Well, the 15% who are in the real estate industry is a subset of real estate holders. Even here in Cinci, a million dollar home community exists in nearly every major suburban town. West Chester has Wetherington where Speaker Boehner's home is located. Cinci city has a couple of communities like Marie.ont and Indian Hill. Mason and Fairfield have at least one each. Hebron, KY has 3 communities on North Bend Rd with river views and Million dollar homes. Newport has a high rise condo where the river view units go for upwards of 2 million. And downtown has some pricey condos as well. So if a metropolitan area who cost of living index is almost exactly 1.0 has a dozen condo buildings or communities with million dollar homes, imagine what the cost is in NYC/Manjattan or Beverly Hills. 3.5 million? My friend Jim Jaeger's place cost way more than that. Hell his car collection cost several times that amount. He has that much in his Ferrari GTO and 63 Grand Sport (1 of 5 race cars built by GM to eat Ferraris and AC Cobras at the track). Oh, he made his money by building Cincinnati Microwave - the original Passport and Escort radar detector manufacturer. So it isn't inherited money going way back and it isn't made in the stock market. He made shit people wanted and they bought it.

I just checked and his 330 GTO (one of two made) is currently valued at 30 million. So his family will probably have to sell the car to pay the taxes of 16.5 million just on it when he croaks if the dens get their way.

Dems not dens. Stupid autocorrect. Anyhow, do you even have a clue how hard it will be to find a buyer when the time comes?

If there is this abundance of wealth though, as you say Draug - why is only .3% of the population expected to be affected by it?

And I'm sure there are people out there willing to buy it....its just not the sort of thing that can be rushed.

The beauty of taxing net 'personal' wealth over $5m (not company assets, this is a different thing) is that you know the person can afford to pay it because it is net wealth.
It would not be a surprise to find out that wealth was earning a return of between 3-8% p.a. for example, therefore the 3% wealth tax liability would and could be partly paid out of the monies earned from the wealth as opposed to eating into the capital sums, yes you do pay an income tax on that money earned also.
So example $100 net wealth invested, returns of 5% = $5m p.a.
Income tax at 40% = $2m
Wealth tax @3% of $103m = $3.09m
Total Income, $5m, total taxes (income & wealth) $5.09m
You've left them with $99.91m which is OK
Remember no inheritance tax if they die so no worries about a massive tax bill for the family, they pay their wealth tax on-going out of yearly income rather than a lump sum when they die.

But Nigee, a sole-proprietorship in the US isn't "company assets". Not every farmer or restaurateur incorporates. I know of an antique bookstore with probably 8 or 9 million in first and second editions that is privately owned by one individual and she isn't incorporated (or wasn't two years ago).

And again, how does this work with real estate? Let's say it was just 50k, not 5 million. I have a 150k home with only 5 years left on the mortgage, but don't have liquid assets to pay 10% of the taxable 100k of home value every year. Just because a person has real property in excess of 5 million doesn't mean they have cash assets to pay the wealth taxes on it.

"what arguments could be raised against it?"

Basically, almost all arguments used against socialism, given the context...

@Draug,
If you have over $5 mil in assets in a sole proprietorship and don't incorporate, you're a terrible businessperson. The liability alone of holding that much in assets without the protection of an LLC or LLP is insane, to say nothing of the tax shelters and deferrals on the income they generate that are only available to corporate entities.

@hecks - I agree, but that doesn't mean it doesn't happen.

@hecks: your opinion. I wouldn't recommend laws or policies based sheerly on opinions or even consensus, although I suppose that is what we do in the west...

@Steephie,
I'm not recommending laws or policies; I'm dispensing financial advice I'm both unqualified and unlicensed to dispense.

I know. My point is merely that it shouldn't matter for the discussion at all.

Well, Steephie, I was just trying to chip away at Draugnar's example.

Chip away all you want. It doesn't invalidate the fact that I was chipping away at Nigee's flawed premise. $5 million isn't that much today. And why should the government get to collect $2.1 billion (with a b) from Bill Gates every year? (his personal net worth is $72 billion as of September 2013) and how is he supposed to pay that? It's mostly invested in Microsoft stock and to sell enough to pay the tax bill would have serious ramifications sending ripples through the markets as well as depressing the value of Microsoft's stock.

There are many problems with the arguments against a $5M inheritance tax (BTW: I speak of first hand experience as a 0.1%-er and I'm personally ambivalent about it.)

Argument 1: Family businesses will suffer.
(a) Firstly, a surviving spouse can receive an unlimited transfer and the estate tax does not apply. Other family members involved in the family businesses can and should receive their own stakes in the business rather than waiting for parents to die, especially if they are active in the company. If they're not active, they could still have a stake before death but it's also less of an issue because they don't deserve as much concern as active family members about having to sell the business (they would probably just sell the business anyway).
(b) A trust can also be set up before death and assets transferred to it.
(c) Term life insurance can cover any gaps.

