What a Capital idea

[SqueakyVoice]

EU-funded report calls for wealth of super-rich to be taxed, not income

https://www.theguardian.com/business/2023/oct/22/eu-funded-report-calls-for-wealth-of-super-rich-to-be-taxed-not-income
Any thoughts? Bernie Ecclestone for one?

[Nearly Sane]

https://www.theguardian.com/business/2023/oct/22/eu-funded-report-calls-for-wealth-of-super-rich-to-be-taxed-not-income
Any thoughts? Bernie Ecclestone for one?

The problem always is that the partners at comoanies who help out with tax evasion avoidance are paid many many times those that draft and enforce the regulations for a reason

[jeremyp]

https://www.theguardian.com/business/2023/oct/22/eu-funded-report-calls-for-wealth-of-super-rich-to-be-taxed-not-income
Any thoughts? Bernie Ecclestone for one?

The biggest problem is that "wealth" often exists only on paper.

Take Elon Musk: he is currently valued at $225 billion. So he would have to find about $4.5 billion every year. Elon Musk doesn't have $4.5 billion. Most of that $225 billion is made up of ownership stakes in various companies. If he had to raise $4.5 billion, he would have to sell some of his shareholding. If he sold $4.5 billion in Tesla shares, the value of the shares would go down because a) it's a lot of shares and b) it's Elon Musk selling them. Most of Elon Musk's Tesla shares are pledged as collateral in loans, so if the value of the shares go down, the banks holding Elon's debt might issue a margin call, which means he either has to pledge more collateral or he has to reduce the size of his debt. Demanding 2% of Musk's wealth might be enough to bankrupt him.

Most billionaires are paper billionaires in the same way that Musk is. Some, even more so. The valuation of a person't stock holding is just the number of shares they own times the price that somebody paid for a share yesterday. It's not real money.

Yes, billionaires find ways of avoiding paying tax on income, but if this measure came in, they would find ways of avoiding paying tax on their wealth. You'll just find that there are very many fewer billionaires than you thought.

[SqueakyVoice]

JP,
I haven't  looked very far, this is the first item I found.
https://wageindicator.co.uk/pay/vip-celebrity-salary/elon-musk

Annual: £82,182,482,371.00
Monthly: £6,848,540,197.58
Weekly: £1,580,432,353.29

If* this is correct  he'd be paying about 3weeks of his wages to cover this tax bill.

* - yes, I know that's  a big(ish) if.

[jeremyp]

JP,
I haven't  looked very far, this is the first item I found.
https://wageindicator.co.uk/pay/vip-celebrity-salary/elon-muskIf* this is correct  he'd be paying about 3weeks of his wages to cover this tax bill.

* - yes, I know that's  a big(ish) if.

I'm afraid it is nonsense. That "salary" was calculated by subtracting his net worth at a point in 2021 from his net worth a year later in 2022. Nobody pays him $82 billion a year - his shares just go up and down. If you'd calculated his annual salary from his net worth change between November 2021 and November 2022, you would find it is -$50 billion.

The reality is that Elon Musk is not paid anything at all (very much). He generates cash by selling shares or by taking out bank loans collateralised on his shares. That's how he avoids tax.

[SqueakyVoice]

The reality is that Elon Musk is not paid anything at all (very much). He generates cash by selling shares or by taking out bank loans collateralised on his shares. That's how he avoids tax.
 

Okay (if surprising). What about Bernie Ecclestone (and the 2,999 people in the article)?

If EM doesn't  pay tax currently  and wouldn't  on this new idea, what other proposal could there be?

[jeremyp]

Okay (if surprising). What about Bernie Ecclestone (and the 2,999 people in the article)?

I don't know how Bernie Ecclestone's wealth is made up.

With all these people, it depends how liquid their wealth is. Probably for most of them much of their wealth is simply their shareholding in a company they started times its price.

Assuming you are a homeowner, do you think it would be fair for the government to tax you on the value of your home - say 2% per annum? Could you find 2% of the value of your home every year without selling it?

OR take Elizabeth Holmes: her company - Theranos - was valued at $9 billion in 2014 and she owned 51%. At 2% tax, she would have had to find $90 million, but the valuation was based entirely on what she promised not on revenue and profits of which there was very little. She didn't have $90 million to give to the IRS. In fact, now she's a convict because her promises were fraudulent.

If EM doesn't  pay tax currently  and wouldn't  on this new idea, what other proposal could there be?

