should we be taxing earnings...or should we be taxing wealth?

[politicat]

104. Ummm... It depends.

My grandmother and I are good examples of how both systems screw both.

My grandmother is in the 15% income tax bracket (not quite poverty, but not comfortable by American standards. She has had to choose between insurance/meds/electric bill et cetera.) her income comes from Social Security and some rental income. Taxing her income hurts her a little because she has barely enough to make ends meet, but she's low income enough that her income tax is pretty insignificant.

On the other hand, she has inherited wealth in the form of land, which has become very, very valuable recently. If we tax her land wealth, she is screwed. She will have to sell the land to pay the taxes, which reduces her income further (because then she's not getting the rent on it.) I would have far fewer issues with a wealth tax that exempted the first $1M of land (and land only) value, because land isn't a liquid asset, and it's hard to turn dirt dollars into paper dollars -- a land sale costs a minimum of $2000 in agent and legal fees, and that has to be paid upfront. For someone who is land rich and cash poor, a wealth tax is devastating. If her wealth was in the form of say, stocks or mutual funds, I'd have far fewer issues with a wealth tax (because selling stock doesn't come with significant legal fees.)

I have a moderately high income (not 1% but in the top 10%) but very little wealth (401k, half-paid mortgage.) it makes sense to tax my income because first, I really don't notice it until February when I do my taxes, and what I don't notice, I don't miss. It doesn't cost me anything to have my taxes paid before I get my paycheck. On the other hand, taxing my wealth would be great for me, because I don't have much and I'd be likely to spend the difference, which would stimulate the economy.

Personally, I'd be happy to add a wealth tax over a certain dollar figure that excluded the primary family home (because some people who bought their house 30 years ago for a reasonable sum are now living in a multimillion dollar space. -- think urban apartments) and excluded a value around $1M to 5M if the person's income was below $40K. Rural cash poverty is a thing, even if some of those rural poor are actually sitting on hundreds of thousands of dollars in acreage.