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JLeslie's avatar

How is a wealth tax going to work?

Asked by JLeslie (59782points) November 4th, 2019 from iPhone

How does the government determine how much your assets are worth every year? Sounds impossible to me. Are they using your property tax appraisal from your county? What about your cars? Do they use the blue book value?

Won’t it making taxes more complicated by having a wealth tax? Isn’t it easier to have fewer loopholes on income tax and have a better estate (death) tax system. The estate tax exemption is so high now that less than 1% of people pay any federal estate taxes.

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24 Answers

josie's avatar

I suspect you will never get a straight answer on that one.

elbanditoroso's avatar

How will it work? Poorly, if at all.

First, the chances of either Sanders or Warren getting their stuff passed through Congress are precisely ZERO. Even if the Senate turns democratic, which is questionable, these multi-trillion dollar ideas are going to get watered down and simplified and neutered before anything remotely useful will take place.

Second, you can be sure that the lobbyists will be out in force, trying to get tax breaks for their own particular constituencies. There will be dozens, even hundreds of loopholes and exceptions made to protect billionaires and their cash. The Wealth tax will never bring in as much as Warren dreams – the math just doesn’t add up.

[Side note: strategically, Sanders and Warren are doing this wrong. They are too ‘out there’ too early, and they’re going to scare people away. Their strategy should have been to introduce their funding ideas incrementally.]

JLeslie's avatar

@elbanditoroso I’m not even thinking about if the candidates played it right to get elected, or whether it can get passed. I’m just asking if let’s say Warren was elected and the plan is passed, how would it work? How are they going to determine a persons wealth every year? What the idea Warren has in her head? I didn’t realize Bernie was talking about a wealth tax also.

MrGrimm888's avatar

I hate the idea, of a flat tax, but it would definitely be the simplist way to get anything done. The system is completely corrupt. Lawyers, and accountants, would simply get richer, hiding all the wealth.

It’s nearly impossible to establish a person’s enormous wealth. Thin about car collectors. If a person has to cars, it’s impossible to get a remote figure, on how much each car would fetch at auction. If you’ve ever watched a car auction, a person might expect, and get $100,000, for a car, but they might just get $40,000. And that’s just their cars. Not counting works of art, and share holdings etc…

It would cost more, and be wildly inaccurate, to try to gather the information, than trying to simplify the system…
I would love for the wealthiest, to pay more, but I don’t see a solution….

gorillapaws's avatar

@elbanditoroso “First, the chances of either Sanders or Warren getting their stuff passed through Congress are precisely ZERO”

Do you have a source? I think you should look back to history to see how big change has happened. If you look at the most successful President in US history: FDR, he used the masses to push through big change by pressuring his own party. Medicare for all has a 70% approval rating and over 50% from Republicans. Taxing the rich has a huge popularity.

As for the feasibility, people pay property tax all of the time. Our company pays taxes on the value of our fixed assets after depreciation. Most homeowners pay tax on the tax-assessed value of their property. In Virginia, I pay tax on the current value of my vehicle. The notion that it’s not possible to total up the value of these assets is a ridiculous excuse.

MrGrimm888's avatar

And… The wealthy, wouldn’t be wealthy, without tax ride offs, and the poor.

elbanditoroso's avatar

@gorillapaws of course I don’t have a source. How could i have a source for anything that hasn’t happened 2 years in the future? Silly remark.

Think about it, even at the best case, Democrats will take the senate back 54–46 or 55–45. Best case. A huge tax increase will be one of those non-filibusterable 60-vote issues.

It won’t happen.

gorillapaws's avatar

@elbanditoroso ” Silly remark.”

So is making a statement about the future with such a high degree of certainty. I don’t accept your “best case” scenario as being the best case. There is tremendous unrest in the working class of this country. With the right politician uniting them, I think they can turn out, en masse and seriously alter the politics as we know it. I think Hillary supporters prove just how completely foolish it is to listen to people with complete certitude who say “X can’t possibly happen.”

I would argue that a best case scenario results in a political revolution, where many blue collar Republicans come around to vote for pro-worker, anti-corporate politicians. Not all working class Republicans are total idiots. Some are smart enough to realize they’re being screwed over by billionaires.

JLeslie's avatar

@gorillapaws In FL if it is your primary residence (ringing any bells) your appraisal can’t go up more than 3% per year, even if the market is up 20%. If I still owned my house in Delray Beach the value would be $650k probably, even though I could sell it for $850k. California has a 2% lock I think, and from what I understand it passes down to your children if they inherit the house. Some states have locks over the age of 65.

gorillapaws's avatar

@JLeslie The Supremacy Clause overrides state law with policies such as taxes. FL could pass a law that said all residences have a value of $0 for the purposes of taxation and the Federal government is within it’s rights to craft legislation that simply ignores any such valuation.

