Governments say they can't tax the super wealthy more because they'll just leave the country but has any first world country tried it in the last 50 years?

[u/Discontitulated]

It would be interesting to see how raising taxes on the super wealthy actually affected a first world country's tax revenue and economy.

Are our first world economies really so fragile the rely on the super wealthy and their meager tax revenue?

[u/Gyrgir]

In addition to the three countries listed in the article, the Netherlands also have something that functions like a wealth tax.

Their income tax system, instead of taxing realized investment gains like most countries, instead assumes a 4% rate of return on financial assets and taxes that as income. At a 30% tax rate, that is equivalent to a 1.2% wealth tax.

[u/rws247 → u/Gyrgir]

This was actually struck down by the courts two years ago. The assumed 4% rate of return was found unconstitutional.

This was quite disappointing, because the Dutch system was simple to administer and the assumed gains fo 4% were less than the actual gains most years.
But a group of people sued because they didn't invest their money, but put it in a savings account in the bank. Their actual gain were lower than 4%, so their argument was that they were taxed unfairly. The courts agreed, struck down that law, and the goverment is still figuring out the replacement. Knowing the current government, it will be terrible or they'll procrastinate on it till the government falls.

[u/elporsche → u/rws247]

The assumed 4% rate of return

This is wrong: the assumed rate of return for capital other than debt instruments or savings, was 5,39% in 2017 and increased to 6,17% in 2023 source

the assumed gains fo 4% were less than the actual gains most years

This may be true for savings in recent years, but the phenomenon of savings accounts offering >2% is very recent. Because the ECB held interest rates low before COVID, most banks didn't offer any savings instruments that offered beyond 0,5%.

And with ths 6% fictional rate of return, you can have trouble finding investments that net you more than that. r/geldzaken is full of stories where the fictional rate of return was way too high when compared to the actual earnings most individuals can find in capital investments.

[u/Jaggedmallard26 → u/rws247]

But a group of people sued because they didn't invest their money, but put it in a savings account in the bank. Their actual gain were lower than 4%,

It really should be noted that this almost always means poorer people. The rich are only using lower interest accounts for hedging but the poor need to actually rely on their money being accessible and they don't have the massive lumps of money that would get them preferential rates. So where the rich happily just invest and ride out the stock market or get high net worth accounts with juicy rates its the poor who are now being taxed into losses for their rainy day funds.

[u/ZwartVlekje → u/Jaggedmallard26]

In this case, that's not true though. The Dutch system allows for a certain amount of wealth tax free which is already higher than most people will have reasonably in their rainy day fund.

[u/ldn-ldn → u/ZwartVlekje]

Tax allowances in the UK haven't kept up with inflation for decades. £100k job today is about the same money as £56k job 15-20 years ago, but you're getting hit with taxes like you're ultra rich.

[u/FarkCookies → u/ZwartVlekje]

It was 50k euros per person and 100k for a household, since been raised slightly. My issue with this scheme is that I have to pay the tax even if my investments are in the red.

[u/Syrdon → u/Jaggedmallard26]

the poor who are now being taxed into losses for their rainy day funds.

Interesting built in assumption that it would be impossible to identify those individuals based on income or something like that.

[u/Sea_Taste1325 → u/rws247]

Ummm. Yeah, that was super fucking stupid. 

[u/Claill1a → u/rws247]

The fact that the courts struck down the law makes it clear that sometimes, even policies that seem to work well can be challenged if they don't account for all possible scenarios.

[u/rws247 → u/Claill1a]

Yes, I agree. But I also see that laws that do account for all possible scenario's lead to bureaucratic hell, which is hard and costly to administer, prone to errors, and still not fair in most cases.

Looking at the Belastingdienst, this was one of the few simple rules that mostly worked. Every other tax rule is hard and full of holes and exceptions, see the Toeslagenaffaire for example.

And it's true that some people were disadvantaged by this: people with more than €100k in non-pension savings with a low risk tolerance, so they put all their money in a low-yield savings account.
But I'm still not convinced we can come up with a better wealth tax rule in the system we live in.

