<p>Here are a couple easy ones off the top of my head:</p>
<ol>
<li><p>Let's say you have a negative interest rate at the bank.  You do not have a negative interest rate under your mattress.  So, rather than keeping your money in the bank, where it accrues negative interest, you take your savings and put it, in cash, under your mattress.  Boom, you've suddenly avoided the negative interest rate.  Meanwhile, the banks are unable to do business because they have no loans from customers with which to invest and produce returns.  Essentially, you've put commercial banking out of business.</p>
</li>
<li><p>You say that the idea of a negative interest rate would be to reduce income inequality, by redistributing the money of the rich to the poor.  However, it almost never actually works like that.  Governments may, for a time, earmark money collected by various taxes to fund various programs, but over a sufficient timescale that rarely holds.  Eventually, the government will start to use this money for other purposes and funding other projects, some (many) of which may not be anywhere close to the original goal of the tax.  One famous example of this was <a href="https://www.thecanadianencyclopedia.ca/en/article/income-tax#:%7E:text=Federal%20income%20tax%20was%20initiated,from%20conscription%20triggered%20its%20need." rel="nofollow noreferrer">the Federal Income Tax in Canada</a>, which was originally intended to be a temporary measure to fund World War 1.  Last I checked, World War 1 was over, but Canadians are still paying income tax.  I wonder why that is...</p>
</li>
</ol>
<hr />
<p>EDIT: I just thought of a third reason why this is a bad idea.</p>
<ol start="3">
<li>There is a concept known as a &quot;regressive tax&quot;.  A regressive tax is a tax that has a higher effect on people of lower income, in that the percentage of money paid to this tax is inversely proportional to the income of the taxpayer (the lower your income, the higher a percentage of it you pay in tax).  Most &quot;sin taxes&quot; (e.g. gas tax, tobacco tax, alcohol tax) are regressive in this way, as are most forms of sales tax.  This proposed scheme is also regressive.  Let's say you are a smart, rich person and you don't keep that much money in the bank (from a personal finance perspective, unless you are planning a large purchase, it's unwise to keep more than 5 figures worth of money in the bank at a time).  So your net worth may be 1M but your bank account may be 20K (2% of your net worth), of which 1% is 200, or 0.02% of your net worth.  Say you're a poor person who doesn't have a lot of money, and in order to pay your bills you have to put almost all your net worth, let's say $10k, in the bank, of which 1%, or 100, is taxed.  The rich person pays a tax rate, relative to wealth, of 0.02%, the poor person pays 1%.  The rich person pays more tax in dollars, but who is paying their fair share in this scenario?</li>
</ol>
<hr />
<p>I'm sure someone else can provide a much more comprehensive and rigorous answer than this, but here are a couple simple reasons why this is a bad idea.</p>

CC BY-SA 4.0
2022-06-22T22:58:50.443Z
Quite naive to point out hide cash.. under the mattress, lol, if Govt restricts cash transactions like many these days? What was the purpose of mentioning world war policies which is not related to negative interest rates? I downvoted.
Creator
CC BY-SA 4.0
2022-06-23T06:48:45.843Z
@Creator "*Quite naive to point out hide cash.. under the mattress, lol, if Govt restricts cash transactions like many these days?*" I simply do not understand what you mean here, Ertai's point 1. is spot on.
Giskard
CC BY-SA 4.0
2022-06-23T08:02:14.333Z
@Giskard You mean you can buy a house paying cash to some people? There is no fear of robbery to keep cask all around. How much money is there in bank accounts at present and do you expect everything to go back to cash transactions? All people will prefer to pay cash instead of 1% tax? In my opinion (NOT sure) 1% of total money in the bank will be 30% income tax.
Creator
CC BY-SA 4.0
2022-06-23T14:59:26.187Z
@Creator Your comment is confusing.  Under what basis do you believe 30% income tax is equal to 1% of money in the bank?  You believe there is 30x more money not stored in banks, than there is in the bank?  That seems like a rather strong assumption that needs more than an "opinion" if you want to be rigorous about it.  This site is for people who want rigorous answers, not people who want their opinions validated, so I hope that's your goal.
Ertai87
CC BY-SA 4.0
2022-06-23T15:01:20.413Z
And yes, unless you live in a country with restrictions on financial transactions, of which the only one I know is China, you can pay for literally anything in the world using cash.  It's not common to pay for real estate using cash (mostly because banks don't have negative interest rates), but there's no reason not to do it, strictly speaking.  The problem is, getting a mortgage to buy a property would be prohibitively difficult if the bank is out of business, but that's not in scope of the question.
Ertai87
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2022-06-23T17:44:57.243Z
@Ertai87 I mean 30 times more money stored in the bank, so a negative interest rate would be very low compared to income tax rate.
