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Name a tax and there’s a way to reduce it, delay it or not pay it. Financial advisers say a wealth tax would be no different.
Gabriel Zucman, an economics professor at the University of California, Berkeley, was one of the lead advisers on the wealth tax proposals by Senators Elizabeth Warren and Bernie Sanders.Credit...Ian C. Bates for The New York Times
By Paul Sullivan
One of the signature initiatives of Elizabeth Warren’s presidential campaign is a wealth tax that, she says, would pay for many of the programs she proposes, like government-paid health care and free college tuition. Bernie Sanders, one of her opponents in the Democratic race, has proposed his own version of a wealth tax that would collect, according to estimates, about $4 trillion over a 10-year period, or $500 billion more than Senator Warren’s plan.
But here’s the big question: Would the proposals, elegant in theory, work in practice?
Lawyers and advisers to the wealthy say there is no way the wealth taxes would collect anything close to the estimates, and they cite ample evidence of taxes that are reduced or eliminated through extensive and sometimes aggressive strategies.
“I’m not saying if it’s a good or a bad thing, but it is hard to implement,” said Eugene Pollingue Jr., a partner at Saul Ewing Arnstein & Lehr in West Palm Beach, Fla. “It sounds simple: Just pay X percent on your assets every year. But it’s not simple to determine the value of those assets.”
Gabriel Zucman, an economics professor at the University of California, Berkeley, who was one of the lead advisers on the Warren and Sanders wealth tax proposals, begs to differ. He said in an interview that he had solutions for many of the concerns and criticisms of the plans, including how to value private companies and illiquid assets.
a lower tax rate — 23 percent — than almost anyone else, according to data in Mr. Zucman’s new book, “The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay,” which he wrote with Emmanuel Saez, another economist at Berkeley. Taxes that hit the wealthiest the hardest, like the estate tax and corporate taxes, have fallen over the last few decades, the economists found, while tax avoidance has become more common.
Name a tax and there’s a way to reduce it, delay it or not ever really pay it, if you have the right adviser.
Upset that the 2017 tax act took away your deduction for state and local taxes in New York? Change your residence to Florida, as President Trump recently did, and those taxes are gone.
Don’t want to pay capital gains tax? Well, you can decide when to sell those investments. If you need the money, you could borrow against the account and leave the capital gains taxes for another day. And if you die still holding those securities, your heirs get them with any tax on the capital gains erased.
If it’s a big income year and your tax bill is going to be huge, you can always put years’ worth of charitable giving into a donor-advised fund: The tax write-off is yours today, but you can make donations whenever you feel like it — or leave it to your children to decide.
Mr. Zucman’s new book says that last year, the 400 wealthiest families in America had a lower tax rate — 23 percent — than almost anyone else
The list of ways the wealthy can reduce their taxes goes on. The tax most similar to a wealth tax is the estate tax, which values your entire estate and taxes it. Few people pay the estate tax these days because the exemption level is more than $22 million for a couple. But for those who do, reducing the value of what might one day be taxed is like a game of chess, with the financial adviser as grandmaster and the tax auditor as novice player.
Would an annual tax on wealth, targeted at the same people who use the best tax advisers to reduce their estate tax, somehow be free of loopholes?
“With the wealth tax, there are plenty of people who can access top-tier advisers and come up with creative ways to avoid it,” said Kimberly Clouse, founder and chief executive of Via Global Advisors. And she said those wealthy people were just doing sophisticated tax planning, and not what she called “intergalactic Isle of Man-type planning,” where assets are held offshore and owned by a web of corporations that obscure their owner’s identity.
The senators’ proposed wealth taxes seem straightforward, with the rates rising as the wealth rises. Senator Warren’s version has just two brackets: 2 percent for assets over $50 million and 6 percent over $1 billion. Senator Sanders’s plan is more graduated, like the income tax: It starts at 2 percent for assets over $32 million and hits a maximum of 8 percent over $10 billion.
how much less wealth billionaires would have had this tax been enacted in the 1980s. Bill Gates’s wealth would be about one-seventh of what it is today, while Jeff Bezos’ fortune would be about a third. Both, though, would still be billionaires.
Professor Zucman said a wealth tax would be different from other taxes that have been skirted. He envisions a way in which the Internal Revenue Service would prepopulate the tax return with an estimate of the person’s wealth.
Tax advisers disagree. The values in an estate tax return are almost always contested by the I.R.S. “We file something as thick as a phone book with all these valuations, and then the I.R.S. fights us over it,” Mr. Pollingue said.
Take a commercial building, which has a fixed value only when it is sold. Since an estate is valuing it, not selling it, the estate is submitting an estimate. What the estate’s appraiser says it’s worth and what the I.R.S.’s auditor says it’s worth aren’t always the same.
“Valuations can differ greatly,” said Jared Feldman, head of the private client group at Anchin, a tax advisory firm. “Who does them?”
The homes of the very wealthy are not standard ranches or center-hall colonials. “These families have distinctive homes,” so there are limited comparable properties, Mr. Feldman added. “So how does that work?”
Professor Zucman had two responses. First, he said his research with Professor Saez found that some 70 to 80 percent of the wealth of the 0.001 percent was in listed securities, which have a daily market value.
