Tax the Super Wealthy

[GuitarStv]

In my mind, the "fairest" approach would be to have a big enough VAT or consumption tax on all goods and services that are consumed, in order to support the needed level of government spending.  Meanwhile, eliminate all of the income tax code.  In order to make it progressive, everyone would receive a monthly or annual transfer-payment of some multiple of the poverty rate, to make up for paying any of the consumption taxes on some base-line standard of living.

You've got two guys.  A has 1,000$ to his name, and B is worth 1,000,000,000.

They both have to eat.  So A buys a bag of rice and a bag of beans . . . and incredibly manages to get the total cost of his meals down to 1$ per day.  B only eats sushi off naked women, so he's spending about 10,000$ a day on food.

They both have to live somewhere.  So A has rented a cockroach infested place with five other guys and only has to pay 500$ a month.  B has three mansions that he bought in the past that he jets to and from.  He's paying 30,000$ each month in property taxes on the mansions.

They both need clothing.  So A will occasionally buy used stuff from Goodwill.  Let's say 5$ a month, because this shit is already pretty worn so it wears out.  B likes to buy clothes that he'll never wear and then burn them for fun.  So 15,000$ a month.

They both need to get around.  A has a monthly bus pass for 120$.  B likes to travel by helicopter . . . so let's say 50,000$ a month all in.

<snip>

Looks good so far right?  The extravagant B is paying way more in taxes!  Well . . . when you look at how much they're paying based upon net worth (ignoring all frivolous spending - just looking at the essentials necessary to survive here) . . . A is spending 39.3% of his net worth in taxes each year just to survive and B is spending 0.0588% of his while being a wasteful dick.

Consumption taxes tend to be rather regressive.  They're great if you're rich enough that the cost of survival is so low you can choose to consume or not to.  But most people dismiss them outright because of how unfairly they penalize the poorest folks in society.

Person A then gets a monthly payment of $32.70 so that they both spend about 0.0588% of their income on living expenses.

Yep.  Wealth redistribution schemes are certainly a way around the problem.  But then you've effectively re-built a graduated tax system . . .everyone pays the same price at the register, but people get monthly refunds based upon their income, wealth, spending, or some combination.

A graduated consumption tax like you're proposing sounds as fair as a graduated income tax . . . but it's going to carry with it all the complication that rantk81 seemed intent on avoiding.

[scottish]

Concentration of capital is definitely a problem.    But -  I've heard that inter-generational wealth tends to disappear after 3 generations.    So if my parents were wealthy, my kids or my grandkids would be likely to blow everything on naked person sushi and helicopter rides as GuitarStv suggested.    Is this true?   Or is it just apocryphal?    'cause it substantially reduces the problem of concentration of capital if it's true.   Otherwise the system doesn't work at all - if capital can concentrate indefinitely across generations you'll see something a lot more extreme than what we have today.

Either way, capitalism seems to be the best system (so far) to produce aggregate societal wealth.     The financial problem here is that people who aren't wealthy want to live beyond their means.   In the case of  poverty, they don't have too much choice in the matter.    And making it worse, they're often trapped in poverty because they're so busy scrambling to earn a living they can't take time to improve their situation. 

Living beyond your means can only be done with borrowed money for so long - eventually you have to pay the piper.    When it's the government doing the borrowing, it's going to come down to taxes, interest rates or inflation.   Take your pick.

So - do the US billionaires have enough concentrated wealth to make a difference in US government debt?    If not, this is more of a feel good measure and society needs to focus on how to get everyone to a reasonable standard of living without borrowinging a ton of money.

As another topic - if you have to pay taxes on unrealized gains, does it follow that you get a deduction for unrealized losses?    The plan seems to be assuming that capital always increases, and I know this is not the case.

[MoseyingAlong]

I agree that those societies are more equal with regards to wealth... but is that actually desirable?

Is it a coincidence that the most innovative and largest companies in the world come from the USA?

I agree we don't want people starving... but I think giving people "comfortable" lives from the government results in less innovation and therefore less improvement for the world as a whole.

Is it "desirable" for the downtrodden of society to come out with pitchforks and baseball bats? What's the point of having more innovative and larger companies if the average family doesn't get any benefit from it? In fact, the average family tends to subsidize companies like Amazon, Nike, Fedex, or Apple, who pay virtually ZERO federal taxes.

Speaking of the world as a whole -> the world may benefit, but it is US policy, stability, and infrastructure that allow these companies to thrive. Thus, they should pay adequate tax to support that structure.

We here on the MMM forum may debate whether it's a benefit but I would guess the average family thinks their life is much improved by
- their smartphones
- quick, cheap and easy access to lots of quality TV shows (and some trash)
- being able to shop at any time and have things delivered to home

So I wouldn't call that subsidizing those companies. I would call that being a consumer and buying what you are interested in.

And yes, those companies produce a lot of taxes,
direct taxes to SS/Medicare
income tax paid by their employees from the wages the companies pay
sales tax paid by the consumers on the products the companies sell
property tax on the building they own/use (either direct or via their rent)
etc., etc., etc.
Taxes produced by a company are not as simple as the bottom line of their income tax returns.
Just like non-profit doesn't mean not obscene pay. Have you looked at the compensation of some non-profit executives? Crazy.

[PDXTabs]

Either way, capitalism seems to be the best system (so far) to produce aggregate societal wealth.     The financial problem here is that people who aren't wealthy want to live beyond their means.   In the case of  poverty, they don't have too much choice in the matter.    And making it worse, they're often trapped in poverty because they're so busy scrambling to earn a living they can't take time to improve their situation. 

