Why is 1% of net wealth such a big deal? Are the richest using some kind of leverage that balloons net wealth and makes it too onerous to pay?
rufus_foreman•2mo ago
I'm planning for retirement. One rule of thumb is that you can spend 4% of your investable net worth a year, there are people that say that is too high and 3% would be a safer number.
Now you want to take 1% a year in wealth taxes on top of the capital gains taxes and income taxes I would pay. So either I now have to spend 25% or 33% less a year in retirement, or I work another half decade.
I vote no. If the US state I live in did that, I would move to another state.
yfw•2mo ago
Bracketing would solve all of that. Im pretty sure the spirit of this is not to tax working class people into relying on a pension.
Im sure everyone agrees Jeff Bezos shouldnt be taxed the same as someone who needs retirement planning
tpmoney•2mo ago
Perhaps, but the Norway tax mentioned in the article kicks in at $174k net worth. That's a paid off house and a nearly drained 401k for even the poorest of Americans. Yes there is an exemption for part of the house, but even if it were 100% exempt, I think you're going to have a rough time getting support for taxing 1% of a retirement account worth less than the code section it's named for.
tpmoney•2mo ago
Replying to myself since it's too late to edit, but according to these numbers[1], it looks like this tax would hit about 52% of American households, so my "even the poorest of Americans" is a bit overwrought. And if we take the US median home price (~410k as of this year[2]) and exclude 75% of that (~307k), then this tax would hit ~30% of American households (~$481k net worth). Even at that, it's still quite a hurdle to clear to convince the top 1/3 of households support a 1% tax on their accumulated wealth.
You would vote no even if you got free healthcare in exchange?
rufus_foreman•2mo ago
"Free" health care paid for by whom?
"Free" health care paid for by people richer than me? There aren't enough of them to pay for all us slackers. "Free" health care pair for by people poorer than me? That's actually probably what is going to happen if I retire early.
I vote no.
If a majority votes yes, does that absolve me of guilt that poor people are paying for my early retirement?
I vote yes!
rini17•2mo ago
What a hell you have there, public goods like healthcare or transport are impossible unless paid by the poor?
Arnt•2mo ago
There are a couple of problems.
If you own a business, ie. not a small fraction of a listed company but your own business, then all is well so long as you make a nice profit every year. But if you have a string of lean years and run out of liquid assets, the taxman's assessed value of your business doesn't change and the taxman will insist that you pay 1% of that. And you have no liquid assets. What do you do? The banks know that you have no liquid assets and are likely to have trouble repaying your loans, so if they lend you any money it's on poor terms.
Most small business owners know that lean times occur and aren't happy about being taxed in this way.
rini17•2mo ago
> the taxman's assessed value of your business doesn't change
That's first time I saw anything like this, usually in accounting the fixed assets depreciate so if there are lean years without much investment the assessed value should get down.
Like, are you saying when you buy a work truck for your business then after 5 years you'd be still paying 1% tax of its original price every year?
Arnt•2mo ago
No, not a truck.
But if you and a pal own a small business, maybe you employ fifteen electricians and business is slow for a few years, slow enough that you make no profit but not so slow that you have to fire anyone, then the assessed value of the company with fifteen employees doesn't shrink much. Which makes sense: it still has fifteen employees so it's future/long term value hasn't really changed.
rini17•2mo ago
Such a LLC would be subject to fixed minimal income tax or so called "tax license" already in many countries, that's nothing new.
Arnt•2mo ago
The tax on companies in Norway is entirely reasonable and works largely as I see when I google those terms. Some people complain about the taxation level, as you would expect. Some people always complain.
Perhaps I'd better describe the wealth tax and what some people see as a big deal.
