# How about a progressive Capital Acquisitions Tax?



## Brendan Burgess (17 Jan 2022)

I have seen people on low incomes inheriting maybe €100,000 from their uncle. With a threshold of €32,500, they pay €22,000 CAT.

Whereas someone on a high income inheriting €300k from their parents pay no CAT.

It doesn't seem right.

How about something like the following

Get rid of the Small Gifts Exemption.
First €20,000 of gifts from anyone - taxed at 0%
Existing thresholds taxed at 10% -
Next €100k taxed at 20%
Balance at 40%.

So let's say your mother leaves you €220k and you had no other inheritances or gifts.

€20,000 @ 0%
€200k@ 10% = €20k    compared to nil under the current regime.

If your uncle left you €100k
€20,000 @ 0%
€32,500 @10%   €3,250
€47,500 @20% €9,500
Total: €12,750   compared to €22,275 at present.


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## asdfg (24 Jan 2022)

Brendan Burgess said:


> I have seen people on low incomes inheriting maybe €100,000 from their uncle. With a threshold of €32,500, they pay €22,000 CAT.



Great idea. Plus if you also inherit from another uncle brother etc (someone from group b) you pay tax on the full amount


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## T McGibney (24 Jan 2022)

What is your rationale in suggesting this, Brendan? Bear in mind that CAT in overall terms is such a tiny money earner for the State compared in particular to income taxes and VAT, that if it was scrapped in its entirety tomorrow, it would be barely noticed. In fact, the increased economic activity from earlier transfer by gift of properties and portfolios otherwise transferring by inheritance would probably yield a net higher income for the exchequer.


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## Purple (24 Jan 2022)

T McGibney said:


> What is your rationale in suggesting this, Brendan? Bear in mind that CAT in overall terms is such a tiny money earner for the State compared in particular to income taxes and VAT, that if it was scrapped in its entirety tomorrow, it would be barely noticed. In fact, the increased economic activity from earlier transfer by gift of properties and portfolios otherwise transferring by inheritance would probably yield a net higher income for the exchequer.


That's an argument for reforming inheritance tax, not scrapping CAT.


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## T McGibney (24 Jan 2022)

Purple said:


> That's an argument for reforming inheritance tax, not scrapping CAT.


It's not, actually.

There is no basis, except perhaps in ideology, to retain a tax that yields an immaterial sum every year for the exchequer and that would probably yield a higher sum in annual receipts under other tax headings if it were abolished.  That's plainly an argument for abolition.


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## NoRegretsCoyote (24 Jan 2022)

T McGibney said:


> Bear in mind that CAT in overall terms is such a tiny money earner for the State compared in particular to income taxes and VAT, that if it was scrapped in its entirety tomorrow, it would be barely noticed.


It's about €600m. For example the entire Prisons Service budget is around €400m.

Saying that a tax that pays for the entire prison budget with a third left over is "a tiny earner" that is "barely noticed" is not a very solid argument.


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## T McGibney (24 Jan 2022)

NoRegretsCoyote said:


> It's about €600m. For example the entire Prisons Service budget is around €400m.
> 
> Saying that a tax that pays for the entire prison budget with a third left over is "a tiny earner" that is "barely noticed" is not a very solid argument.


It's less than one-thousandth of the 2021 tax take.


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## Brendan Burgess (24 Jan 2022)

Hi Tommy

I do understand that argument. 

I remember a guy from the Nevin Institute (I think)  giving a paper on wealth taxes (as distinct from CAT and CGT). He made the point that wherever they are levied, they raise very little.   So his argument was that we either do it properly and tax all wealth including land and homes or don't do it at all. He said that if we exclude land and homes, then it's not worth doing.

And CAT is probably the same.  Effectively excluding farms and other businesses from it probably makes it not worth bothering with. So, 
1) It should apply to all gifts and inheritances 
2) It should be progressive 

But I probably agree with you. If we don't bother applying it fully, then we should scrap it.

€600m only sounds like a lot of money.  If that is all we are going to raise from it, then scrap it and raise that with higher Income Tax.


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## Protocol (24 Jan 2022)

T McGibney said:


> It's less than one-thousandth of the 2021 tax take.



Are you out by a factor of ten there?


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## Purple (24 Jan 2022)

Brendan Burgess said:


> I remember a guy from the Nevin Institute (I think) giving a paper on wealth taxes (as distinct from CAT and CGT). He made the point that wherever they are levied, they raise very little. So his argument was that we either do it properly and tax all wealth including land and homes or don't do it at all. He said that if we exclude land and homes, then it's not worth doing


That could well be the first time I've agreed with anyone from the Trade Union's Nevin Institute.


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## T McGibney (24 Jan 2022)

Protocol said:


> Are you out by a factor of ten there?


