How about a progressive Capital Acquisitions Tax?

[The Horseman]

Do you think a 0.5% or 1% tax on retained wealth is a bigger disincentive to wealth creation than a 50% tax on the wealth creation itself?
There's a balance to be struck but suggesting that people won't accumulate wealth because there's a small tax on it doesn't make sense.
We already have a wealth tax. It's called property tax. I don't see any evidence that people aren't buying houses because of that property tax. Do you think people will stop buying houses if property tax was doubled or tripled?

People work and better themselves firstly to fulfil their basic needs of food, shelter, clothing etc. they then go onto fulfil their wants, bigger house, car, holiday, retirement etc.

Suggesting people will not buy houses because of a property tax is not comparable. People buy houses to live in not as investments. People need somewhere to live and choose to buy to fulfil that need. People invest in property or pensions the key word here is "invest". Capital gains are charged at 30%

I don't accept that if peoples wealth improves through their sacrifices they should be punished for it when others choose not to make sacrifices and they should benefit off the back of those who do make sacrifices.

 

[T McGibney]

No, it creates an environment in which wealth can be created. It facilitates the creation of wealth but it doesn't create it.

Ok, so if I own a green field with sheep on it in Blanchardstown, and its market value is €5m, I'm no wealthier than my cousin who owns a similar sheep field in North Leitrim worth €10k?

Now consider that both fields were worth roughly the same as each other when our grandad owned them both 60 years ago. Really, has no wealth been created by the massive capital appreciation in Blanchardstown in the meantime?

That's because it's not complete nonsense, it's the truth.

What you said last week wasn't the truth. It was easy for me to demonstrate how it was false, without having to rant about "complete nonsense" and the like.

 

[Purple]

People work and better themselves firstly to fulfil their basic needs of food, shelter, clothing etc. they then go onto fulfil their wants, bigger house, car, holiday, retirement etc.

Suggesting people will not buy houses because of a property tax is not comparable. People buy houses to live in not as investments. People need somewhere to live and choose to buy to fulfil that need. People invest in property or pensions the key word here is "invest".

Their wealth improves but if it improves through asset price inflation then they are not creating wealth. If it improves through working in the traded goods and services sector then they probably are creating real wealth in the economy. They are also not improving their wealth through their sacrifices, but rather due to the appreciation of existing assets. I'm in favour of taxes that encourage real wealth creation rather that taxes which penalise it. I'm not in favour of a greater net tax take but a shift away from taxing wealth creation and onto wealth retention.

I don't accept that if peoples wealth improves through their sacrifices they should be punished for it when others choose not to make sacrifices and they should benefit off the back of those who do make sacrifices.

Yes, people who improve their wealth through their sacrifices, in other words through their work, should not be punished. High taxes on labour do exactly that.
People who choose not to make sacrifices but simply own assets are currently rewarded by the hard work of others; their assets appreciate due to the economic activity of others but those hard workers are taxed up to the hilt. That doesn't seem fair to me.

 

[Purple]

Ok, so if I own a green field with sheep on it in Blanchardstown, and its market value is €5m, I'm no wealthier than my cousin who owns a similar sheep field in North Leitrim worth €10k?

Of course you are but if you are grazing the same amount of sheep you are creating the same amount of wealth. You are confusing the wealth you are creating with the wealth retained in the value of the land.

Now consider that both fields were worth roughly the same when our grandad owned them both 60 years ago. Really, has no wealth been created by the massive capital appreciation in Blanchardstown in the meantime?

Yes, but the owner of the land didn't create the wealth, though they are the beneficiary of the creation of that wealth.

What you said last week wasn't the truth. It was easy for me to demonstrate how it was false, without having to rant about "complete nonsense" and the like.

No, you haven't demonstrated anything of the sort. You are confusing the transfer of wealth and retention of wealth in an asset with the creation of wealth. They are different things.

Back to your fields. Why is one worth more than the other? It's because one has a far greater potential to be a place where wealth is created. The one in Blanchardstown is located in a place where more goods and services are traded. The owner of the field didn't create any of the value. It is a reflection of it's potential as a location where wealth can be created.

 

[T McGibney]

You are confusing the wealth you are creating with the wealth retained in the value of the land.

No, if I sell that field for €5m, having bought or inherited it from my grandad when it was worth €10k, I am wealthier by circa €5m. I and my family are free to live a lavish lifestyle on the proceeds. My ownership of that land, a lucky accident, created that wealth for me.

And even if I never sell it, I can quite reasonably count myself as wealthy on foot of owning it.

My cousin, contemplating his €10k-value field, can not.

 

[T McGibney]

Back to your fields. Why is one worth more than the other? It's because one has a far greater potential to be a place where wealth is created. The one in Blanchardstown is located in a place where more goods and services are traded. The owner of the field didn't create any of the value. It is a reflection of it's potential as a location where wealth can be created.

One is worth more than the other because someone is willing to pay more the difference. It correlates to potential wealth creation, but only loosely.

A rich person around Blanchardstown may be just as happy to buy it for personal enjoyment, eg as a site for their home. Or the Council might buy it from me to use as a public amenity. Either way, I am wealthy on foot of it, regardless of the motivations of whoever would pay me €5m for it.

 

[T McGibney]

No, you haven't demonstrated anything of the sort.

Yet, you found it necessary this morning to qualify what you said previously. If it was "the truth" a few days ago, you wouldn't have needed.