Creator
CC BY-SA 4.0
2022-06-23T18:09:03.593Z
@Creator You assume by this, that people will have the same spending habits under a negative interest rate scheme as they have now.  Literally nobody would do that, though.  The primary reason for putting your money in the bank is to accrue predictable interest on it while maintaining liquidity.  If you couldn't accrue interest on your money, you would either invest the money, or you would store it in cash or cash-equivalents like precious metals.  Therefore, your scheme would have to include a way of taxing investments (obviously you can't tax cash), but that opens a whole other can of worms.
Ertai87
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2022-06-23T18:14:29.230Z
I should say, "saving" habits, not "spending" habits.
Ertai87
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2022-06-23T18:30:19.000Z
@Creator In general, people who are wealthy do not hold much cash.  Almost all rich people have almost all their money in investments.  For example, Elon Musk, currently valued in the tens of billions of dollars, has almost all his net worth in Tesla stock.  Were he to sell out his Tesla holdings, he would actually get far, far less than his supposed "net worth".  Jeff Bezos is the same with Amazon; I don't know what Bill Gates does these days but he used to be the same with Microsoft.  Rich people hold almost all their money in investments, not the bank.
Ertai87
CC BY-SA 4.0
2022-06-23T18:38:04.830Z
The solution, therefore, if you want to have "rich people pay their fair share", is to tax not bank accounts, but investments.  Forewarning: I'm going to butcher finance terminology by using "capital gain" to refer to unrealized increases in value of investment portfolio, and "capital loss" to refer to unrealized losses (generally those terms are only used for realized gains/losses, not unrealized ones, and I apologize to anyone who just vomited for reading that).  The problem is, using fancy math and accounting, it's easy to make a capital gain look like a capital loss, and this happens often
Ertai87
CC BY-SA 4.0
2022-06-23T18:41:02.527Z
So the question becomes, what to do about capital losses?  If you give a tax credit for capital losses, then rich people can (and will, and in fact do, under current capital gains tax laws) exploit those tax credits to pay lower rates of tax.  If you don't give a tax credit, then you can completely fuck an "ordinary" (not "rich") person who happens to have a stock that was a solid winner, but also a stock that was a huge loser; they get taxed on their small gain, then also get fucked on their huge loss.  Then next year when that loser stock recovers, boom here's a tax bill for that.
Ertai87
CC BY-SA 4.0
2022-06-23T18:47:55.327Z
But actually it gets even worse than that.  Let's say you are an average person who holds a stock like NorTel (which went from roughly 180 to roughly 1.80 in a matter of months a couple decades ago).  Let's say you bought NorTel at 150, it went to 180, and then to 100.  So you're down 50/share.  You sell out and buy, say AMZN for 100/share.  Then your AMZN goes from 100 to 150, so you're back where you started.  But you get taxed on that 50 gain, even though it wasn't actually a gain!  The incentive here is to not sell NorTel and let it crash, losing all your money, to avoid tax.  That's bad.
Ertai87
CC BY-SA 4.0
2022-06-22T21:51:31.700Z
2022-06-23T18:24:54.023Z
2022-06-23T18:24:54.023Z
Ertai87
<p>Other answers do good job covering original question so this answer will focus only on new sub-question:</p>
<blockquote>
<p>It seems the community did not understand what I mean. So let's simplify the concepts with numbers. There are 330 million people in the USA or let's say 100 million families. Further, let's say the basic need of each family can be met by 100 thousand a year. So the total expenses to cover the basic need for the people of the USA is 100 million times 100 thousand which is 10 trillion. The worth or total assets of the USA is more than 400 trillion. So we only need 3% worth of tax to cover the basic needs of the people. What are we doing with the present tax system?</p>
</blockquote>
<p>Total assets are the total sum of value of all assets accumulated by country from its birth till present day. That includes all factories, buildings, cars all past investments into productive capacity of a country, peoples retirement accounts all the military bases US has around the world etc.</p>
<p>First, it is absolutely not feasible to have indiscriminate 3% wealth tax on a value of all assets in economy. That would mean government would have to figure out market value of every car, even second hand, every house heck even every garden shack, every old piece of machinery etc. That would require too much auditing. I also can't imagine how government would manage to find out how much cash holdings each household has without some sort of extremely invasive gestapo style IRS auditors knocking on peoples doors. Politically such tax would be probably infeasible, people might support wealth taxes on rich, but I don't know of many people of any political persuasion that would support taxing all wealth period. Moreover, every tax has both administrative burden and deadweight loss, it would be absurd to tax the value of a car of some low income family just to later send them a check. Also, it would be absurd for government to tax its own assets.</p>
