Globally coordinated Wealth Tax

[Candace]

I think a globally coordinated wealth tax is almost inevitable.

I am interested in your thoughts on the topic, specifically:

1. What probability would you assign to a global Wealth Tax?
2. When might this Wealth Tax be implemented?
3. Do you believe that it is more likely to be a onetime event, an ongoing tax or both?
4. What scale do you think might be assigned (Will middle class be included? How much if you have $1M in financial assets, $5M, …$1B, $10B).
5. What assets might considered taxable? (i.e. stocks and bonds, but what about real estate, gold, art etc).
6. Where might the wealthy attempt to hide their money in the months/years preceding? How would this effect the economy?
7. What would be the psychological effect of “gifting” large sums of money to children of the wealthy before they are ready to handle it?
8. What would the world look like AFTER implementation of a globally coordinated Wealth Tax?

I am very interested in reading what you think. (Or direct me to a thread that has already hashed out this topic if such a thread exists).

 

[Candace]

http://www.zerohedge.com/news/muddl...ays-there-may-be-only-painful-ways-out-crisis

"...the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world's financial asset holders: the middle-and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path. "

I think by BCS they meant BCG. Have a look at this article.

Here is a gentler version, with the Germans saying "tax me harder", but meaning only a 5% levy. Catchy title for the group: Vermögende für eine Vermögensabgabe.
http://www.guardian.co.uk/world/2011/aug/29/tax-us-more-say-wealthy-europeans

And here's one from wsj discussing a 46% tax for wealthy Belgiums.
http://blogs.wsj.com/brussels/2011/05/25/why-not-a-wealth-tax-2/

 

[Candace]

In a last ditch attempt at generating some discussion, here are my thoughts (amateurish as they are) on the questions I put out. Despite the constant bickering and namecalling, there are some obviously brilliant minds here. I would much rather read YOUR thoughts on the topic than present my own, but here goes…

1. What probability would you assign to a global Wealth Tax?
The only possibility I see for a global Wealth Tax NOT being implemented is if the majority of the wealthy believe that one is coming and act in such a way that a Wealth Tax is no longer necessary. (Will expand when I present my views on #6 in next post). Otherwise, the widening rich/poor gap (Gini coefficient) and escalating social unrest, along with seemingly unsolvable sovereign debt problems all point to wealth redistribution.

2. When might this Wealth Tax be implemented?
I’m thinking two years from now, maybe three. I guess my prediction means that Dems will also be re-elected. If the tax is not globally coordinated, Canada (where I live) might be a safe haven until our next election.

3. Do you believe that it is more likely to be a onetime event or an ongoing tax?
Maybe a combination. Wresting away 46% of a multibillionaire’s assets seems extreme, dangerous even. Would he not use some of his money to put up a good fight? Perhaps something like a one-time sliding scale tax amounting to 15 or 20% on average and an ongoing tax (0.5-2%).

4. What scale do you think might be assigned (i.e for $1M in financial assets, $5M, $10M, … $1B etc).
BCG’s article included the middle class but I can’t see that being voted in unless the amount is only token. Perhaps it will only be that 1% the OWSers are pointing at. Maybe it will be token up to the magical $1M, at which point it would still be smallish (5%) and scale up to a max of 25% for our billionaires.

 

[Candace]

5. What assets might considered taxable? (i.e. stocks and bonds, but what about real estate, gold, art etc).
I think it may be stocks and bonds initially and then loopholes will get closed as time goes by, i.e. precious metal purchases will be taxed, real estate transactions, art etc. I have read that incorporated businesses could be left alone, but without further definition that seems to be too big a loophole. I already have personally an incorporated holding company that invests and dividends out money to me. Surely ALL the wealthy would.

6. Where might the wealthy attempt to hide their money in the months/years preceding? How would this effect the economy?
If real estate is left out of the asset calculation (as some have suggested) we could see yet another real estate boom. Theoretically, art, wine, coins and other collectibles should increase in value although I think people may realize the likelihood of a bubble being pricked and not send them to the moon. I think that wealth might funnel into buying up private businesses (which are generally considered to be exempt from such a tax). PMs will escalate in value at least initially. They may subsequently tank if rules are established to entice money back into deflated stock and bond markets. People may follow Buffett’s example and donate money to charity rather than handing it over to the government. The rich could recognize the futility of trying to hang onto all of their wealth and go on a drunken spending spree that would boost the world’s economy. Giving money to children early should also stimulate the economy hugely. They are far more likely to spend it than the wealthy middle-aged and elderly. I spent a day in the Caymans a while ago trying to understand how tax havens work. Fascinating stuff but I think the world will get together to clamp down further on Lichtenstein, Caymans etc. I assume different countries will tax differently according to their debt burdens but I guess they could also tax according to their wealth structure as part of a sovereign debt restructuring pact. i.e. If there are more billionaires in the US, the tax rate would be higher there than in France for instance, who, as I understand it, lost a lot of their billionaires when they implemented a Wealth Tax on their own. Also, I wouldn’t be surprised if the spectre of a Wealth Tax had a good bit to do with the stock market sell off and what I believe will soon be a bond market sell off.

7. What would be the psychological effect of “gifting” large sums of money to children of the wealthy before they are ready to handle it?
Having read my gibberish this far (bless you!), I will share my hidden agenda for starting this thread. I am seriously considering gifting money to each of our two daughters (18 and 20) immediately. Our wills specified that they would get next to no money until they were 30. Keeps the money away from early failed marriages and gives them a chance to get out and earn a living on their own first. We live a fairly frugal lifestyle even though we have money and I THINK they are unlikely to act like lottery winners but I might be disappointed. I will of course contact paid professionals for advice before doing so.

