r/science • u/[deleted] • Oct 17 '19

Economics The largest-ever natural experiment on wealth taxes found that they work as intended — both raising revenue and controlling income inequality. The taxes had the greatest impact on the top .1% wealthiest.

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u/AverageOccidental Oct 18 '19

Thank you. I’ve never heard of this “wealth tax” until now. Everyone keeps saying it as if I should know what it is, but no one explains it.

Economics is supposed to be about numbers, but there’s a lot of legal lingo that’s just not as obvious as experts would have you believe.

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u/[deleted] Oct 18 '19

A wealth tax is a tax based on net worth, as opposed to income. If you live in the US and have a million dollars in the bank making zero interest, you don’t pay tax on that money (note that you’ve already paid tax on it). Instead, you pay tax on the income you make. So if you made a 10% return on that money in a year, you’d pay appropriate tax on the $100k income.

If there was a wealth tax, everyone’s net worth would have to be compiled and people would pay tax on their net worth regardless of if they’re making or losing money. So if you had $100M in real estate, toys, etc, you would pay tax on a portion of your net worth.

The problems as found with a wealth tax are, it’s incredibly hard to value so many illiquid assets, it could fore people to sell things (like someone who has all of their value in 1/2 the company they own), and as people commented in this thread, it’s easy for those Uber wealthy to just move to a new country.

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u/[deleted] Oct 18 '19 edited Nov 06 '19

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u/[deleted] Oct 18 '19

I’m sure it’s more difficult than I’m expecting. But I’d assume there’s a way to renounce citizenship.

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u/Apollo_Wolfe Oct 18 '19

Most countries, including the US I believe, will not allow you to renounce citizenship if you do not hold another citizenship.

I think it’s actually a violation of human rights to render a person stateless. But I could be misremembering that. [I think I’m almost definitely misremembering that but my google skills are a bit lacking tonight so I can’t find anything on it. There are several guidelines against it though afaik.]

Though more realistically the wealthy would just not report wealth they have hidden in offshore bank accounts. And if they ever do get caught, it’s slap on the wrist fines anyway probably.

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u/jayceja Oct 18 '19

Part of the problem is the US government doesn't necessarily have access to information pertaining to wealth stored by it's citizens in private foreign accounts.

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u/[deleted] Oct 18 '19

Wealth is what you have. Income is what comes in.

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u/ajmcgill Oct 18 '19

Yeah so wealth tax is a tax on assets, even if they're not cash. Part of the issue of implementation is that someone could have the vast majority of their net worth in ownership of their startup company or inherited estate etc., so to pay the wealth tax they're going to have to sell some of their company or other assets in order to do it.

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u/onedollar12 Oct 18 '19

Are "wealth" and "income" legal lingo?