> The wealthy would be paying way more in tax than they are now (they have to, or their own assets would be sold as well)
That has nothing to do with the concept. The rate of the tax is separate from how it operates.
> I suspect the stable equilibrium would be a lot more renting rather than property ownership
Then the person doing the renting out would be paying the tax (and incurring the associated risks) and passing it on as higher rents. What does that help?
The problem here is assets that are hard to value. Not just in a subjective sense (what is a piece of art really worth?), but in a very practical sense. Take the things we have very good pricing information on -- stocks. If a share of Google is worth $100 and then six months later it's worth $110, but you put down $100 on the form -- objectively its market price at the time -- now someone can lift your shares off of you for a discount because the value changed and they raced to the filing office before you did. Now imagine the same thing but for something that doesn't have a high trading volume or an observable market price at any given time, but can still suddenly change in value over time.
Then it gets worse. Many types of property have a value to the owner which is different than their market value.
Suppose you operate a self-storage company. You have a piece of property which is objectively worth $500,000 where you operate your business. You declare that it's worth $500,000, because it is. Now a competitor can buy it off you for that amount just to grief you, because even though that's the value of the property, in order to move you have to contact all your customers and have them come and pick up their stuff, pay real estate commissions to find and purchase an otherwise identical property to move your business to, shut down your business while you hire contractors to move all your storage lockers to the new property etc.
Meanwhile the competitor just buys it from you for $500,000 and sells it to anyone but you for $500,000 (easy because that's it's true market value), causing you all this trouble and poaching half your customers in the process.
It's the kind of thing academics come up with which has enormous negative consequences in practice.
>The problem here is assets that are hard to value. Not just in a subjective sense (what is a piece of art really worth?), but in a very practical sense. Take the things we have very good pricing information on -- stocks. If a share of Google is worth $100 and then six months later it's worth $110, but you put down $100 on the form -- objectively its market price at the time --
This isn't a problem at all. You can let the brokerage report the value on your behalf. It's weird that you picked stocks specifically, because those are actually very easy to value. That's why your brokerage can provide you with a very precise number that fluctuates every time you log in.
>now someone can lift your shares off of you for a discount because the value changed and they raced to the filing office before you did.
That someone would be the government, and the government would presumably put a bid in anticipation of your filing. When you file your taxes in April 2025 and you say your grand masterpiece is worth $1.2 million, the tax office can be prepared to say "yup, that sounds like a good price to us. Now sell it to us for that price" at the point when you file your taxes.
>Then it gets worse. Many types of property have a value to the owner which is different than their market value.
How on earth is that worse? If you put the property in at market value then the government will not try to buy it from you. They'll be going after the low hanging fruit - the guy who valued a picasso at $1 million, not the guy whose grandmother passed down a family heirloom nobody else gives a shit about.
>Suppose you operate a self-storage company. You have a piece of property which is objectively worth $500,000 where you operate your business. You declare that it's worth $500,000, because it is. Now a competitor can buy it off you for that amount just to grief you
Government, not competitor. If the government employee responsible for finding underpriced assets and bidding on them put a $500k bid on $500k property then their bonus is not likely to amount to much. They'll be aiming for $1 million bids on $10 million property.
Yes, if you let anybody bid on things it could cause more issues which require mitigation. Even then, if you put in a threshold that they have to bid 10-15% over then this would stem abuse. Imagine a competitor trying to "grief" you by overpaying $50-75k for your assets.
Something tells me that you will still object.
>It's the kind of thing academics come up with
Sometimes people who object to the practicalities of a tax are actually objecting to it on principle.
> This isn't a problem at all. You can let the brokerage report the value on your behalf.
How does that help? The value is constantly in flux. They would still have to be faster than the other party (presumably well-heeled large investment banks with fast computers) trying to pick up stocks at a discount to their current value.
Conversely, trying to asses the value non-continuously leads to all kinds of weirdness where people temporarily shift their holdings to more advantageous asset classes on the day the form has to be filed. Or it just provides a method for defeating the tax entirely: On the day before your filing day you sell all your stocks and use the money to buy an assortment of esoterica from your buddy, declare it to have minimal value (because no one else could easily use or sell it), then the next day you sell some other difficult-to-value stuff back to them for the original amount of money and put the money back into stocks. In general people could arrange for the asset someone could deprive them of to be something nobody else would want.
> It's weird that you picked stocks specifically, because those are actually very easy to value.