<p>In practice to make any such tax to be feasible it would have to be only limited to certain high value assets (e.g. more expensive real estate) or financial wealth of millionaires/billionaires.   In such cases expensive auditing would be feasible however in that case the tax would not raise much revenue.</p>
<p>According to <a href="https://budgetmodel.wharton.upenn.edu/issues/2021/3/15/budgetary-effects-of-senator-warren-wealth-tax" rel="nofollow noreferrer">Huntley and Ricco 2021</a> estimates a 3% billionaire wealth tax, coupled with 2% millionaire tax applied at 50 million (the most closest tax proposal to just flat 3% I could find) would require additional 100 billion in auditing/enforcing costs and would raise about 225 billion per year.</p>
<p>Hence, using the above example of realistic 3% wealth tax and assuming you want to distribute the revenue directly to 100 million families, you would only be able to give each family about \$2250 per year.</p>
<p>What even more, government cannot decide what the incidence of a tax is. That is decided by endogenous interactions throughout the economy. Large part of the wealth tax (which is implicit capital tax) incidence is shifted to labor as labor is less elastic in the long-run (<a href="https://www.jstor.org/stable/1911310?seq=1#metadata_info_tab_contents" rel="nofollow noreferrer">Chamley, 1986</a>; <a href="https://eml.berkeley.edu//%7Esaez/course/Judd_JPubE(1985).pdf" rel="nofollow noreferrer">Judd, 1985</a>). For example, <a href="https://budgetmodel.wharton.upenn.edu/issues/2021/3/15/budgetary-effects-of-senator-warren-wealth-tax" rel="nofollow noreferrer">Huntley and Ricco (2021)</a> estimate the above mentioned tax would in long run lead to 1% drop in wages compared to scenario where the tax is not adopted, so in the end once you would net it out average family would end up with less than \$2250 extra per year.</p>
<p>Furthermore, such tax could arguably negatively affect economic growth, although research on this topic is not conclusive, in some models it would in some it wouldn't. In case, such tax would affect economic growth it would make it even worse proposition. With 3% economic growth standards of living of people double every 24 years about every generation, with 1% economic growth standards of living double only about once in every 70 years so about once per life time. Even for many poor families it would likely be preferable for them to have their standards of living double 2-3 times during their life time rather than just 1 time in their lifetime even if this comes at a cost of not getting extra \$2250 welfare check <em>per year</em>.</p>
<p>Now we currently do not know how much would growth be affected by wealth tax if large country like US would implement it, if it would be affected at all. However, given this uncertainty it would be responsible to start with limited experiment with small wealth tax of lets say 0.01-0.05% and research the effects rather than immediately trying to set it as high as 3%.</p>

CC BY-SA 4.0
2022-07-17T22:48:58.767Z
@Creator that is just estimate, for that you can use various statistical techniques to try to provide best guess. For example, you can examine value of car of representative family and then assume all families in that class have car with the same value. Also you cannot use historical records, values of things change over time. Taxing estate that someone purchased in 1800s for \$10000 at it historical value would be absurd, even after you would adjust for inflation you would get widely inaccurate value because housing in the US got more expensive then just inflation
1muflon1
CC BY-SA 4.0
2022-07-17T22:51:44.970Z
also what are you even talking about working poor people paying 10 to 30%, 10 to 30% of what and where is a data source for that claim?
1muflon1
CC BY-SA 4.0
2022-07-17T22:55:04.377Z
How it is estimated that nearly 400 trillion is there now? All the records are there we do not have to do anything else to find or go to houses. Not sure what you mean. One needs to understand the difference between 30% and 3%. Working poor people are paying 10% to 30% income tax, they would love to pay 3% on their worth instead. In fact, more than 90% population will love it. Further, a very low percentage of property may be hard to give a value.
Creator
CC BY-SA 4.0
2022-07-17T22:59:12.697Z
@Creator I dont know you tell me you claim that is the estimate. I am just giving you an example of an estimate could be made. You tell me where you found that estimate, if I have time I might have look at bits of it to give you some examples of how it would not be directly applicable to taxing. First, any rational working person would rather prefer 10% income tax than 3% wealth tax, they would pay much less with the wealth tax since wealth tax applies to all their accumulated possessions repeatedly year after year. Paying 3% on a \$1000 car every year is preferable than paying 10\% once on
1muflon1
CC BY-SA 4.0
2022-07-17T23:01:18.577Z
single wage of \$1000 yet the 1000 car and single wage check have equivalent value, with the 3% wealth tax over a life time the working person (assuming 80 years life span) would pay \$2400 which is much higher than 10% income tax from 1000 dollar paycheck.