I am, apologies. €600m is of course 1% of €60bn. (My point stands regardless.)


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## Purple (24 Jan 2022)

T McGibney said:


> It's not, actually.
> 
> There is no basis, except perhaps in ideology, to retain a tax that yields an immaterial sum every year for the exchequer and that would probably yield a higher sum in annual receipts under other tax headings if it were abolished.  That's plainly an argument for abolition.


The same can be said for lots of taxes that, collectively, broaden the tax base and raise a substantial amount of money for the exchequer. 1% of our total tax take is a fair bit of money. 

On balance I'm more in favour of a meaningful wealth tax than CAT or inheritance tax. We know who owns the properties and we know who owns the pensions and they constitute the vast majority of the wealth in the country.


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## Purple (24 Jan 2022)

Brendan Burgess said:


> If that is all we are going to raise from it, then scrap it and raise that with higher Income Tax.


And narrow the tax base even more. Are you sure that's a good idea?


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## NoRegretsCoyote (24 Jan 2022)

Brendan Burgess said:


> €600m only sounds like a lot of money. If that is all we are going to raise from it, then scrap it and raise that with higher Income Tax.


But inheritance taxes have no impact on the decision to work, or whether to work more.

Income taxes very much do!

Euro for euro, inheritance taxes are much less destructive of economic activity than income taxes are.


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## Purple (25 Jan 2022)

NoRegretsCoyote said:


> But inheritance taxes have no impact on the decision to work, or whether to work more.
> 
> Income taxes very much do!
> 
> Euro for euro, inheritance taxes are much less destructive of economic activity than income taxes are.


Exactly. Taxing wealth creation is a disincentive to create wealth. Taxing wealth retention is not.


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## Nicklesilver (25 Jan 2022)

You all seem to be obsessed with collecting more tax, you never look at how the money is being used. One thing is certain government has an inexhaustible ability to spend other peoples money.


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## T McGibney (25 Jan 2022)

Nicklesilver said:


> You all seem to be obsessed with collecting more tax, you never look at how the money is being used. One thing is certain government has an inexhaustible ability to spend other peoples money.


And it's by no means a given that collecting more and more tax is socially beneficial.

When the pandemic started, I worried that the existence of the USC for the previous decade had meant that most people had on average less ability to accumulate personal savings than they had in the years prior to 2008, and were correspondingly less able to weather a financial storm had Covid destroyed our economy. It is still a concern that I have as we inevitably face future crises.


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## T McGibney (25 Jan 2022)

NoRegretsCoyote said:


> But inheritance taxes have no impact on the decision to work, or whether to work more.


Now there's a sweeping statement!


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## Purple (25 Jan 2022)

Nicklesilver said:


> You all seem to be obsessed with collecting more tax, *you never look at how the money is being used.* One thing is certain government has an inexhaustible ability to spend other peoples money.


I don't think anyone could accuse me of that.


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## The Horseman (25 Jan 2022)

Purple said:


> Exactly. Taxing wealth creation is a disincentive to create wealth. Taxing wealth retention is not.


You can't create wealth without encouraging wealth creation if its subsequently going to be taxed. Why bother creating it in the first place.


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## NoRegretsCoyote (25 Jan 2022)

Nicklesilver said:


> You all seem to be obsessed with collecting more tax, you never look at how the money is being used.


It's a threat about tax!


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## ClubMan (25 Jan 2022)

NoRegretsCoyote said:


> It's a threat ...


Freudian slip?


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## Purple (25 Jan 2022)

The Horseman said:


> You can't create wealth without encouraging wealth creation if its subsequently going to be taxed. Why bother creating it in the first place.


Taxing the creation of wealth i.e. work, is more of a discouragement than taxing wealth retention.


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## T McGibney (25 Jan 2022)

Purple said:


> Taxing the creation of wealth i.e. work, is more of a discouragement than taxing wealth retention.


Why should wealth retention be discouraged? Is it not the bedrock of prosperity?


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## Purple (25 Jan 2022)

T McGibney said:


> Why should wealth retention be discouraged? Is it not the bedrock of prosperity?


It shouldn't be discouraged. There's nothing wrong with wealth retention, but it should be taxed so that wealth isn't concentrated in one group. Taxing labour heavily and not taxing wealth at all makes for a more unequal society with less equality of opportunity. 
If you have a high income would a tripling of the current property tax cause you to not buy the house you can afford? If the property tax is increased but income tax in lower you can work harder to earn the money to pay the property tax, thus creating more net wealth in the economy. Higher taxes on labour just discourage work so less wealth is created.


