But any real wealth tax is going to have exemptions, only apply to wealth above some threshold, and for the wealthy who structure their finances so as to have little or no taxable income, well they end up paying 20% like all the rest of us do.
Having your house get ‘too expensive to live in’, in fact, is a classic issue with property taxes, and was happening in California - which is exactly why prop 13 happened. And most of those locations the maximum tax is around 1-3%!
‘Wealth’ is not the same as income, because wealth is potential money, if you can sell - and if you sell, you lose access to it.
A 20% wealth tax would mean any asset which doesn’t earning free cash flow returns of at least 20% a year, or which isn’t appreciating at least 20% a year in a risk free way would be impossible to hold for anyone except the most rich people. And even they couldn’t do it for long.
I can’t think of anything which that realistically describes.
A 20% income tax reduces actual cash in hand to 80% of what you’d otherwise have, which isn’t great. But you still get the actual 80% cash in hand right now, and can use it.
You can’t have ‘80% control/ownership for the year’ of a house in a meaningful way, and especially for people actually using/relying on the asset to live, they can’t find 20% (or in most cases even 5%!) of the value in cash for the asset every year. They’d go bankrupt.
I think there's no reason why a wealth tax can't be progressive. Just making up numbers here, it could be zero for your first 30 million, and rise to some palpable amount for your first billion.
This would protect granny from being taxed out of her house, and in fact would affect relatively few salary earners.
I'm not overlooking the possibility that such a tax structure could create an effective wealth cap at some level.
The problem in California is that it's very hard to change laws. Likewise in my state, where many aspects of the tax system are constrained by the state constitution.
The biggest personal complaint I have is why should the government be getting more tax money when all they seem to use it for is blowing up random countries in the Middle East and spying on law abiding citizens for whatever random reason.
If grandma has $50M in her house and pension, she can afford to pay a tiny tiny tiny fraction of her wealth to make sure her grandkids still have a place to live that's not falling apart.
Please read before making replies that don't make sense in context. When I refer to 20% I'm referring the PG's characterization of a 1% wealth tax as an effective 20% income tax, not a 20% wealth tax.
Thank god no one is talking about this, then. According to Graham, a 20% wealth tax is equivalent to a 400% income tax.
It is clearly the case if you try to apply the income tax rate as a wealth tax using concrete real world examples.
Even a 3% property tax makes it very difficult for many normal people to own those assets in many real world economic circumstances.