2% or 6%.
Ms. Warren has proposed a dramatic increase in the federal capital-gains tax rate, along with taxing current appreciation of asset values for wealthy taxpayers. She has proposed raising the current top long-term capital-gains rate from 20% to 39.6%, leaving in place the current additional investment tax of 3.8%, and assessing an additional 14.8% tax for taxpayers with net investment income over $400,000. That adds up to a total federal tax rate of 58.2%, more than double the current maximum 23.8% on long-term capital gains. For a California taxpayer who would also be required to pay the state’s 13.3% income tax, the total state and federal income taxes to raise the funds to pay Ms. Warren’s 6% federal wealth tax would be 71.5%.
There’s another complication: Investors and business owners often take on third-party debt to pursue their objectives, using their assets as collateral to secure the debt. When owners sell these encumbered assets, they have a primary obligation to pay back the debt secured by the assets sold. Only after this important first step would taxpayers turn to paying taxes—first, federal and state income taxes, then the wealth tax.
(Excerpt) Read more at wsj.com ...
Most USA millionaires are private business owners.
How will that work?
Will an army of IRS appraisers calculate the monetary value of businesses they know almost nothing about?
And, even more important, most business owners DO NOT WANT partners or shareholders.
That means the asset tax will come straight out of their take home pay, or it will have to be borrowed.
And the “2%” asset tax is extremely deceptive.
That is NOT an extra 2% of income tax. That is 2% on the total value of your business EVERY YEAR.
In a bad year, that 2% could swallow 100% of your take home pay.
Complete insanity.
“Even worse, if they have to liquidate assets, there has to be someone left with the money to buy.”
not to mention, coming up with a single number for each person that defines their “wealth” would require a new tax code that at least doubles the complexity of the existing one, and would require the number of auditors at the IRS to over double ...
6% is roughly 1/16th. That’s a pretty steep drop in total wealth.
The inflation and tax adjusted return on the SP 500 (all dividends reinvested) for the last 90 years is about 7% per year.
Since 90% of investment professionals UNDERPERFORM the SP 500 over any given 10 year period, an annual 6% asset tax is literally insane.
Speaking of micro-returns on your money, did you know that a “lepton” is (was) 1/100th of a Greek drachma?
The Greeks use the Euro now, no more drachmas.
Anyway - I like your screen name “lepton,” which, as I recall, commonly refers to irreducible particles like electrons and neutrinos.
Speaking of micro-returns on your money, did you know that a “lepton” is (was) 1/100th of a Greek drachma?
Yes, I did. My “about” page references that: A small sliver of silver.
Both meanings are an admonishment of my small significance. :)
Au contraire...
In the world of physics, it means you are indestructible!
And, almost every time you get punched by a photon, you instantly punch back.
Ezra Pound:
“The ant is a centaur in his dragon world.”
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