Yup, capitalism is the best bad system, for sure. My favorite example is Pfizer. Pfizer was founder in 1849 by two German immigrants. 171 years later the corporation that they founded would release the first EUAed mRNA SARS-CoV-2 vaccine. One year later it would get full FDA approval.

But none of that means that Charles Pfizer and Charles F. Erhart should have got to live as robber barons during their lifetimes.

[Log]

I agree that those societies are more equal with regards to wealth... but is that actually desirable?

Is it a coincidence that the most innovative and largest companies in the world come from the USA?

I agree we don't want people starving... but I think giving people "comfortable" lives from the government results in less innovation and therefore less improvement for the world as a whole.

Is it "desirable" for the downtrodden of society to come out with pitchforks and baseball bats? What's the point of having more innovative and larger companies if the average family doesn't get any benefit from it? In fact, the average family tends to subsidize companies like Amazon, Nike, Fedex, or Apple, who pay virtually ZERO federal taxes.

Speaking of the world as a whole -> the world may benefit, but it is US policy, stability, and infrastructure that allow these companies to thrive. Thus, they should pay adequate tax to support that structure.

We here on the MMM forum may debate whether it's a benefit but I would guess the average family thinks their life is much improved by
- their smartphones
- quick, cheap and easy access to lots of quality TV shows (and some trash)
- being able to shop at any time and have things delivered to home

So I wouldn't call that subsidizing those companies. I would call that being a consumer and buying what you are interested in.

And yes, those companies produce a lot of taxes,
direct taxes to SS/Medicare
income tax paid by their employees from the wages the companies pay
sales tax paid by the consumers on the products the companies sell
property tax on the building they own/use (either direct or via their rent)
etc., etc., etc.
Taxes produced by a company are not as simple as the bottom line of their income tax returns.
Just like non-profit doesn't mean not obscene pay. Have you looked at the compensation of some non-profit executives? Crazy.

^This is an issue that could be addressed by higher income taxes on the top brackets. If past a certain point, half the money is going to the government anyway, then it wouldn't make sense for non-profits (or for-profit companies) to pay their executives such exorbitant sums. Since executive pay is determined by the board, and the board is usually made of people who are (or might someday be) executives of other institutions, they're personally incentivized to set the precedent for extremely high executive pay. You don't see these exorbitant wages as much in other countries that have higher rates on top income brackets, and surprise surprise, they still have companies and non-profits that are competently run.

Also, for all the societal benefits that come from innovative companies that make their founders and executives rich, it's important to also consider the costs. When these companies (and their shareholders) become too rich, they have the capacity and the incentives to stomp out or acquire competitors before they gain too much traction, and then the entire market becomes less efficient due to lack of competition.

I totally understand the perspective that these companies provide enormous value to society. Where I take issue is that I don't see a reality where higher taxes on extremely profitable companies and their extremely highly-compensated executives would reduce that value by an amount greater than the benefit to society caused by those taxes. The benefits would be a more competitive market, lower federal deficits, and less power accumulated in the hands of a billionaire oligarch class.

[seattlecyclone]

So - do the US billionaires have enough concentrated wealth to make a difference in US government debt?

I just pulled up the Forbes billionaires list, filtered by US billionaires, and they list 711 people. Their wealth sums to a bit under $5 trillion. You could impose a 100% wealth tax on all net worth exceeding $1 billion and pay off about 15% of the debt in the first year, but then we'd be out of billionaires and would bring in much less in future years.

[scottish]

The great thing about the US system, is that anyone can try to start a company and become a billionaire.   If they manage to succeed through a combination of luck, hard work and competence, then good for them.    I don't really get the hate for billionaires, especially self made ones.   

Poorly behaved billionaires is another story.    If they're behaving badly, attack the behaviour.    For example, if we don't like the business model where big companies buy out their potential competitors, then there should be a more effective way to address this than taxing the company's owners.

[Ron Scott]

It is amazing how the Republicans and the Democrats don’t give a damn about appealing to each other’s voters. It’s all about stirring the nuts in their own base.

The GOP talks stop the steal, life, guns, and tax reduction.

The Dems talk impeachments, socialism, and class warfare.

The parties are a disgrace. America is better than these morons and should rebel against them both.

Tax more INCOME, if you need to, not growth in net worth, but please don’t bullshit us that it’s going to accomplish anything.

[bmjohnson35]

It is amazing how the Republicans and the Democrats don’t give a damn about appealing to each other’s voters. It’s all about stirring the nuts in their own base.

The GOP talks stop the steal, life, guns, and tax reduction.

The Dems talk impeachments, socialism, and class warfare.

The parties are a disgrace. America is better than these morons and should rebel against them both.

Tax more INCOME, if you need to, not growth in net worth, but please don’t bullshit us that it’s going to accomplish anything.

I think Ron summarizes things well.  The problem with getting more taxes out of our billionaires (or corporate America) is the fact that our elected leaders will piss it away through corruption and waste. 

[Scandium]

The great thing about the US system, is that anyone can try to start a company and become a billionaire.   If they manage to succeed through a combination of luck, hard work and competence, then good for them.

Please show me how this is not possible in other countries? In what way is this unique to the US?

First; it's not really true. Economic mobility is LOWER in the US then many other OECD counties. How many have the freedom to "start a business"? Healthcare and retirement tied to employment? Majority having no opportunity to save up capital?

Second; starting a business isn't particularly easier in the US. In the Economist "ease of doing business" index it usually rates average. Especially all the red tape and inefficiecies. Precisely because of low taxes and hence low investment in general infrastructure (physical and digital), and effective government, the US is more like a developing country. Not to mention the lax anti-trust regulation that allows existing firms to crush competitors.

