wealth tax

[M Paquette]

Hmmm... I'm going to want an offshore corporation, and a US registered public shell corporation, with interlocking non-US citizen sock puppet directorates. Unbeliezeable, LLC... The shell issues a new class of voting, dividend paying shares which I buy, and then sadly suffer a sharp loss on. Hilarity ensues...

 

[Loving Life]

M. Paquette I guess is being sarcastic

Private Companies (US equilivent is LLC) is used for both keeping assets (like a US trust), and to hold my non us realestate (home in UK and Condo in Dubia) along with investments. The cost of these vehicles are in-expensive, keeps your assets private from Goverments eyes and allows easy access to visas via company guarantees. I don't understand what is so funny - I guess I am dense.

 

[FANOFJESUS]

Wow, as a ER (57) and very FI, I have seen this coming for years - most of the socialized countries of the world have done this in one way or another - here is my thoughts (worth about 2 cents) of the future taxing process

1. The taxes we pay right now will remain as they are (Give or take a few percentage points)

2. Within the next few years (or earlier) the wise goverment will hit us with a National VAT or sales tax that we will be told that this is a temp tax (to reduce defict, but we know that taxes never go away)

3. A national wealth tax will be institued that will hit all non - retirment funds

I think like you do. The only thing is I am low income so there will be a lot better game in the forest than me.

 

[ERD50]

Wow, as a ER (57) and very FI, I have seen this coming for years - most of the socialized countries of the world have done this in one way or another...

Not sure what you define as a 'socialized country' (maybe any one with a 'wealth tax'?), but I see seven, according to wiki:

Existing net wealth/worth taxes

France: A progressive rate from 0 to 1.8% of net assets. In 2006 out of €287 billion "general government" receipts, €3.68 billion was collected as wealth tax. See Solidarity tax on wealth.

Iceland: Temporary wealth tax was re-introduced in 2010, for four years. A rate of 1,5% on net assets exceeding ISK. 75.000.000 for individuals and ISK 100.000.000 for married couples.

India: Wealth tax is 1% on net wealth exceeding 30 Lakhs (Rs 3,000,000). However, non-residents returning to India are given exemption for seven years.

Liechtenstein

Netherlands: Interest income is taxed like a wealth tax, i.e. a fixed 30% out of an assumed yield of 4% is a rate of 1.2%. See Income tax in the Netherlands.

Norway: Up to 0.7% (municipal) and 0.4% (national) a total of 1,1% levied on net assets exceeding NOK. 700,000.

Switzerland: A progressive wealth tax with a maximum of around 1.5% may be levied on net assets.[16] The exact amount varies between cantons.

-ERD50

 

[nun]

As a FI with a mid 7 figures in assets - what I have done is this: a) removed all non sheltered assets to the Isle of Man (Non-Tax British Protectorate) - I don't like the more famous alternatives, (I do pay US tax on all distributions - but the assets are held in a LLC were I control the distributions. (no tax until funds are distibuted to me) -- Since assets are in a non - US LLC, they will have no regulatory authority over them. Neither does the British Govt or EU - Also a smaller LLC in Dubai which is a 10% owner in the Man LLC.

Are there any PFIC and 8938 implication of such an arrangement?

 

[HFWR]

My foolproof system for beating the tax man is to have both low income and low net worth...

 

[rescueme]

My foolproof system for beating the tax man is to have both low income and low net worth...

I hope you meet/exceed your goals...

 

[NYEXPAT]

My foolproof system for beating the tax man is to have both low income and low net worth...

Or invest all your assets in the "State of Flux"!

 

[Loving Life]

NUN - good question (this is a little off topic, but ok)

In my case, it will not fall under the PFIC rules but under CFC reg's - since my ER, from Mega Oil Corp - I do consulting/contract work in Angola, Nigeria, Azerbaijan, Australia and just starting to do contract work in Viet Nam -- I run all my work out of this Corp. an never has greater than 40% investment income therefore it is considered an operating company - The Dubai corp just is holding company for my personal realestate with no income.

