Taxing wealth a way to tax Roth IRAs?

[Chuckanut]

Some have proposed a tax on a person’s total net worth.

This sounds like a potential backdoor way to tax Roth accounts.

Or, am I turning into a cynical man of experience?

 

[CardsFan]

Some have proposed a tax on a person’s total net worth.

This sounds like a potential backdoor way to tax Roth accounts.

Or, am I turning into a cynical man of experience?

Yes, you are turning cynical. And yes that is a way to tax Roth's, without taxing Roth distributions.

 

[JDARNELL]

No doubt Roth’s are growing to a bigger target for the govt to tax. “Hey we need money just look at how much is setting over there. “ I can hear the arguments now “only the Wealthy have Roth’s, why don’t I have one? Blah blah blah”. Then we’ll see a greater consumption tax or something that hoses everyone. I’ll show them and just won’t spend my money. No matter what happens you can bet that someone else wants what you have. Just position yourself to play the hand that is dealt you and make the most of the opportunity when it arises.

 

[Dtail]

Not sure how easily one's wealth can be measured by the gov't.

 

[RunningBum]

Who are "some" and where have they proposed it?

 

[dirtbiker]

Who are "some" and where have they proposed it?

Seriously? Elizabeth Warren. Publicly.

"Warren, currently holding the No.2 spot behind Joe Biden in an average of presidential polls, has proposed an annual 2% tax on every dollar of net worth above $50 million, and a 3% tax on each dollar of net worth above $1 billion."

https://www.marketwatch.com/story/h...ortunes-of-bezos-gates-and-buffett-2019-09-10

 

[RunningBum]

Seriously? Elizabeth Warren. Publicly.

"Warren, currently holding the No.2 spot behind Joe Biden in an average of presidential polls, has proposed an annual 2% tax on every dollar of net worth above $50 million, and a 3% tax on each dollar of net worth above $1 billion."

https://www.marketwatch.com/story/h...ortunes-of-bezos-gates-and-buffett-2019-09-10

I hadn't been keeping up with all of the candidate campaign proposals/ideas. This is a far cry from taxing Roths for most of us.

 

[dirtbiker]

I hadn't been keeping up with all of the candidate campaign proposals/ideas. This is a far cry from taxing Roths for most of us.

Sorry. I thought you were baiting. My bad. Cheers.

 

[Clone]

I just received a text from Yang that he would give me $1000 each month. I think I will respond that he can forward that to Warren to pay for the wealth tax!

 

[NW-Bound]

France has had a wealth tax for 30 years. It is levied on assets above 800,000 euros, and the assets include all personal properties and financial accounts, with some exemptions for rural land, professional properties, etc...

Other countries had a wealth tax but abandoned it in recent years, such as Austria, Germany, Finland, Sweden, etc... Current French President Macron proposed abandoning the wealth tax, and faced violent demonstrations saying he favored the rich.

For wealth tax discussion for the US, Google is your friend. Beware of the little piggy though.

 

[ziggy29]

Just to give this discussion a chance and not seem too heavy handed, I just want to remind folks that our Community Rules don't allow for the invitation for political discussions of potential "wish list" legislation that is not far enough in the pipeline to even be a bill, let alone through committee and under serious consideration.

That said, the question, "What moves can I make to protect myself against the possibility of a wealth tax?" is risk management in financial planning, so if we keep partisan or ideological political commentary out of it and focus on how to manage our own nest eggs for potential risks, we'll be OK. If we can keep the context of the discussion within that framework, great. But this is only (possibly) a campaign promise, so there is no point in debating its merits or demerits.

 

[zinger1457]

That said, the question, "What moves can I make to protect myself against the possibility of a wealth tax?" is risk management in financial planning, so if we keep partisan or ideological political commentary out of it and focus on how to manage our own nest eggs for potential risks, we'll be OK.

I'll be anxiously awaiting all the comments and strategies from those on this forum with a net worth of >$50M on how they plan to protect their nest egg.

 

[ziggy29]

I'll be anxiously awaiting all the comments and strategies from those on this forum with a net worth of >$50M on how they plan to protect their nest egg.

1. Someone with more than $50M doesn't need "help" to figure out how to FIRE, and with that much money, you probably have a team of accountants and lawyers at your disposal.

2. Someone with more than $50M, unless they picked the right stocks, probably has a small percentage of their net worth in Roth investments.

3. Someone with more than $50M is not going to have an early retirement busted by taxes.

 

[Koolau]

Yep, I've already discounted the effects of "wealth tax" as ANY current proponent has laid out. Those who 'would' be affected are too smart to ever pay it. The rest of us don't qualify. Having said that, the "real" money (tax or otherwise) must, by definition be within the middle class (not political, just fact.) Thats where "we" (the FIRE community) need to stay alert. I'll leave it at that, much as I love bacon. YMMV

 

[zinger1457]

1. Someone with more than $50M doesn't need "help" to figure out how to FIRE, and with that much money, you probably have a team of accountants and lawyers at your disposal.

