The wealth tax and privacy — from the comments

Despite the unnecessary duplication (FATCA etc), I’m actually in favor of requiring banks to disclose how much income US taxpayers earn on ther accounts in the US and abroad. Unfortunately, if you are going to have an income tax system, you can’t simply rely on everyone voluntarily reporting. But, this also raises serious privacy concerns that need to be balanced. The wealth tax on all or most all assets would significantly alter the current balance between disclosure and privacy. As noted in the article, *everything* would need to be disclosed to the IRS *every year* much like an annual estate tax return. Expect substantial additional reporting requirements on all assets. Think that won’t apply to you? How else are they going to know you don’t have $50 million hidden somewhere? How are *taxpayers* going to know they don’t meet that (or some other) threshold ? Trust me, lawyers and accountants, (legitimately) worrying about their own potential liability, will insist that far more people undergo these audits internally just to make sure they are not above the limit.

These privacy issues also have potentially serious political implications. I suppose Bill and Hillary and Barrack and Michelle (add your own list) would be subject to these annual wealth tax returns. Annual audit by the IRS on everything? Do they really want the Trump administration (or some other) having access to all that? This sounds like a potential special prosecutor on steroids and one that is not always going to be politically neutral. I see the potential here for a lot of political abuse and not just from one side or the other.

That is from Vivian Darkbloom on MR and in the LOC, with other good points in the comment too.

Comments

Look, it's simple:

Civilization enables accumulation of property beyond the homestead -- the accumulation of what might be called "artificial" property. Artificial property rights are therefore the proper tax base. Basing your taxes on economic activity is crazy and leads to run-away centralization of wealth. It is an obvious failure mode of civilization as the wealthy are prone to institutional capture in order to shift the tax base from wealth to economic activity.

To fix this, tax the liquid value of artificial property rights at the risk free interest rate of modern portfolio theory. Establish liquid value via escrowed bids. The high escrowed bid for a property right receives interest at the risk free interest rate. Other bids do not.

This gets rid of what might be called "private sector economic rent" as a corrupting influence on civilization.

However, it leaves public sector rent seeking as a moral hazard. This is best dealt with by distributing revenues as a citizen's dividend -- equally to all citizens -- and requiring national defense to be decentralized as it is with the Swiss.

That might suggest that we largely do not tax real people, only artificial people. It would be simpler to tax corporations than the adult population. Moreover, corporation are perhaps the best institution for wealth consolidation.

'I’m actually in favor of requiring banks to disclose how much income US taxpayers earn on ther accounts in the US and abroad'

And since the burden of following American regulations for a foreign bank under FATCA is so high, Americans are simply not accepted as customers by foreign banks any longer. (Simple non-interest bearing accounts - such as a German Girokonto - excepted. Even then, you will be asked for your Social Security number, and you will apparently be handed the appropriate IRS documents to fill out.

Which might be one way to make it easier to track all wealthy Americans. Or at least cause Americans living overseas to give up their citizenship, as continues to happen in ever growing numbers.

Why should we be concerned over expats who feel inconvenienced by the burdens of citizenship?

Because they take their money, their ideas, and their children with them.

buh-bye

You can thank Lorne Michaels for that comment. It's just one of the many jokes that wouldn't exist without immigration, ie. rich people with good ideas who want to be here.

Sorry, not following you.

Are you suggesting that Mr Michaels deserves extra consideration from the Canadian government because he chose to pursue his career in the United States?

I'm saying even the likes of you, McMike, benefit when people want to live in your country, as opposed to wanting to leave. So, we should pursue policies that make people to want to be here instead of pursuing policies that make people want to leave.

And since you don't seem to be following, I'll also remind you of the context of my comments. Recall from above that you were wondering why we should be concerned by people who feel inconvenienced by the burdens of citizenship. My answer was: Because otherwise they'll leave, and when they do, we'll lose all the benefits of having them as fellow citizens.

