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The United States’ financial system is unique because it doesn’t have a complete wealth tax. On the other hand, proponents say that a wealth tax could be a way to deal with the growing problem of inequality and the widening gap in wealth division. Here’s what the public thinks about the matter.
Drives Rich People Out
“I don’t think they’re a good idea,” commented someone. Many European countries used to have them, but most decided to repeal them since they drove wealthy people out. I’d rather see capital gains tax, inheritance tax, income tax, and loopholes closed.
The Targeted People Dodge the Tax
France’s experience with a wealth tax, which was eventually abolished due to evasion, raises doubts about its success in the US. However, someone notes that differences between France and the US, such as the absence of a convenient tax haven in the latter, may impact outcomes. They argue that the administrative benefits of a wealth tax that includes a comprehensive asset ownership record would make tax evasion more difficult. Alternatively, taxing land wealth is suggested as a solution to prevent asset relocation and generate more housing, businesses, jobs, and public revenue.
Let’s Put Our Focus Elsewhere
According to one user, there’s no point flogging a dead horse if it wasn’t practical. The fact that people who are less tax-averse abandoned it leads the user to believe that other solutions should be considered. They propose that looking at the inheritance tax, capital gains taxation, and step-up basis are far easier techniques, rather than adding new tax rates to the existing income tax system.
A Case for Loan Collateral as a Realization Event
Continuing the previous point, a third opponent of the wealth tax adds that taxing items like unrealized gains is nonsensical. Instead, they propose a different approach: disallowing the use of unrealized earnings as collateral for loans. According to this viewpoint, rather than implementing a wealth tax, it would be more effective to treat the act of using any asset as loan collateral as a realization event. This means the capital gain would be actualized and taxed based on the value claimed as security. One user believes it would also make tax evasion much more difficult because loan companies would be required to report securities-backed loans to the IRS and/or the SEC (for publicly traded companies), allowing you to impose this tax on US citizens, people taking out loans on companies traded in the US, and people using US-based loan originators.
One user supported implementing an inheritance tax, but only for extremely high amounts. However, they pointed out that the ongoing question presented in the Moore v. United States case suggests that the Supreme Court believes such a tax may be unconstitutional. Proposing an alternative approach, they suggest that it might be more effective to consider taxing corporate market capitalization instead.
Someone highlights their preference for addressing existing loopholes in the current tax code and implementing slightly higher taxes on wealthy individuals earning $2 million or more. Additionally, they suggested imposing taxes on churches and religious organizations. Notably, the user opposed raising inheritance taxes, arguing that families should have the right to pass on the wealth they have worked hard for or accumulated over time.
Wealth Tax Is Regressive
One significant concern associated with wealth taxes is their regressive nature in taxing asset returns. According to the user, the conventional finance approach aims for exceptional returns at progressive rates. However, they argue that wealth tax deviates from this norm. Wealth subject to a wealth tax experiences a significantly lower rate when it grows at an annual rate of 20% compared to wealth growing at a 5% annual rate.
Wealth Tax Is the Fairest Way To Tax the Rich
As per a user’s observation, many affluent individuals do not amass their wealth primarily through traditional income sources. According to them, implementing a wealth tax is one of the most straightforward and equitable approaches to taxing high-net-worth individuals. To address the concern of affluent individuals relocating, proponents suggest implementing a comprehensive wealth tax system encompassing all forms of ownership within the United States. Regardless of your location, individuals who possess stocks in the US stock market or own property within the country must fulfill their tax obligations.
Implementing a wealth tax presents significant administrative issues involving temporal and financial factors, most notably the complex and costly process of asset valuation. Real estate, investments, businesses, artwork, and personal property all demand the knowledge of professional appraisers, increasing the complexity and cost of the undertaking. Practical methods and databases are essential for tracking individual wealth over time. These systems must be regularly updated to reflect the ever-changing nature of asset prices, ownership, and acquisitions.
Wealth Tax Exists in Other Forms
One use observes that wealth taxes already exist in the form of property taxes on homes and cars, which most people pay. They question whether the person opposing a wealth tax also opposes getting rid of those existing taxes. They argue that valuing stocks is not difficult, as the financial system is already built on doing so, with knowledgeable people involved in this process. The user concludes by stating that they have not yet encountered a problem with an American wealth tax that couldn’t be solved through good legislation. However, they acknowledge that crafting such legislation is the challenging part.
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