They have to sell eventually to pay off the loans. And if they die, their estate has to sell the assets to pay off the loans, and then their heir will pay inheritance taxes on top of that.
Unless their spouse is still alive. In the US, assets' cost bases are reset when a spouse dies. That is the main way that rich people avoid capital gains taxes. I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax.
> I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax.
Neither of these would really work against the people you actually want it to work against.
If you don't have a basis reset then they just do a transaction that has the same effect, e.g. create a new corporation owned by the recipient and then have it repeatedly enter into slightly favorable transactions with the one owned by the donor until the new one has all the assets, or any of a hundred other things.
If you try to do a wealth tax then their assets end up in another country under whatever arrangement is necessary to give them de facto control but not formal ownership.
The best way to solve the "buy, borrow, die" thing is actually a consumption tax because then borrowing money in order to spend it doesn't avoid the tax.
I'd like to see all taxes replaced by consumption, sales, and/or value-added taxes, with an automatic rebate to offset the regressiveness. It would kind of end up being UBI with a vastly simpler tax code.
This would be an extremely regressive tax regime, effectively a flat tax rate. Worse than a flat tax rate, actually, since consumption rates do not scale linearly with income or wealth.
I think he meant that you'd have the brackets apply to types of consumption instead of income level, so no tax on food, low tax on restaurants, medium tax on high-end electronics, insane tax on planes and yachts. I mean it sounds like it would be easier to maintain/enforce such tiering system than constantly fight with people trying to not technically be wealthy. Downside of course is that some people's luxuries are other's basic needs, but I wonder if there's been serious research on the implications of such system.
Easiest thing would be to not have any tiers of consumption. The stuff people "need" to spend money on such as food and housing would be handled by an automatic rebate, effectively a UBI. No other welfare, assistance, etc. What you earn you keep, unless you spend it, then you pay tax.
What "high end electronics" would be taxed at a medium rate? Do billionaires not just use iPhones? Most high end private planes are the same models as regional jets (e.g. Embraer ERJ line), so a tax on them would still be mostly impacting normal folks' plane tickets.
The core problem remains the same: consumption does not scale with wealth. If we limit taxes go a handful of goods and services, then demand is just going to shift to something else. Consumption taxes give billionaires the option to drastically reduce their tax burden by consuming less. The lifestyle of someone with a $20 million net worth is not that much worse than someone with a $2 billion net worth.
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That scheme still wouldn't work. When that new corporation is first formed, it's near worthless. After the series of favorable deals, the value of each share in that corporation goes up. Thus it still incurs capital gains taxes.
Of course people will try to cheat taxes, but they'll try to cheat any form of tax: income, capital gains, inheritance taxes, etc. People are good to try and evade taxes regardless of the tax mechanism.
Consumption taxes are regressive: a sales tax is a flat tax that taxes a billion on their $10 latte the same as a poor person. Consumption also doesn't scale linearly with wealth: most billionaires don't consume 1000x as much as a millionaire.
Debt is usually rolled over if the billionaire is still rich (banks will do that for fees). The only expenses are the interest charges- which were small 3 years ago but larger now because of how interest rate increased.
Re: estate taxes - almost no ultra rich pays them, even without surviving wife. According tom Garry Cohn (former big kahuna at Goldman Sachd and former treasury something or other in the first Trump admin) only morons pay estate taxes : https://www.cnbc.com/2017/08/29/only-morons-pay-the-estate-t...
Lol nah. The assets are held by a trust. The trust, being a friendly bunch, loan you capital which it gets by liquidating assets, at a rate of 0% with “don’t worry about it” default terms. You’ll probably pay a management fee for each loan.
You croak, your heirs become the beneficiaries of the trust. Rinse, repeat.
In this case, the beneficiaries of the trust pay income tax on the money they receive from the trust.