Are you following yet, McMike? Societies that people want to join are good, flourishing, pleasant societies. Societies that people want to leave are bad, waning, unpleasant societies.

Maybe that doesn't matter to you. Maybe you'd like to be rid of anyone who doesn't desperately want to pay to be close to you. But that's not how I feel.

If you follow me.

For someone as snarky as you, you should try and stay on track.

The question on the table is: having already left the country, and taken their genius and fruits of their loins somewhere else - but still wanting to hang onto their passport, because, well, you never know when the nanny state that you ran away from in a tantrum will come in handy - why should we go out of our way from back here in the US of A to make the expats' lives easier in whatever Gaultian paradise they landed at?

Last I heard, there's a line long line of people perfectly wiling to move here and take their place.

Re: RPLong -- you don't have to worry too much about people giving up citizenship in huge numbers. The US already treats all your property as "sold" in the year you renounce citizenship, so any gain becomes income for tax purposes. That's only for rich people (who have more than $2 million in assets, or who have paid significant amounts of tax in the past few years), but it's a pretty strong disincentive against trying to escape. That, and the fact that the US is apparently quite petty about denying visas to people who relinquish their citizenship but who may have left family behind in American territory.

"is quite petty"

Indeed. And why shouldn't they be? I am still waiting for an meaningful argument as to why your government should make life easier for expats.

(No, I do not endorse arbitrary or capricious policy and enforcement. But see no reason why our official policy should not be "don't let the door hit you in the rear end")

"don't let the door hit you in the rear end"

You really cannot see how an American university professor teaching at a foreign university for five years, for example, is not an 'expat,' can you? And how that professor will not be able to actually use any banking services apart from an exceedingly basic account.

And due to FATCA, it is basically impossible for American university students to study - essentially tuition free - in Germany, because no bank will handle the necessary German account required to ensure that a student has enough money to pay for health insurance, a place to live, etc.

Unless, of course, you also consider a university student an expat too.

Things change over time - I can still remember when American managers were a normal part of how American companies operated internationally - and no one called the manager of a DuPont facility in Europe an expat, considering that it was the company that transferred them - and that they expected to return in a fixed number of years.

Good points by clockwork_prior.

From a purely pragmatic perspective, I'll also build on that last one. If we want American companies to be large exporters that are competitive in foreign markets, it's hugely counterproductive to make it difficult for American citizens to live overseas.

No. I do not count people who operate for american companies in foreign countries to be expats. Nor students. Or anyone else who goes elsewhere for a discrete period of time to engage in commerce or culture.

A fair delineation would be when conversations become relevant about passports, dual citizenship, voting, etc.

Scratch a progressive, find a Fascist. A beautiful example of actual American Exceptionalism: progressive fascism. The only country taxing income from working overseas, double taxation.

You belong to the State. Your body belongs to the state. Your family belongs to the state. You can purchase it for 40% of your assets. Buying your freedom....reminiscent of ...

'Why should we be concerned over expats who feel inconvenienced by the burdens of citizenship?'

It is an interesting question in its way. For example, why should an American company like Caterpillar have Americans oversee Caterpillar's operations outside of the U.S.? The same applies to DuPont, ExxonMobil, Apple - pick any major American company with an international presence as an example.

Americans overseas already face an interesting burden of citizenship that no other industrial nation imposes on its citizens outside of the country's borders, which is filing - and paying in many cases - American taxes on income earned outside of the U.S., while of course paying taxes on their income in the country where they earned it.

And of course, most of those expats are married to a citizen of another country, and it is impossible for the American spouse to open a normal retirement account, as offered in Germany for example.

The fascinating part of your question is why should Americans be disadvantaged for exercising their freedom to live where they wish, which used to be one of the advantages of American citizenship, and not a burden. Until recently, that is.