[Log]

It is amazing how the Republicans and the Democrats don’t give a damn about appealing to each other’s voters. It’s all about stirring the nuts in their own base.

The GOP talks stop the steal, life, guns, and tax reduction.

The Dems talk impeachments, socialism, and class warfare.

The parties are a disgrace. America is better than these morons and should rebel against them both.

Tax more INCOME, if you need to, not growth in net worth, but please don’t bullshit us that it’s going to accomplish anything.

I think Ron summarizes things well.  The problem with getting more taxes out of our billionaires (or corporate America) is the fact that our elected leaders will piss it away through corruption and waste.

I think this line of thinking is kind of missing the point. Our federal government has run deficits nearly every year of the 21st century, and cut taxes while doing so. Taxes and spending are no longer tied together. Increasing taxes might have a side benefit of reducing our deficits or even allowing us to return to running a surplus year here and there, which would be nice.

But that bigger point is that people having this much money at all is a net negative for society. When money is speech, the ultra-rich have concerning capacity to influence the government, spread disinformation, and create so much random distraction that it's harder for ordinary citizens to sort through all the noise to make informed decisions. That's in addition to the fact that they can use this money to manipulate markets, destroy the competition, and expand the power of their functional monopolies. Markets and democracy are the two best forms of collective decision making we have - extreme wealth accumulation gives a tiny sector of unaccountable, un-elected people way too much power over both of them.

Bezos owns the Washington Post. A stray tweet from Musk can send a stock or a Cryptocurrency tumbling or shoot it to the moon. Since social media's taken a big PR hit and Facebook is a raging dumpster fire with no future, Zuck is turning around and using his pile of cash to make sure he gets to be king of the VR/AR industry. Even the biggest capitalism fan-boys should admit these aren't healthy, competitive markets.

[JGS1980]

So - do the US billionaires have enough concentrated wealth to make a difference in US government debt?

I just pulled up the Forbes billionaires list, filtered by US billionaires, and they list 711 people. Their wealth sums to a bit under $5 trillion. You could impose a 100% wealth tax on all net worth exceeding $1 billion and pay off about 15% of the debt in the first year, but then we'd be out of billionaires and would bring in much less in future years.

Seattlecyclone, could you do the math with anyone in the us with more than $100,000,000? I mean, if you can't live on that... /s

[Catbert]

In this board, I would hope people understand what a horrible precedent it would set to tax unrealized wealth.

You would hope.  And quite often you would be disappointed.  It comes with the territory.

I can think of so many things in my tax lifetime that started out only affecting the "rich" (not necessarily super rich) but now apply to many more of us:  Alternative Minimum Tax (ATM); taxing social security if taxable income is over 25K; phasing out ability to write-off real estate losses if income is over 100K; Medicare surcharge if MAGI is over 250K.  And those are the only ones that eventually affected my taxes after initially looking like they would only affect "the other guy".

Once they work out the bugs in figuring out net worth for the super rich, it'll be easier to inch down the cut-off for the rest of us.

[GuitarStv]

Once they we work out the bugs in figuring out net worth for the super rich, it'll be easier to inch down the cut-off for the rest of us.

In a democracy where the government is chosen from the people, by the people . . . there isn't a 'they'.  No need to fear 'them' when 'they' are actually 'you'.

[FIPurpose]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

[wageslave23]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

[lemonlyman]

This is different than capitalism.  Capitalism is the cause of wealth disparity by design.  The person who wins more gets more capital.  This capital can be used to increase existing capital.  It's a positive feedback loop.  Socialism was originally devised as a counter to the wealth concentration that is fundamentally built into capitalist systems.  So in capitalist/socialist hybrids, when wealth concentration becomes too great the only solution that can work to fix the problem is to shift balance towards more socialist policy.  Whether that's through increased taxation/wealth distribution, more government programs, nationalization/abolition of private property, greater regulation . . . there is no way around it.

I don't think capitalism is the cause of wealth disparity. If you're trying to frame economics within the context of the board game Monopoly, I guess that's the way to look at it, but it's not the driver of capitalism. The driver of capitalism is the ability for individuals to exchange value for capital. People who have a lot of capital exchanged a whole lot of value to accumulate it. With stock ownership, the market has priced those shares and the owners of the business either provided products or services that people really, really wanted. My business works because I provide a service that many people don't want to do themselves (tax, accounting, and consulting). I don't need to work anymore. I just like doing it. I completely disagree that capitalism is only about capital acquisition; it's a small part of it. Most capital exists in the economy exchanging hands.

I'm ok with taxing realized gains of the wealthy more, but taxing unrealized gains is just a bad idea. It changes the game for allocating new funds to start ups and will lower job creation while not helping with wealth redistribution at all because the deficit is so bad already. IMO, the government should be focusing its resources on downstream benefits for the population that capitalism doesn't address like health because medical issues are inelastic in demand. $3 trillion annually going to health cost outside of CMS is insane. Surely we can deal with that "market" better with single payer. That's off topic. I just mean this new tax is a bad idea and isn't about the living standard of the wealthy or what they can "afford". It's moral grandstanding to change capital allocation from people who are good at it to the government who is bad at it.

[rantk81]

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

100% agree. and I tend to lean toward taxing consumption instead of production, as being a better thing on the whole (Even though it might not be better for me personally, as I've already pretty much reached FI with the headwinds of paying hefty income taxes my whole life, and don't relish the possibility of now paying high consumption taxes on any of my future spending.)