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## T McGibney (25 Jan 2022)

Purple said:


> It shouldn't be discouraged. There's nothing wrong with wealth retention, but it should be taxed *so that wealth isn't concentrated in one group*. Taxing labour heavily and not taxing wealth at all makes for a more unequal society with less equality of opportunity.
> If you have a high income would a tripling of the current property tax cause you to not buy the house you can afford? If the property tax is increased but income tax in lower you can work harder to earn the money to pay the property tax, thus creating more net wealth in the economy. Higher taxes on labour just discourage work so less wealth is created.



Sorry, I genuinely don't see the logic in having this as an objective? 

It can just as easily be argued that taxation of wealth just ends up with the government mis-spending more money than it otherwise would, and serves merely to destroy wealth.  And if I work harder to pay a higher property tax that is wasted by the government, how have I created more net wealth?

Of course the more wealth we destroy, the more equal a society we have. But it'll be a very miserable society.


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## Baby boomer (25 Jan 2022)

Brendan Burgess said:


> ......
> €600m only sounds like a lot of money.  If that is all we are going to raise from it, then scrap it and raise that with higher Income Tax.


Better still, scrap it and cut spending by €600 million.   A mere 1% of government spending.    Unless of course, we're sure there's no inefficiencies and waste left that couldn't be eliminated with a bit of effort and resolve.


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## Purple (25 Jan 2022)

T McGibney said:


> Sorry, I genuinely don't see the logic in having this as an objective?


Okay.


T McGibney said:


> It can just as easily be argued that taxation of wealth just ends up with the government mis-spending more money than it otherwise would, and serves merely to destroy wealth.


No it can't. That's complete nonsense.  


T McGibney said:


> And if I work harder to pay a higher property tax that is wasted by the government, how have I created more net wealth?


Wealth is created through the trading of manufactured good and services. Inflating the value of assets through speculation isn't real wealth creation. Taxation is wealth redistribution. It never creates wealth. 


T McGibney said:


> Of course the more wealth we destroy, the more equal a society we have. But it'll be a very miserable society.


Taxation doesn't destroy wealth. That's complete nonsense too.


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## The Horseman (25 Jan 2022)

Purple said:


> Taxing the creation of wealth i.e. work, is more of a discouragement than taxing wealth retention.


You need to create wealth before you can tax it. Working creates wealth and people work to create wealth as a result of working. If you tax wealth you remove the incentive to create wealth in the first instance. You refer to wealth increasing and they don't create any economic activity, they do or at least they did in the first instance to create this wealth. 

If people have property, pensions these as a result of working in the first instance. If you remove the incentive to "enjoy the fruits of your labour" you remove the desire to create wealth and with it the very nature of investment needed for economic activity and by extension to create work. 

For example why do you think pension companies invest pension funds in company shares? if pension funds did not invest in company shares where would these company's source funds for expansion?


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## T McGibney (25 Jan 2022)

Purple said:


> Okay.
> 
> No it can't. That's complete nonsense.
> 
> ...


"_That's complete nonsense.... That's complete nonsense too_"
Looks like I hit a nerve.   But we'll battle on.

"_Wealth is created through the trading of manufactured good and services_"
No, that's income. Income can also be created through non-trading activities such as rents, investment etc.

Wealth is essentially accumulated income that isn't diminished or spent in the meantime on taxation, living costs and discretionary (leisure) costs.

"_Taxation doesn't destroy wealth._"
If taxation is levied on wealth, it axiomatically diminishes that wealth. And if it's successively diminished without being replenished, of course it will be eventually destroyed. 

Even if you quibble or disagree with this truism, it's a bit much to dismiss it out of hand as "_complete nonsense_" except perhaps as an attempt to divert from my earlier question?


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## Purple (27 Jan 2022)

The Horseman said:


> You need to create wealth before you can tax it. Working creates wealth and people work to create wealth as a result of working. If you tax wealth you remove the incentive to create wealth in the first instance.


Yes, taxing wealth creation reduces the incentive to create it in the first place. I agree. Those taxes are called income taxes. 
Taxing wealth retention also reduces the incentive to create wealth if they are very high.
Currently we don't tax wealth retention at all but we tax wealth creation at a marginal rate of over 50%.

There's a balance to be struck and we aren't striking it.


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## Purple (27 Jan 2022)

T McGibney said:


> "_Wealth is created through the trading of manufactured good and services_"
> No, that's income. Income can also be created through non-trading activities such as rents, investment etc.


Income can be created through non trading activities but wealth can't. Wealth can be transferred through non trading activities and make an individual richer but that isn't wealth creation. 


T McGibney said:


> Wealth is essentially accumulated income that isn't diminished or spent in the meantime on taxation, living costs and discretionary (leisure) costs.


That's wealth transfer, not wealth creation.


T McGibney said:


> _"Taxation doesn't destroy wealth._"
> If taxation is levied on wealth, it axiomatically diminishes that wealth.


No, it transfers the wealth, it doesn't destroy it. 


T McGibney said:


> And if it's successively diminished without being replenished, of course it will be eventually destroyed.