1muflon1
CC BY-SA 4.0
2022-07-17T23:04:01.447Z
@Creator Also it is simply false to claim that poor working people in the US pay between 10\%-30% of their income as tax. **The average tax rate on income for bottom 50% of income distribution** is **3.5%** according to the latest estimates, so where did you get your  10-30%? poor people are already paying about 3% of their income on average as taxes. If you want it to be lower that is fine, but you should not make false claims about it https://taxfoundation.org/publications/latest-federal-income-tax-data/
1muflon1
CC BY-SA 4.0
2022-07-17T23:06:01.563Z
It is not the amount, it is who is paying? The present system is exploiting the poor and giving benefits to the rich. The present system is leading to inequalities.  Please see who is paying more in the proposed system. This should lead to equilibrium rather than a one-sided affair, rich only to richer. I mean 10% to 30% individual tax rate.
Creator
CC BY-SA 4.0
2022-07-17T23:07:48.913Z
@Creator under the present tax system of USA bottom 50% of all people pay only 3.5% income tax on average and top 10% of richest people pay 20% on average.... so I can clearly see richer people are paying more of their income under present system. Again it is fine if you believe that poor people should pay less than 3.5% and rich people more than about 20% but dont blatantly lie and say paying 20% of all income on average is less than paying 3.5%... I mean common
1muflon1
CC BY-SA 4.0
2022-07-17T23:12:21.160Z
https://www.bankrate.com/taxes/tax-brackets/
Creator
CC BY-SA 4.0
2022-07-17T23:14:01.860Z
@Creator but those are tax brackets, people dont actually pay those rates, people can deduct kids etc. If you want to see how much people are actually paying you have to look at average rates
1muflon1
CC BY-SA 4.0
2022-07-18T02:14:30.100Z
Further, the present system is collecting the 3.5% income tax from people who may not have anything in the bank and a net worth of nothing.  It is simply not fair.
Creator
CC BY-SA 4.0
2022-07-18T11:27:11.577Z
no it does not income tax is always paid as % of income so someone with no income pays no tax. That 3.5% is average someone with no income pays 0% tax, that’s why 3.5% is as low as it is many poor people pay 0% of their income in taxes some poor people pay 1% some 2% some 3%, some 5% that 10% is maximum possible tax rate someone in that bracket could pay if they cannot deduct anything but in US everyone can deduct something most poor people end up paying only few % points and the average for people at the bottom half of income distribution is 3.5%
1muflon1
CC BY-SA 4.0
2022-07-18T23:03:20.930Z
The main purpose of the proposal is to make the Govt rich and create jobs as required, rather than looking for the rich to create jobs.
Creator
CC BY-SA 4.0
2022-07-23T22:04:57.043Z
"According to Huntley and Ricco 2021 estimates a 3% billionaire wealth tax, coupled with 2% millionaire tax applied at 50 million (the most closest tax proposal to just flat 3% I could find) would require additional 100 billion in auditing/enforcing costs and would raise about 225 billion per year"  What you have just said that lots of job will be created and money flow would go towards equilibrium, that's exactly was the point and what is wrong in that direction was the question.. Humans are here not to make money but to survive together.
Creator
CC BY-SA 4.0
2022-07-17T22:19:08.643Z
2022-07-17T22:25:39.867Z
2022-07-17T22:25:39.867Z
1muflon1
<p>I believe the idea is to make society more equal (reduce imbalance of living standards)?</p>
<p>You make some bold statements like</p>
<p><strong>Statement 1</strong></p>
<blockquote>
<p>In my opinion (NOT sure) 1% of total money in the bank will be 30%
income tax.</p>
</blockquote>
<p>I work as a risk manager for a reasonably large internationally operating bank. I have a good understanding of what percentage of money our clients hold in bank accounts and what their income is. Obviously I cannot share that data but
here are some official figures that aren't that different.</p>
<ul>
<li><a href="https://www.pgpf.org/blog/2021/11/income-and-wealth-in-the-united-states-an-overview-of-data" rel="nofollow noreferrer">Peter G. Peterson Foundation</a><br>
2019 US white, not Hispanic median household income was \$77,007<br>
2019 US white, not Hispanic median household wealth (that figure takes all assets into consideration, not simply money in a bank account) was \$181,440<br>
That is only 2.35x the income. For other ethnicities these figures are even lower according to this source.</li>
<li><a href="https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult#By_region" rel="nofollow noreferrer">Wikipedia</a> using data from Credit Suisse's <a href="https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/global-wealth-databook-2021.pdf" rel="nofollow noreferrer">Global Wealth Databook</a> shows similarly low numbers for regions and countries.</li>
</ul>
<p><strong>Statement 2</strong></p>
<blockquote>
<p>For example money in a savings account is treated differently than in
