[freefaler]

This is a bad solution to taxation. It brakes the long-established tax practice of "realization principle".

Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price. You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to pay and if you don't you'll be in big trouble, because you owe the money to the government.

So independently of your own actions & impossible to predict you will need to plan for this expense. How many homeowners and rentiers would like that?

The "realization principle" in tax law specifies that income is not subject to tax until it is "realized" through a taxable event, such as the sale or exchange of an asset. In the US this was established in early 20th-century U.S. Supreme Court cases such as Eisner v. Macomber (1920). In this case it was established that mere appreciation in value does not constitute taxable income until a sale or exchange occurs.

Europe is not very business friendly. This regulation will make creating businesses even harder. When governments need more revenue they need to create more opportunities to create that revenue, not squeeze the current business tighter and tighter. Startups are risky, adding additional risk would just kill more of them sooner.

BTW, it's easy to fix "loan against my equity" evasion by classifying the "money has been loaned" as a "realization" event.

[jltsiren]

Wealth tax is a long-established practice in Germanic Europe. The list of countries that collected it in 1965 is kind of interesting: Austria, Denmark, Finland, Germany, Netherlands, Norway, Sweden, and Switzerland. Most of them eventually abolished it.

It made more sense in the past, when speculative valuations were less common and capital flight was less of an issue. It was collected from wealthy people, who could probably afford to pay. And it served as an additional incentive to invest your wealth productively. But then globalization arrived and made the drawbacks bigger than the benefits.

[mark_and_sweep]

There is still a wealth tax in Germany which is, in fact, enshrined in its constitution. However, the tax has not been collected since 1997 due to legal issues regarding its calculation. Back then, the constitutional court decided that wealth in the form of properties would have to be taxed more. However, instead of adjusting the calculation, politics instead decided to suspend collecting the tax. Ever since, there have been multiple political initiatives aimed at restarting the collection of the tax, none successful so far, despite a large majority of Germans (70+%) being in favor of collecting the wealth tax.

[galleywest200]

>Ever since, there have been multiple political initiatives aimed at restarting the collection of the tax, none successful so far, despite a large majority of Germans (70+%) being in favor of collecting the wealth tax.

Gee, I wonder who could possibly be financing voices to oppose a wealth tax at the government level. Maybe we should tax the wealthy to stop them from doing stuff like this.

[skobes]

> You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to pay...

Isn't this exactly how property taxes usually work? (In the absence of caps like California Prop 13, that is.)

The realization principle is a hallmark of income tax law, but many taxes are not income taxes.

[freefaler]

In some states there are, which is also a bad & unjust practice. The difference is that the rates are between 0.49% and 2.5% and reassessment period differs between the states/localities (these are local taxes). This is way less that the proposed Norway taxes and "value" can be established much more justly than a "startup shares".

[vidarh]

> This is way less that the proposed Norway taxes and "value" can be established much more justly than a "startup shares".

The Norwegian wealth tax is 0 up until ~$150k, then 0.7% local tax and 0.3%-0.4% to the state.

So 1%-1.1% above the threshold. But this is of taxable value which for shares is discounted 20%, so the actual tax rate is ~0.8%.

But again, for unlisted companies, the taxable value is the taxable valuation of company assets excluding goodwill, so in practice, it's even lower than that.

[asadotzler]

So, it's OK if it has rules and the Norway laws don't have any rules... is that what you're saying here/

[freefaler]

The principle of taxation without value exchanging hands will lead to bad consequences, this is the point I'm trying to make.

What will Norwegian's representatives do they will do. It's stupid and will lead to bad things down the road. Norway is rich and can afford stupid politics for now.

It's also morally wrong, but morality and taxes are not the same.

[vidarh]

Norway has done this for many decades. It's worked just fine.

Morality is subjective, so it's meaningless to argue it is morally wrong without making an argument for why.

[dzhiurgis]

Yes and property taxes are terrible.

Tax. Vacant. Land.

[tzs]

In the US property taxes largely go to fund public schools, local police/fire/emergency medical service, parks, roads, sewer, water, and trash collection.

Generally the amount you need for such services is more a function of how much non-vacant land you have in the area than how much vacant land, so unless switching to just taxing vacant land was accompanied by some tax on something else to cover the aforementioned things it would not work very well.