And you've spent this morning debating the nuances of something that a few days ago you dismissed as "complete nonsense". If it was complete nonsense, there would surely be nothing to discuss?

 

[Purple]

No, if I sell that field for €5m, having bought or inherited it from my grandad when it was worth €10k, I am wealthier by circa €5m. I and my family are free to live a lavish lifestyle on the proceeds. My ownership of that land, a lucky accident, created that wealth for me.

And even if I never sell it, I can quite reasonably count myself as wealthy on foot of owning it.

My cousin, contemplating his €10k-value field, can not.

Yes, you are wealthier but you didn't create that wealth. Wealth transfer and wealth creation are not the same thing.

 

[Purple]

Yet, you found it necessary this morning to qualify what you said previously. If it was "the truth" a few days ago, you wouldn't have needed.

Only because you didn't understand it.

And you've spent this morning debating the nuances of something that a few days ago you dismissed as "complete nonsense". If it was complete nonsense, there would surely be nothing to discuss?

See above.

 

[noproblem]

Wealth transfer and wealth creation are not the same thing.

They are to the beneficiary. Stop playing with words and sentences, and just pretend for a minute that you're normal.

 

[Purple]

They are to the beneficiary.

No they aren't. People who create wealth often don't retain that wealth. As an employer I retain some of the wealth created by my employees. I am the beneficiary of the wealth they create.

 

[noproblem]

No they aren't. People who create wealth often don't retain that wealth. As an employer I retain some of the wealth created by my employees. I am the beneficiary of the wealth they create.

You'd be some crack having a few pints with. I'd say the barman would love to see you coming in, and be over the moon when you left

 

[Purple]

You'd be some crack having a few pints with. I'd say the barman would love to see you coming in, and be over the moon when you left

I move around so they don't know me but yes, it could certainly be a problem otherwise.

 

[Sophrosyne]

Perhaps there is a nomenclature issue.

What exactly do you mean by wealth transfer?

If A is taxed on his wealth, does that make taxpayer B wealthy?

 

[Purple]

Perhaps there is a nomenclature issue.

What exactly do you mean by wealth transfer?

If you make something, say you knit a sweater, and sell it for more than the cost of the materials then, through your labour, you have created wealth. If you make dozens of sweaters and sell them from a business premises then your business and the people you employ to knit for you are creating wealth.
If I then charge you rent for the use of the premises you knitted the sweater in then some of that wealth has been transferred to me.
By renting the premises to you I have facilitated you to create wealth.
We both end up wealthier but only you have created the wealth.
Taxing you and your employees on your labour may act as a disincentive to your economic activity which is wealth creating. Taxing you on the wealth you retain from your activity (and that of your employees) is less likely to act as a disincentive to your economic activity. Taxing your labour at a marginal rate of over 50% is more of a disincentive on your labour than taxing your retained wealth at 1% is on your likelihood to retain that wealth.

If there are lots of places in one area knitting sweaters and they are all creating lots of wealth then the land and the premises in that area will increase in value because there is a greater potential for wealth creating activities to take place on that land and in those premises. That's asset price inflation but it's not wealth creation. That's why a housing bubble doesn't make a country richer. In fact it drives capital away from activities which create wealth; instead of using your money to open a company knitting sweaters you invest it in premises in the hope that others will do the knitting. In the end that drives up rents and eats the margins of the manufacturer, thus acting as a disincentive to wealth creation.

If A is taxed on his wealth, does that make taxpayer B wealthy?

Possibly, but it certainly is wealth redistribution but so is all taxation.

 

[Sophrosyne]

So, If I understand you, this is not strictly wealth transfer but a tax on accumulated wealth to lessen the burden of other taxes, such as income tax.

There have been many studies over the years on potential exchequer gains from wealth taxes. In the Irish context, what is considered “wealth” would have to be set at a very low threshold for exchequer gains to be meaningful.

But that would defeat the purpose as wealth taxes would fall on the very individuals and businesses that are already overburdened.

 

[Purple]

So, If I understand you, this is not strictly wealth transfer but a tax on accumulated wealth to lessen the burden of other taxes, such as income tax.

Yes, it's moving the tax base away from wealth creation (labour) and onto wealth retention.

To be clear, it absolutely is a wealth transfer.

There have been many studies over the years on potential exchequer gains from wealth taxes. In the Irish context, what is considered “wealth” would have to be set at a very low threshold for exchequer gains to be meaningful.

But that would defeat the purpose as wealth taxes would fall on the very individuals and businesses that are already overburdened.

Just increase property tax, maybe change it to a site value tax. That's the best form of wealth tax there is. A small tax on pension fund values would also be a good idea but harder to do. None of that places any extra burden on the business activity.

 

[T McGibney]

Only because you didn't understand it.

I only misunderstood it because you didn't communicate it concisely, as evidenced by the fact that you later clarified it. And I did query it literally minutes after you posted it.

 

[Sophrosyne]

To be clear, it absolutely is a wealth transfer.

Well, you are determined to think that it is.

 

[T McGibney]

Yes, it's moving the tax base away from wealth creation (labour) and onto wealth retention.

A small tax on pension fund values would also be a good idea but harder to do. None of that places any extra burden on the business activity.

Another tax on work and wealth creation

(Pension pots are predominantly accumulated from earnings, as pension contributions funded from passive income don't qualify for tax relief.)