This is just what I do, each individual needs to structure(if necessary) with there Attorney's to legally avoid/pospone taxes, not to illegally evade taxes based on the facts and benefits as needed

 

[meierlde]

Actually some states have pieces of a wealth tax, look up intangibles tax. It is imposed on financial assets, not real property (since the state taxes that with property tax) At one time in theory at least you were supposed to pay property tax on financial assets, but that proved to be a mess to administer, so it went to intangibles taxes, and the like.
So its not a new idea (what really is)

 

[nun]

NUN - good question (this is a little off topic, but ok)

In my case, it will not fall under the PFIC rules but under CFC reg's - since my ER, from Mega Oil Corp - I do consulting/contract work in Angola, Nigeria, Azerbaijan, Australia and just starting to do contract work in Viet Nam -- I run all my work out of this Corp. an never has greater than 40% investment income therefore it is considered an operating company - The Dubai corp just is holding company for my personal realestate with no income.

This is just what I do, each individual needs to structure(if necessary) with there Attorney's to legally avoid/pospone taxes, not to illegally evade taxes based on the facts and benefits as needed

Ahh, ok so you get US tax deferral.......of course the IRS could always change the rules for US owners of CFCs and I imagine your 8938, FBAR, 5471 etc filings keep a few tax professionals employed

 

[youbet]

My foolproof system for beating the tax man is to have both low income and low net worth...

Are you looking forward to the gov't thugs pulling strips of skin off your back with a pair of nippers?

 

[Khufu]

A wealth tax has the advantage that by taxing accumulation it can correct for the inordinately preferential tax rates that have enabled the 1% to sequester most of the productivity gains in the US for the past 30 years or so. However, I expect the enforcement problems would be formidable. Valuation of many kinds of real property would be impossible to verify on a large scale, particularly property held outside the country.

We already have a wealth tax in the form of property taxes. Valuation disputes are endemic.

I think a VAT tax is much more likely for ease of enforcement reasons. Compliance almost disappears as an issue. I oppose VAT taxes because they are inherently regressive. It seems though that people accept sales and VAT taxes more readily because they view purchasing decisions as more discretionary than they really are.

 

[Koolau]

A wealth tax has the advantage that by taxing accumulation it can correct for the inordinately preferential tax rates that have enabled the 1% to sequester most of the productivity gains in the US for the past 30 years or so.

I suppose if the goal is to "even things up" (whatever that means) a wealth tax might accomplish something along those lines. But, if the wealth tax is a legitimate attempt to balance the budget or reduce deficits, etc., aiming it at the so-called 1% won't be of much help. Countless times, it has been shown that the gummint will eventually have to raise revenues from the middle class to come out "even" with spending. That really is where the money is. Confiscating money from the "rich" is popular, but it won't do much for deficits. There just ain't that much money! Difficult as it is to convince folks, the bulk of the money is in the middle class. Stated another way, "We have met the rich and he is us." Of course, YMMV.

 

[pb4uski]

A wealth tax has the advantage that by taxing accumulation it can correct for the inordinately preferential tax rates that have enabled the 1% to sequester most of the productivity gains in the US for the past 30 years or so. ......

Egad.....you still pushing this productivity poppycock? Nobody is buying....

 

[nun]

A wealth tax has the advantage that by taxing accumulation it can correct for the inordinately preferential tax rates that have enabled the 1% to sequester most of the productivity gains in the US for the past 30 years or so. However, I expect the enforcement problems would be formidable. Valuation of many kinds of real property would be impossible to verify on a large scale, particularly property held outside the country.

Agreed, there would be lots of schemes to hide the wealth. In as much as a wealth tax discourages thrift I'm against it. I'd far rather see passive income taxed at the same rates rise to be the same as those on earned income.

 

[sheehs1]

I think we already have a yearly" extra wealth tax on income. Granted it is not on "assets" but still it is an extra tax none the less. It's called the AMT. Alternative Minimum Tax. Has grabbed me every year since I can remember. I'm sure it grabs a lot of us here. Where we the stopping point be.? It's anyone's guess. The more little buckets they tax, the harder it is to navigate. Just wish they would come up with one tax and leave it at that.

 

[marko]

"Tax the rich
Feed the poor
Till there are,
No rich no more" (Ten years after)

Said it earlier: The flaw in the assumption is that the rich will just sit there and write a bigger check. The reality is that the rich have all sorts of options to avoid these schemes. (Uh....that's one reason they're rich!)

Good luck to anyone who thinks it'll change.