[u/presentation-chaude → u/rws247]

But a group of people sued because they didn't invest their money, but put it in a savings account in the bank. Their actual gain were lower than 4%, so their argument was that they were taxed unfairly. The courts agreed

So a group of people sued because they were taxed unfairly, and won, because, well, they were taxed unfairly.

Surprising.

[u/ldn-ldn → u/rws247]

The courts did the right thing. Flat gain rate is a recipe for a disaster. You can't tax wealth, because wealth is not money. People should really stop trying to do so.

[u/Minimus-Maximus-69 → u/ldn-ldn]

By the same logic, you can't use wealth as collateral for a loan. And yet

[u/ldn-ldn → u/Minimus-Maximus-69]

How's that the same logic? If you can't use wealth as a collateral then mortgages wouldn't exist and you'd rent until death. You think that would be a better world?

[u/Minimus-Maximus-69 → u/ldn-ldn]

So wealth is money.

[u/ldn-ldn → u/Minimus-Maximus-69]

No. You can't buy bread with wealth.

[u/Minimus-Maximus-69 → u/ldn-ldn]

Wealth is fungible. Take a loan against your wealth, buy bread with it.

[u/ldn-ldn → u/Minimus-Maximus-69]

Are you 15 years old or something?

[u/Minimus-Maximus-69 → u/ldn-ldn]

You somehow not getting the concept?

[u/LadyUsana → u/Minimus-Maximus-69]

I mean you could tax the money received from loans rather than trying to go after something that is only speculated value. Loans are realized and have an actual value.

[u/Minimus-Maximus-69 → u/rws247]

Sounds pretty simple.

1) exclude a base amount of wealth (which I think they already did);

2) if you can show you had an actual rate of return lower than 4%, you pay tax on that rate.

[u/GameRoom → u/rws247]

Not sure about this specific law, but the intent of many wealth tax laws is for the taxation to be larger than the investment gains, with the explicit goal of making the ultra rich eventually not be ultra rich anymore.

[u/Xdddxddddddxxxdxd → u/GameRoom]

So people are going to invest out of the goodness of their hearts to support government spending? Why would anyone invest in countries with these laws if you are guaranteed to lose money?

[u/GameRoom → u/Xdddxddddddxxxdxd]

Not saying I endorse the idea but that is the intent for many

[u/Cazzah → u/GameRoom]

Typical market rate of return on investments is long term around 8% year on year.

The wealth taxes are typically 1-2%.

You do not have any idea what you are talking about.

[u/gastro_psychic → u/Gyrgir]

But if someone owns stock and the market is down that year they might need to sell some of their stocks (like ASML) to pay this tax. That is depressing.

[u/TurnDown4WattGaming → u/gastro_psychic]

That’s what the people in favor of it want to happen though. To them, that’s a feature and not a bug. Jealousy makes people quite vindictive.

[u/Goredema → u/gastro_psychic]

That's the risk of investing in stocks. They should stop buying avocado toast and lattes so they can afford the tax.

[u/Admirable-Word-8964 → u/Goredema]

Better than investing in property and making real estate ridiculously hard to obtain for regular people.

[u/gastro_psychic → u/Goredema]

Investing in companies is probably a good thing in a capitalist society…

[u/Candid-Mycologist539 → u/gastro_psychic]

Investing in companies is probably a good thing in a capitalist society…

Wealth hoarding and extreme income inequality is definitely NOT a good thing for society.

What if we spread the wealth out through taxation and opportunity?

Instead of one guy investing $1B, we could have 1000 people each investing $1M in businesses.

[u/gastro_psychic → u/Candid-Mycologist539]

I have invested in startups. I would be mortified if I had to pay tax on illiquid shares for a startup that will probably go bankrupt.

[u/Candid-Mycologist539 → u/gastro_psychic]

Are you worth more than $50M?

Then the tax doesn't apply to you. "You get the first $50M for free.*"

*Tax free when it comes to the proposed wealth tax.

[u/gastro_psychic → u/Candid-Mycologist539]

Where is the $50M number coming from?

[u/Candid-Mycologist539 → u/gastro_psychic]

This was the proposed wealth tax bill by Elizabeth Warren in the U.S. The Wealth Tax wouldn't kick in until the $50M mark. At that point, the rate is 2% for everything above $50M. 3% for everything above $1B.