If you have 10 bicycles and I take one then you have 9 bicycles and I have 1 bicycle but there's still 10 bicycles.
You can invest in a company making bicycles and you can trade bicycles and accumulate more bicycles that way but the only person actually creating bicycles is the person making them. 
You are confusing wealth transfer and asset price inflation with wealth creation. 


T McGibney said:


> Even if you quibble or disagree with this truism, it's a bit much to dismiss it out of hand as "_complete nonsense_" except perhaps as an attempt to divert from my earlier question?


What earlier question.


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## T McGibney (27 Jan 2022)

Purple said:


> Income can be created through non trading activities but wealth can't. Wealth can be transferred through non trading activities and make an individual richer but that isn't wealth creation.
> 
> That's wealth transfer, not wealth creation.
> 
> ...



We're talking about creating wealth, not creating bicycles. If I'm currently keeping sheep on the best site in the world for creating bicycles, and if a bicycle manufacturer can make more, better and more profitable bicycles there than anywhere else and thus pays me a correspondingly enhanced rent or purchase price for the site, of course I have created wealth for both myself and the manufacturer by agreeing to the deal.


Purple said:


> What earlier question.


If I work harder to pay a higher property tax that is wasted by the government, how have I created more net wealth?


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## Purple (27 Jan 2022)

T McGibney said:


> We're talking about creating wealth, not creating bicycles. If I'm currently keeping sheep on the best site in the world for creating bicycles, and if a bicycle manufacturer can make more, better and more profitable bicycles there than anywhere else and thus pays me a correspondingly enhanced rent or purchase price for the site, of course I have created wealth for both myself and the manufacturer by agreeing to the deal.


No, the bicycle manufacturer would be creating the wealth. You're be getting some of that wealth up front by agreeing to the deal. You'd be like the government but they'd be getting a cut in taxes after the wealth was created.


T McGibney said:


> If I work harder to pay a higher property tax that is wasted by the government, how have I created more net wealth?


Because you don't retain all of the wealth you create. Some of it goes in taxes, some in retained by your employer. That's assuming that you are not part of the rentier economy. If you are then you don't create any wealth at all.


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## T McGibney (27 Jan 2022)

Purple said:


> No, the bicycle manufacturer would be creating the wealth. You're be getting some of that wealth up front by agreeing to the deal. You'd be like the government but they'd be getting a cut in taxes after the wealth was created.


But if I facilitate the manufacturer to create more wealth than they would otherwise have been capable to achieve without my facilitation, hasn't my facilitation _de facto_ created a portion of that wealth, which I can enjoy in the form of enhanced rents or sale proceeds?


Purple said:


> Because you don't retain all of the wealth you create. Some of it goes in taxes, some in retained by your employer. That's assuming that you are not part of the rentier economy. If you are then you don't create any wealth at all.


A man spends a day digging a hole and then refilling it. He bills the government €200 for his day's work. He's €200 wealthier, the fruits of his traded labour. The government levies a tax on someone else to finance the payment of the €200. That second person is now €200 poorer. No wealth is created by the trade.


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## Purple (27 Jan 2022)

T McGibney said:


> But if I facilitate the manufacturer to create more wealth than they would otherwise have been capable to achieve without my facilitation, hasn't my facilitation _de facto_ created a portion of that wealth, which I can enjoy in the form of enhanced rents or sale proceeds?


No. As best you are facilitating the creation of wealth by other people. The State also does that through taxation when they fund the building of the road to the new bicycle factory. In fact they are doing much more to facilitate the wealth creation than you are. 


T McGibney said:


> A man spends a day digging a hole and then refilling it. He bills the government €200 for his day's work. He's €200 wealthier, the fruits of his traded labour. The government levies a tax on someone else to finance the payment of the €200. That second person is now €200 poorer. No wealth is created by the trade.


Ture. I didn't say that all labour or all manufacture and trade of goods and services create wealth. I said that only manufacture and trade of goods and services creates wealth.


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## T McGibney (27 Jan 2022)

Purple said:


> No. As best you are facilitating the creation of wealth by other people. The State also does that through taxation when they fund the building of the road to the new bicycle factory. In fact they are doing much more to facilitate the wealth creation than you are.


No, the building of a road that facilitates future wealth creation clearly creates wealth, as measured by the enhanced open market value of the newly-accessible property after the road is built. Ditto a rezoning decision to the same effect.


Purple said:


> Ture. I didn't say that all labour or all manufacture and trade of goods and services create wealth. I said that only manufacture and trade of goods and services creates wealth.


You may have meant that, but you said, without qualification...



> Wealth is created through the trading of manufactured good and services.



Note how I chose to have you clarify that rather than dismiss it out of hand as "complete nonsense".