[HPsquared]

The fairest system would be a flat tax per person, surely. Each person will use a pretty average amount of state resources. It's expensive to live in California, after all.

[grakker]

I can remember when people actually advocated for a flat tax with a straight face. Freaking hilarious idea supported by shallow thinkers.

[vidarh]

It wouldn't surprise me, though I've usually seen that applied as a reductio ad absurdum to show that the notion of a flat percentage as "fair" is arbitrary because surely a flat tax would be even fairer - on the basis that it highlights how flattening out the tax curve can make the burden on the poorest unsustainable.

[no_wizard]

Land value tax is the most effective tool in creating market conditions for real estate

[cardiffspaceman]

Put. A. Farm. On. Each. Plot. Of. Land.

Locally people dodge the remit of the California Coastal Commission by converting land to farms because you can convert a farm to anything.

[devchix]

> Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price.

This is exactly how state property tax is assessed in the US. You're not taxed on just the difference but the entire assessed value of the house. There have been cases of seniors who have bought and lived in their homes for 30, 40 years having to sell because they could not afford the tax after the value of their home went into the stratosphere. Similarly for poorer neighborhoods experiencing gentrification when property value shot up beyond what the original buyer paid, and they are forced out. When objections are raised on how a wealth tax would be infeasible to administer, my rejoinder is local governments levy it all the time, on the middle class, they just call it a property tax.

[HPsquared]

The other thing is what happens when the notional value goes down a year later? Do they get a tax refund?

[novok]

Usually, you get a credit or deduction that can only apply to future tax liability in the same category. Ex: Capital losses are stuck with capital gains in the USA and can only be applied to $3000 of your income per year otherwise. These rule systems are usually incredibly self-serving.

[vidarh]

The wealth tax is yearly based on your wealth that year.

[HPsquared]

Oh right so it's not a tax on the gains in that year. Makes sense then, if it's just a wealth tax.

[freefaler]

At most you'd get a rebate of your future tax payment as is the current practice.

[asadotzler]

Yes.

[vidarh]

> Suppose the same principle was applied to a home owner.

Norway does apply the wealth tax to home owners. Though there is a discount factor for different types of assets, and the value of your primary home is discounted by 75%. There's also a minimum threshold.

[freefaler]

There is a difference between a well-established market with "value" that is established and something much more speculative like other type of assets.

If people there are OK with these taxes and don't vote them out it's their choice. My point is that it's a bad and wrong solution with bad consequences.

There is data about this: https://www.gemconsortium.org/data

And also check how many big companies have been started in the last 10 years in EU.

[vidarh]

> If people there are OK with these taxes and don't vote them out it's their choice. My point is that it's a bad and wrong solution with bad consequences.

Norway has had this tax for decades, and done just fine.

> There is data about this: https://www.gemconsortium.org/data

I don't see any data that gives any useful indication about this there.

> And also check how many big companies have been started in the last 10 years in EU.

Norway isn't in the EU, and the EU doesn't have wealth taxes, so it doesn't seem awfully relevant.

[freefaler]

Taxes are levied on economic activity. In capitalist systems the main economic activity is created by companies by direct tax on profits or direct tax on labor they buy (wages for the workers).

Count the number of companies created and grown in the last 20 years and see the trend. If it's going down your tax revenues will decrease. So indeed number of companies created is a very good proxy for future tax revenues.

[vidarh]

Taxes are levied on all kinds of things that are not economic activity. Including, in Norway, on ownership.

> Count the number of companies created and grown in the last 20 years and see the trend. If it's going down your tax revenues will decrease. So indeed number of companies created is a very good proxy for future tax revenues.

Even if it was that simple, that does not provide even a correlation - much less causation - with wealth taxes, which Norway has had for decades. E.g. we'd expect to see changes corresponding with changes in the wealth tax rates.

[freefaler]

Yes, I agree with you that taxes can be levied on property too, but to pay for those taxes economic activity is needed. I don't see how it's different though.

Companies and people need to generate money to pay for these. Profits are created by economic activity. When you increase the risk for companies to die by creating a cost that is not easily planned you decrease your future revenues. just basic math...