Mr. Gates’s wealth tax bill at $6.379 billion next year.
https://www.nytimes.com/2019/11/15/your-money/wealth-tax-warren-sanders.html
Gabriel Zucman, an economics professor at the University of California, Berkeley, was one of the lead advisers on the wealth tax proposals by Senators Elizabeth Warren and Bernie Sanders.Credit...Ian C. Bates for The New York Times
By Paul Sullivan
One of the signature initiatives of Elizabeth Warren’s presidential campaign is a wealth tax that, she says, would pay for many of the programs she proposes, like government-paid health care and free college tuition. Bernie Sanders, one of her opponents in the Democratic race, has proposed his own version of a wealth tax that would collect, according to estimates, about $4 trillion over a 10-year period, or $500 billion more than Senator Warren’s plan.
But here’s the big question: Would the proposals, elegant in theory, work in practice?
Lawyers and advisers to the wealthy say there is no way the wealth taxes would collect anything close to the estimates, and they cite ample evidence of taxes that are reduced or eliminated through extensive and sometimes aggressive strategies.
“I’m not saying if it’s a good or a bad thing, but it is hard to implement,” said Eugene Pollingue Jr., a partner at Saul Ewing Arnstein & Lehr in West Palm Beach, Fla. “It sounds simple: Just pay X percent on your assets every year. But it’s not simple to determine the value of those assets.”
Gabriel Zucman, an economics professor at the University of California, Berkeley, who was one of the lead advisers on the Warren and Sanders wealth tax proposals, begs to differ. He said in an interview that he had solutions for many of the concerns and criticisms of the plans, including how to value private companies and illiquid assets.
a lower tax rate — 23 percent — than almost anyone else, according to data in Mr. Zucman’s new book, “The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay,” which he wrote with Emmanuel Saez, another economist at Berkeley. Taxes that hit the wealthiest the hardest, like the estate tax and corporate taxes, have fallen over the last few decades, the economists found, while tax avoidance has become more common.
Name a tax and there’s a way to reduce it, delay it or not ever really pay it, if you have the right adviser.
Upset that the 2017 tax act took away your deduction for state and local taxes in New York? Change your residence to Florida, as President Trump recently did, and those taxes are gone.
Don’t want to pay capital gains tax? Well, you can decide when to sell those investments. If you need the money, you could borrow against the account and leave the capital gains taxes for another day. And if you die still holding those securities, your heirs get them with any tax on the capital gains erased.
If it’s a big income year and your tax bill is going to be huge, you can always put years’ worth of charitable giving into a donor-advised fund: The tax write-off is yours today, but you can make donations whenever you feel like it — or leave it to your children to decide.
Mr. Zucman’s new book says that last year, the 400 wealthiest families in America had a lower tax rate — 23 percent — than almost anyone else
The list of ways the wealthy can reduce their taxes goes on. The tax most similar to a wealth tax is the estate tax, which values your entire estate and taxes it. Few people pay the estate tax these days because the exemption level is more than $22 million for a couple. But for those who do, reducing the value of what might one day be taxed is like a game of chess, with the financial adviser as grandmaster and the tax auditor as novice player.
Would an annual tax on wealth, targeted at the same people who use the best tax advisers to reduce their estate tax, somehow be free of loopholes?
“With the wealth tax, there are plenty of people who can access top-tier advisers and come up with creative ways to avoid it,” said Kimberly Clouse, founder and chief executive of Via Global Advisors. And she said those wealthy people were just doing sophisticated tax planning, and not what she called “intergalactic Isle of Man-type planning,” where assets are held offshore and owned by a web of corporations that obscure their owner’s identity.
The senators’ proposed wealth taxes seem straightforward, with the rates rising as the wealth rises. Senator Warren’s version has just two brackets: 2 percent for assets over $50 million and 6 percent over $1 billion. Senator Sanders’s plan is more graduated, like the income tax: It starts at 2 percent for assets over $32 million and hits a maximum of 8 percent over $10 billion.
how much less wealth billionaires would have had this tax been enacted in the 1980s. Bill Gates’s wealth would be about one-seventh of what it is today, while Jeff Bezos’ fortune would be about a third. Both, though, would still be billionaires.
Professor Zucman said a wealth tax would be different from other taxes that have been skirted. He envisions a way in which the Internal Revenue Service would prepopulate the tax return with an estimate of the person’s wealth.
Tax advisers disagree. The values in an estate tax return are almost always contested by the I.R.S. “We file something as thick as a phone book with all these valuations, and then the I.R.S. fights us over it,” Mr. Pollingue said.
Take a commercial building, which has a fixed value only when it is sold. Since an estate is valuing it, not selling it, the estate is submitting an estimate. What the estate’s appraiser says it’s worth and what the I.R.S.’s auditor says it’s worth aren’t always the same.
“Valuations can differ greatly,” said Jared Feldman, head of the private client group at Anchin, a tax advisory firm. “Who does them?”
The homes of the very wealthy are not standard ranches or center-hall colonials. “These families have distinctive homes,” so there are limited comparable properties, Mr. Feldman added. “So how does that work?”
Professor Zucman had two responses. First, he said his research with Professor Saez found that some 70 to 80 percent of the wealth of the 0.001 percent was in listed securities, which have a daily market value.
Mr. Gates’s wealth tax bill at $6.379 billion next year.
https://www.nytimes.com/2019/11/15/your-money/wealth-tax-warren-sanders.html