a loan account. My point is this distinction is artificial? Both
should be treated as the same.</p>
</blockquote>
<p>A loan is fundamentally different from a savings account, in any measure I can think of (accounting, balance sheet, cashflows, net wealth, taxation,...). Moreover, large corporations would almost surely not use loans at all anymore (they can deduct interest expenses and therefore pay less tax now, as opposed to pay tax on them). Since you exclude all other assets, they would simply issue bonds.</p>
<p>While we (the bank I work for) do have some accounts where we charge negative interest rates (mainly wholesale, a few retail), many account holders tend to switch to alternatives (bonds, stocks, art, collectibles, structured products.. ). There was a bit of an exception in the months after COVID 19 started, potentially because savings rates went up so much due to lack of alternatives (many places were closed and people couldn't spend their money). Also it is not even legally applicable in all jurisdictions - e.g. in Austria, there was a supreme court ruling that made it illegal to charge interest on bank deposits for retail clients because (original German ruling)</p>
<blockquote>
<p>... den elementaren und gesetzlich angelegten Zwecken einer
Spareinlage (Gewinn- und Vermögensbildungsfunktion) diametral
widerspricht.“</p>
</blockquote>
<p>which essentially means that</p>
<blockquote>
<p>&quot;(negative interest) ... diametrically contradicts the elementary and
statutory purposes of a savings deposit (profit and capital formation
function).&quot;</p>
</blockquote>
<p>The ruling was originally for zero interest, but naturally encompasses negative interest as well.</p>
<p>Leaving aside legal obstacles (in some countries), the by far biggest problem (based on my banking experience only) is that you would predominantly charge this tax for low income people.</p>
<p><strong>Statement 3</strong></p>
<blockquote>
<p>@Alex Did you think who is entitled for a loan? The person who already
has money.</p>
</blockquote>
<p>you completely ignore that most people can in fact afford a house. You can look at <a href="https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate" rel="nofollow noreferrer">home ownership rates</a>. So you either only care for the very poor (who anyhow do not pay taxes apart from some taxes like VAT that apply to everyone who can buy stuff - but than again, they must have money to buy stuff after all).</p>
<p>In reality, your proposal would make renting a lot more attractive for most people because if you had say \$20,000 (assume in a bank account for simplicity) and take out a loan of \$380,000 (borrowing a conventional loan — one available through or guaranteed by a private lender or either of two government-sponsored entities, Fannie Mae or Freddie Mac — requires a down payment of 5 percent or higher) your tax basis would all of a sudden increase to \$380,000 if you paid \$400,000 for a house based on your proposed scheme. Add a student loan, a car loan and a few other things the average John and Jane Doe have, and you end up paying a lot of tax, despite being highly indebted.</p>
<p>The people or firms that would remain to be home owners will be the more wealthy fraction of society. However, hardly any wealthy person has considerable amounts of their wealth as money in a bank account. In a simply example, if they had the \$400,000 in a bank account and would have bought a house for it, they would in fact no longer pay taxes (as opposed to the unfortunate individual that needed to take out loans, and now not only pays interest on the loans but also taxes on top of it) You can have a look at the current <a href="https://www.visualcapitalist.com/composition-of-wealth/" rel="nofollow noreferrer">composition of wealth in the US</a>. Combined with my simple example of buying a house, it should be clear that the wealthy will pay very little tax under your proposed scheme (even if you assume they would not change the composition - in reality they would avoid holding money in bank accounts). If you want to tax assets (everything from houses, cars stock ownership, art,..) you actually are proposing a wealth tax.</p>
<p><strong>Statement 4</strong></p>
<blockquote>
<p>@1muflon1 interest is money to money mapping, is not ir?</p>
<p>@erik Here work and money is replaceable and a kind of one-to-one
bijection and reversible mapping. The present tax system replaces work
with money, my question is can we replace money with money.</p>
</blockquote>
<p>I guess you think of <a href="https://en.wikipedia.org/wiki/Map_(mathematics)" rel="nofollow noreferrer">mathematical maps</a>, but that statement simply makes no sense and no one working in finance, banking or law firms would understand what you mean in my humble opinion. Also, taxing income is taxing money because income is paid in &quot;hard earned dollars&quot; (that directly go into your bank account, after it was taxed - at least in most circumstances - in some cases taxation may happen afterwards).</p>
