posted
I think that depends on what you mean by ideal world. I am fairly certain that there is no possible world (that can be reached from the current one) where wealth-based taxation as the primary means of taxation would be at all feasible (unless it was subject to a set of rules that made it basically equivalent to income-based taxation).
Simply put, if you tax wealth, people will not accumulate wealth. This means nobody will save very much, because it will be extremely counterproductive to do so. If there's a 10% wealth tax, nobody will ever accumulate more than a small multiple of their income in wealth -- retirement savings, house, et cetera -- since once they hit a few times their income, they're suddenly paying most of their income in taxes every year!
Of course, you have a very strange idea of what 'wealth' means.
quote:Money sitting in a yacht is money that's not doing anything useful.
Almost all wealth is in the form of investments. That is definitionally money that is doing something. Even in your example, every bit of the value of the appraisal value of that yacht was spent to obtain the yacht -- the money is out there doing stuff. What money do you imagine is sitting in the yacht purchase that would be "out in the world" if the yacht were not purchased?
Indeed, your basic premise, that the wealth isn't "doing anything useful" is pretty much entirely defeated by observation: the sum of savings matches the sum of investment within a few percent in first world economies. People are not stuffing money under their mattresses, figuratively or literally.
Posts: 15770 | Registered: Dec 2001
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quote: Because when discussing whether it's "fair" to tax the rich at such a high level, the holdings they already have must be considered in such a discussion.
So we are taxing them when they earn the money and then taxing that same money again the next year (and all subsequent years) because they didn't spend it on things that have no value? Perhaps a 100% inheritance tax would be a way to remove wealth from people that lived a lifestyle that enabled them to amass wealth. Who really owns the 'wealth'? Currently the bank owns more of my home than I do. Does this mean the owners of the bank have most of the wealth in my home? Does the credit union own the wealth of my checking and savings account since it is in their posession?
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quote:Originally posted by fugu13: Almost all wealth is in the form of investments. That is definitionally money that is doing something.
I would have thought that if the last few years had proved anything, it was that money in investments was in no way guaranteed to be tied to anything tangible.
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quote:I would have thought that if the last few years had proved anything, it was that money in investments was in no way guaranteed to be tied to anything tangible.
You're right, there is another possibility: some investments are partly illusionary, or more commonly, are more risky than presumed, so it makes even less sense to tax them (since they're tying up possibly much less money than their nominal value).
However, this is quite wrong:
quote:t was that money in investments was in no way guaranteed to be tied to anything tangible.
All of those housing loans and instruments built on top of housing loans ultimately represented money that had been leant for houses. The loans were bad because the values of those houses went down in a way that was not properly anticipated, given the structure of the instruments, but there definitely was something extremely tangible behind all the investment: all those houses (many of them excess houses) that have been built.
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quote:All of those housing loans and instruments built on top of housing loans ultimately represented money that had been leant for houses.
Including the derivatives and the investment instruments built off of the insurance? That's contrary to my understanding.
Posts: 10177 | Registered: Apr 2001
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posted
The most common MBS definitely yes: they were effectively mortgage purchases, sliced differently.
Mortgage CDS were pure risk swaps; they represent no money in and of themselves, only a transfer of risk. The outcomes are zero-sum. (edit: this sentence is an aside with no impact on the conclusion; They have high notional value, but they are pretty much always part of packages that have low total possible upsides or downsides (as turned out to be the case in most institutions after the dust cleared -- few actually lost all that much money on CDS)). So, while they didn't represent money that had been leant for houses, that's only because they didn't represent any money in the first place. Just risk transfers.
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posted
Double taxation isn't really relevant, of course. Any part of the house owned by the bank wouldn't be owned by the person -- that is, it would not increase their wealth, because their mortgage debt would offset it.
All moot, of course. Wealth taxation is a stupid idea that could only work if people were angels, for the reasons I outlined above.
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