If someone wants to own 51% of a company, they typically have to pay you a price for your shares above where they're currently trading. But it's really only those last few shares that yield majority voting rights which have that higher value, not all of them. Not even the 49% they don't buy. And yet every individual share is perfectly fungible, so how are you supposed to value them to reflect the amount you could normally get, without giving up the control premium you would be entitled to if a buyer comes who wants a controlling interest?
> That someone would be the government, and the government would presumably put a bid in anticipation of your filing.
This completely defeats the premise of the tax on both ends. You now have the government rather than potential buyers assessing the value of the property, they still have to estimate the value of hard-to-value assets and the whole thing just becomes a game of trying to guess the government assessor's secret estimate of your property value. Not to mention the fun new game where you acquire or create hard-to-value assets that you personally know are not worth very much or will otherwise be overestimated by the government assessor, and then try to come in just under their assessment value so they overpay you for them.
And how is the government supposed to anticipate your filing if neither of you know it's about to happen? If you're in the business of trade you could have bought and sold something in the time it takes them to estimate its value. What happens for a company with diverse inventory and a high turnover rate?
> If you put the property in at market value then the government will not try to buy it from you. They'll be going after the low hanging fruit - the guy who valued a picasso at $1 million, not the guy whose grandmother passed down a family heirloom nobody else gives a shit about.
This is an adversarial process. If you can value a $100M asset at $2M and not lose it unless you go below $1M then that's what everybody is going to do. It would be an entire industry dedicated to valuing property just above the threshold where the government would actually take it, with everyone striving to operate just at the threshold, wherever that is. You can't put a safety margin in because the market will just remove it.
It's like the speed limit. It doesn't matter if the sign says 55, if you only get a ticket at 70 then traffic moves at 69 and anybody who gets ticketed for going 58 is going to be surprised and resentful.
> Government, not competitor.
Then how is this solving the government's problem in valuing things? The whole point is to let anybody do it so the market can decide if someone is undervaluing their property.
> Even then, if you put in a threshold that they have to bid 10-15% over then this would stem abuse. Imagine a competitor trying to "grief" you by overpaying $50-75k for your assets.
They've interrupted your business, stolen half your customers and possibly caused you to exit the market. That could easily be worth $50-75k.
Also notice this is identical to just telling people to overpay their taxes by 10-15% by overvaluing their assets, because anyone whose assets are fungible would just undervalue them by the allotted threshold, and for others 10-15% is nowhere near enough. There isn't any specific fixed margin because the cost of being forced to sell an asset can be arbitrarily large. Suppose you buy a piece of property that you're now using as the terminus for a $100M undersea cable. The property is just an arbitrary acre of land but the $100M cable is now fixed in place.
Or take software for example. The Linux kernel is "free" but how much grief would it cause if people suddenly couldn't use it anymore? Does Linus Torvalds have enough money to pay the taxes every year on the one-time amount old Microsoft would pay to make that happen?
> Sometimes people who object to the practicalities of a tax are actually objecting to it on principle.
Sometimes people who like the principle of a tax dismiss the practicalities.
That has nothing to do with the concept. The rate of the tax is separate from how it operates.
> I suspect the stable equilibrium would be a lot more renting rather than property ownership
Then the person doing the renting out would be paying the tax (and incurring the associated risks) and passing it on as higher rents. What does that help?
The problem here is assets that are hard to value. Not just in a subjective sense (what is a piece of art really worth?), but in a very practical sense. Take the things we have very good pricing information on -- stocks. If a share of Google is worth $100 and then six months later it's worth $110, but you put down $100 on the form -- objectively its market price at the time -- now someone can lift your shares off of you for a discount because the value changed and they raced to the filing office before you did. Now imagine the same thing but for something that doesn't have a high trading volume or an observable market price at any given time, but can still suddenly change in value over time.
Then it gets worse. Many types of property have a value to the owner which is different than their market value.
Suppose you operate a self-storage company. You have a piece of property which is objectively worth $500,000 where you operate your business. You declare that it's worth $500,000, because it is. Now a competitor can buy it off you for that amount just to grief you, because even though that's the value of the property, in order to move you have to contact all your customers and have them come and pick up their stuff, pay real estate commissions to find and purchase an otherwise identical property to move your business to, shut down your business while you hire contractors to move all your storage lockers to the new property etc.
Meanwhile the competitor just buys it from you for $500,000 and sells it to anyone but you for $500,000 (easy because that's it's true market value), causing you all this trouble and poaching half your customers in the process.
It's the kind of thing academics come up with which has enormous negative consequences in practice.