[wageslave23]

This is different than capitalism.  Capitalism is the cause of wealth disparity by design.  The person who wins more gets more capital.  This capital can be used to increase existing capital.  It's a positive feedback loop.  Socialism was originally devised as a counter to the wealth concentration that is fundamentally built into capitalist systems.  So in capitalist/socialist hybrids, when wealth concentration becomes too great the only solution that can work to fix the problem is to shift balance towards more socialist policy.  Whether that's through increased taxation/wealth distribution, more government programs, nationalization/abolition of private property, greater regulation . . . there is no way around it.

I don't think capitalism is the cause of wealth disparity. If you're trying to frame economics within the context of the board game Monopoly, I guess that's the way to look at it, but it's not the driver of capitalism. The driver of capitalism is the ability for individuals to exchange value for capital. People who have a lot of capital exchanged a whole lot of value to accumulate it. With stock ownership, the market has priced those shares and the owners of the business either provided products or services that people really, really wanted. My business works because I provide a service that many people don't want to do themselves (tax, accounting, and consulting). I don't need to work anymore. I just like doing it. I completely disagree that capitalism is only about capital acquisition; it's a small part of it. Most capital exists in the economy exchanging hands.

I'm ok with taxing realized gains of the wealthy more, but taxing unrealized gains is just a bad idea. It changes the game for allocating new funds to start ups and will lower job creation while not helping with wealth redistribution at all because the deficit is so bad already. IMO, the government should be focusing its resources on downstream benefits for the population that capitalism doesn't address like health because medical issues are inelastic in demand. $3 trillion annually going to health cost outside of CMS is insane. Surely we can deal with that "market" better with single payer. That's off topic. I just mean this new tax is a bad idea and isn't about the living standard of the wealthy or what they can "afford". It's moral grandstanding to change capital allocation from people who are good at it to the government who is bad at it.

I'm also a tax cpa. Ask any tax professional and they will tell you the same thing. It just won't work. Especially start ups.  They can be cash strapped but have insane valuations, so the founder has to sell his share of the company to pay taxes on a valuation that isn't realistic. Also causing the valuation to plummet. They need to have tax professionals and people with real world business experience creating tax laws because a politician isn't going to have a clue and neither will popular opinion.  I'd be all for taxing estates above $5 million at 90%. Or taxing consumption.

[JGS1980]

This may been addressed already, but won't taxing consumption lead to less consumption?

And isn't 70% of the US economy based on consumption/consumer spending?

So what will happen to the US economy if you institute a 30% VAT? Even with tax credits after the fact, won't this discourage spending?

JGS

*from an environmental perspective, this may be great! from an economic perspective, this may be a disaster!

[wageslave23]

This may been addressed already, but won't taxing consumption lead to less consumption?

And isn't 70% of the US economy based on consumption/consumer spending?

So what will happen to the US economy if you institute a 30% VAT? Even with tax credits after the fact, won't this discourage spending?

JGS

*from an environmental perspective, this may be great! from an economic perspective, this may be a disaster!

As long as all consumption was taxed evenly, it shouldn't have an effect.  Money is no good unless you spend it, there would be no point in hoarding it and not spending it just to avoid taxes.

[DadJokes]

This may been addressed already, but won't taxing consumption lead to less consumption?

And isn't 70% of the US economy based on consumption/consumer spending?

So what will happen to the US economy if you institute a 30% VAT? Even with tax credits after the fact, won't this discourage spending?

JGS

*from an environmental perspective, this may be great! from an economic perspective, this may be a disaster!

As long as all consumption was taxed evenly, it shouldn't have an effect.  Money is no good unless you spend it, there would be no point in hoarding it and not spending it just to avoid taxes.

Well, the super wealthy could probably find a way to spend all of their money overseas to avoid spending it here. It'd be about like the Washington residents slipping over the border to buy stuff in Oregon.

I still think a consumption tax is a good strategy, but it would require doing something to keep billionaires from taking their money overseas to spend.

[FIPurpose]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

1. Art investments are stupid and overinflated, so if forcing people to sell them off busts that bubble (and is basically just a way for wealthy people to hide their money)... ok.

2. There's a very easy way for taxing illiquid investments without having to sell off small pieces of it. So it's a moot point anyways. (By basically back dating valuations of when you bought it so that illiquid and liquid investments are treated the same)

Your example of selling art is an example of realization. So I'm not sure what you're getting at.

[seattlecyclone]

So - do the US billionaires have enough concentrated wealth to make a difference in US government debt?

I just pulled up the Forbes billionaires list, filtered by US billionaires, and they list 711 people. Their wealth sums to a bit under $5 trillion. You could impose a 100% wealth tax on all net worth exceeding $1 billion and pay off about 15% of the debt in the first year, but then we'd be out of billionaires and would bring in much less in future years.

Seattlecyclone, could you do the math with anyone in the us with more than $100,000,000? I mean, if you can't live on that... /s

Good question. For that we're going to need to look at a different data source. I found a company called Wealth-X that tries to collect such data. They have a report available with some summary data. They think there were 2,792 global billionaires in 2020, a couple hundred more than Forbes is saying there are now but the number is in the same ballpark.

They estimate a further 60,000 people with net worth between $100-999 million. Those are worldwide numbers. Most of the report is about the "ultra high net worth" cohort (defined as over $30 million), of which about a third are in the US. That ratio holds pretty true on the Forbes billionaire list, so let's assume it also holds true in the $100-999 million cohort. We can then estimate about 20,000 Americans between $100-999 million, with a combined wealth of roughly $5 trillion (again, dividing the global numbers in the report by three). Let each of these folks, plus the billionaires, keep $100 million after tax, and you'd stand to raise about $7-8 trillion the first year, much less after that.