Yes, McMike's view of U.S. citizens who choose to live outside of the country - whether for a planned temporary period of time (e.g., schooling or job posting) or for a less determined period - is a hell of a lot closer to the view of the U.S.S.R. and East Germany than anything I'd associate with the U.S. political tradition. McMike seems to think that U.S. citizens are the property of the state.

Well, at least he did not demand that expats reimburse the state for the education those expats received before those expats selfishly decided to live somewhere else, thus depriving the state of its expensive investment in creating productive citizens.

I said no such thing.

Of course, what other people actually say probably isn't relevant to you when you reply

McMike:

Our policy should be “let the door hit them on the way out.” Aka punitive measures and asset forfeiture.

“Why should we care about Americans who work or live overseas? They’re traitors and should be destroyed.” Why do we care about the burdens arbitrarily imposed on our own people ?

“We own you. Your body, your soul, and quoting McMike ‘the fruit of your loins.’” Very North Korea.

“You were born in America. We own everything you are or will be. If you leave you owe us your money. After all, you moved to France to avoid taxes.”

Insane and fascist. And extremely anti cosmopolitan. If you can’t keep a citizen, you let them go. Just like any personal relationship. You’re treating citizenship as a forced marriage at age zero.

You do realize that when you put in quotes things I didn't actually say, everyone can tell?

As noted in the article, *everything* would need to be disclosed to the IRS *every year* much like an annual estate tax return.

For an asset protected by law (herein after "asset") it must be publicly declared by the owner who must be a natural person. Corporate assets are indirectly protected by law when their shares are so protected. An asset has an assessed value equal to the highest bid in escrow with the government. Lower bids for the asset which remain in escrow are added to the assets of the bidder but the highest bid in escrow is not counted as an asset of the bidder.

Fictitious persons (corporations, etc.) are not assessed. However, the natural persons who hold the derivative assets are assessed, for example, the liquid value of their shares held in the fictitious persons.

A natural person's tax liability is:

("Assessed value of assets" - "Assessed value of liabilities") * "MPT's risk free interest rate"

Liabilities are assessed as their liquidation value to the creditor. For instance, a mortgage lender can sell a mortgage on the open market and the new owner receives the mortgage payments. The mortgage is therefore an asset to the mortgage lender and is assessed as usual. To the home owner, the mortgage is a liability subtracted from his total asssets but the value subtracted is not the amount shown in the mortgage contract -- it is the liquid value of the mortgage to the lender if he sells it as an instrument to the highest escrow bid.

A KEY POINT:

The most common criticism of this system is that it can be "gamed" by anti-competitive forces who try to shut down entrepreneurial startups by bidding for ownership at such a high price that it imposes an immediate tax burden so great as to overwhelms the cash flow of the startup. The start-up is either forced into bankruptcy or is forced to sell to the the anti-competitive entity, which then shuts it down as a cost of maintaining its monopoly position. The answer to this, which is obvious after moment's reflection, is that the startup can defer its tax liability (not counting it as a liability in computing its tax liability, of course) up to the point that its liquid value is equal to its deferred tax liability. At that point the government forces liquidation. The startup can, of course, place a bid in escrow for itself to maintain its liquid value above its deferred tax liability. Any such deferred tax liability accumulates further interest liability compounded at the tax rate.

You are kidding, right?

The liquid value of shares in a number of S&P 500 firms - with millions of shares traded, tens of professional analysts, and extensive public financial reports - have varied by 20% just in the last 6 weeks.

Establishing a "liquid value" for a non-publicly traded asset is rife with problems. Does "liquid value" mean auction on the courthouse steps within 10 days? Something else? Does "something else" vary by business type or size?

Solved.

As long as the balance sheets are reasonably standard, even if fraudulent, we have simple reconstructive techniques and can get you a fair tax recovery without ever revealing the tax payer. No human will ever see the tax pain account, nor identify the tax payer. The tax payer has long since signed onto the deal and has its own process that makes sure the other side f the deal is fair. This problem been solved, not an issue, we have the technology in hand. Something else is wrong.