Suppose you own half of a company as above. The company pays normal taxes on its income minus expenses etc. You, as owner, pay tax on your salary and dividend. But in addition, the company's historical earnings are used to compute the value of the company. NB: The historical earnings, not this year's. These earnings are multiplied by a P/E ratio to assess a value of the company, the company's assets play a role too but often minor. You own half, so about 0.5% of the company's assessed value is added to your personal tax for this year. In the end, even if the company does poorly enough that you and the other the owners choose to pay yourselves neither salary nor dividends, you can have a substantial personal tax bill.
Now, paying taxes when you do well is not regarded as a big deal in Norway. You pay a lot and get a lot for your money. But paying the wealth tax at times when you worry whether your business will survive at all makes people angry, and IMO that's a problem. Taxes should be seen as just.
rini17•2mo ago
The question is, is it more or less just than allowing for abuse of all kinds of loopholes to avoid paying taxes altogether. Hiding everything in "unrealized" and other kinds of hitherto untaxable stuff. Even if they would have no problem actually paying it. Taxes will never be fully just.
fluorinerocket•2mo ago
So 12% of the population pays it? So more of a tax on the professional, works for a living, upper middle class?
rini17•2mo ago
rufus_foreman•2mo ago
Now you want to take 1% a year in wealth taxes on top of the capital gains taxes and income taxes I would pay. So either I now have to spend 25% or 33% less a year in retirement, or I work another half decade.
I vote no. If the US state I live in did that, I would move to another state.
yfw•2mo ago
Im sure everyone agrees Jeff Bezos shouldnt be taxed the same as someone who needs retirement planning
tpmoney•2mo ago
tpmoney•2mo ago
[1]: https://dqydj.com/net-worth-percentiles/ [2]: https://fred.stlouisfed.org/series/MSPUS
rini17•2mo ago
rufus_foreman•2mo ago
"Free" health care paid for by people richer than me? There aren't enough of them to pay for all us slackers. "Free" health care pair for by people poorer than me? That's actually probably what is going to happen if I retire early.
I vote no.
If a majority votes yes, does that absolve me of guilt that poor people are paying for my early retirement?
I vote yes!
rini17•2mo ago
Arnt•2mo ago
If you own a business, ie. not a small fraction of a listed company but your own business, then all is well so long as you make a nice profit every year. But if you have a string of lean years and run out of liquid assets, the taxman's assessed value of your business doesn't change and the taxman will insist that you pay 1% of that. And you have no liquid assets. What do you do? The banks know that you have no liquid assets and are likely to have trouble repaying your loans, so if they lend you any money it's on poor terms.
Most small business owners know that lean times occur and aren't happy about being taxed in this way.
rini17•2mo ago
That's first time I saw anything like this, usually in accounting the fixed assets depreciate so if there are lean years without much investment the assessed value should get down.
Like, are you saying when you buy a work truck for your business then after 5 years you'd be still paying 1% tax of its original price every year?
Arnt•2mo ago
But if you and a pal own a small business, maybe you employ fifteen electricians and business is slow for a few years, slow enough that you make no profit but not so slow that you have to fire anyone, then the assessed value of the company with fifteen employees doesn't shrink much. Which makes sense: it still has fifteen employees so it's future/long term value hasn't really changed.
rini17•2mo ago
Arnt•2mo ago
Perhaps I'd better describe the wealth tax and what some people see as a big deal.
Suppose you own half of a company as above. The company pays normal taxes on its income minus expenses etc. You, as owner, pay tax on your salary and dividend. But in addition, the company's historical earnings are used to compute the value of the company. NB: The historical earnings, not this year's. These earnings are multiplied by a P/E ratio to assess a value of the company, the company's assets play a role too but often minor. You own half, so about 0.5% of the company's assessed value is added to your personal tax for this year. In the end, even if the company does poorly enough that you and the other the owners choose to pay yourselves neither salary nor dividends, you can have a substantial personal tax bill.
Now, paying taxes when you do well is not regarded as a big deal in Norway. You pay a lot and get a lot for your money. But paying the wealth tax at times when you worry whether your business will survive at all makes people angry, and IMO that's a problem. Taxes should be seen as just.
rini17•2mo ago