Of course nobody is seriously proposing a 100% wealth tax above any given threshold. The Biden budget is for a 20% tax on unrealized capital gains over the past year for people over $100 million. This isn't a tax on the whole principal, but just the gains over the past year. It's also billed as a "minimum tax," so if the person is paying more than 20% of their unrealized gains anyway in other income taxes, this tax might not affect them. A Bloomberg article about this proposal cites a prediction that the tax would raise about $0.036 trillion per year in the first decade. It also estimates 20,000 people who would be subject to the tax, agreeing with the Wealth-X numbers.

[PDXTabs]

There's a very easy way for taxing illiquid investments without having to sell off small pieces of it. So it's a moot point anyways. (By basically back dating valuations of when you bought it so that illiquid and liquid investments are treated the same)

But how do I know the fair market value of an illiquid investment? I've seen private tech startups either intentionally overvalue or undervalue their company to suit their needs at the time.

The same thing happens in divorce all the time. If one party is going to buy out the home equity of the other party you can spend a lot of time and money arguing about how much an illiquid investment is worth when the only way you will really know is to sell it.

The lack of known value is the biggest problem I see with this proposal, as I noted earlier.

[YttriumNitrate]

So if the "unrealized gains" go down, would the government issue a refund? I'm guessing news articles about the government writing Zuckerberg a six billion dollar check would not go over too well.
https://www.ndtv.com/world-news/mark-zuckerberg-lost-29-billion-in-just-one-day-2748554

[Scandium]

So if the "unrealized gains" go down, would the government issue a refund? I'm guessing news articles about the government writing Zuckerberg a six billion dollar check would not go over too well.
https://www.ndtv.com/world-news/mark-zuckerberg-lost-29-billion-in-just-one-day-2748554

I mean you could read the article? But I guess asking stupid, irrelevant questions here is also an option

[wageslave23]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

1. Art investments are stupid and overinflated, so if forcing people to sell them off busts that bubble (and is basically just a way for wealthy people to hide their money)... ok.

2. There's a very easy way for taxing illiquid investments without having to sell off small pieces of it. So it's a moot point anyways. (By basically back dating valuations of when you bought it so that illiquid and liquid investments are treated the same)

Your example of selling art is an example of realization. So I'm not sure what you're getting at.

Please explain the solution to taxing illiquid assets because I don't follow.  My art example is you have a piece of art, someone else sells a similar piece of art for $1 million, now your piece is worth about a million. Sorry can't keep the art because I can't afford to pay taxes on money I don't have. Same thing with I start a company and it's now worth $1 million dollars, how do I come up with the $200,000 taxes with money I don't have? Or I have a rental house that suddenly increases in value by $200k, where do I come up with the $40k in taxes? Or farmland increases in value to $10 million, but the farm is barely breaking even. I can think of dozens of examples where this doesn't work. 

The easiest solution is wait until I sell the appreciated asset and the tax the proceeds that I receive.  Seems pretty intuitive.  Just get rid of the step up in basis at death and tax appreciated assets when they sell.

[scottish]

So if the "unrealized gains" go down, would the government issue a refund? I'm guessing news articles about the government writing Zuckerberg a six billion dollar check would not go over too well.
https://www.ndtv.com/world-news/mark-zuckerberg-lost-29-billion-in-just-one-day-2748554

I mean you could read the article? But I guess asking stupid, irrelevant questions here is also an option

I don't see anything in the original article that addresses this question.

My investment goes up for 5 years.   Then it stumbles badly and drops in value to below its cost base.

Does the government now issue a refund for all the taxes I paid for the first 5 years?    How about the apparent loss in capital that I have now incurred?

[PhrugalPhan]

I don't see anything in the original article that addresses this question.

That's because there isn't anything in the article discussing the question. 

And yes, I have the same question.  I guess they could say you don't get a refund of prior year Real Estate taxes if the value goes down either.  But you need a place to live and R.E. is extremely difficult to pick up and move, which is why its taxed.  You don't need to invest and improve your life in other ways however and this wealth tax will incentivize people to destroy wealth, not create it.  Can't say I see how that will turn out well, as much as some here like to say it will.

[FIPurpose]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

1. Art investments are stupid and overinflated, so if forcing people to sell them off busts that bubble (and is basically just a way for wealthy people to hide their money)... ok.

2. There's a very easy way for taxing illiquid investments without having to sell off small pieces of it. So it's a moot point anyways. (By basically back dating valuations of when you bought it so that illiquid and liquid investments are treated the same)

Your example of selling art is an example of realization. So I'm not sure what you're getting at.

Please explain the solution to taxing illiquid assets because I don't follow.  My art example is you have a piece of art, someone else sells a similar piece of art for $1 million, now your piece is worth about a million. Sorry can't keep the art because I can't afford to pay taxes on money I don't have. Same thing with I start a company and it's now worth $1 million dollars, how do I come up with the $200,000 taxes with money I don't have? Or I have a rental house that suddenly increases in value by $200k, where do I come up with the $40k in taxes? Or farmland increases in value to $10 million, but the farm is barely breaking even. I can think of dozens of examples where this doesn't work. 

The easiest solution is wait until I sell the appreciated asset and the tax the proceeds that I receive.  Seems pretty intuitive.  Just get rid of the step up in basis at death and tax appreciated assets when they sell.

Illiquid assets wouldn't be taxed until they're sold, but instead there would be a retrospective tax applied to it so that they would be taxed the same as liquid investments under this model: https://www.jstor.org/stable/2006793

[lutorm]

The one area where people are already paying taxes on unrealized gains is real estate.

There's (at least) one more: the exercise of Incentive Stock Options.

[jnw]

Imagine having to pay taxes on unrealized gains in stock market. And you do this for years. And then for some reason stock market tanks 80% and you have to sell for some reason.  You've unfairly paid taxes on gains that didn't happen.. so unfair.