<p><strong>Statement 5</strong></p>
<blockquote>
<p>Here, saving is not encouraging as the present crisis is related to an
imbalance of money in people's accounts.</p>
</blockquote>
<p>I am not sure what crisis you are referring to? Also, what is an imbalance of money in people's accounts? From an accounting perspective, a balance sheet always balances, because for every debit, there is an equal and opposite credit. Lastly, discouraging saving is economically troublesome as well because lower savings rates lower the level of output (you can look at any <a href="https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model" rel="nofollow noreferrer">growth model</a> really). That unfortunate character needing a loan for his / her house may  in fact not get a loan if no one saves. Taken to the extreme, all machinery and investment will also go to zero and we will end up as hunter-gatherers again.</p>
<p><strong>Statement 6</strong></p>
<blockquote>
<p>If money to money was the system, the objection to the present system
would have, been &quot;people won't work&quot;. Where the money will disappear
with the proposed system if govt restricts cash transactions? Present
Govt forcing the beggers to pay tax, (they beg as pay is not
compatible to price for all jobs).</p>
</blockquote>
<p>I read this several times, and I still have no clue what you really mean to be completely honest. People will work, even if taxed because it is the only way to earn a living (apart from the relatively few who decided that long term unemployment benefits are enough to get by). If you beg and earn more than the tax free allowance, why should you not pay tax? What makes income from begging different from any other income? Since you write that pay is not compatible to price for all jobs, I assume you think the beggars chose their &quot;profession&quot; over a lousy alternative. If so, it makes even more sense to tax them, as they do something that is deemed more worthy than the alternative sources of income and are hence better off that way.</p>
<p><strong>At least one statement is actually correct (for some countries)</strong></p>
<blockquote>
<p>if Govt restricts cash transactions like many these days?</p>
</blockquote>
<p>It depends a lot on the <a href="https://www.europe-consommateurs.eu/en/shopping-internet/cash-payment-limitations.html" rel="nofollow noreferrer">country</a> you are from though. Many countries do not have restrictions and the reason for these restrictions is to fight black markets and underground / illicit activities.</p>
<p><strong>Summary</strong> <br>
I have no idea how you can think this would have the potential to reduce inequality.</p>
<p>Wealth, ultimately comes from income earned. It is harder than you think to maintain wealth across generations. It <a href="https://www.wsj.com/articles/SB10001424127887324662404578334663271139552" rel="nofollow noreferrer">seem</a> that 70% lost their wealth by the end of the second generation, and 90% by the end of the third. The research is from a wealth consultancy The Williams Group and may not be 100% accurate but there are other studies, like from the top 1%, less than 15% comes from <a href="https://www.washingtonpost.com/blogs/wonkblog/post/research-desk-did-the-top-1-percent-inherit-its-wealth/2011/11/04/gIQA4T8kmM_blog.html" rel="nofollow noreferrer">wealth transfers</a> (mainly inheritances, but also including gifts).</p>

CC BY-SA 4.0
2022-06-24T02:16:54.197Z
Thank you so much for such an explained answer. My assumption was that there are so many properties in the world and it is only growing so the value of those properties must be hidden somewhere in cash or "another form". Hence if all taxes are based on those (not income) inequality would reduce because that would reduce wealth accumulation by the wealthy.
Creator
CC BY-SA 4.0
2022-06-24T20:15:01.143Z
The financial position of the United States from Wikipedia states:  includes assets of at least $269.6$ trillion and debts of $145.8$ trillion. Would you please just tell me are not these amounts in people's or companies' bank accounts in some form?  My whole question was to tax on these amounts not on "income". Would you please tell me? I want to edit the question but not sure it is appropriate. Please help.
Creator
CC BY-SA 4.0
2022-06-25T10:19:57.560Z
An asset is everything, from houses, to cars, and potentially even intangibles like trademarks etc (I did not look up the definition the article uses). You can look at the link I provided above for the composition of wealth. If you want to tax this, you are talking about a wealth tax not a tax on bank accounts. Ideally you should also exclude loans (debt), otherwise you disproportionately tax people with low net worth.
AKdemy
CC BY-SA 4.0
2022-06-25T21:31:36.700Z
Not wealth tax, edited.
Creator
CC BY-SA 4.0
2022-07-08T21:27:10.537Z
I downvoted because all your point was rich will buy this and that but you have failed to understand that "someone will have the money? "We do not destroy money", it is there with the humans.
