I hate to sound like a Libertarian or a Republican but that's just taking money out of somebody's bank account rather than their income....
So, do you propose increasing the income tax rate rather than imposing a wealth tax?
If you earn interest in the United States, it's taxable, as is capital gains.
Yes, interest is payable, but interest rates are rather low. Its not a vehicle that major investors would necessarily worry about.
Capital gains are also payable, but if I understand correctly, they are only counted at the time the asset is actually sold. So, if you bought something that was cheap and its now worth millions, you can actually sit on your investment indefinitely. You could be a multi-billionaire because you bought a few picassos at a yard sale, and never pay any tax on their increased value because you never sell them.
Now, with Warren's "wealth tax" these rich people (and probably other people a lot poorer than them, as well) won't bother to put all their savings in banks.
I doubt many wealthy people put their money in banks
now. I suspect they mostly invest it, either in stocks, or real estate, or some other item that will either increase in value or will provide income. (And indeed, that is the type of things that most wealth taxes target... not necessarily money stuck in a bank somewhere.)
Sticking it in a bank account just won't provide that type of return.
That's how it works: People get loans from the bank for a house, car, etc., because a bunch of depositors have put their money in that bank (at interest) for the bank to lend out (at slightly more interest). Institute a wealth tax and it will be harder for banks to find the deposits they need to thrive and, in consequence, there will be less money to lend out.
First of all, you're not talking about taking
all wealth, only a small fraction of it and only from certain people. I doubt a wealth tax will cause banks to become insolvent because a tiny fraction of wealthy people have slightly less money, which they probably weren't storing in the banks anyways.
Secondly, keep in mind that if the wealthy loses a few million to a wealth tax, that money doesn't just disappear... it would get recirculated in the economy. Some might go to infrastructure that expands the overall economy. Some might result in higher wages for middle class workers that then get deposited in banks (to be lent out again).
Bill Gates and Warren Buffet will just get really big Scrooge McDuckian vaults in their basements, or, worse, funnel it to banks in the Cayman Islands or other tax havens. Our wealth inequality will not be affected one iota, and you'll mostly **** off the middle class.
Strangely enough, both Gates and Buffet have called for increased taxes on the wealthy.
https://www.cnbc.com/2019/02/25/warren-buffett-and-bill-gates-the-rich-should-pay-higher-taxes.html"The wealthy are definitely undertaxed relative to the general population" - Warren Buffet
"I’ve paid more taxes, over $10 billion, than anyone else, but the government should require people in my position to pay significantly higher taxes." - Bill Gates
Now, as far as I know, neither has called specifically for a "wealth tax", but other wealthy people have:
From:
https://finance.yahoo.com/news/richest-could-lose-hundreds-billions-080000068.htmlBillionaire investor George Soros, heiress Abigail Disney and 17 other wealthy individuals published an open letter in June in support of Warren’s wealth tax and said lawmakers have a moral responsibility to levy higher taxes on the rich.Hmmm... Soros studied economics at university and became wealthy through financial dealings. Do you think he has an idea of what he's talking about?
As for the chance that they may put it in a 'scrooge-like vault' or funnel it to offshore accounts: Again, we're not simply talking about taxing bank accounts. We're talking about a wealth tax, that includes investments like real estate, stocks, etc. Kind of hard to ship those to some offshore bank.
I could also point out that even if it were possible to send your assets off shore to protect them from taxes, it might be a very dumb thing to do. Those offshore accounts tend not to pay much in the way of interest. So, any wealthy person thinking "I'll just send my money to the Caymen islands to avoid the wealth tax" may save on taxes but will lose even more because their investments won't grow as much as if they left it in North America.
It would at the least cause a very serious recession, as banks will scramble to get deposits. And scramble they will, because who the hell anywhere in the world wants to open a bank account in a country that will just raid it? Gotta think of the end result and consequences, rather than catering to a bunch of people (millennials mostly) who don't understand how banks work. I don't think Bernie Sanders was stupid enough to propose that one.
Well, lets see... Netherlands, Norway and Switzerland all have wealth taxes, and none of those countries is in recession.
Now, some countries have dropped their wealth taxes, but it wasn't because "OMG! Its causing a recession!", but more because of difficulties in enforcing the tax.
And what makes you think people proposing a "wealth tax" don't know how banks work?