"You get the first $50M for free."

Of course, taxing the wealthy in the U.S. is a no-no.

[u/chmarti → u/Candid-Mycologist539]

FYI though that in the Netherlands the number is not 50 million, it's 50,000 eur. So the issue mentioned about needing to sell stock to pay the tax is a real thing, even for middle class investors. Interestingly, the Netherlands allows a wealth tax exemption for a house you're currently living in. This prevents people from needing to sell their house to pay a wealth tax, but drives up housing prices too as everyone pours money into their tax exempt home.

[u/gastro_psychic → u/Candid-Mycologist539]

Ah, gotcha.

[u/CryptoNoob546 → u/Candid-Mycologist539]

You assume our government will take that money and actually help people….

[u/Candid-Mycologist539 → u/CryptoNoob546]

You assume our government will take that money and actually help people….

Other countries and societies do it. America has done it in the past.

I know this much for certain: the wealth is NOT helping people where it is right now -- being hoarded by billionaires.

[u/Minimus-Maximus-69 → u/CryptoNoob546]

Economically speaking, the government almost HAS to help people. The worst thing the government could do is take that tax money and give it to rich people, which is just the status quo. If they wanted to use it to persecute people, they'd just do that anyway without the tax. If they spend the money inefficiently, they're still spending it which is providing stimulus to the economy. Government jobs are jobs and help the economy.

[u/presentation-chaude → u/Candid-Mycologist539]

You won't get people to have that $1bn unless you incentivize innovation and wealth building. That's literally why our Western societies are so wealthy. This is not a zero sum game. Larry Page or Bill Gates didn't make billions by stealing from others. They made billions by building companies that create wealth. The gains in efficiency from Google, Windows and Office are HUGE.

Wealth building definitely IS a good thing for society.

[u/Candid-Mycologist539 → u/presentation-chaude]

You won't get people to have that $1bn unless you incentivize innovation and wealth building.

Not true. A lot of people are motivated to improve society.

Larry Page or Bill Gates didn't make billions by stealing from others.

Hahahahahahahaha!!! TY for the laugh!

Wealth building definitely IS a good thing for society.

Yes. But wealth hoarding is not. Find me a society where wealth hoarding exists in a healthy society.

[u/presentation-chaude → u/Candid-Mycologist539]

Not true. A lot of people are motivated to improve society.

Yeah, obviously works so well for countries like France. Where soooo much innovation takes place nowadays and a lot of high paying jobs are create... wait.

Hahahahahahahaha!!! TY for the laugh!

K.

Yes. But wealth hoarding is not. Find me a society where wealth hoarding exists in a healthy society.

The fucking western world.

[u/Carvj94 → u/gastro_psychic]

Not if some people are allowed to escape all the risks. That just screws over everyone else. If the worry is that retirement accounts might be affected then they can simply be made an exception. If the worry is your average gambler losing some extra money them fuck em. They should be avoiding risky companies and high stakes bets.

[u/si329dsa9j329dj → u/Carvj94]

This is a delusional take even by reddit standards.

[u/Carvj94 → u/si329dsa9j329dj]

It's delusional to say investments shouldn't be a guarantee for rich people?

[u/si329dsa9j329dj → u/Carvj94]

Investments aren’t a guarantee for rich people, what are you talking about? Also, guess what stocks tend to be risky? Start ups. Guess who needs capital the most? Start ups.

Economies famously grow when you decide to encourage people to avoid “risky companies” (start ups) and therefore divert investment away from your country for the sole reason of “fuck them, i’m mad they have more than me and need to cry about it on Reddit to feel better”

[u/Carvj94 → u/si329dsa9j329dj]

Investments aren’t a guarantee for rich people, what are you talking about?

I was obviously exaggerating, but you're naive to think they don't legally have the deck stacked in their favor on top of having the raw money necessary to manipulate the market. The privilege of having investment firms give them special attention is a gigantic advantage by itself. You and I can only dabble in investing while the rich have people who can watch prices and headlines 24/7. They're "guaranteed" to make a profit investing like a casino is guaranteed to turn a profit.