8. What would the world look like AFTER implementation of a globally coordinated Wealth Tax?
Too much for my pea brain. But I’d love to hear your thoughts.

 

[Debaser82]

It wil happen for sure both through inflation as through outright possesion taking of X% of savings...

I work with someone from Argentina and he talks a bit about what happened couple of years ago there.

If you didnt have your money outside of the country you got screwed.

Now assuming this time the effort will be global just having your money outside the country will be less eficient then it once was.

This leaves us with a couple of alternatives for keeping your money.

1: Real estate. They are not going to disown everyone of their house. But... Taxes on owning a house will rise no doubt and you can't "hide" owning a house.

2: Stocks. Capital gain taxes will rise no doubt + who knows what the markets will do right..

But, even if you lose 50% on stock value in theory the stock will still be yours....


3: Gold and other tangibles....

Buying and selling those will be severely restricted if they aren't already....

But, if you have the time and enough money.... They remain one of the most favourable options in my book.

Say you have 1 million USD.

You buy 500K of gold and put it in a deep hole somewhere and get it back in 5 years.

Nobody knows about it + should you die it can be passed on to your children without any inheritance tax.

 

[Candace]

If regulators step in, what's to say that the price of gold wouldn't collapse? Thank you for replying btw, I think I will head over to the metals forum and do some reading. Wealth preservation is a well discussed theme on ET, but until reading that ZeroHedge article in conjunction with OWS I was able to dismiss my occasional worries as tinfoil hat thinking. I'm in full blown paranoia now, truly considering burying money and various valuables in a coffee tin in the backyard. My husband thinks I'm crazy.

Quote from Debaser82:

It wil happen for sure both through inflation as through outright possesion taking of X% of savings...

I work with someone from Argentina and he talks a bit about what happened couple of years ago there.

If you didnt have your money outside of the country you got screwed.

Now assuming this time the effort will be global just having your money outside the country will be less eficient then it once was.

This leaves us with a couple of alternatives for keeping your money.

1: Real estate. They are not going to disown everyone of their house. But... Taxes on owning a house will rise no doubt and you can't "hide" owning a house.

2: Stocks. Capital gain taxes will rise no doubt + who knows what the markets will do right..

But, even if you lose 50% on stock value in theory the stock will still be yours....


3: Gold and other tangibles....

Buying and selling those will be severely restricted if they aren't already....

But, if you have the time and enough money.... They remain one of the most favourable options in my book.

Say you have 1 million USD.

You buy 500K of gold and put it in a deep hole somewhere and get it back in 5 years.

Nobody knows about it + should you die it can be passed on to your children without any inheritance tax.

 

[Debaser82]

Quote from Candace:

If regulators step in, what's to say that the price of gold wouldn't collapse? Thank you for replying btw, I think I will head over to the metals forum and do some reading. Wealth preservation is a well discussed theme on ET, but until reading that ZeroHedge article in conjunction with OWS I was able to dismiss my occasional worries as tinfoil hat thinking. I'm in full blown paranoia now, truly considering burying money and various valuables in a coffee tin in the backyard. My husband thinks I'm crazy.

There was a couple here that got scared of the banking crisis and took all their money from the bank. They got robbed a few weeks later and lost everything. Elsewhere on Elite trader you could read about a banking heist that cleared all the vaults and left them uninsured.

What is safe and what not? That's for each and everyone themselves to dedice. Be aware of the pro's and cons of whatever route you decide and be sure no one decides but you so when it turns sour you will be able to blame no one but yourself.

 

[jem]

I would design a wealth tax based on fairness.

Those who advocate for big govt spending are hit with up to 0 to 60% surtax... based on an internet ballot. The goal of the voting would be to have those advocating for more govt... pay for it.

There is a also a 5% tax for those who contribute money to causes advocating for more taxes and bigger govt.

We would also have a a 10% tax wealth recapture tax for all wealthy people who have advocated for bigger govt and more taxes who have moved to lower tax havens.

We will also have a 10% tax on those who have advocated for higher taxes or bigger govt in the media or movies, or tv or the internet.

The money by law must go to desalination plants and childrens charities which document greater than 90% of the donations get to the children.

 

[oldtime]

yeah I've thought about it. I call it a net worth tax. The only fair tax is an income tax, here's why.

Let's just say the rate is 10% a year.

you start with a million dollars in an S&P 500 index fund.
the gov takes 10%
now you have 900k
the mkt drops by 10%
now you have 810k
the gov takes 10%
now you have 729k
the mkt drops by 3%
now you have 707k
the gov takes 10%
now you have 600k
the mkt goes up 10%
now you have 660k
the gov takes 10%
now you have 594k
the mkt goes up 8%
now you have 641k
the gov takes 10%
now you have 577k

are you sure you want to do this?

 

[Candace]

Quote from Debaser82:

There was a couple here that got scared of the banking crisis and took all their money from the bank. They got robbed a few weeks later and lost everything. Elsewhere on Elite trader you could read about a banking heist that cleared all the vaults and left them uninsured.

What is safe and what not? That's for each and everyone themselves to dedice. Be aware of the pro's and cons of whatever route you decide and be sure no one decides but you so when it turns sour you will be able to blame no one but yourself.

I am unlikely to make all-in kind of moves, but I am thinking that I will proceed with giving money to my daughters perhaps in the form of a trust fund. Other than that I may just spend a little more than I do normally, maybe buy some of those "other tangibles" that suit me, like antiques and art. And lastly, I may put a little less effort into trading. I make a decent profit trading but it takes its toll. Why spend so much time if it will just be taxed away?