OK, what is the problem?

he prior hidden deals. Negotiating parties plan on spending the taxes before collected. The code ends up with tight feed back loops so payers can turn around and be collectors again. It is the induced feedback volatility. The trick is to collect it, and never spend it. Collect, don't spend the federal government becomes disconnected from wealth, a really good idea.

The problem of public sector rent seeking as a moral hazard is best dealt with by distributing revenues as a citizen's dividend -- equally to all citizens -- and requiring national defense to be decentralized as it is with the Swiss.

Facebook established that your privacy is worth virtually nothing on the open market. The IRS and the government in general have another view. Do the math.

So does the FBI, along with the company that people paid money to, resulting in their DNA data being shared - 'Family Tree DNA, one of the largest private genetic testing companies whose home-testing kits enable people to trace their ancestry and locate relatives, is working with the FBI and allowing agents to search its vast genealogy database in an effort to solve violent crime cases, BuzzFeed News has learned.

Federal and local law enforcement have used public genealogy databases for more than two years to solve cold cases, including the landmark capture of the suspected Golden State Killer, but the cooperation with Family Tree DNA and the FBI marks the first time a private firm has agreed to voluntarily allow law enforcement access to its database.' https://www.buzzfeednews.com/article/salvadorhernandez/family-tree-dna-fbi-investigative-genealogy-privacy

1. People who give their DNA to a third-party are stupid.

2. FamilyTree did not give the FBI access to their whole database. Instead, they got the same view that I would get if I had some mystery DNA, signed up for the website, submitted it as my own, and asked to see who was related to me.

Can you explain this to me, better? I was given a "23 and me" package at Christmas, and I said yes to all the questions.

If I believe in the health of other people, including their protection against criminals, what is the downside for me?

Are you actually making the case that we should prefer protecting our criminal in-laws to law and order?

That was stronger than necessary, but, if you really care about the privacy of your DNA, don't give it to strangers.

'Are you actually making the case that we should prefer protecting our criminal in-laws to law and order?'

Actually, there is a reason why normally, when conducting investigations that require accessing information which one would normally consider not public, the police require a search warrant, as specified in the Bill of Rights.

The police are not entitled to go on fishing expeditions, but instead actually have to follow this - 'The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.'

Basically, saying someone is a criminal, and they must have relatives is not probable cause, and it certainly violates 'The right of the people to be secure in their persons.' Hard as it may be to grasp, protecting freedom does actually end up protecting criminals too.

A police state does not have that problem, of course.

You don't have privacy rights in things you give to other people and that those other people freely give to the government.

'You don't have privacy rights in things you give to other people and that those other people freely give to the government.'

Sort of - your phone calls (theoretically, and depending on the state) require your permission to be recorded and passed on. Whether your DNA as stored in a database is to be considered information along the lines of a phone call or property along the lines of a letter is a much broader discussion.

And the police are currently not allowed to collect DNA from all the citizens of a town when looking for a criminal. Searching a database instead may be seen as a loophole in the idea of being secure in your person. Open to discussion, of course. Clinton's DNA was definitely Monica's Lewinsky's to pass along, but that did not entitle the FBI to go looking for any possible relatives of Clinton's that may have committed a crime by searching a law enforcement DNA database. At least by the understanding of the Constitution at the time, in major part to the basic lack of such broad and easily accessed databases.

I am afraid I see no real examples of harm, just feelings about "my DNA is mine," but on the flip side we have real positive externalities.

Identifying genetic diseases and catching criminals are both good things.

Not just feels.

'Instead, they got the same view that I would get if I had some mystery DNA, signed up for the website, submitted it as my own, and asked to see who was related to me.'

Well, apart from the FBI is able to arrest those who are 'related,' and do not require a search warrant (and probable cause, at least in the eyes of a judge) to use the service.

