1. I suggested taxing consumption and assets instead of income. Income taxes would fall to zero to be replaced with taxes on consumption and assets. You might have to pay more tax on your consumption and assets, but you would have more income to pay for it.

2. Consumption taxes like VAT are hard to avoid given the way they compound through the production chain. They really are very efficient taxes and any regressive nature can be mitigated with other transfer payments.

3. A wealth tax applied directly to the asset (the asset owes the tax, not the owner of the asset) would also be very efficient and hard to avoid. It would encourage the productive use of the asset rather than hoarding.

4. All taxation is stripping people of property they already own - income tax is stripping you of your labor after all. That is what taxation is.

5. Taxing wealth would not stop the poor from becoming wealthy. If would actually help the poor to become wealthier as the only thing they have of value (their labor) would stop being taxed.

I do agree with you that a change from an income based taxation system to a consumption/asset based system would be unfair to those that have paid income taxes all their lives and saved and are now taxed on their savings. The solution would be to have a long transition period (25 to 30 years) where each year the income tax rate fell and the consumption/asset tax rose.

All of this is rather academic anyway since the rich and powerful will never allow an asset tax to be implemented - the last thing they want is to start paying tax. As Leona Helmsley famously said "We don't pay taxes. Only the little people pay taxes."

There's definite pros and cons to this. The obvious pros is that it's relatively easy to administer as you don't need to record investment income or losses. You only need to measure net assets periodically, which is not easy but definitely a lot easier.

It also means fewer loopholes are possible. On the other hand, those loopholes aren't set in stone, they're a human construct. Choosing to tax wealth instead of capital gains is a choice, just like the deductions and valuation rules and carryforwards and carrybacks are choices for capital gains taxes, which can be changed. But in general again here, taxing wealth is the simpler approach.

The obvious cons is that it goes against basic principles of taxation that many people agree with (but seem to let go, at large amounts). The basic principle is: only if you earn money, you're supposed to share some of it to taxation to fund public goods and the less fortunate. That's why we tax added value, or profit, but not turnover. Taxing wealth means those with losses or no-income, still get taxed and lose money.

In the Netherlands there've been many court cases against the state precisely because of this. People with $200k in savings, a zero-appetite for (risky) investments in stocks or bonds, are losing their own money (for which they've already paid either income tax or inheritance tax to gain) to taxes without any income.

But it's more than that, even those who have large investment returns would feel it. (although here I would say, that's okay and entirely the point. Still it can be surprising to what extent). Paul Graham has written about how a small seemingly innocuous wealth tax (e.g. 1% per year) can really bite you over-time here: http://www.paulgraham.com/wtax.html

This is true essentially regardless of your average level of return, whether it's 0% or 5%.

What the wealth tax does do is push you into riskier investments. If you pay 1% and have say a 1% savings account, your effective investment income tax is 100% and you slowly lose purchasing power to inflation. It almost forces you to invest in higher return, but riskier assets, like stocks. At the same time, people like me who average 20% returns per year so far, are very much undertaxed by a tiny 1% wealth tax (as there's no other capital gains tax in the Netherlands). It also very much favours leveraged investments, as it's a tax on net wealth, favouring heavy use of debt (particularly popular in Dutch real estate markets). Suppose you somehow borrow 99%, invest 1%, and average only a 1% net return on your total investments, you're still earning a 100% return which is then taxed at just 1%. It's a strange system indeed, not sure what system would be best, but wealth tax systems have some obvious flaws as well.

1) I agree with you, taxing asset holdings is strange logistically.

I think it be best to tax income. The only change I'd make is currently, income is taxed at a percentage based on your total income in the year. What could change is to tax income at a percentage that is a function of the current estimated value of your wealth instead. So if you cashed out 1 million and that's all you have, you'd pay less tax on it than if someone cashed out 1 million but still had another 10 million worth.

2) Maybe it's a bad idea to allow anyone to own too much of anything of great value to society.

In that regard, it could make sense to force wealthy people to sell some of it, to whatever treshold we believe is too much for one person to own.

That's where I think a wealth tax could come in as a vehicle to force people who own too much to sell some of it. So that we have a more evenly distributed wealth ownership accross the board.

The only thing here is I'm not sure if a wealth tax is the best scheme for this. I think the income tax that I described in #1 would be good when it comes to taxes (money that goes to the government). For wealth, I'd be more inclined with something like where people have to sell a percentage, but taxes don't necessarily need to be involved (beyond the income tax as described from the sell). The idea here is just that no one should own too much, so at some point, you need to sell so that ownership is better distributed. Not necessarily that this should go towards taxes.

E.g. where I live it's just assumed that all your assets produce a yield of 4% yearly, and that is taxed as regular income. Makes the tax declaration also a lot easier, since people don't have to list all exact dividends and profits they might have gotten from investments.

Are you saying that the wealth tax proposed does not apply to assets and only applies to actual liquid cash holdings?

If you did this you would not need a very high tax rate (my guess is something around 1%) and it would encourage efficient allocation of assets. Of course the owners of all these assets won’t be happy and since they are very powerful this idea has zero chance of ever being adopted.

Wealth taxes are a not the best idea. Being taxed on something illiquid that can’t generate cash flow is the pinnacle of dumb taxation. For example, you have a piece of art. You’d have to sell something just to hold onto the art, and if you don’t have anything to sell, you’d have to sell the art itself just to pay for ownership of the art. It would make some sense to increase capital gains taxes instead of slapping people with a wealth tax. I say this as someone that would not be hit by a wealth tax.

Also, the rich can simply move assets out of the country, and then you erode the very thing you want to tax.

Income tax is already an administrative burden on every single taxpayer, and it works fine.

Do you imagine that people don't already track and value their vehicles and homes and other high value material wealth? That strikes me as unusual.

(Note that this includes consumption of housing, and VAT + imputed rent is basically a property tax.)

Second point against a pure wealth tax: some of that wealth might be tied up in very illiquid assets (say, a castle worth €20m), meaning you might not be able to keep them because you have to pay the annual wealth tax. Or in say, art, which can be highly volatile in its valuation. This will automatically lead to disputes with tax authorities about valuations, etc etc. Not exactly fun to deal with + it's hard to enforce/verify

But even as someone without a lot to worry about, I can't think of a fair way to tax wealth outside of land taxes, which would greatly disrupt the economy.