I do hope the 10 year thing takes into account how long you’ve been in the state and how much you earned within the state.
Remember. You’re only getting taxed on the amount over >30mil in assets (first 30 million isn’t taxable). That’s quite a lot of money before a very small tax begins to be levied.
I do hope there’s also allowances for income tied up in illiquid investments (eg private business investments). I would also worry about taxation on net worth that hasn’t been realized (eg private company that does a valuation that suddenly puts you over the 30 mil threshold). These seem like important nuances that could quickly torpedo any benefits.
As an example a popular “Just two cents” plan takes a third of the value of a taxed base in 20 years and by 35 years, the government has received over half.
IMO, "small" wealth taxes "get big" because they take repeated bites at the same apple.
Government take [via wealth tax] in the example above is the result of 1 - (1 - taxrate) ^ years.
1 - (1 - 0.02) ^ 20 = 0.3323 ; (20 years => 33%)
1 - (1 - 0.02) ^ 35 = 0.5069 ; (35 years => 51%)https://docs.google.com/spreadsheets/d/1_k6sFrBAjwpJbXKHmpNA...
Take a 45-year-old who's worked hard and gotten very lucky. They've earned $50 million from an IPO and are retiring early. How much money can they spend per year, before and after the wealth tax?
Just to keep it interesting, I'm proposing this scenario before running the numbers.
Assumptions:
1. Death at 90, no money left over.
2. Money invested very conservatively with 3.5% return.
3. No income, so no income tax or capital gains tax [1].
4. Inflation is 1.76% (average of last 10 years [2]).
5. Wealth tax is 0.4% applied to wealth in excess of $30mm.
With the wealth tax, our lucky devil can spend $1,509,000 every year. That's inflation adjusted, so when they turn 90, they're spending $3.3mm per year.
Without the wealth tax, they can spend $45K more: $1,554,000 per year (inflation adjusted).
I don't know about you, but if I had $1.51mm in spending money per year, I wouldn't be sweating the extra $0.05mm. It seems like a reasonable cost to me, and very low compared what you'd pay in income tax.
https://docs.google.com/spreadsheets/d/1fV9pip51Z-qqRUG3pDEc...
[1] I may have misunderstood how capital gains are taxed when you have no other income. I don't think it detracts from the overall point, though.
[2] https://www.usinflationcalculator.com/inflation/current-infl...
However, if we were to use Warren's proposal, our lucky millionaire would be unaffected, because it doesn't kick in until $50mm. (A happy coincidence.)
If I run the numbers again, using a very lucky millionaire with $100mm in assets, it comes out as follows:
1. Warren wealth tax: $2,613,000 yearly spending power
2. CA wealth tax: $2,939,000 yearly spending power
3. No wealth tax: $3,104,000 yearly spending power
Warren's proposal is much more aggressive about leveling wealth inequality, especially considering that it jumps to 6% for billionaires. I'm not convinced it was a serious proposal, though, given that it was part of Warren's campaign rhetoric. I think she's serious about a wealth tax, but I suspect the specific proposal was a starting point in the bargaining process—an attempt to shift the Overton window, if you will—not the expected outcome.
What people (wealth tax supporters) are really trying to do is tax unrealized gains that compound because there are no transactions to tax. Dubious legally for the U.S. but not onerous if structured right.