Comment by outside1234
2 hours ago
It isn't, because the ultra rich have no capital gains. They get ultra low interest rate loans against assets so they never have to sell assets and trigger capital gains. Google "Buy, Borrow, Die" if you don't understand this strategy.
They have to sell eventually to pay off the loans. And if they die, their estate has to sell the assets to pay off the loans, and then their heir will pay inheritance taxes on top of that.
Unless their spouse is still alive. In the US, assets' cost bases are reset when a spouse dies. That is the main way that rich people avoid capital gains taxes. I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax.
> I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax.
Neither of these would really work against the people you actually want it to work against.
If you don't have a basis reset then they just do a transaction that has the same effect, e.g. create a new corporation owned by the recipient and then have it repeatedly enter into slightly favorable transactions with the one owned by the donor until the new one has all the assets, or any of a hundred other things.
If you try to do a wealth tax then their assets end up in another country under whatever arrangement is necessary to give them de facto control but not formal ownership.
The best way to solve the "buy, borrow, die" thing is actually a consumption tax because then borrowing money in order to spend it doesn't avoid the tax.
I'd like to see all taxes replaced by consumption, sales, and/or value-added taxes, with an automatic rebate to offset the regressiveness. It would kind of end up being UBI with a vastly simpler tax code.
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That scheme still wouldn't work. When that new corporation is first formed, it's near worthless. After the series of favorable deals, the value of each share in that corporation goes up. Thus it still incurs capital gains taxes.
Of course people will try to cheat taxes, but they'll try to cheat any form of tax: income, capital gains, inheritance taxes, etc. People are good to try and evade taxes regardless of the tax mechanism.
Consumption taxes are regressive: a sales tax is a flat tax that taxes a billion on their $10 latte the same as a poor person. Consumption also doesn't scale linearly with wealth: most billionaires don't consume 1000x as much as a millionaire.
Lol nah. The assets are held by a trust. The trust, being a friendly bunch, loan you capital which it gets by liquidating assets, at a rate of 0% with “don’t worry about it” default terms. You’ll probably pay a management fee for each loan.
You croak, your heirs become the beneficiaries of the trust. Rinse, repeat.