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## The Horseman (27 Jan 2022)

Purple said:


> Yes, taxing wealth creation reduces the incentive to create it in the first place. I agree. Those taxes are called income taxes.
> Taxing wealth retention also reduces the incentive to create wealth if they are very high.
> Currently we don't tax wealth retention at all but we tax wealth creation at a marginal rate of over 50%.
> 
> There's a balance to be struck and we aren't striking it.


Lets look at this further so. 

Why accumulate wealth if you are going to be taxed on it? Spend what you earn and don't invest for the future (either via a pension or any other investment). So something happens that you can't earn an income and you have no resources to fall back on. What happens then? 

You reach retirement and rely on the state pension only as you decided it was not worth accumulating wealth because of the tax imposed on it. Who finances your state pension? we have a ticking pensions time bomb and it keeps getting kicked down the road. Currently state pensions are paid for from current tax income. 

So you impose a higher wealth tax and people can't pay out of their income (assume they are retired and their only income is the state pension but their house is worth 400k for arguments sake). They say I can't afford the tax so let it come out of my estate when I die (like the property tax). Then again lets assume that the person needs to go into a nursing home under the fair deal scheme. 

The fair deal scheme takes its share of the estate when the person passes away. 

Lets look at the financial collapse and the individuals who invested in bank shares as their pensions and the value of their shares were wiped out. So in your scenario these people who tried to look after their future rather than relying on the state to do so may end up with a large tax bill from their estate potentially leaving little or nothing to family despite creating wealth by sacrificing some lifestyle choices. 

How exactly is that fair?


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## Purple (27 Jan 2022)

T McGibney said:


> No, the building of a road that facilitates future wealth creation clearly creates wealth, as measured by the enhanced open market value of the newly-accessible property after the road is built. Ditto a rezoning decision to the same effect.


No, it creates an environment in which wealth can be created. It facilitates the creation of wealth but it doesn't create it.


T McGibney said:


> You may have meant that, but you said, without qualification...


Yes. Not all bicycles are cycled but all bicycling is done on bicycles. 
Not all traded goods and services create wealth but all wealth is created by the trading of goods and services. 



T McGibney said:


> Note how I chose to have you clarify that rather than dismiss it out of hand as "complete nonsense".


That's because it's not complete nonsense, it's the truth.


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## Purple (27 Jan 2022)

The Horseman said:


> Lets look at this further so.
> 
> Why accumulate wealth if you are going to be taxed on it? Spend what you earn and don't invest for the future (either via a pension or any other investment). So something happens that you can't earn an income and you have no resources to fall back on. What happens then?
> 
> ...


Do you think a 0.5% or 1% tax on retained wealth is a bigger disincentive to wealth creation than a 50% tax on the wealth creation itself?
There's a balance to be struck but suggesting that people won't accumulate wealth because there's a small tax on it doesn't make sense. 
We already have a wealth tax. It's called property tax. I don't see any evidence that people aren't buying houses because of that property tax. Do you think people will stop buying houses if property tax was doubled or tripled?


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## The Horseman (27 Jan 2022)

Purple said:


> Do you think a 0.5% or 1% tax on retained wealth is a bigger disincentive to wealth creation than a 50% tax on the wealth creation itself?
> There's a balance to be struck but suggesting that people won't accumulate wealth because there's a small tax on it doesn't make sense.
> We already have a wealth tax. It's called property tax. I don't see any evidence that people aren't buying houses because of that property tax. Do you think people will stop buying houses if property tax was doubled or tripled?


People work and better themselves firstly to fulfil their basic needs of food, shelter, clothing etc. they then go onto fulfil their wants, bigger house, car, holiday, retirement etc. 

Suggesting people will not buy houses because of a property tax is not comparable. People buy houses to live in not as investments. People need somewhere to live and choose to buy to fulfil that need. People invest in property or pensions the key word here is "invest". Capital gains are charged at 30%

I don't accept that if peoples wealth improves through their sacrifices they should be punished for it when others choose not to make sacrifices and they should benefit off the back of those who do make sacrifices.


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## T McGibney (27 Jan 2022)

Purple said:


> No, it creates an environment in which wealth can be created. It facilitates the creation of wealth but it doesn't create it.


Ok, so if I own a green field with sheep on it in Blanchardstown, and its market value is €5m, I'm no wealthier than my cousin who owns a similar sheep field in North Leitrim worth €10k?

Now consider that both fields were worth roughly the same as each other when our grandad owned them both 60 years ago.  Really, has no wealth been created by the massive capital appreciation in Blanchardstown in the meantime?



Purple said:


> That's because it's not complete nonsense, it's the truth.


What you said last week wasn't the truth. It was easy for me to demonstrate how it was false, without having to rant about "complete nonsense" and the like.


