Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

Economic question based on billionaire's

  1. Mar 26, 2009 #1
    If the United States government decided to take half of each billionaires net worth (resided in the US), and allowed them not to pay taxes for the rest of their lifetime. What would do this to the economy? Cripple it? Temporary fix? What? Curious to know.
  2. jcsd
  3. Mar 27, 2009 #2


    User Avatar

    Staff: Mentor

    The amount of money you are talking about is somewhere on the order of $100 billion, maybe a little less. So it would help somewhat in the short term, but it isn't a lot compared to the numbers that are being thrown around for our deficit spending over the next 10 years (about $10 trillion).

    ...and do I have to comment on the morality/legality of such a thing?
  4. Mar 27, 2009 #3


    User Avatar
    Science Advisor
    Homework Helper

    The real problem (ethics aside) is that it would tend to spook wealthy people from living (and thus spending) in the US in the future.

    The US (and the UK) benefits greatly from the French wealth tax (ISF) which encourages many who would otherwise live in France to live in those countries. This measure would do the reverse: encourage investors, inventors, and entrepreneurs to live in the UK and Switzerland rather than the US.

    A naive economic analysis would yield a different result: it would be a one-time revenue boost (a wealth transfer, no incentive to move away from the US) followed by a tax reduction (which would increase economic efficiency). The problem is that it would be very hard to make a credible claim that the money grab wouldn't simply be repeated, and that there are psychological effects of that kind of seizure ("they took my money, I'm leaving").
  5. Mar 28, 2009 #4


    User Avatar

    Staff: Mentor

    Well, I think that's really a result of the ethical issue, but yes, if I were wealthy and I saw something like this coming, I'd immediatly send all my money overseas (if not myself as well). Heck, I think some already do - you hear about a lot of rich people sending money to Swiss or Cayman's banks.
  6. Mar 29, 2009 #5


    User Avatar
    Staff Emeritus
    Science Advisor

    With much of the income from capital gains, billionaires don't pay a lot of taxes (proportionally) to begin with. Warren Buffett likes to point out that he pays about 15% rate while his secretary pays a higher rate on her salary. The average age is 66.

    As of the end of 2008, the combined wealth of the top 50 billionairs in the US is just over $500 billion, and the combined wealth of the top 300 billionaires is just over $1 trillion.

    Alternatively - http://www.forbes.com/2008/09/16/fo...s-400list08_cx_mn_0917richamericans_land.html
    So $500 billion is a drop in the bucket compared to the ~$14 trillion/yr GDP. The bailouts are running at about $2 trillion+ and there's trillions more in various programs.

    The federal budget is over $3 trillion, not counting the various supplemental items. :rolleyes:

    I suspect that much of the wealth is illiquid, i.e. the wealth is tied up in stock, or some form of equity, and real estate. The value thus fluctuates with the markets, and in fact the world's billionaires have lost about $1.4 trillion in 2008.

    Coincidentally, the 'off-shore tax havens' are now under assault, not just from the US, but from all developed nations seeking tax revenue from their wealthy citizens.

    http://news.yahoo.com/s/ap/20090329/ap_on_bi_ge/tax_havens [Broken]
    The US is putting pressure on the Swiss government to change the bank secrecy laws where potential violation of US laws are concerned. UBS has apparently agreed to turn over names of US citizens who are hiding their money in various accounts.
    Last edited by a moderator: May 4, 2017
  7. Apr 18, 2009 #6


    User Avatar

    given that estate tax rates are 45% we in effect do that at their death
  8. Aug 22, 2009 #7
    It's not the amount of money. It's what they do with it that counts.
Share this great discussion with others via Reddit, Google+, Twitter, or Facebook