Contemplating wealth taxes
May. 8th, 2026 10:18 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
walkitoutWe already have a few taxes that are based on valuation of property. I believe all of the 50 states have property taxes that apply to real estate. And about half the states have valuation taxes on registered automobiles. You could argue forever about whether these are or are not “wealth” taxes, and we could further engage in pedantry around payments in lieu of taxes, however, for them moment, as a rough measure, let’s just consider real estate taxes as wealth taxes _and then look at the rate_, which is generally referred to as “millage”, which refers to 1 in 1000 (per mille), in much the same way that percent means 1 in 100 (per 100).
Asking price can be anything; what the sales price was is a much more useful comparator. Similarly, what a proposal on a ballot says is not a fair comparator for a law that is passed, implemented, and has been adjusted over time by case law and administrative rule making. But I do want to point out that both the California wealth tax on billionaires as proposed, is a single digit _per cent_. It is not millage. And that’s fine, because sometimes millage for real estate taxes reaches two digits, which would be single digit percent. ON THE OTHER HAND I have yet to see a functional jurisdiction (housing vacancy is not an evergreen local political topic, city emergency services response times are not an evergreen local political topic) where the millage exceeds 25, which would be half the proposed California wealth tax. Taxes in absolute dollar amounts in cities with very high millage tend to be very, very low, and you hear things like the city is selling houses for a $1, which usually means, you pay the back taxes owing and a $1 and you own the property now (there’s some variability — sometimes you don’t have to pay all or even any of the back taxes).
The California proposal has numerous problems, but mostly looks like a straightforward “belling the cat” situation, another reason to not consider it a real basis for discussing an functional wealth tax
Taxes in our country are generally paid willingly (and believe me when I say, I do know about tax evasion, and I also know how things have worked in other times and places and taxes in our country are generally paid willingly, even, at times enthusiastically) for three main reasons, the reasons which should be the goal and constraints of every tax policy: they are perceived as fair, the proceeds are perceived as generally going to worthy causes, and they are relatively straightforward to calculate and collect.
While there continue to be an astonishing number of people in our country who do not understand progressive taxes, we do have them, and people who understand them and are not horrible human beings generally support them, while finding plenty of room to debate things like exemption amounts, brackets, highest rate, credits, deductions, etc. Similarly, people who understand property taxes and the inherent difficulties of evaluation, and the tradeoffs between perfect accuracy and privacy, understand that property tax valuation is not going to be the same as market price, and they are fine with that unless they believe there is unfair variation within the population of taxed properties. Fancy way of saying, as long as everyone’s valuation is low, no one cares. As long as everyone’s valuation is high, no one cares. If mine is low compared to others, I will be expected to guard my privilege but not be an ass about it. If mine is high compared to others, I will be expected to argue to get it regularized, and also not use that as the basis to go at anyone else while I’m at it, unless there really is a corrupt pattern, in which case we all know it’s about to get ugly in this town and after the dust settles we’ll avoid getting into it quite that hard again for a while.
In times of inflation, whether a general rise in prices, or a rise specifically in housing prices, associated rises in nominal property taxes paid will generally trigger resistance (I mean come on humans gonna human) and this can lead to real issues in which people limit millage increases, or valuation increases or something in order to keep at least ONE of their unavoidable bills from going up. This is worth remembering as a phenomenon; you’ll see it at least a couple of times in a long life, more depending on how much you move around.
Property taxes are generally accepted because property owners know that their houses cannot be readily picked up and moved, and if the neighborhood goes to shit they will not get their money back. Property owners know that the value of their property is defined at least in part by road quality, emergency services, local school system and similar infrastructure (honestly, this is part of the reason we go hard against corruption — corruption makes an entire community worth less because we don’t like that shit). Even if you “only” pay rent, your rent is going to go pay all the costs associated with whatever you are renting in terms of property, so you are paying property tax one way or another. Schools are often funded by a combination of property taxes and sales taxes, and this can become extremely regressive extremely quickly, but property owners are well-positioned to fight back against efforts to shift the balance away from sales taxes and towards property taxes.
With all that in mind, I decided to take a crack at how we could devise a wealth tax that might be collectible, perceived as fair, perceived as going to worthy causes, and relatively straightforward to implement and collect. Washington State recently added a capital gains tax to their revenue streams, and they went to considerable effort to do carve outs for all the really contentious stuff. So with that in mind (no wealth tax on 401ks and other protected retirement accounts), I think if you put together a wealth tax that focused on stocks and bonds, and you kept the rate down at the low millage level, I think you could probably collect way more overall then a “belling the cat” scenario (even if you successfully pulled off the California one time). A low single digit millage on brokerage accounts should be very easy to implement, because we already have tons of KYC laws to deal with money laundering and so forth. Administrative rule making could cope with all the But Different Places Tax My Money situations (which Washington State is grappling with now) by defining credits / deductions for taxes paid in other locations.