The National Bureau of Economic Research estimates that 30% of the income and wealth of the ultra-rich (people whose net worth exceeds $45 million) evades tax; the ultra-rich are ten times more likely to evade tax than the average citizen. The NBER says this is likely a conservative estimate. The research also found that offshore wealth increases the “top 0.1 percent wealth share from 8 percent to 10 percent” when looking at Norway specifically. And for top 0.01 percent “taking tax evasion into account increases their wealth by a third.” Of course, this means that the non super-rich pay more than their fair share of tax. Tax evasion is possible among the super-rich because most of their income is capita income, which receives all manner of tax preferences in our tax code; yet the super-rich evade tax on capital income anyway. Because they can. When Apple executives are greeted as heroes by Congress for employing schemes with little substance to avoid U.S. tax, you think that might induce others to do the same. Shedding crocodile tears for law-abiding citizens who must relinquish some privacy in the case of a wealth tax is but a rationalization for protecting those who are evading tax. [An aside, I don't favor a wealth tax. What I favor is a tax system that's less skewed in favor of capital income as compared to earned income so there's less reliance on rising asset prices for prosperity. But that would violate the Golden Rule, wouldn't it?]

Rationalizations to protect tax dodgers.

Yeah, and terrorist financing and drug cartels benefit from the annonimity as well. A steep price to pay to enable tax dodgers.

Its my impression that the IRS has done a pretty decent job with privacy. Certainly better than its private sector data peers

I realize that 2016 was three whole years ago, but this was an easy thing to Google before commenting about...

https://www.cbsnews.com/news/irs-identity-theft-online-hackers-social-security-number-get-transcript/

Frankly, the loss of less than a million SSN's is small potatoes compared to many of the private data breaches.

In any case, I am referencing the sanctity of tax returns. To my knowledge, there are precious few leaks of tax return data for notable and notorious people. And - unlike private companies whose business model is built around abusing your data and lying to their customers - the IRS has overt policies against that.

"I am referencing the sanctity of tax returns."

McMike, do you read? This was the third sentence in the link provided:

Hackers used the "Get Transcript" program, which allows you to check your tax history online.

It's clear that you do not read.

Go back and read my entire post. Pretend like I reiterated it here.

All right, but apart from losing SSNs, tax records, OPM files of secret clearances, US voter databases, Department of Veteran Affairs medical records, and 76 million people from the National Archives and Records Administration, what has the government ever lost for us?

(NB: This is not a defense of private data breaches. Equifax should be shut down.)

My response was specific to the actual OP, which stated a concern about the privacy of tax returns for people like the Clinton, Obama, and Trump. Or mere celebrities for that matter.

To my knowledge that system has not been abused, at least not in any widespread way.

What happens over a Veterans Affairs is a non sequitur.

Pure Progressive:

Data breaches and the IRS giving your social security number and bank accounts to anyone who asks is fine. Unless you’re a member of the ruling class.

Veterans deserve to have their medical records, bank accounts, and social security numbers released. They put Chelsea Manning in jail.

Pure troll.
Refuses to stay on point.

I wonder, is this technical based opposition to a wealth tax an opening bid, before acceptance of an inheritance tax?

That's the way it adds up for me. We need taxes to pay the bills. We don't want too much of an overhead. But we should tax easily available and identifiable transfers, including inheritance.

(Given almost free computation, a VAT might now also be less intrusive than other traditional filings.)

We already have the following wealth taxes: (a) inflation, (b) real estate taxes, and (c) estate taxes.

Also, income taxes are a kind of proxy for wealth taxes.

But yes, let's do annual net worth calculations for everyone.

I am sure you know the details. A few states have an inheritance tax currently, with effective rates ranging up to 15% or so. We have a federal estate tax which, according to the link below, has a maximum statutory rate of 40%. But according to the same link, the average effective rate for estates over $20 million is just 19.4%.

I am not sure if Democrats and/or populists are going to prevail here, but if they do I think I would look for higher statutory and effective rates, especially on billionaires.