Creator
CC BY-SA 4.0
2022-06-23T23:05:43.117Z
2022-06-25T20:07:49.667Z
2022-06-25T20:07:49.667Z
AKdemy
<p><strong>It seems the community did not understand what I mean. So let's simplify the concepts with numbers. There are 330 million people in the USA or let's say 100 million families. Further, let's say the basic need of each family can be met by 100 thousand a year.  So the total expenses to cover the basic need for the people of the USA is 100 million times 100 thousand which is 10 trillion. The worth or total assets of the USA is more than 400 trillion. So we only need 3% worth of tax to cover the basic needs of the people.</strong> What are we doing with the present tax system?</p>
<p><strong>EDIT Motivation</strong>: There is a clear distinction between human's &quot;basic needs&quot; and &quot;wants&quot; if not, every govt should have its own distinctions. The point is, that each Govt should be capable of satisfying the basic needs of the people first, before considering anything else. To achieve this goal, IMHO, one needs to organize the requirement at the source. <strong>For every dollar Govt prints, a percentage needs to go towards providing the basic needs</strong>. A Govt needs to be rich in order to do justice to the people. In addition, human needs to understand that <strong>primary</strong> purpose of the work is to serve humanity, not to earn money for themselves alone.</p>
<p>I am trying to understand the economic consequences if a country decides to tax every bank account but not the earner alone. This means instead of income tax, govt would collect money by having negative interest rates on the people or companies, who have money in their banks. The reason for such action is to reduce inequality. This can have a balance version as well, meaning some amount tax and some negative interest on the saving accounts.</p>
<p>The idea of negative interest is that you pay money to the Govt instead of getting money from the bank as interest. Here, saving is not encouraging as the present crisis is related to an imbalance of money in people's accounts. This is derived from the fact that poor people have no money to do anything but some have all to do anything.</p>
<p>EDIT: Here assumption is work and money are replaceable and a kind of one-to-one bijection and reversible mapping. The present tax system replaces work with money, my question is, can we rotate money with money (or add a map/cycle in the system). Can we have money to the money in the tax system as well (not a job to money alone, which is the present tax system)?</p>
<p>There is no reference to the above, as it is an idea to reduce the imbalance of living standard of people of the world.</p>
<p>EDIT: The question may not be clear because we tend to differentiate money between different accounts. For example money in a savings account is treated differently than in a loan account. My point is this distinction is artificial? Both should be treated as the same. Secondly, any other form of value is not in the picture, so the question has nothing to do with the existing wealth tax.</p>
<p>EDIT: The closest I can think of is sales tax. You pay tax for each sale it does not matter who sells to whom and what it is. Exactly you pay tax on each dollar in the bank.</p>
<p>EDIT: Example: A person/company has different bank accounts for example say Checking accounts, Savings accounts, Money market accounts,(MMAs), certificate of deposit accounts (CDs), and the person/company has 100 dollars in each account so the person/company pays tax on 400 dollars. One can say it is a kind of wealth tax but wealth is related to cash alone.</p>
<p>The question is if there is a tax i.e. to pay to the Govt, from every bank account (like every job pays tax). whether this would lead to unsustainable &quot;economic consequences&quot;?</p>
<p><strong>EDIT</strong>: Finally, I think I got the correct terminology. Wikipedia states that the financial position of the United States contains assets of at least 269.6 trillion and debts of 145.8 trillion. I postulate there would be at least that much cash in the USA. This cash may not be in bank accounts but must be in some form, in people's or companies' names? <strong>My whole question was to tax on these amounts not on &quot;income&quot;</strong>.</p>
<p><strong>Final EDIT</strong>: It is not wealth tax. For example, X has 500K and bought a house from Y. Now X does not pay tax but Y does, as he has 500K. Now if X borrows 200K by mortgaging the house then he has to pay tax on 200K. The general concept is that X should not pay tax as he is taking a loan. The point is paying interest is not a contribution to society so it should not be an excuse for not paying taxes. Proposing to change paying tax on the basis of income but it is based on the worth of a person. I am not saying there should not be a wealth tax I am just explaining in this edit the difference between the wealth tax and the proposed one.</p>

CC BY-SA 4.0
2022-06-17T17:57:44.203Z
Can you clarify your tax proposal? You want to abolish all income taxes and replace them by taxes on saving while keeping government revenue constant or what? Also what do you mean by negative interest rates, taxes on savings are not negative interest rates
1muflon1
CC BY-SA 4.0
2022-06-17T18:02:13.287Z
@1muflon1 Thank you for your interest, I am editing.
Creator
CC BY-SA 4.0
2022-06-17T20:30:46.300Z
As worded, your question seems to be asking about the consequences of taxing savings held in banks, but not savings held in other forms, eg company shares, bonds, real estate.  Is that really your intention?
Adam Bailey
CC BY-SA 4.0
2022-06-18T08:44:41.963Z
"*The reason [...] is to reduce inequality*" Which "inequality"? Income inequality? Wealth ineqaulity?
Giskard
CC BY-SA 4.0
2022-06-18T08:47:06.470Z
@Giskard Reality is living standard inequality, more probable wealth inequality.
Creator
CC BY-SA 4.0
2022-06-18T08:48:59.523Z
The question also seems to rely on some vague assumptions, like the government taxing wealth by charging negative interest rates on savings. How do you charge interest rates on self-owned farmland, a house, intellectual property, or a piece of art? I think it might be best to take some time getting the basic idea straight, gathering information where needed, because currently it is not quite clear what you are asking, and it seems likely that the answer would depend on the details.