2. Someone with more than $50M, unless they picked the right stocks, probably has a small percentage of their net worth in Roth investments.

3. Someone with more than $50M is not going to have an early retirement busted by taxes.

I guess I should have use the sarcastic emoji instead of the smiley.

 

[NW-Bound]

Yep, I've already discounted the effects of "wealth tax" as ANY current proponent has laid out. Those who 'would' be affected are too smart to ever pay it. The rest of us don't qualify. Having said that, the "real" money (tax or otherwise) must, by definition be within the middle class (not political, just fact.) Thats where "we" (the FIRE community) need to stay alert. I'll leave it at that, much as I love bacon. YMMV

Yes, the French got it figured out. Hence the exemption limit is just 800,000 euros.

 

[Another Reader]

I believe the likelihood of some kind of wealth tax is significant and growing.

I also believe that once it's enacted, there will be a plethora of tax attorneys, financial advisers, and insurance salespeople competing to sell you ways to minimize or avoid the wealth tax.

 

[Chuckanut]

I hadn't been keeping up with all of the candidate campaign proposals/ideas. This is a far cry from taxing Roths for most of us.

Agreed. It is a far cry. My concern is that it opens a back door to taxing Roths indirectly. And the minimum wealth needed to pay the tax will go down over the years.

FWIW, the sales tax where I live used to be about 7.5%. It is now 10%. These taxes have a way of going up and not going down.

 

[pb4uski]

I hadn't been keeping up with all of the candidate campaign proposals/ideas. This is a far cry from taxing Roths for most of us.

+1 even though I would oppose a wealth tax in principle.... I presume that these people with $50 million+ or $1 billion+ pay income tax already... so they pay income tax on their income and then it gets taxed again becaue it is part of their wealth?

 

[mpeirce]

Even if it started at $50,000,000 do you really believe it would never get lowered?

In 1913 (when the 16th amendment was ratified), the top tax bracket was 7 percent on all income over $500,000 (roughly $12 million in today’s dollars).

Funny how that didn't stick.

 

[dirtbiker]

Even if it started at $50,000,000 do you really believe it would never get lowered?

In 1913 (when the 16th amendment was ratified), the top tax bracket was 7 percent on all income over $500,000 (roughly $12 million in today’s dollars).

Funny how that didn't stick.

EXACTLY! Anyone on this site should uniformly oppose any such legislation. It only takes a pen stroke to lower the tax threshold. It gets real when it gets lowered to the point that it affects our retirement.

 

[Koolau]

Even if it started at $50,000,000 do you really believe it would never get lowered?

In 1913 (when the 16th amendment was ratified), the top tax bracket was 7 percent on all income over $500,000 (roughly $12 million in today’s dollars).

Funny how that didn't stick.

Yep, there's not much money among the rich - by comparison to us "comfortable" folk. Oops. Think I smell bacon. YMMV

 

[steelyman]

I guess I should have use the sarcastic emoji instead of the smiley.

Your humor was not lost on the unwashed masses.

 

[RenoJay]

I was thinking about the argument in favor of a wealth tax, and it’s basically that very wealthy people do not recycle their wealth back into the economy....they sit on it. I personally couldn’t care less what someone else chooses to do with their funds, but if we get to this place of making the wealthy give it up they should be given the choice to either be taxed or spend it. Instead of a 1% wealth tax, they can prove they spent 1% of net worth on consumer goods.

 

[NW-Bound]

+1 even though I would oppose a wealth tax in principle.... I presume that these people with $50 million+ or $1 billion+ pay income tax already... so they pay income tax on their income and then it gets taxed again becaue it is part of their wealth?

That's what wealth tax is. Instead of "capital gain tax", it's now just "capital tax". You pay tax on your retirement account, even in years when you lose money. Heck, you pay tax even if you already pay negative interest rate.

The only way to avoid wealth tax is to not have wealth.

I was thinking about the argument in favor of a wealth tax, and it’s basically that very wealthy people do not recycle their wealth back into the economy....they sit on it. I personally couldn’t care less what someone else chooses to do with their funds, but if we get to this place of making the wealthy give it up they should be given the choice to either be taxed or spend it. Instead of a 1% wealth tax, they can prove they spent 1% of net worth on consumer goods.

Consumer goods? Could that be why the French have the Hermès woman bag that sells for $265,000? They really know how to "blow the dough".

Oh wait! The bag is a personal property! It is included in the assets to be taxed. Arghhh...

Perhaps you can depreciate it to lighten up the bag tax with time. The problem is some of these bags commanded as high a price when auctioned in the used market. You will need to have your bag appraised, and document the lower price.

I tell you, there's no escape.