I'm retired. I hope to get a 3% per year income from my savings every year after inflation and taxes. If my state implemented a 1% wealth tax on savings each year, I would go bankrupt in 20 years. I am hoping that I will live 20 years.
Lol, that's still totally feasible for normal FIRE/retirement situations, my understanding is that most proposals only start at $50 million or more. You can still have a super cushy retirement with $3mil+ and 3% withdrawal forever.
curious how they came to that number. There's probably plenty of voters willing to cast a vote for $0.5M+ and plenty ready to cast a vote for $100M+. How was the line drawn?
The minimum net worth of the top 1% of households is roughly $13.7 million[1]. So at $50 million they can say "we're only taxing the top of the top 1%" as a way to sell it.
"The top 1%" is a popular target for these schemes because 99% of people might be convinced to support it, since it won't affect them (at least not directly).
A wealth tax will affect the distribution of investments. It might make higher risk investments like stocks more attractive as compared to bonds, it might make them less attractive. More likely it might make publicly available instruments less attractive in general, as private investments have more flexibility in how they are evaluated. In any case, there will be winners and losers as the investment landscape shifts, which affects everyone. If equity becomes more attractive, it could force less wealthy people into equity, which means they will take on more risk. If private investments become more attractive, less wealthy people will lose out. It might not affect those with no assets, but that is not certain either. So, everyone will be affected, in some way. Impossible to model due to unintended side effects.
Yeah, "It won't affect the 99%," is the wrong framing. The entire point is for it to affect the 99% (by undoing the effect disproportionately high wealth among the wealthiest and disproportionately low wealth among the middle and least wealthy).
I think your assumptions are off, though; less wealthy people might not be "forced" into investment at all, but given the "opportunity" to pay off debt or increase/diversify consumption. In the end, the important part is the wealth transfer downward, wherever it ends up. No trickle, but you can pump it.
In 2020, there was a campaign (prop 15) to legalize increases on the property tax rate in California that only applied to commercial and industrial properties. Intuitively, the constituency for prop 15 should be very similar to a wealth tax on $0.5M+, since the set of people owning commercial/industrial real estate in California are mostly a subset of people with $0.5M+ wealth. What actually happened is there was heavy opposition and prop 15 was narrowly rejected by the voters. Organizations opposing the proposition included the American Legion, the NAACP, and California Beer and Beverage Distributors.
Arguably, there’s a disconnect where the people who lead civic organizations don’t have a great deal in common with the median member. They might be wealthier and generally more plugged in to power structures. They might not support policies that are in the best interest of members they represent, especially people who have a hard time representing themselves.
Anyway, if your goal is to get a policy enacted, it’s not enough for your policy to be theoretically good for the median voter. You need a winning political coalition.
There are probably good argument for it being lower (maybe circa $10 or $12 million. But I have a feeling they do want to try and not hit land-rich-but-otherwise-maybe-not "family farms" that have hundreds or thousands of acres.
Do you remember when the top marginal tax rate was 90%? Things don't only move in one direction. The effective tax rate on the ultra wealthy has been steadily trending down for decades.
I'm sure any wealth tax would only apply to wealth above a certain amount. For instance, inheritance tax only applies to $15mil and above. Likewise, when you sell a house the first $500K (I believe) in capital gains from the sale is tax free.
I don't think people with savings of $15mil and above (assuming that would be the cutoff) are in danger of going bankrupt in 20 yrs from a 1% wealth tax. Assuming your 3% return, they'd be earning $450,000 a year that wouldn't be touched by the wealth tax.
No one is proposing a wealth tax on anyone other than the ultra-wealthy. If you are in a position where a 1% wealth tax would bankrupt you, then you probably aren't someone that it would apply to.
I can't tell if this is sarcasm or a serious point.
Obviously people who have retired and based their entire life plan on making that work have many fewer options than those who are still working. You are arguing that nobody can plan for any kind of secure retirement, including you.
It depends on the net wealth we're discussing. I'm sorry if I touched someone who lives with $1M saving. But should I be sorry for someone with $10M, which might be way more than 30 years of lifetime earnings of p80 population? Wealth tax is obviously targeting the latter.
Having progressive tax rate might be a better way to discuss, instead of blaming whole points.
