patrick.net

But they would accumulate money from work FAR faster than they do now, since there would be zero tax on income from labor.

Initially (which the real estate agents would like) although it's not enough to compensate over a typical working life.

You want 20 years final salary saved ($1M for a family with the $50K median income) for a 4% annual draw to yield 80% of your final salary during retirement under the current scheme and 40 years with a 2% asset tax ($2M) counting for half your allowed draw. Arithmetic dictates that most of that come from growth not contributions.

Planning on spending through the principal and saving less is imprudent because without suicide we can't put bounds on the length of retirement. Circumstances can force early retirement. I know people who stopped working before 55 due to disabling medical conditions which weren't considered sufficiently disabling for Social Security. Senior positions are less numerous and available. Junior people are more attractive for junior positions due to salary history, malleability, and being at a better performing psychological arousal level due to inexperience which means market forces can end peoples careers past 50. You can live a long time - 3 out of 4 of my grandparents made it past 90 without the medical care available in 2033 and the one who died young still reached 88.

Assuming historic (a real 7% from the stock market since 1950) returns $1 saved by a young person today grows over the 40 years remaining until retirement to 15 current dollars which is $0.60/year indefinitely. In the asset tax scheme $1 would yield $6.90 and $0.14 in income. The young person would need to set aside over $4.28 for each dollar they would have saved with the present tax situation. To match the 10% of income they should (that number is low) save now they'd need to set aside 42% which is is unlikely since money going into current federal taxes which might come as take-home pay doesn't constitute 32% of their salary (Although marginal tax rates are high, exemptions and deductions make the real rates extremely low with the median 4 person household paying just 5.8% in Federal income tax and both halves of FICA + Medicare totaling just 15.3%. Even $150K without a mortgage deduction isn't enough for a married couple to break 25% total in the current scheme). Employers not funnelling what they were spending on FICA/Medicare into salaries and additional inflation due to the take-home pay increases make coming out ahead in that situation even less likely.

Growing older the retirement contributions needed to hit the same target date remain high. In the final years before retirement the $50K/year family would need to contribute $45K/year to retire at the same time they would under the current scheme with $5K/year contributions.

In theory there's always Social Security; although even with delayed retirement that can be limited to 30% of pre-retirement income (up to the wage cap; less beyond it), the survivor from a dual income couple looses all of the dead spouse's benefits, and there's increasing pressure to means test it so "millionaires" who provided for themselves are likely to receive nothing

While costs often decrease in early retirement they may not stay low. Private rooms in California nursing homes average $90K/year and can break $150K/year in urban areas. "Medicare for millionaires'" days may be limited.

Of course this is irrelevant. The vast majority of people don't save enough for retirement and wouldn't care about such changes. Whether they care is also irrelevant because the congress critters aren't writing laws for them - they're doing that on behalf of the 0.4% who make campaign contributions past the FEC mandatory reporting threshold. Fortunately retirement savers do well in the same situations as the people (natural and otherwise) buying elected officials.

A 2% asset tax may also have undesirable effects on entrepreneurial ventures. Everyone I've met who started a business with the realistic potential to grow to large size with a lot of well-paid domestic employees did so after saving enough they no longer needed to work for a paycheck. The asset tax doubles the size of pay-off needed to make that happen or delays the ability to work indefinitely for free 15 years into the future.

Companies yet to produce profits can be worth hundreds of millions or even a billion dollars (due to arithmetic - it's total shares multiplied by the last per share price. When a reputable entrepreneur sells VCs 25% post-money for a $10M series-A by definition that's a $40M company even though it's spending $6 - $12M/year to make and start selling a product) even when they're loosing tens of millions each year. A 2% asset tax could radically multiply those losses ($10M/year operating loss, $100M market cap, $20M tax, $30M/year loss) and shift gains away from employees who might become entrepreneurs to investors as the investors add more money sooner resulting in increased dilution.

John Bailo says

Because in order to have a rational "Free Market" you have to exactly determine the value of things.

If the value of things can be exactly determined, why would there be a market at all? Free or otherwise. If an apple is exactly 25 cents everywhere, why would anyone move it from the orchard to the supermarket?

It is not at all easy to assess the value of illiquid assets like houses. I just recent bought a house on the open market MLS listed for weeks, yet tax assessor in that particular town insists the valuation is 3x what I paid! I'd love to flip it to the town this very moment for half of the assessed value!

That's why asset tax is fraught with valuation problems. The value is extremely difficult to assess . . . in fact price discovery is the very function of a market place. To think that tax assessors know the best smack of the good old soviet style central planning, where the central bureau has massive table for the "correct price" for everything, yet not much gets traded at those officially "correct prices."

In addition, the tax itself would affect valuation. For example, if something yields only 2% return a year, a 2% asset tax would make it worth exactly zero! An example would be a currently $1M house that can collect $20,000/yr rent (after insurance, water, sewer and maintenance repairs, but before tax), if the property tax were $20,000/yr, how much is the house worth? ZERO!

Some people hold assets they might not be able to afford to keep at 2% load. Also, some people might own something very expensive and would have to liquidate it or the position to afford to pay 2%. Also, value is subjective and market driven. Whats the value of a priceless heirloom or a numismatic coin.

I do think those with massive wealth/power power/wealth need to pay into the system a bit more than currently, but stuff like this is tough.

I would say a consumption tax and a luxury tax is probably the best way to go with exemptions for life staples on the consumption side.

However, our idiot corrupt moron government would just spend the extra revenue and load the system even further.