Heck, maybe that is even a moderate or mainstream hope in this political moment.

https://www.cbpp.org/research/federal-tax/ten-facts-you-should-know-about-the-federal-estate-tax

Why do we have loopholes in the first place? People don't accept that sometimes tax laws are not a problem to be solved but a reality faced. It's not an axiomatic system, as Cowan points out. Neither are card games. Action Bronson it turns out is a decent painter. Evasion is another thing. Tax loopholes poison the water supply, just imagine you are a lawyer who knows they exist. Of course motives matter. Only after we know expectations.

Your question is answered by Krugman!

"Suddenly, taxing the rich is on the political agenda. Candidates are talking frankly about taxes as a way to limit inequality in a way we haven't seen for decades. But why is this happening now? The WaPo says there's a 'profound shift in public mood'" 1/n

https://twitter.com/paulkrugman/status/1092022000531505152?s=19

"taxing the rich is on the political agenda" is weird framing for a situation where today, taxing the rich is a main pillar of government finance, poor people pay almost no tax, and the middle class is undertaxed compared to other developed nations. The framing invites one to not understand anything about the status quo.

Is that true?

Is it only people who want higher tax rates who don't know what people are actually paying?

In other news today there is going to be a big legal battle about whether Trump's tax returns are going to be released to Congress. The real Russia-heads think there's going to be a Smoking Gun, but what if it is much simpler? What if Trump is a billionaire who pays no taxes?

Would the last tax rollback have happened with that information public?

Everything I wrote is true. Now you want to have a different conversation. I blame myself, just like I blame Charlie Brown for continuing to try to kick that football.

Statute and effective rates have been the national conversation for about 3 weeks now. YMMV.

"The framing invites one to not understand anything about the status quo."

+1

That being said, anonymous seems incapable of grasping any data that disagrees with his world view. So, the argument is pointless.

Shawty work there, troll.

I am the one in this thread with all the data.

To back up to the big picture, Krugman's observation, which I think is correct, is that while a majority have wanted higher taxes on the wealthy for decades, a political dynamic has kept power with a dissenting minority.

This isn't to say the dissenting minority themselves are all rich, but as I say I think it was some of them or misled by the idea that since the rich is a group a lot of tax, the rich as individuals should not?

"The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of ... Billionaires like Warren Buffett pay a lower tax rate than millions of Americans because federal taxes on ..."

etc

"I am the one in this thread with all the data."

Nobody bother posting links because you always ignore them. But hey let's go with this.

"The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of ... Billionaires like Warren Buffett pay a lower tax rate than millions of Americans because federal taxes on ..."

Bullshit! The top 1% have paid an effective tax rate between 30% and 45% since WW2.

"In 2014, the top 1 percent of taxpayers paid an average tax rate of 36.4 percent."

https://taxfoundation.org/taxes-rich-1950-not-high/

"Greenberg is not pulling his numbers out of thin air. Rather, he’s drawing them directly from a recent paper by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman in which the three economists—all well-loved by progressives—estimate the average tax rates Americans at different income levels have actually paid over time."

https://slate.com/business/2017/08/the-history-of-tax-rates-for-the-rich.html

Here is my link, for anyone serious.

https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-taxing-wealthy-americans/

Dueling stats are at least better than no stats.

And a recognition that the effective tax rate matters, not the total revenue from the group, is an improvement.

Don't get mad at data, it's just reality.

tl;dr

Disingenuous troll gets busted promoting Fake News and tries to claim it's valid. My source is based upon highly rated economists. Your source is using made up data and provides a link that generates a "Page Not Found" error.

However, I can predict what the EPI's actual data says. It's almost certainly a weighted average of income tax and capital gains taxes.

As I said above:

" anonymous seems incapable of grasping any data that disagrees with his world view. So, the argument is pointless."

Here's your chance to prove me wrong. Just come out and admit that the number you quoted is bogus.

That's hilarious. Did you walk around happy with yourself for coming up with that?