Economies famously grow when you decide to encourage people to avoid “risky companies” (start ups) and therefore divert investment away from your country for the sole reason of “fuck them, i’m mad they have more than me and need to cry about it on Reddit to feel better”

Yea capitalism naturally ends in the destruction of small business for various reasons. That's why they should get tax incentives and grants paid for by big businesses that get an overwhelming majority of investments. Encouraging investment into small businesses doesn't help.

[u/planetaryabundance → u/Goredema]

Is the idea here that only boomers own stock or something? lol…

[u/Own-Weakness-2247 → u/Goredema]

And do what? Park their money under their bed?

[u/Minimus-Maximus-69 → u/gastro_psychic]

But they'll also owe less, because their wealth decreased.

[u/gastro_psychic → u/Minimus-Maximus-69]

They lost wealth because they had to sell some of their shares. And the government took money on top of that.

[u/rws247 → u/gastro_psychic]

True, but most years the assumed rate of return was lower than your actual gains. And it helps discourage people from making overtly risky investments.

[u/Candid-Mycologist539 → u/gastro_psychic]

If someone owns $100M in stocks and has to pay 2% on the top $50M in a losing year, I'm not gonna feel bad for them. I'm pretty sure they're still gonna be more okay than me or anyone I've ever met in my life.

This is the wealth tax proposed by Elizabeth Warren.

Oh, darn! You lost half your wealth, and now you're only worth $50M? Well, at least you don't have to pay the wealth tax!

Anywho...

[u/gastro_psychic → u/Candid-Mycologist539]

What percentage of Dutch does this apply to?

[u/chmarti → u/gastro_psychic]

In the Netherlandsyou are taxed on amounts over 50,000 eur, not including the value of your primary residence. So it affects a much larger percentage of people here than Warren's proposed tax would in the US. I agree that when you have 50 million, a 2% or so wealth tax feels really reasonable.

[u/Candid-Mycologist539 → u/gastro_psychic]

The original premise was that countries in general cannot tax the super wealthy because they will leave.

In the prior comment, everyone seemed all sad panda because sometimes the value of the stocks that the superwealthy own goes down.

I'm not gonna feel sad for someone who is still worth $50M.

[u/gastro_psychic → u/Candid-Mycologist539]

I own ASML stock and I am sure a lot of folks in /r/netherlands do too. Owning stocks doesn’t make you super wealthy.

[u/Candid-Mycologist539 → u/gastro_psychic]

I own ASML stock and I am sure a lot of folks in /r/netherlands do too. Owning stocks doesn’t make you super wealthy.

Agreed.

The tax I am talking about was a wealth tax proposed by American Senator Elizabeth Warren.

Under her plan, "You get the first $50M (in assets) for free," before the 2% tax kicks in.

So, if you are a multimillionaire worth $50,000,010, your tax burden for the wealth tax would be 20 cents.

But in America, it is wrong to tax the wealthy, so, of course, this bill has gone nowhere.

[u/gastro_psychic → u/Candid-Mycologist539]

Ah okay. Sorry.

[u/SpeciousSophist → u/Candid-Mycologist539]

Sure, because in a court of law “i just dont care how this effects other people” is a totally reasonable take

[u/Candid-Mycologist539 → u/SpeciousSophist]

Sure, because in a court of law “i just dont care how this effects other people” is a totally reasonable take

This is your opinion on my comment about my lack of compassion for a multimillionaire who has to pay taxes...but is still worth $50M+. I'm pretty sure the multimillionaire will be fine.

However, is it an acceptable take to say, "I just don't care how this affects other people," when poor people are affected by the law? Because we got a whole lotta that going on right now in American society...and the poor are NOT fine.

[u/presentation-chaude → u/[deleted]]

Sell to whom, exactly? People who could afford to buy would be... selling theirs.

Jealousy is no basis for lawmaking. It runs countries to the ground.

[u/elporsche → u/Gyrgir]

something that functions like a wealth tax.

To clarify: it is something that works like a wealth tax FOR PRIVATE INDIVIDUALS ONLY. For rich folk who have their assets managed by companies (e.g., family holdings), this wealth tax method doesn't apply and they are instead taxed with the usual actual income minus expenses method.

[u/Xdddxddddddxxxdxd → u/Gyrgir]

“Assumes a 4% rate of return”

Wow that’s a terrible idea