What would the tax rate be on the unrealized gains in stock market?  like 1% similar to property taxes?  Don't they realize this would help tank the stock market and make people not want to invest?

Also Biden has mentioned that long term capital gains should vanish and that all capital gains should just be taxed same as interest / short term gains.  Another thing which would devastate the stock market.

[wageslave23]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

1. Art investments are stupid and overinflated, so if forcing people to sell them off busts that bubble (and is basically just a way for wealthy people to hide their money)... ok.

2. There's a very easy way for taxing illiquid investments without having to sell off small pieces of it. So it's a moot point anyways. (By basically back dating valuations of when you bought it so that illiquid and liquid investments are treated the same)

Your example of selling art is an example of realization. So I'm not sure what you're getting at.

Please explain the solution to taxing illiquid assets because I don't follow.  My art example is you have a piece of art, someone else sells a similar piece of art for $1 million, now your piece is worth about a million. Sorry can't keep the art because I can't afford to pay taxes on money I don't have. Same thing with I start a company and it's now worth $1 million dollars, how do I come up with the $200,000 taxes with money I don't have? Or I have a rental house that suddenly increases in value by $200k, where do I come up with the $40k in taxes? Or farmland increases in value to $10 million, but the farm is barely breaking even. I can think of dozens of examples where this doesn't work. 

The easiest solution is wait until I sell the appreciated asset and the tax the proceeds that I receive.  Seems pretty intuitive.  Just get rid of the step up in basis at death and tax appreciated assets when they sell.

Illiquid assets wouldn't be taxed until they're sold, but instead there would be a retrospective tax applied to it so that they would be taxed the same as liquid investments under this model: https://www.jstor.org/stable/2006793

Oh lord that's dumb. So you're illiquid property increases in value $100k. You owe $20k in taxes but just get charged interest on it until you eventually sell in 40 yrs.  Now including interest you owe 80k on $100k price appreciation. And really with inflation on the original purchase price of the property, the 100k gain represents a real loss. So you have a real loss after inflation and you are almost doubling the loss by taxing it.

[FIPurpose]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

1. Art investments are stupid and overinflated, so if forcing people to sell them off busts that bubble (and is basically just a way for wealthy people to hide their money)... ok.

2. There's a very easy way for taxing illiquid investments without having to sell off small pieces of it. So it's a moot point anyways. (By basically back dating valuations of when you bought it so that illiquid and liquid investments are treated the same)

Your example of selling art is an example of realization. So I'm not sure what you're getting at.

Please explain the solution to taxing illiquid assets because I don't follow.  My art example is you have a piece of art, someone else sells a similar piece of art for $1 million, now your piece is worth about a million. Sorry can't keep the art because I can't afford to pay taxes on money I don't have. Same thing with I start a company and it's now worth $1 million dollars, how do I come up with the $200,000 taxes with money I don't have? Or I have a rental house that suddenly increases in value by $200k, where do I come up with the $40k in taxes? Or farmland increases in value to $10 million, but the farm is barely breaking even. I can think of dozens of examples where this doesn't work. 

The easiest solution is wait until I sell the appreciated asset and the tax the proceeds that I receive.  Seems pretty intuitive.  Just get rid of the step up in basis at death and tax appreciated assets when they sell.

Illiquid assets wouldn't be taxed until they're sold, but instead there would be a retrospective tax applied to it so that they would be taxed the same as liquid investments under this model: https://www.jstor.org/stable/2006793

Oh lord that's dumb. So you're illiquid property increases in value $100k. You owe $20k in taxes but just get charged interest on it until you eventually sell in 40 yrs.  Now including interest you owe 80k on $100k price appreciation. And really with inflation on the original purchase price of the property, the 100k gain represents a real loss. So you have a real loss after inflation and you are almost doubling the loss by taxing it.

If you add in inflation then this literally already happens with all investments already. You're taxed by the increase, not some inflation-adjusted price.

Not sure that you're numbers are quite correct though. I imagine that their would more likely be sliding scale tables that would instead smooth that curve overtime. My guess in the way that would shake out is by having that 80k be part of an exponential growth curve, so that way, most of the increase is on the latter end rather than the beginning. Not perfect, but much fairer than it is today.

[JGS1980]

Just because it's HARD TO DO does not mean it's not worth doing.

Details will be figured out by some tax geniuses eventually, and I'm all for it.

Meanwhile, the rich will use their massive publicity machine to put fear in our hearts that "the taxman is coming for YOU next!". Yup, great reason not to try to tax them at all.

Nothing to see here, folks. Move on to the next distraction.

[DadJokes]

Just because it's HARD TO DO does not mean it's not worth doing.

Details will be figured out by some tax geniuses eventually, and I'm all for it.

Meanwhile, the rich will use their massive publicity machine to put fear in our hearts that "the taxman is coming for YOU next!". Yup, great reason not to try to tax them at all.

Nothing to see here, folks. Move on to the next distraction.

And yet the CPAs in this thread* have pointed out how unfeasible taxing unrealized gains is. There are better ways to "tax the evil rich" than this proposition. Just as we'd caution people against taking pandemic advice from non-epidemiologists on the internet, I'd caution against disregarding the suggestions from tax code experts.

*There have only been three CPAs in this thread as far as I can tell, so maybe there are other tax experts here who are in support and not using their credentials as justification for their argument.

