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Originally Posted by TW Teczka
Technically speaking your country quite recently had such highest rate thus at least theoretically it should have worked...
Not subject to US taxes. Though if they want to among other visit Poland and spend here with paying our 23% VAT I'd be grateful that you sent them on such a voyage.
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They still have to pay for transport from here. If they travel in the States, visiting Vegas/Arizona/Hawaii/Virgin Islands all the better. Again, I don't think it's a meaningful concern. I sincerely doubt even the ultra-rich will as a practical matter splurge millions/hundreds of millions or billions on travel and other non-domestically taxable consumption.
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Don't underestimate the Force and... international tax planning. Don't looking far my country doesn't have any controlled foreign corporation rules, does not tax gifts and inheritances between close relatives so all you need is a some legal entity abroad, let's say a Cyprus investment fund, (though Polish closed ended investment fund could also be useful) which our tax authorities can not blatantly mistreat because Cyprus is also an EU member so we can't discriminate against it.
I'm not saying that Poland would be the best, but it would be workable. I bet that actually quite many countries would serve well and there would be even not only as you suggested some backward African countries but presumably also a few actually more civilized than the US countries like Switzerland or Singapore.
This study assumes nicely no loopholes, no perverse incentive to actually retire earlier because anyway the additionally earned money would be taken by gov and closed economy from which one can not strategically flee.
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Given that the estate tax applies after death, can be constrained to only the very wealthiest, and leave more than enough for any children to live in luxury and do nearly anything they like for the entirety of their lives, I don't see disincentive as a problem.
Tax havens/tax competition are issues certainly. I was of course joking about Africa. As a solution, increased tax code sophistication is a partial fix which has yielded success as have political pressure on tax havens. Memorandums of understanding between countries to standardize and strengthen anti-money laundering and tax evasion law and enforcement are long overdue and should be implemented ASAP. Direct capital flight and tax competition elsewhere is a potential problem. In the end, between improved enforcement and the example of other countries that have comparable estate tax burdens (that don't seem to have excess problems with evasion/avoidance), I don't feel this would be too problematic.
Third, yes, a weakness of the study is certainly that no tax flight or avoidance is accounted for. This is why I have stated that in practice that either the inclusiveness or size of the tax must be increased, in addition to the above stated enforcement measures.
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Because one feels better when can force all those greedy rich to make them share big part of their wealth with the more disadvantaged, while forcing the poor to live more prudent and responsible lives does not give such a pleasurable feeling?
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The lifestyles of the rich aren't materially impacted if the compliance onus is on them, the poor's would be if they were forced to put aside a substantial portion of earnings; this is the fundamental problem with obligatory saving for the poor without government assistance (that said such a program would be more acceptable for the middle class). I also specify that these programs would only apply to the working poor, who are contributing to the economy, even if they aren't contributing to the government.
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I think that two factors seem to be ignored so far:
1) Actually nowadays boring investments in less risky assets like gov bonds of highly developed countries bring negative real yields. (after adjusting inflation) That would be anyway obstacle in building huge wealth just from inheriting money and having the only virtue of not going on spending spree. So some merit and reasonable investment is required otherwise in long run the levelling that you wanted regardless of any additional tax changes would happen.
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I'm not ignoring that. I know all too well the impacts of inflation on investment (very big on clients investing in solid dividend stocks, high quality short term corporate bonds, and/or inflation indexed/convertible bonds). However, this tends to be a non-factor for the rich who can easily purchase the expertise needed to guarantee a return on investment well over inflation and grow wealth.
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2) I've got a feeling that partially you have a point with slightly restructuring tax structure, but partially you concentrate your ideas too much on fighting symptoms and not on fighting underlying problems. What I mean is moving the money that you would acquire from the rich (after a heroic struggle from both sides ) not in giving it directly to the poor as negative tax, but as high quality education starting from kindergarten. They would like you less, that would look worse in statistics but in long run that would increase social mobility, not persistent transfer of cash.
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Oh, I certainly agree with expanding and improving social programs, absolutely. Quality education and medicare should be available to all in order to improve social mobility and true equality of opportunity. As an aside, I also feel medicare is a logical and natural extension of the 'right to life' that citizens in the free world are afforded. You need relative parity on these terms, otherwise the advantages of the existing wealthy (and thus their economic power) are compounded and entrenched. I had only concerned myself with sketches of ideas related to saving programs as that was the focus and thrust of the conversation.
Also, these cash transfers would not be indefinite. Once a person has built up an adequate reserve of savings, negative taxation subsidies would naturally be phased out for that individual.
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Originally Posted by silveroak
Whenever you increase the gain on a feedback mechanism (in this case capital gains) you push a system towards instability. in this case teh gain is effectively pushed by ratio of taxation. There may be periods in which other market forces compensate but in the aggregate high taxes on dividends and low taxes on capital gains does destabilize teh system. Note that I also never claimed this is the only possible source of destabilization. However it is very hard to pick out other sources when such a blatant source of destabilization remains at the forefront.
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While I acknowledge the potential influence of incentives like capital gains tax advantages to encourage speculative bubbles, I have never known it to be a major factor in any recently notable bubble. Can you provide specific examples of where tax differentials were considered a significant contributor to a major economic bubble?