 

[Midpack]

Do I understand him correctly?

Let's tax accumulated wealth after the fact (punish savers & investors and progressively reward consumption) vs modifying tax code so people know the rules going forward - both of which can reduce wealth/income inequality. Dodges will be possible in either case.

Aren't we still suffering from the worst recession in 80 years in which over consumption/leverage played a substantial role?

 

[audreyh1]

Do I understand him correctly?

Let's tax accumulated wealth after the fact (punish savers & investors and progressively reward consumption) vs modifying tax code so people know the rules going forward - both of which can reduce wealth/income inequality. Dodges will be possible in either case.

Aren't we still suffering from the worst recession in 80 years in which over consumption/leverage played a substantial role?

Yes, you do understand him correctly. This punishes savers. Especially those of us who invested and already paid bookoos capital gains taxes (20% even) on assets in our taxable accounts. Taxes that would not have been owed under the new scheme.

But I don't see this radical change happening, so I can't waste time worrying about it.

 

[pb4uski]

Not only that, but in many cases the income that generated that wealth has already been taxed and the wealth is the cumulative effect of what was leftover the first time.

I guess their scheme would be to just continue to tax until no wealth is left.

I agree, it is so radical that it has zero chance of ever becoming reality.

 

[nun]

Not only that, but in many cases the income that generated that wealth has already been taxed and the wealth is the cumulative effect of what was leftover the first time.

I guess their scheme would be to just continue to tax until no wealth is left.

I agree, it is so radical that it has zero chance of ever becoming reality.

A wealth tax is not radical, we already have one in real estate taxes. Some countries also tax other forms of wealth. IMHO US tax reform should start by modifying the basis of taxation to that of residence and remove the citizenship aspect, remove the vast majority of deductions and also tax all income an gains at the same progressive rates. So if you are in the 35% income tax rate, your dividends and capital gains would also be taxed at 35%.

 

[ERD50]

... and also tax all income an gains at the same progressive rates. So if you are in the 35% income tax rate, your dividends and capital gains would also be taxed at 35%.

In some recent threads, we showed (and even convinced someone to change their view of this), that capital gains tax can be very unfair at any straight %. Unless it is adjusted for inflation, a 'gain' may actually be a loss.

I do agree with you on simplifying the tax code. I still think there is a problem on defining what makes up 'income' - I don't think it is as simple as it sounds. As I've said many times, I think 'spending' is a much better measure of someone's ability to pay. And to be pragmatic, since you can't get blood from a rock, taxes probably need to come progressively from those with an ability to pay. Or like that old quote, "Q: Why do you rob banks? - A: 'Cause that's where the money is."

One problem with progressive income tax: One year I had a very large cap gain (poor tax planning on my part). I was taxed like I was a rich person, yet, I spent no more that year than any other. I knew I wasn't rich - it was just a timing thing. So why am I taxed the same as someone who makes that $$$ every year? The same can be said of people in very volatile businesses, maybe they have one good year out of three, and they plan accordingly? Not fair, I say.

-ERD50

 

[pb4uski]

A wealth tax is not radical, we already have one in real estate taxes. Some countries also tax other forms of wealth. IMHO US tax reform should start by modifying the basis of taxation to that of residence and remove the citizenship aspect, remove the vast majority of deductions and also tax all income an gains at the same progressive rates. So if you are in the 35% income tax rate, your dividends and capital gains would also be taxed at 35%.

I couldn't disagree more.

Real estate such a a poor proxy for wealth that suggesting that a real estate tax is a wealth tax is naive. The person whose entire net worth is tied up in a highly leveraged McMansion is treated as wealthy yet a person of the same income who LBYM and has a modest paid for home and $10m in investments would not.

The issue I have with non-preferential rates for dividends and capital gains is that that in that vast majority of cases they arise from corporate income that is distributed or retained so it has already been taxed.

We would agree on eliminating most deductions though.

One out of three ain't bad.

 

[M Paquette]

Egad.....you still pushing this productivity poppycock? Nobody is buying....

Um. Not so much. Khufu has a point, and has identified one of the factors involved. There are others... His point is ideologically unacceptable to many folks, and probably not worth discussing here at the risk of bacon on the hoof appearing.

I am a big fan of maple smoked bacon, though...