First I'm the only one who presents data on this thread, then you present some contrasting data, then you declare my data as fake.

Genius. You should be on Fox News.

There was a broken link on the Americans for Tax Justice site, but it was trivial to find the upstream PDF.

https://www.ctj.org/pdf/taxday2014.pdf

And you know what I'm noticing now?

The troll is calling me a liar when our numbers don't actually even disagree. It's just that I am naming federal tax, and he is naming total tax.

As the kids say, lolz.

And yes I am concerned with federal tax.

"And yes I am concerned with federal tax."

Sigh, so the anonmouse moves the Goal Posts. That figures.

Let's make ALL tax reports public.

You want to know how many income your boss ? Your father-in-law ? Your neighbour ? Its all open and searchable on net.

This would severely hinder wages repression, corruption, etc. And significantly raise support for wealth distribution in society.

That's only half the picture. You also need to make all spending public too. After all you can't really stop people from doing things you don't like if you don't know about it, can you?

{sarcasm}

plus side: transparency
minus side: nightmarish mimetic hellscape

Your President is Donald J. Trump. Your Senate is controlled by Republicans.

There will be no wealth tax. Shut the hell up about it.

True but the billionaires better watch out, if there's a 2020 recession Trump is out and the Senate may turn blue too.

Powell and the Fed seem to have gotten smart recently, and have all but promised they will not invert the yield curve, so the recession may be a few years away still.

Shouldn't it be obvious now after performing this 15 min thought experiment why taxes are assessed on transactions?

Nobody knows the true value of something until two parties agree to the transaction. That value cannot be "gamed".

The outliers are when a transactions must occur by law (inheritance) and the transaction itself may be illegal (passing down a piece of art that used material from an endangered species that was legal when the art was created). How can you assess that?

Transactions are gamed all the time. And pricing is often heavily obscured in opaque transactions.

Hell, Wall Street banks and public companies have entire departments devoted to gaming transaction value.

I'm not convinced by your hand waving. Can you provide an example?

Your presence here assumes at least a passing familiarity with accounting valuation and transaction structure schemes designed to avoid taxation, evade liability, obscure ownership, and game reported earnings.

But in case you are actually that naive: The AICPA has entire sections of rules devoted to valuing transactions. You can google it.

There are certainly straw sales of assets, like selling my house to my son for 20K and then hoping that establishes FMV.

I strongly oppose a wealth tax, for reasons just starting with privacy, but people hope to fudge these things all the time. When Apple sells IP from one division to another, it is not based on what some wonk decides is FMV, but either how much or how little they think they can plausibly justify in a court of law.

Exactly, the pricing is gamed significantly. The entire field of transfer pricing is about obscuring the actual value.

Let's not forget about Wall Street's off balance sheet vehicles. An entire terrain of companies set up solely to hide asset ownership by pretending that an exchange happened when in fact no such thing occurred.

Yeah, but you're just trying to avoid estate taxes in this scenario. A full audit would reveal that you undersold your house and then you would owe back taxes.

As a licensed professional, I cannot simply work for free to avoid a transaction, I have to declare a donation of my professional time and rate to provide my services for a charitable cause.

And You still haven't given me an example @McMike, you only trot out the Wall St. boogy man. If you think there really is a way to game the transaction, then tell me, for example, If you owned property in China, and wanted to sell it bring the funds back to the US, how could you structure the transaction to "game" the tax treatment? and be as detailed as possible.

Seriously man. Transfer pricing and sham transactions are a thing. Educate yourself.

Surely this is just a nonsense comment.

It's really not hard to envisage a system where the vast vast majority of people would not have to prove they don't have 50,000,000.

Check your biases, Tyler :-)

Why would one think an initial $50 million exemption would be retained? I would not be surprised to see $1 million. Certainly one could predict an argument that it should be not more than the inheritance exemption.

I would not be surprised if it was raised to $100 million.

There, our expectations cancel out, and the slippery slope is avoided.