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## Purple (27 Jan 2022)

The Horseman said:


> People work and better themselves firstly to fulfil their basic needs of food, shelter, clothing etc. they then go onto fulfil their wants, bigger house, car, holiday, retirement etc.
> 
> Suggesting people will not buy houses because of a property tax is not comparable. People buy houses to live in not as investments. People need somewhere to live and choose to buy to fulfil that need. People invest in property or pensions the key word here is "invest".


Their wealth improves but if it improves through asset price inflation then they are not creating wealth. If it improves through working in the traded goods and services sector then they probably are creating real wealth in the economy. They are also not improving their wealth through their sacrifices, but rather due to the appreciation of existing assets. I'm in favour of taxes that encourage real wealth creation rather that taxes which penalise it. I'm not in favour of a greater net tax take but a shift away from taxing wealth creation and onto wealth retention. 


The Horseman said:


> I don't accept that if peoples wealth improves through their sacrifices they should be punished for it when others choose not to make sacrifices and they should benefit off the back of those who do make sacrifices.


Yes, people who improve their wealth through their sacrifices, in other words through their work, should not be punished. High taxes on labour do exactly that. 
People who choose not to make sacrifices but simply own assets are currently rewarded by the hard work of others; their assets appreciate due to the economic activity of others but those hard workers are taxed up to the hilt. That doesn't seem fair to me.


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## Purple (27 Jan 2022)

T McGibney said:


> Ok, so if I own a green field with sheep on it in Blanchardstown, and its market value is €5m, I'm no wealthier than my cousin who owns a similar sheep field in North Leitrim worth €10k?


Of course you are but if you are grazing the same amount of sheep you are creating the same amount of wealth. You are confusing the wealth you are creating with the wealth retained in the value of the land. 



T McGibney said:


> Now consider that both fields were worth roughly the same when our grandad owned them both 60 years ago.  Really, has no wealth been created by the massive capital appreciation in Blanchardstown in the meantime?


Yes, but the owner of the land didn't create the wealth, though they are the beneficiary of the creation of that wealth.  


T McGibney said:


> What you said last week wasn't the truth. It was easy for me to demonstrate how it was false, without having to rant about "complete nonsense" and the like.


No, you haven't demonstrated anything of the sort. You are confusing the transfer of wealth and retention of wealth in an asset with the creation of wealth. They are different things.

Back to your fields. Why is one worth more than the other? It's because one has a far greater potential to be a place where wealth is created. The one in Blanchardstown is located in a place where more goods and services are traded. The owner of the field didn't create any of the value. It is a reflection of it's potential as a location where wealth can be created.


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## T McGibney (27 Jan 2022)

Purple said:


> You are confusing the wealth you are creating with the wealth retained in the value of the land.


No, if I sell that field for €5m, having bought or inherited it from my grandad when it was worth €10k, I am wealthier by circa €5m. I and my family are free to live a lavish lifestyle on the proceeds. My ownership of that land, a lucky accident, created that wealth for me. 

And even if I never sell it, I can quite reasonably count myself as wealthy on foot of owning it.

My cousin, contemplating his €10k-value field, can not.


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## T McGibney (27 Jan 2022)

Purple said:


> Back to your fields. Why is one worth more than the other? It's because one has a far greater potential to be a place where wealth is created. The one in Blanchardstown is located in a place where more goods and services are traded. The owner of the field didn't create any of the value. It is a reflection of it's potential as a location where wealth can be created.


One is worth more than the other because someone is willing to pay more the difference. It correlates to potential wealth creation, but only loosely.

A rich person around Blanchardstown may be just as happy to buy it for personal enjoyment, eg as a site for their home. Or the Council might buy it from me to use as a public amenity. Either way, I am wealthy on foot of it, regardless of the motivations of whoever would pay me €5m for it.


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## T McGibney (27 Jan 2022)

Purple said:


> No, you haven't demonstrated anything of the sort.


Yet, you found it necessary this morning to qualify what you said previously. If it was "the truth" a few days ago, you wouldn't have needed.

And you've spent this morning debating the nuances of something that a few days ago you dismissed as "complete nonsense". If it was complete nonsense, there would surely be nothing to discuss?


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## Purple (27 Jan 2022)

T McGibney said:


> No, if I sell that field for €5m, having bought or inherited it from my grandad when it was worth €10k, I am wealthier by circa €5m. I and my family are free to live a lavish lifestyle on the proceeds. My ownership of that land, a lucky accident, created that wealth for me.
> 
> And even if I never sell it, I can quite reasonably count myself as wealthy on foot of owning it.
> 
> My cousin, contemplating his €10k-value field, can not.


Yes, you are wealthier but you didn't create that wealth. Wealth transfer and wealth creation are not the same thing.


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## Purple (27 Jan 2022)

T McGibney said:


> Yet, you found it necessary this morning to qualify what you said previously. If it was "the truth" a few days ago, you wouldn't have needed.