The problem is that shares aren't real money. So probably you could tax them when they people turn the shares into real money. If Elon Musk sells $1,000,000 of shares, he should be taxed a percentage of the profit he made, or his "gain in capital". We could call it "gains of capital tax", or more snappily "capital gains" tax, but that's what we already do. Maybe there are some loopholes that could be closed, but other than that, extra taxes for very rich people seem somewhat punitive to me.

[Nearly Sane]

....
Assuming you are a homeowner, do you think it would be fair for the government to tax you on the value of your home - say 2% per annum? Could you find 2% of the value of your home every year without selling it?

...

Just to note that to an extent the council tax bands are based around that idea, and that a land value tax suggested by some would be close to what you mention above. As to whether it's fair or not, that would depend on your definition of fair. The poll tax argument was based around some seeing it as fair, others not 

[jeremyp]

Just to note that to an extent the council tax bands are based around that idea

Yes, I don't think the method for evaluating council tax is fair.

and that a land value tax suggested by some would be close to what you mention above.

I don't think that would be fair either.

As to whether it's fair or not, that would depend on your definition of fair. The poll tax argument was based around some seeing it as fair, others not

What's your definition of fair? I think it's unfair to tax somebody without taking into account their ability to pay the tax.

[Nearly Sane]

Yes, I don't think the method for evaluating council tax is fair.
I don't think that would be fair either.


What's your definition of fair? I think it's unfair to tax somebody without taking into account their ability to pay the tax.

What if their inability to pay is caused by their own actions?

As to what is 'fair', I don't think that a definition works. I suspect that those on either side of the poll tax debate would have a generally similar definition of 'fair'. As to what you regard as fair in that circumstance, are you saying that for you the flat poll tax was fair?

[SqueakyVoice]

I don't know how Bernie Ecclestone's wealth is made up.

With all these people, it depends how liquid their wealth is. Probably for most of them much of their wealth is simply their shareholding in a company they started times its price.

Assuming you are a homeowner, do you think it would be fair for the government to tax you on the value of your home - say 2% per annum? Could you find 2% of the value of your home every year without selling it?

Obviously  I'm  not giving you figures, but based on my current  situation, I would be paying less tax on assets than I'm paying in income tax (again, no surprise but, I pay that monthly, not annually).

OR take Elizabeth Holmes: her company - Theranos - was valued at $9 billion in 2014 and she owned 51%. At 2% tax, she would have had to find $90 million, but the valuation was based entirely on what she promised not on revenue and profits of which there was very little. She didn't have $90 million to give to the IRS. In fact, now she's a convict because her promises were fraudulent.
The problem is that shares aren't real money. So probably you could tax them when they people turn the shares into real money. If Elon Musk sells $1,000,000 of shares, he should be taxed a percentage of the profit he made, or his "gain in capital". We could call it "gains of capital tax", or more snappily "capital gains" tax, but that's what we already do. Maybe there are some loopholes that could be closed, but other than that, extra taxes for very rich people seem somewhat punitive to me.

IMO, if tax was based on overseas assets that could move money from all those off-shore bases (Monaco amongst others) to almost any landbased(?) country they could be used for education, any NHS'es (or almost anything), the funding would be the priority of the govnmt (hopefully at least elected).
(Just to note BE had to pay £652m in fines interest and tax after he pleaded guilty*. I'd be very surprised  if he 'had to' sell his shares to meet that amount.)
Basically, all these 3,000 super rich people can move there assets around and receive more than 2% back (the BoE's interest rate is 5.something) if they invested in that they'd still get 3% after paying their tax. I can't  see that being 'punitive'.

[jeremyp]

What if their inability to pay is caused by their own actions?

Can you give some examples?

As to what is 'fair', I don't think that a definition works. I suspect that those on either side of the poll tax debate would have a generally similar definition of 'fair'. As to what you regard as fair in that circumstance, are you saying that for you the flat poll tax was fair?

No. I said that taxing people should take into account their ability to pay the tax. A poll tax clearly doesn't do that.

[jeremyp]

Obviously  I'm  not giving you figures, but based on my current  situation, I would be paying less tax on assets than I'm paying in income tax (again, no surprise but, I pay that monthly, not annually).

But if there were no income tax, the tax on your property would have to be substantially higher, and it wouldn't go away if you lost your job, as income tax would.