Argument 2: Family homes will be lost.
Again, spouses can typically keep homes because of the spousal exemption. Parents of children should take out term life insurance. That basically leaves the homes of unmarried/widow(er)ed older people. Those homes can be treated like any other assets in the estate and may be sold off if necessary. In the occasional scenario that a child wants to move into that house, there are plenty of other issues such as buying out other siblings. Again, life insurance can cover all this.

Argument 3: Double taxation.
As several others have pointed out, we are subject to multiple taxation at many levels.

Argument 4: Greedy government.
The government has a budget and should strive to balance it. Generally, the money has to come from some sort of tax or spending must be reduced. It's just not realistic to cut government spending by 2% when almost all spending is "off-the-table" before such negotiations ever start (e.g., Democrats nix cuts on social spending, Republicans on military spending, farm subsidies -- but many more). So, if it's not this tax then it's got to come from through some other tax. I think most of the people fanatically against the estate/inheritance tax are just anti *any* tax so their arguments sound similar to arguments in every other discussion about taxes. They seem to forget that we already have the lowest effective tax rates as a share of GDP for 60 years (http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/?_r=0).

BTW: I've got no problem with the fairness of estate taxes in redistributing wealth. My main issue with this tax, like many things related to personal taxes (as opposed to the simpler corporate tax laws), is the cost of managing all of this, both in terms of the cost to the individual and the cost of collection by the IRS.

BTW2: I am neither a democrat nor a republican nor a libertarian. I take every issue at face value. On any given issue, I can agree with one side or another or neither.

"Just because a person has real property in excess of 5 million doesn't mean they have cash assets to pay the wealth taxes on it."
You make a good and important point here. If you have a property with net value of $5m but are not cash rich then the tax authorities would place a charge on your house equal to 3% of the value of that property, then on sale of that asset you would pay the charge to the tax authorities and keep the net proceeds.

Draug, I'm sure that Bill Gates sets aside plenty of money throughout the year to pay his taxes, which need to be paid 4 times a year, by the way -- not once. I do too. He is surely diversified in non-MSFT stock and he surely earns plenty of dividends that have no effect on the stock market whatsoever. My portfolio probably looks similar to his but much smaller, of course. If I can pay my taxes without selling any stock then so can he. BTW: He also takes advantage of being able to contribute to his foundation. When doing so, he can deduct both the contribution and also avoid paying capital gains on stock that he contributes - a double deduction, in fact! I do this too and so does Mitt Romney and presumably Warren Buffett and most other rich people. Out effective tax rate is much, MUCH lower than the top income tax rate.

... So how rich are you? How many digits, if a number is too precise?

Just so I know what you're talking about, and, well, there's the potential of friends in high places I suppose...

8

Friends born in NL, no less! :)

@Numbat - we are talking about a tax on net worth, not income. That has to be evaluated at year end. I guess you could estimate it quarterly and pay 1/4th each quarter, but even 14th of 2.1 billion is still $500 million a quarter. Do you really think BG keeps $500 million floating around doing nothing?

As far as capital gains goes, he doesn't pay any capital gains unless he sells some stock. So his tax liability is more likely (just an estimate based on what he has announced sales of as he is required to do) maybe $15 million a year, not $2.1 billion, and he just has to keep it out of the sale of the stock. But he can choose to sell or not to sell and that changes his tax liability for capital gains. With a net worth tax, he would have no choice *but* to sell to pay that bill and would have to sell 21 times the amount her currently sells in any given year.

Low-8? Mid-8? High-8?

Between me and my wife, we're worth mid-5-figures if we're lucky.

Oh, wait a minute... I forgot to count student debt as a liability. Yeah, we're worth negative high-four-digits.

If I die and leave debt, can I pay negative taxes?

"Argument 3: Double taxation.
As several others have pointed out, we are subject to multiple taxation at many levels."

But not generally from the same entity as there is no national sales tax and principal in an investment is not taxable, only capital gains above the principal.

With retirement accounts and home equity, I am worth almost 7 digits. But don't tell my wife or she'll find ways to spend it. :-)

@Draug: Given that you said "entity" and not "Federal Government", then I point to state governments that have both state income taxes and sales taxes, not to mention room taxes, property taxes, etc. Actually, the IRS double-dips when it comes to dividends: corporations usually have to pay tax on net profits before the distribution of dividends and then shareholders pay tax again on the dividends.

@Draug: If I can keep $500K around doing nothing (for short periods) then BG probably keeps at least $500M. Seriously. Larry Ellison picked up 98% of the island of Lana‘i for over $500M. We need to have such money lying around to be able to invest great opportunities! I'm totally serious.

Regarding the annual net worth tax that Nigee is touting, I do agree that would be much more problematic. Most of the counter arguments I presented for the estate tax do not apply to an annual wealth tax and I would be against such a tax as being too cumbersome for most payees.

However, I don't have a problem with the notion of an estate tax and I don't mind paying higher income taxes and capital gains taxes, especially on unearned income and hands-off capital gains -- as long as others of my ilk are required to do the same. This is what Warren Buffett basically says too.

That was why I said not *generally*. There are exceptions, of course. And it could be argued that states should have to choose one or the other.