Only because you didn't understand it. 


T McGibney said:


> And you've spent this morning debating the nuances of something that a few days ago you dismissed as "complete nonsense". If it was complete nonsense, there would surely be nothing to discuss?


See above.


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## noproblem (27 Jan 2022)

Purple said:


> Wealth transfer and wealth creation are not the same thing.


They are to the beneficiary. Stop playing with words and sentences, and just pretend for a minute that you're normal.


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## Purple (27 Jan 2022)

noproblem said:


> They are to the beneficiary.


No they aren't. People who create wealth often don't retain that wealth. As an employer I retain some of the wealth created by my employees. I am the beneficiary of the wealth they create.


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## noproblem (27 Jan 2022)

Purple said:


> No they aren't. People who create wealth often don't retain that wealth. As an employer I retain some of the wealth created by my employees. I am the beneficiary of the wealth they create.


You'd  be some crack having a few pints with. I'd say the barman would love to see you coming in, and be over the moon when you left


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## Purple (27 Jan 2022)

noproblem said:


> You'd  be some crack having a few pints with. I'd say the barman would love to see you coming in, and be over the moon when you left


I move around so they don't know me but yes, it could certainly be a problem otherwise.


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## Sophrosyne (27 Jan 2022)

Perhaps there is a nomenclature issue.

What exactly do you mean by wealth transfer?

If A is taxed on his wealth, does that make taxpayer B *wealthy*?


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## Purple (27 Jan 2022)

Sophrosyne said:


> Perhaps there is a nomenclature issue.
> 
> What exactly do you mean by wealth transfer?


If you make something, say you knit a sweater, and sell it for more than the cost of the materials then, through your labour, you have created wealth. If you make dozens of sweaters and sell them from a business premises then your business and the people you employ to knit for you are creating wealth.
If I then charge you rent for the use of the premises you knitted the sweater in then some of that wealth has been transferred to me.
By renting the premises to you I have facilitated you to create wealth.
We both end up  wealthier but only you have created the wealth.
Taxing you and your employees on your labour may act as a disincentive to your economic activity which is wealth creating. Taxing you on the wealth you retain from your activity (and that of your employees) is less likely to act as a disincentive to your economic activity. Taxing your labour at a marginal rate of over 50% is more of a disincentive on your labour than taxing your retained wealth at 1% is on your likelihood to retain that wealth.

If there are lots of places in one area knitting sweaters and they are all creating lots of wealth then the land and the premises in that area will increase in value because there is a greater potential for wealth creating activities to take place on that land and in those premises. That's asset price inflation but it's not wealth creation. That's why a housing bubble doesn't make a country richer. In fact it drives capital away from activities which create wealth; instead of using your money to open a company knitting sweaters you invest it in premises in the hope that others will do the knitting. In the end that drives up rents and eats the margins of the manufacturer, thus acting as a disincentive to wealth creation.


Sophrosyne said:


> If A is taxed on his wealth, does that make taxpayer B *wealthy*?


Possibly, but it certainly is wealth redistribution but so is all taxation.


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## Sophrosyne (27 Jan 2022)

So, If I understand you, this is not strictly wealth transfer but a tax on accumulated wealth to lessen the burden of other taxes, such as income tax.

There have been many studies over the years on potential exchequer gains from wealth taxes. In the Irish context, what is considered “wealth” would have to be set at a very low threshold for exchequer gains to be meaningful.

But that would defeat the purpose as wealth taxes would fall on the very individuals and businesses that are already overburdened.


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## Purple (27 Jan 2022)

Sophrosyne said:


> So, If I understand you, this is not strictly wealth transfer but a tax on accumulated wealth to lessen the burden of other taxes, such as income tax.


Yes, it's moving the tax base away from wealth creation (labour) and onto wealth retention. 

To be clear, it absolutely is a wealth transfer.



Sophrosyne said:


> There have been many studies over the years on potential exchequer gains from wealth taxes. In the Irish context, what is considered “wealth” would have to be set at a very low threshold for exchequer gains to be meaningful.
> 
> But that would defeat the purpose as wealth taxes would fall on the very individuals and businesses that are already overburdened.


Just increase property tax, maybe change it to a site value tax. That's the best form of wealth tax there is. A small tax on pension fund values would also be a good idea but harder to do. None of that places any extra burden on the business activity.


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## T McGibney (27 Jan 2022)

Purple said:


> Only because you didn't understand it.


I only misunderstood it because you didn't communicate it concisely, as evidenced by the fact that you later clarified it. And I did query it literally minutes after you posted it.


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## Sophrosyne (27 Jan 2022)

Purple said:


> To be clear, it absolutely is a wealth transfer.


Well, you are determined to think that it is.