All the people who do NOT have investment accounts outside of retirement accounts could probably be convinced to support this measure — the downside here is that this demographic votes less, and can be swayed by promises that one day they WILL have such accounts and would they really want to pay that tax then? OTOH, if the exemption amount if high enough (not billionaire, but, say, somewhere between 1 and 10 million dollars), and if you created a structure that recognized that Age and Dependents Matter (you do not want to be taking all the money needed for an aged person or dependents with expensive health needs, for example — if they are willing and able to pay for their health care, let them! Everyone else will spend down to access Medicaid), you may be able to push back on that argument. But maybe not — liars gonna lie and it is hard to keep up.
For those WITH those investment accounts, it’s worth really looking at fee structures on investment accounts. There’s a range! Beeps are Millage. And that’s one of the reasons why I want to stay in low millage territory for this tax. This crowd _already pays_ fees on their accounts every year in the form of beeps, and they _used_ to pay in low digits percentage (which would be comparable to higher end of property tax).
You _could_ argue that people would dodge paying taxes with overseas accounts, and I would not argue but I would also argue that they already try and some of them are fined and go to jail for it.
You _could_ argue that people would dodge paying taxes by buying art or jewelry or whatever, but remember I was exempting the lower end of rich. They could also dodge by buying houses — but they’ll be paying property tax on those houses.
PILOT is always available for other situations, as are deductions and credits for things that seem relevant. I don’t know what those would be, but I’m sure someone would be persuasive. That’s how simple taxes become complex taxes — by sapping the motivation for eliminating the tax by absorbing the impact of the motivated minorities with exceptions and accommodations.
I don’t really know if I am interested in anyone else’s opinion on any of this. This is mostly just me writing down what I started thinking when I quit thinking of the California ballot measure as “belling the cat” or a waste of time and energy. When I started thinking in terms of, But That Rate Is Just Wrong, and realized that the ballot measure and Warren’s proposals are hamfisted attempts to create an Overton window for taxing stocks and bonds, I had a Lot of Thoughts and didn’t want to instantly forget them. Which I for sure otherwise will.
Oh, and if you are thinking, But What About Private Credit / Equity. I keep trying to write what I’m thinking, but I mostly can’t seem to get it down in words that compare just how hilarious I think it would be to do this. Totally worthy, and an absolute MAD scramble to arbitrage the fuck out of all of it. So. Much. Material. for much funnier writers than I will ever be.
Asking price can be anything; what the sales price was is a much more useful comparator. Similarly, what a proposal on a ballot says is not a fair comparator for a law that is passed, implemented, and has been adjusted over time by case law and administrative rule making. But I do want to point out that both the California wealth tax on billionaires as proposed, is a single digit _per cent_. It is not millage. And that’s fine, because sometimes millage for real estate taxes reaches two digits, which would be single digit percent. ON THE OTHER HAND I have yet to see a functional jurisdiction (housing vacancy is not an evergreen local political topic, city emergency services response times are not an evergreen local political topic) where the millage exceeds 25, which would be half the proposed California wealth tax. Taxes in absolute dollar amounts in cities with very high millage tend to be very, very low, and you hear things like the city is selling houses for a $1, which usually means, you pay the back taxes owing and a $1 and you own the property now (there’s some variability — sometimes you don’t have to pay all or even any of the back taxes).
The California proposal has numerous problems, but mostly looks like a straightforward “belling the cat” situation, another reason to not consider it a real basis for discussing an functional wealth tax
Taxes in our country are generally paid willingly (and believe me when I say, I do know about tax evasion, and I also know how things have worked in other times and places and taxes in our country are generally paid willingly, even, at times enthusiastically) for three main reasons, the reasons which should be the goal and constraints of every tax policy: they are perceived as fair, the proceeds are perceived as generally going to worthy causes, and they are relatively straightforward to calculate and collect.
While there continue to be an astonishing number of people in our country who do not understand progressive taxes, we do have them, and people who understand them and are not horrible human beings generally support them, while finding plenty of room to debate things like exemption amounts, brackets, highest rate, credits, deductions, etc. Similarly, people who understand property taxes and the inherent difficulties of evaluation, and the tradeoffs between perfect accuracy and privacy, understand that property tax valuation is not going to be the same as market price, and they are fine with that unless they believe there is unfair variation within the population of taxed properties. Fancy way of saying, as long as everyone’s valuation is low, no one cares. As long as everyone’s valuation is high, no one cares. If mine is low compared to others, I will be expected to guard my privilege but not be an ass about it. If mine is high compared to others, I will be expected to argue to get it regularized, and also not use that as the basis to go at anyone else while I’m at it, unless there really is a corrupt pattern, in which case we all know it’s about to get ugly in this town and after the dust settles we’ll avoid getting into it quite that hard again for a while.