[Log]

Yeah while I’ve been a proponent in this thread for higher taxes on the rich, I’m not really sold that this is the way to do it. For now we should increase the top marginal income tax rates by quite a lot, and implement a modest wealth tax and on the largest fortunes to start working out the kinks in measuring and taxing overall wealth. It may “not work” when the ultra-wealthy can just shelter their assets in another country, but having the infrastructure in place sets the precedent for a future where major countries can band together to make the wealth tax harder and harder to dodge. Even taxing 2% of 25% of a hundred-billionaire’s fortune after they’ve sent the other 75% overseas is still something.

[SwordGuy]

Well, first of all, everyone who owns a home or rents a home is paying property taxes on the unsold value of the property.   So the statement that it can't be done is ludicrous since it's done on almost all privately owned property in the country, each and every year.

But to make it simple, don't tax the value of the shares, tax the shares.    Let the government sell the shares to raise the cash.  Sometimes the government will make extra, other times it will make less, but it will always collect in taxes the correct percentage of the shares.

[SwordGuy]

Well, first of all, everyone who owns a home or rents a home is paying property taxes on the unsold value of the property.   So the statement that it can't be done is ludicrous since it's done on almost all privately owned property in the country, each and every year.

But to make it simple, don't tax the value of the shares, tax the shares.    Let the government sell the shares to raise the cash.  Sometimes the government will make extra, other times it will make less, but it will always collect in taxes the correct percentage of the shares.

As we all know, about 2 out of 3 times you'll gain value on the delay between the time the shares are taxed and they are sold.

I bet if **THIS** was the taxing proposal and it was likely to get passed, we would find the tune changing to "Oh, sure, go ahead and tax us on the unrealized gains."

My proposal also has the advantage of avoiding refunding unrealized losses that were paid as taxes in prior years.

[lemonlyman]

Well, first of all, everyone who owns a home or rents a home is paying property taxes on the unsold value of the property.   So the statement that it can't be done is ludicrous since it's done on almost all privately owned property in the country, each and every year.

But to make it simple, don't tax the value of the shares, tax the shares.    Let the government sell the shares to raise the cash.  Sometimes the government will make extra, other times it will make less, but it will always collect in taxes the correct percentage of the shares.

As we all know, about 2 out of 3 times you'll gain value on the delay between the time the shares are taxed and they are sold.

I bet if **THIS** was the taxing proposal and it was likely to get passed, we would find the tune changing to "Oh, sure, go ahead and tax us on the unrealized gains."

My proposal also has the advantage of avoiding refunding unrealized losses that were paid as taxes in prior years.

I think you'd lose that bet. Perhaps you can elaborate on your proposal. The government seizes and sells the shares? You say your proposal is simple, but I don't understand it. Maybe that's just me.

BTW, Property tax on homes is not the same thing as taxing unrealized gains. As you also know, when you sell a home, you pay tax on the gain above the exclusion. You don't pay that gain BEFORE you sell it.

[JGS1980]

Well, first of all, everyone who owns a home or rents a home is paying property taxes on the unsold value of the property.   So the statement that it can't be done is ludicrous since it's done on almost all privately owned property in the country, each and every year.

But to make it simple, don't tax the value of the shares, tax the shares.    Let the government sell the shares to raise the cash.  Sometimes the government will make extra, other times it will make less, but it will always collect in taxes the correct percentage of the shares.

As we all know, about 2 out of 3 times you'll gain value on the delay between the time the shares are taxed and they are sold.

I bet if **THIS** was the taxing proposal and it was likely to get passed, we would find the tune changing to "Oh, sure, go ahead and tax us on the unrealized gains."

My proposal also has the advantage of avoiding refunding unrealized losses that were paid as taxes in prior years.

I think you'd lose that bet. Perhaps you can elaborate on your proposal. The government seizes and sells the shares? You say your proposal is simple, but I don't understand it. Maybe that's just me.

BTW, Property tax on homes is not the same thing as taxing unrealized gains. As you also know, when you sell a home, you pay tax on the gain above the exclusion. You don't pay that gain BEFORE you sell it.

Wait, so lets say you pay 10K in taxes on your home as it is worth 500K, and you do this yearly for 10 years.

Then there is a depression, and the value of your home drops to 250K.  Do you get all your money back from State/Local from those previous years just because the value dropped?

BTW, this happened in Florida (and lots of other places) during the real estate crisis in the mid aughts.

[rantk81]

Property taxes work as a quazii "wealth tax" because:

- The government has the role of keeping track of who owns it, who transfer ownership, and enforcing ownership rights
- The assets cannot be "hidden" since they are real and exist in plain sight (e.g. they are "real" as in real estate, have an address associated with them, etc.)

The combination of those two unique factors makes it easy for taxes to be imposed on it.  However, it doesn't seem like it would scale well to overall net worth/wealth in general, since that can take many different forms, and the government isn't involved in all transactions.

[former player]

Having individuals who are richer than governments leads to dictatorship.  Either tax the billionaires now or become their slaves later.

[YttriumNitrate]

Wait, so lets say you pay 10K in taxes on your home as it is worth 500K, and you do this yearly for 10 years.
Then there is a depression, and the value of your home drops to 250K.  Do you get all your money back from State/Local from those previous years just because the value dropped?BTW, this happened in Florida (and lots of other places) during the real estate crisis in the mid aughts.

One big difference is that property taxes on real estate are not trying to pretend to be income taxes. They are a wealth tax.

[wageslave23]

"What happens if they start taxing MY capital gains?!" Uhhh ok. When there's something that isn't taxed, we call it a loophole. Taxing unrealized CG especially against the stock market makes sense to me. I'll likely be realizing most of my gains before I die anyways (along with like 98% of the posters on this site) so it's not a big deal. The problem is the .00001% of people in the country who carry 80% of the wealth who use CG's as simply a way of avoiding taxes. If this becomes a thing, you'll magically start seeing the Billionaires realize more of their gains instead of simply waiting for them to rollover on their death.