JLeslie's avatar

@gorillapaws Ok, that’s good to know. I just don’t see in a practical sense how the fed could evaluate all properties every year. Or, even every 3 years. It just seems overwhelming. I would assume there would be an exemption, like a tax on wealth doesn’t kick in until over $2 million, or whatever number. Another thing to remember is the appraised value of a house is not the same as the equity the owner has in the house. Someone who owns a million dollar house, but has a $600k mortgage on it, only has the wealth value of the $400k.

MrGrimm888's avatar

That’s why it’s SO complicated. And maybe impossible to determine.

gorillapaws's avatar

@JLeslie ”I would assume there would be an exemption, like a tax on wealth doesn’t kick in until over $2 million, or whatever number.”

Bernie’s proposal begins at wealth over $32 million for couples, Warren starts at $50 million.

This is hardly impossible. Estates are valued all of the time for divorces, inheritances, criminal and civil cases, etc. It’s pretty basic accounting.

Sagacious's avatar

@JLeslie Unless you and hubby have assets in excess of $32Million you will not have to worry about wealth tax. That’s Sanders idea. Warren will only tax wealth in excess of $50Million. That is what they are saying today.

MrGrimm888's avatar

@gorillapaws . That’s true, but someone has to be paid to do all of the evaluation. Will the cost of that, ooutweigh any gains, in tax revenue?

Think about our court systems. Even immigration courts. They’re all backed up, because there is not enough money allocated to the causes…

gorillapaws's avatar

@MrGrimm888 “Will the cost of that, ooutweigh any gains, in tax revenue?”

Absolutely. Couples with estates valued over $32 million almost certainly have an accountant that does their taxes every year. Bernie’s plan is estimated to raise $1.6 trillion (with a “t”) over 10 years.

Here’s a link to an article that goes into detail about Bernie’s wealth tax plan.

gorillapaws's avatar

Correction. Bernie’s plan is estimated to raise $4.35 trillion, which is $1.6 trillion more than the estimates for Warren’s plan.

JLeslie's avatar

@Sagacious I wasn’t worried for myself, but thanks for those details. I figured there was a large exempt amount that I would be well within. Lol. $32million is mind boggling to me. I sometimes cite the Forbes article from years ago that said the top 400 earners in America make over $200 million a year and pay and average of 17% tax on income. Something like that.

MrGrimm888's avatar

But that’s not how things work. If the cap, is $32 million, let’s say, won’t most of the wealthy just find ways to make their estate worth $31 million?

The richest people who I know, have multiple ways, of hiding their income. Even a waitress, doesn’t have to report her entire earnings. Just enough to not be audited… Practically every person who earns cash tips, does not report what they actually make. That’s dozens of millions of people. Plus, like I said, the uber wealthy already find loopholes, and find ways to fuck the system.

My point is, how do we stop that? And will THAT cost, outweigh the benefits?

Think of all of the untaxed exchanges, in this country. Example. I pay a kid $40, to cut my lawn. Uncle Sam, doesn’t get a dime of that.

Don’t get me wrong, I’d love to see the wealthy pay more. They should. But my gut tells me, most won’t. They’ll find ways around it.

Side note. I find it ironic, that many rich people are bitching about the poor, “playing the system.” They’re the ones who are most guilty, and are living the dream…

gorillapaws's avatar

@MrGrimm888 I think that’s easier said than done. For example, if you own 20% of the outstanding shares of a company with a market cap of $100 billion, that means you’ve got wealth valued at $20 billion. It’s pretty hard to hide that. I’m sure some will cheat, but tax fraud can land you in jail.

MrGrimm888's avatar

Good call.

JLeslie's avatar

I don’t see it working. Wealth changes every year for most people with a lot better of money, and so what do you use Dec 31? I guess similar to how much IRA disbursement you have to take in a year without suffering a penalty?

gorillapaws's avatar

@JLeslie I think it works exactly like the IRA disbursement rules. Keep in mind that wealth taxes exist and have existed elsewhere in the world. It’s not like people are advocating for something that’s never been done before.

MrGrimm888's avatar

The wealthy should definitely pay MUCH higher taxes. And the IRS, should be after the wealthy, the hardest. The US, doesn’t need the rich. The rich definitely need the poor. The poor build the streets the rich drive there fancy cars on. The poor fight our wars. The poor, make the wealthy people’s lifestyles possible. And yet, there is a war on the poor…

I know people who have 2 jobs, but live in a homeless shelter. I know that McCain, didn’t even know how many houses/properties he owned.

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