In times of inflation, whether a general rise in prices, or a rise specifically in housing prices, associated rises in nominal property taxes paid will generally trigger resistance (I mean come on humans gonna human) and this can lead to real issues in which people limit millage increases, or valuation increases or something in order to keep at least ONE of their unavoidable bills from going up. This is worth remembering as a phenomenon; you’ll see it at least a couple of times in a long life, more depending on how much you move around.
Property taxes are generally accepted because property owners know that their houses cannot be readily picked up and moved, and if the neighborhood goes to shit they will not get their money back. Property owners know that the value of their property is defined at least in part by road quality, emergency services, local school system and similar infrastructure (honestly, this is part of the reason we go hard against corruption — corruption makes an entire community worth less because we don’t like that shit). Even if you “only” pay rent, your rent is going to go pay all the costs associated with whatever you are renting in terms of property, so you are paying property tax one way or another. Schools are often funded by a combination of property taxes and sales taxes, and this can become extremely regressive extremely quickly, but property owners are well-positioned to fight back against efforts to shift the balance away from sales taxes and towards property taxes.
With all that in mind, I decided to take a crack at how we could devise a wealth tax that might be collectible, perceived as fair, perceived as going to worthy causes, and relatively straightforward to implement and collect. Washington State recently added a capital gains tax to their revenue streams, and they went to considerable effort to do carve outs for all the really contentious stuff. So with that in mind (no wealth tax on 401ks and other protected retirement accounts), I think if you put together a wealth tax that focused on stocks and bonds, and you kept the rate down at the low millage level, I think you could probably collect way more overall then a “belling the cat” scenario (even if you successfully pulled off the California one time). A low single digit millage on brokerage accounts should be very easy to implement, because we already have tons of KYC laws to deal with money laundering and so forth. Administrative rule making could cope with all the But Different Places Tax My Money situations (which Washington State is grappling with now) by defining credits / deductions for taxes paid in other locations.
All the people who do NOT have investment accounts outside of retirement accounts could probably be convinced to support this measure — the downside here is that this demographic votes less, and can be swayed by promises that one day they WILL have such accounts and would they really want to pay that tax then? OTOH, if the exemption amount if high enough (not billionaire, but, say, somewhere between 1 and 10 million dollars), and if you created a structure that recognized that Age and Dependents Matter (you do not want to be taking all the money needed for an aged person or dependents with expensive health needs, for example — if they are willing and able to pay for their health care, let them! Everyone else will spend down to access Medicaid), you may be able to push back on that argument. But maybe not — liars gonna lie and it is hard to keep up.
For those WITH those investment accounts, it’s worth really looking at fee structures on investment accounts. There’s a range! Beeps are Millage. And that’s one of the reasons why I want to stay in low millage territory for this tax. This crowd _already pays_ fees on their accounts every year in the form of beeps, and they _used_ to pay in low digits percentage (which would be comparable to higher end of property tax).
You _could_ argue that people would dodge paying taxes with overseas accounts, and I would not argue but I would also argue that they already try and some of them are fined and go to jail for it.
You _could_ argue that people would dodge paying taxes by buying art or jewelry or whatever, but remember I was exempting the lower end of rich. They could also dodge by buying houses — but they’ll be paying property tax on those houses.
PILOT is always available for other situations, as are deductions and credits for things that seem relevant. I don’t know what those would be, but I’m sure someone would be persuasive. That’s how simple taxes become complex taxes — by sapping the motivation for eliminating the tax by absorbing the impact of the motivated minorities with exceptions and accommodations.
I don’t really know if I am interested in anyone else’s opinion on any of this. This is mostly just me writing down what I started thinking when I quit thinking of the California ballot measure as “belling the cat” or a waste of time and energy. When I started thinking in terms of, But That Rate Is Just Wrong, and realized that the ballot measure and Warren’s proposals are hamfisted attempts to create an Overton window for taxing stocks and bonds, I had a Lot of Thoughts and didn’t want to instantly forget them. Which I for sure otherwise will.
Oh, and if you are thinking, But What About Private Credit / Equity. I keep trying to write what I’m thinking, but I mostly can’t seem to get it down in words that compare just how hilarious I think it would be to do this. Totally worthy, and an absolute MAD scramble to arbitrage the fuck out of all of it. So. Much. Material. for much funnier writers than I will ever be.