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## T McGibney (27 Jan 2022)

Purple said:


> Yes, it's moving the tax base away from wealth creation (labour) and onto wealth retention.
> 
> *A small tax on pension fund values *would also be a good idea but harder to do. None of that places any extra burden on the business activity.


Another tax on work and wealth creation 

(Pension pots are predominantly accumulated from earnings, as pension contributions funded from passive income don't qualify for tax relief.)


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## Purple (27 Jan 2022)

T McGibney said:


> Another tax on work and wealth creation
> 
> (Pension pots are predominantly accumulated from earnings, as pension contributions funded from passive income don't qualify for tax relief.)


Taxes on earnings are taxes on wealth creation. The deferred income tax on your pension is a deferred tax on wealth creation. A tax on the appreciation of the value of your pension fund is a different thing but yes, it's not nearly as clear cut as a property tax.


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## Purple (27 Jan 2022)

T McGibney said:


> I only misunderstood it because you didn't communicate it concisely, as evidenced by the fact that you later clarified it. And I did query it literally minutes after you posted it.


If that makes you happy then that's fine by me.


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## Purple (27 Jan 2022)

Sophrosyne said:


> Well, you are determined to think that it is.


taking wealth from someone or some business through taxation and spending it on something else is wealth redistribution. There's nothing wrong with that.


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## T McGibney (27 Jan 2022)

Purple said:


> If that makes you happy then that's fine by me.


Ditto.


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## Purple (27 Jan 2022)

T McGibney said:


> Ditto.


All's well that ends well


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## Itchy (27 Jan 2022)

Great discussion folks, this line got me through the last page and a half...


T McGibney said:


> We're talking about creating wealth, not creating bicycles. If I'm currently keeping sheep on the best site in the world for creating bicycles....


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## The Horseman (29 Jan 2022)

Purple said:


> Their wealth improves but if it improves through asset price inflation then they are not creating wealth. If it improves through working in the traded goods and services sector then they probably are creating real wealth in the economy. They are also not improving their wealth through their sacrifices, but rather due to the appreciation of existing assets. I'm in favour of taxes that encourage real wealth creation rather that taxes which penalise it. I'm not in favour of a greater net tax take but a shift away from taxing wealth creation and onto wealth retention.
> 
> Yes, people who improve their wealth through their sacrifices, in other words through their work, should not be punished. High taxes on labour do exactly that.
> People who choose not to make sacrifices but simply own assets are currently rewarded by the hard work of others; their assets appreciate due to the economic activity of others but those hard workers are taxed up to the hilt. That doesn't seem fair to me.


If people increase their wealth through sacrifice (earning more than they spend) and use this excess to purchase a home or invest I apension they shouldn't be penalised with wealth taxes. 

People acquire assets through sacrifice, they either earn income above their needs or they have acquired them from family. Whether you accept it or not at some point these assets are a result of foregoing spending of income either by the owner of the asset or by the person who has given the asset.

High taxes do indeed punish labour but so too do wealth taxes. A wealth tax acts as a disincentive to better oneself and plan for the future. One of the main reasons people better themselves is to enjoy a better standard of living as they get older. 

Imposing a punitive wealth tax (even a small yearly % figure) when compounded over the medium term can equate to a significant figure.


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## Purple (31 Jan 2022)

The Horseman said:


> If people increase their wealth through sacrifice (earning more than they spend) and use this excess to purchase a home or invest I a pension they shouldn't be penalised with wealth taxes.


I agree, and we penalise that hard work with income taxes and charges of over 50%. Reduce the income tax and introduce a wealth tax to balance things out.


The Horseman said:


> People acquire assets through sacrifice, they either earn income above their needs or they have acquired them from family.


Acquiring them from their family is not a sacrifice. 


The Horseman said:


> Whether you accept it or not at some point these assets are a result of foregoing spending of income either by the owner of the asset or by the person who has given the asset.


Yes, but a sacrifice by someone else is not your sacrifice. 


The Horseman said:


> High taxes do indeed punish labour but so too do wealth taxes. A wealth tax acts as a disincentive to better oneself and plan for the future.


Over 50% marginal income tax rates are more of a disincentive than a small wealth tax. 
The property tax on a €1.3 million house is €1,400 a year. That's ridiculously low. If the owned can't afford to pay it and it rolls over as an estate tax it's still tiny.  


The Horseman said:


> One of the main reasons people better themselves is to enjoy a better standard of living as they get older.


Better themselves? That's a very broad definition of increasing your net wealth. 


The Horseman said:


> Imposing a punitive wealth tax (even a small yearly % figure) when compounded over the medium term can equate to a significant figure.


The property tax above, compounded over 30 years is still well under 10% of the value of the property. Is that going to stop you buying the house? Is that going to mean you stop saving and investing?


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