Being forced to realize a couple thousand dollars of my gains is hardly the end of the world and has virtually no effect on my goals of FIRE or wealth accumulation.

There is a reason they are called unrealized.  You don't actually have the money, who cares if other people are selling investments that you own and aren't selling for higher than what you paid for them. If you own a $10k piece of art and then it sells for a $1 million, would you pay $200k in capital gains tax? Where would you get the money from?  Tax either income or consumption and close all loopholes.  Taxing paper increases in networth is impractical and unfair.

1. Art investments are stupid and overinflated, so if forcing people to sell them off busts that bubble (and is basically just a way for wealthy people to hide their money)... ok.

2. There's a very easy way for taxing illiquid investments without having to sell off small pieces of it. So it's a moot point anyways. (By basically back dating valuations of when you bought it so that illiquid and liquid investments are treated the same)

Your example of selling art is an example of realization. So I'm not sure what you're getting at.

Please explain the solution to taxing illiquid assets because I don't follow.  My art example is you have a piece of art, someone else sells a similar piece of art for $1 million, now your piece is worth about a million. Sorry can't keep the art because I can't afford to pay taxes on money I don't have. Same thing with I start a company and it's now worth $1 million dollars, how do I come up with the $200,000 taxes with money I don't have? Or I have a rental house that suddenly increases in value by $200k, where do I come up with the $40k in taxes? Or farmland increases in value to $10 million, but the farm is barely breaking even. I can think of dozens of examples where this doesn't work. 

The easiest solution is wait until I sell the appreciated asset and the tax the proceeds that I receive.  Seems pretty intuitive.  Just get rid of the step up in basis at death and tax appreciated assets when they sell.

Illiquid assets wouldn't be taxed until they're sold, but instead there would be a retrospective tax applied to it so that they would be taxed the same as liquid investments under this model: https://www.jstor.org/stable/2006793

Oh lord that's dumb. So you're illiquid property increases in value $100k. You owe $20k in taxes but just get charged interest on it until you eventually sell in 40 yrs.  Now including interest you owe 80k on $100k price appreciation. And really with inflation on the original purchase price of the property, the 100k gain represents a real loss. So you have a real loss after inflation and you are almost doubling the loss by taxing it.

If you add in inflation then this literally already happens with all investments already. You're taxed by the increase, not some inflation-adjusted price.

Not sure that you're numbers are quite correct though. I imagine that their would more likely be sliding scale tables that would instead smooth that curve overtime. My guess in the way that would shake out is by having that 80k be part of an exponential growth curve, so that way, most of the increase is on the latter end rather than the beginning. Not perfect, but much fairer than it is today.

You are right, in that we already tax inflation gains.  My point is that this would add insult to injury.  They should be going in the opposite direction and adjusting basis for inflation and then taxing any gains.

[Phenix]

Wait, so lets say you pay 10K in taxes on your home as it is worth 500K, and you do this yearly for 10 years.
Then there is a depression, and the value of your home drops to 250K.  Do you get all your money back from State/Local from those previous years just because the value dropped?BTW, this happened in Florida (and lots of other places) during the real estate crisis in the mid aughts.

One big difference is that property taxes on real estate are not trying to pretend to be income taxes. They are a wealth tax.

And, most people have a general idea of what their property taxes are going to be year over year so it can be planned for in a budget.

[seattlecyclone]

Wait, so lets say you pay 10K in taxes on your home as it is worth 500K, and you do this yearly for 10 years.
Then there is a depression, and the value of your home drops to 250K.  Do you get all your money back from State/Local from those previous years just because the value dropped?BTW, this happened in Florida (and lots of other places) during the real estate crisis in the mid aughts.

One big difference is that property taxes on real estate are not trying to pretend to be income taxes. They are a wealth tax.

And, most people have a general idea of what their property taxes are going to be year over year so it can be planned for in a budget.

That, and the county assessor does the work of appraising your property for you and just sends you a bill. Put the onus on the individual to seek out an annual independent appraisal of every asset of significant value so that they can calculate how much unrealized appreciation they had in the past year, and you're creating a pretty huge administrative burden compared to the amount of money being raised.

[Phenix]

Wait, so lets say you pay 10K in taxes on your home as it is worth 500K, and you do this yearly for 10 years.
Then there is a depression, and the value of your home drops to 250K.  Do you get all your money back from State/Local from those previous years just because the value dropped?BTW, this happened in Florida (and lots of other places) during the real estate crisis in the mid aughts.

One big difference is that property taxes on real estate are not trying to pretend to be income taxes. They are a wealth tax.

And, most people have a general idea of what their property taxes are going to be year over year so it can be planned for in a budget.

That, and the county assessor does the work of appraising your property for you and just sends you a bill. Put the onus on the individual to seek out an annual independent appraisal of every asset of significant value so that they can calculate how much unrealized appreciation they had in the past year, and you're creating a pretty huge administrative burden compared to the amount of money being raised.

But it's okay, because we're only worried about the super wealthy. They can afford it.

[PathtoFIRE]

Maybe a wealth tax could work if you require people to declare assets and value them every year. The carrot would be that declared assets would get some benefit, maybe only partial estate tax. The stick would be that undeclared assets get 100% estate tax. And you could encourage realistic valuation by requiring the owner to sell up to half if someone was willing to pay some amount based off your value, like maybe 200%. If you undervalue something, you risk having to sell (or perhaps you just got lucky and found that rare buyer who values it way beyond what you or just about anyone else does). If something is of great value to you, you declare it accordingly pay tax accordingly. No surprises on your end for what you'll be taxed.