You're making an obvious strawman argument by deliberately picking an asset that isn't fungible and doesn't increase in value like everything else. Any sensible person would, at that point, sell the art, so now we can talk in sensible terms, with real fungible and taxable assets.

Wealth compounds much, much faster than the tax burden grows. Someone who inherits $3 million (not much from the point of view of the very-wealthy) can live comfortably on the growth alone while still compounding their wealth further every year.

The only way a wealth tax would compound faster than the wealth itself is if it is larger than the growth rate of the wealth. And since the growth of wealth (e.g. by just putting it in the stock market) has averaged at ~8-10% over the past several decades, a 1% tax is not going to eat into a person's wealth over time. It's simply going to slightly slow that growth down.

Let's say you inherited a home in the US valued at $2 million. You would pay 2% of that ($40,000) as property taxes, every year. If you can't afford to pay the tax, you would sell the house and pocket the $2 million.

Is this so terrible? Doesn't seem to have stopped people investing in property.

Uh, if that's true then yes, that seems really awful, but the market probably also makes it so the real estate prices are adjusted to that taxation regime, because buyers and sellers can take that into account before settling the transaction.

With a wealth tax, you can't escape it. You would have to liquidate (parts of) your own company or other illiquid property (which might not even be possible depending on how illiquid it really is) in order to pay a tax. That doesn't seem right to me at all.

Again, why would you do that, if there are much better alternatives possible (like I said, higher capital gains taxes as an example).

(For context: I'm not from the USA and property taxes are not calculated on a percentage of the value of your property where I live. I'm just using USD in my example because I know there are mostly Americans here.)

That's buying a new house every 50 years. That's re-building all of the wealth your family spent generations accumulating, every 50 years.

That's a direct disincentive to saving money and frugality - the more you save, the bigger your tax gets, while your income stays the same.

> re-building all of the wealth your family spent generations accumulating, every 50 years.

Correct, that's the point.

> the more you save, the bigger your tax gets, while your income stays the same.

Only if you're a completely useless investor. Most people's income increases as their wealth increases. That's part of the problem. Especially the "r > g" question: are you growing the pie or simply sitting on a larger share?

On the other hand, this can and should be irrelevant to the average family. Start the wealth tax at $1m, say.

> Most people's income increases as their wealth increases. That's part of the problem.

But that's already solved by taxing income.

Have you actually checked what's available in places like LA for $1m?

I hadn't, because the precise value doesn't matter, but from here it looks like that's above the median: https://www.zillow.com/los-angeles-ca/home-values/

(I was also assuming it would operate like income tax allowances, where you deduct the $1m first and then apply the percentage to the remainder; and we should also consider families, so you could co-own a $2m home without hitting that limit)

The question of which inflation measure the number should keep pace with might be more important in the long term...

> the more you save, the bigger your tax gets

And the more you save, the more the returns on your money are. Wealth grows much faster than the tax.

If you have over $50 million (which is the target of this tax), or even if you have $5 million, you're not putting this in a savings account. Even just sticking it in an index fund and forgetting about it generates 8%, and has done so for decades.

But as I pointed out in my other comment, those returns are already taxed. If you think those returns are excessive, the solution is to raise the tax on them, not introduce an entirely different type of tax, with plenty of collateral damage.

Exactly, that's also what I try to point out to people: there are already tax mechanisms in place. Just raise tax rates if that's the goal.

It seems to me with a wealth tax they just want to force everyone to work & spend forever, except for the ultra rich who can afford it and who have the means to hide most of their capital offshore. It would be a devastating blow to the FIRE movement, where normal people have the goal the accumulate enough resources & invest them wisely so they and their family can "retire" early.

How many members of the FIRE movement have saved away $50 million?

Remind me, is that "lean FIRE" or "fat FIRE?"

> That's re-building all of the wealth your family spent generations accumulating, every 50 years.

Only if you assume a 0% rate-of-return on your family's wealth. With a realistic assumption about rate-of-return, your wealth will never deplete because of a 2% wealth tax. It will simply grow more slowly.

You can't invest a family farm, or a painting. I will repeat myself a 3rd time - if the goal is to slow the growth of wealth, the right course of action is to raise the tax rate on the returns to that wealth. If you tax wealth itself, you're needlessly relying on the investability of said wealth, as well as on market returns.

Family farms produce income and are rarely large enough to hit the threshold for these proposed taxes.

As for case of non-income generating wealth, too bad. If you can't manage to generate the absolutely pathetically low returns (2%!) that would be needed, then you don't deserve to be rich forever.