IMO, if tax was based on overseas assets that could move money from all those off-shore bases (Monaco amongst others) to almost any landbased(?) country they could be used for education, any NHS'es (or almost anything), the funding would be the priority of the govnmt (hopefully at least elected).
(Just to note BE had to pay £652m in fines interest and tax after he pleaded guilty*. I'd be very surprised  if he 'had to' sell his shares to meet that amount.)

Why would you be surprised? I doubt if Bernie Ecclestone has £652 million in his current account. If I had that much money, almost all of it would be invested.

Basically, all these 3,000 super rich people can move there assets around and receive more than 2% back (the BoE's interest rate is 5.something) if they invested in that they'd still get 3% after paying their tax. I can't  see that being 'punitive'.

You can't just move shares around. You have to sell them and then buy new ones. The act of selling the shares triggers capital gains tax. Many shares also pay dividends and they are taxed too.

[SqueakyVoice]

But if there were no income tax, the tax on your property would have to be substantially higher, and it wouldn't go away if you lost your job, as income tax would.

My property was built and held in the UK.I think I once bought  a fridge magnet overseas, but that's  about it.
Why would you be surprised? I doubt if Bernie Ecclestone has £652 million in his current account. If I had that much money, almost all of it would be invested.

You can't just move shares around. You have to sell them and then buy new ones. The act of selling the shares triggers capital gains tax. Many shares also pay dividends and they are taxed too.
Yes you can. (You could ask Google about their alphabet shares, but I wouldn't  advise it. (I suspect I'm wondering if that's  you're concern and clearly not mine?)

There are oversea holding companies (based overseas) so the dividends are received  in those holding companies and they're taxed on the overseas rate, which is usually nothing. The holders of those closed companies  then get the company to buy a big new yacht, or 'pay their expenses' in a luxurious hotel.

[jeremyp]

My property was built and held in the UK.I think I once bought  a fridge magnet overseas, but that's  about it.
Why would you be surprised? I doubt if Bernie Ecclestone has £652 million in his current account. If I had that much money, almost all of it would be invested.

You can't just move shares around. You have to sell them and then buy new ones. The act of selling the shares triggers capital gains tax. Many shares also pay dividends and they are taxed too.
Yes you can. (You could ask Google about their alphabet shares, but I wouldn't  advise it. (I suspect I'm wondering if that's  your concern and clearly not mine?)

There are oversea holding companies (based overseas) so the dividends are received  in those holding companies and they're taxed on the overseas rate, which is usually nothing. The holders of those closed companies  then get the company to buy a big new yacht, or 'pay their expenses' in a luxurious hotel.

Overseas assets are subject to capital gains tax in the UK, but the rules are complicated. I'm not saying there aren't loopholes but the solution to loopholes is to close them, not invent new punitive taxes that would also likely have loopholes.

[SqueakyVoice]

Overseas assets are subject to capital gains tax in the UK, but the rules are complicated. I'm not saying there aren't loopholes but the solution to loopholes is to close them, not invent new punitive taxes that would also likely have loopholes.

...when they are sold by an overseas holder the gains remain overseas. The report is from the EU (unfortunately no longer) not the UK.
I don't  think I'm  patronising  them but, I suspect that  Rich people are good at making money and good at planning for the future, why you keep referring  to a tax rate as "punitive" is beyond me.
(P.S. UK taxes are 'suffered'. I found that out a long time ago, still stuck with me.)

[SqueakyVoice]

I was looking  for something  else, then I found this,

68% of respondents from this demographic support higher taxes on wealth. The same percentage supported the introduction of a wealth tax of 1-2% on those with more than £10 million.

https://patrioticmillionaires.uk/latest-news/new-poll-wealthiest-6-percent-of-brits-support-a-wealth-tax
There are other parts of the polls with similar  results but this link....
https://www.wired.co.uk/article/millionaires-begging-governments-tax-wealth

A group of multimillionaires say it’s time to get serious about taxing wealth. They argue that this would promote economic stability and benefit everyone.

...is a bit more accessible.

[SqueakyVoice]

Even more super-rich-winney billionaires want to pay even more some tax.

https://www.theguardian.com/business/2024/jan/17/wealth-tax-super-rich-davos-abigail-disney-brian-cox-valerie-rockefeller

Cox, an Emmy and Golden Globe-winning actor, said: “We are living in a second ‘Gilded Age’. Billionaires are wielding their extreme wealth to accumulate political power and influence, simultaneously undermining democracy and the global economy. It’s long past time to act. If our elected officials refuse to address this concentration of money and power, the consequences will be dire.”