Engineer, $1 million doesn't even pass in a Dem Congress.

+1, I agree with this. If the Democrats passed it, a significant number of their donation base would suddenly withdraw their support.

Indeed, if you are going to have it that low, then you would have to evaluate the cash equivalent of a pension. It would be inherently unfair to tax a retiree with a $1.5 million 401K withdrawing $75K per year (and owning a $500K house) and not tax a pension plan retiree drawing $75K per year (and owning a $500K house).

This is all a class warfare tactic. For that to work you can't have the number too low.

Will the congressmen "owned" by billionaires count as taxable assets?

This seems to be an incoherent comment -- US financial institutions already report income to Uncle so what exactly is the issue that this comment is addressing? Offshore accounts, the failure to disclose already leads to criminal punishments. Also lots of money both onshore and offshore is held by legal entities and there are lots of issues in determining legal ownership of those entities. Hard to believe Tyler read and thought about this comment before he gave it a place of honor at the top of the page.

It's regarding a proposed wealth tax. In order to have a wealth tax, the government has to determine how much wealth everyone who should pay it has every year. Furthermore, the government is going to be wary of people claiming to have less assets than they do. So, the threshold for reporting will be lower than the nominal amount.

The result of that would be drastic changes to financial reporting assuming a Warren style wealth tax were enacted. This would apply not just to off shore accounts, but to all accounts. And to property values, household assets, funds held in trust, vehicles, etc.

Most of the public (starting with politicians and media but here too) discussion on taxes is a distraction from the core issues:
What should government cost?
How much should be funded from current income and how much from debt?

It is pointless to talk about tax levels unless we know what a reasonable level of tax revenue might be.

Until we run at least a good portion of government within a budgetary process that does join spending and revenue tax policy discussion is largely hyperbole and smoke and mirrors.

That creation of wealth is taxed rather than possession of wealth is precisely what is wrong with the tax base. Taxing creation rather than possession is precisely backwards from the fundamental standpoint of proper statecraft.

When you create something you are not costing society anything. When you possess something you are: the cost of defending your right to possess that thing.

It's that simple.

When you have assets beyond those you, yourself, can effectively defend (such as your house and essential tools), the only reason you can claim them is the existence of the government to enforce your legal rights and protect them from foreign invasion. You want this service for free and to have people who are engaging in transactions to pay that fee for you. That's unfair of you.

That's the reason an fair tax would be a mix of (a) flat head tax for protecting your life, (b) income/payroll tax to the extent society is fairly enabling the income and providing pensions, and (c) wealth tax proportional to what is being defended by police and military.

Of course, when it comes to extra bond measures for extravagant police pensions, police are both protecting and predating on the real property. Also, police is just a supplementary protection to our property insurance, while the military protects from foreign invasions, that insurance specifically list as non covered losses.

Well, I'm truly honored to have been quoted again (and with approval!) by Tyler Cowen. Despite my pointed criticisms of his occasional cognitive deficiencies and lapses of logic, he turns out to be a pretty good sport. I'm also honored to have my comment in LOC, whether that be shorthand for Loss of Consciousness, Learning Outside the Classroom, Lesbians of Color, or whatever (I think).

And, my apologies for starting what appears to be a very messy food- fight.

If we hadn't had an income tax infrastructure in place for more than a century we'd (rightly) consider it an offensive breach of privacy. It ought to be self-evident that the government should require a search warrant based on probable cause of a crime to obtain any information that you wouldn't be willing to disclose to your neighbor or brother-in-law without blinking, such as annual income.

But, you know, time and tradition. If we end up with a wealth tax, we'll boil that frog when we come to it. (A lot more can be done, both for revenue and for equality, by closing loopholes. Getting rid of the AMT and income tax exception for municipal bonds cuts off the ability of the insanely wealthy to live off capital without paying taxes; getting rid of all of the holes in the estate tax code would allow it to actually limit inherited fortunes.)

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