Giskard
CC BY-SA 4.0
2022-06-18T15:05:01.113Z
If interest rates are negative for savers there is no incentive to save. Therefore there is no saving. Therefore no tax revenue from taxing the savers. I don’t see how the suggestion is viable.
erik
CC BY-SA 4.0
2022-06-18T15:06:38.650Z
Secondly, I do not understand the difference between an earner and a saver. These adjectives are not mutually exclusive.
erik
CC BY-SA 4.0
2022-06-19T19:06:20.113Z
@Giskard Art, Farmland, property is not "money in the bank" so no tax on them in the question. Only money in the bank, If one has 100 in the bank and borrows another 50 with those with that deposit of 100, the total worth is 150, so pay tax on 150. The point is to rotate money. – 
Creator
 10 hours ago
Creator
CC BY-SA 4.0
2022-06-19T20:42:15.193Z
@erik Here work and money is replaceable and a kind of one-to-one bijection and reversible mapping. The present tax system replaces work with money, my question is can we replace money with money. If money to money was the system, the objection to the present system would have, been "people won't work". Where the money will disappear with the proposed system if govt restricts cash transactions? Present Govt forcing the beggers to pay tax, (they beg as pay is not compatible to price for all jobs).
Creator
CC BY-SA 4.0
2022-06-19T21:00:22.357Z
The new edits just make your question more confusing: 1) "Here, saving is not encouraging as the present crisis is related to an imbalance of money in people's accounts." - do you have any reference for such statement? I dont think any serious economist would endorse idea that any economic crisis is related to imbalance of money in peoples accounts, what does that even mean? 2) "The present tax system replaces work with money," what do you even mean by this? The present tax system does not replace anything with anything. Present tax system is a transfer of money from individual to government
1muflon1
CC BY-SA 4.0
2022-06-19T21:05:54.703Z
3) "my question is, can we replace money with money." again what does this even mean? Money is already money, are you proposing monetary reform where paper notes with another set? 4. "Present Govt forcing the beggers to pay tax, " <- what tax are you talking about beggars are not paying income taxes 5. You ask in your question whether this is right site for questions about taxing savings, and indeed this is correct site, but on any SE site, questions have to be clear, your question reads like text you would get by spilling a bag of alphabet soup on a floor
1muflon1
CC BY-SA 4.0
2022-06-19T21:08:35.017Z
my recommendation is to: 1) remove all the assertions you cannot support with sources (e.g. crisis caused by imbalance of money on peoples account), 2) make a coherent proposal with an example, for example if I save 100 euros with bank offering 5% interest what is being taxed? the 5% interest, or separate tax quoted as a percentage of principal? Show some simple example of calculation before and after tax, if you dont know econ terminology just use some simple numeric example, saying that current system replaces work with money and you want to replace it with system that replaces
1muflon1
CC BY-SA 4.0
2022-06-19T21:10:48.767Z
money with money is incomprehensible
1muflon1
CC BY-SA 4.0
2022-06-20T19:10:32.380Z
I downvoted because it's impossible to grasp what you try to ask. In one comment you respond to Adam Bailey that company shares, bonds, real estate are "finally in the bank" (whatever that means). You also wrote you want to tax savings but you respond to Giskard that property (which is real estate, land ...) is "not in the bank" and suggest if someone borrows money  (which is the opposite of saving) that they should pay taxes on this. Most countries (incl. the US and the UK have capital gains taxes). Also, many countries (US) add capital gains to regular income tax if the holding period is <1y
AKdemy
CC BY-SA 4.0
2022-06-20T22:16:13.303Z
@AKdemy I really do not understand what is not clear. There is a tax on "every dollar in the bank" and there is nothing else in the question. The money you borrow or earn does not matter. It is the most simple statement but it has been associated with all other stuff and it becomes unclear. See property is not money in the bank it is a house which has value.
Creator
CC BY-SA 4.0
2022-06-20T23:34:24.607Z
@Creator I dont understand why you cant simply make a numerical example that could be easily understood and instead of that you keep stubbornly describing the tax in a vaguest terms possible and with each edit you just add more vague terms. One cannot evaluate a vague policy. Just describe with a numeric example how the tax would work, plus you can add asset classes it would apply to if you want to make distinction between stocks and houses. Also money in bank is by definition a wealth so if you want to tax it it is a wealth tax, saying it isn't would be akin to saying dolphin isnt mammal
1muflon1
CC BY-SA 4.0
2022-06-20T23:36:36.253Z
If anything, that will greatly increase inequality as opposed to decrease it as you seem to think. You propose to tax also loans (so anyone who cannot buy a house without a loan will pay tax, same for cars, education). Anyone with money will simply buy whatever to avoid being taxed (you wrote yourself that property doesn't matter), while at the same time not having to pay income tax anymore.
Alex
CC BY-SA 4.0
2022-06-20T23:53:26.373Z
@Alex Did you think who is entitled for a loan? The person who already has money. Regarding property tax, it was a clarification that I am not talking about property tax. One can have both, that was not the point. I think most money printed in the last decade or more by Federal reserves is stored in someone's bank accounts in reality and they did not have any obligation, they all took chances, IMHO.
Creator
CC BY-SA 4.0
2022-06-21T07:12:28.310Z
@1muflon1 interest is money to money mapping, is not ir?
Creator
CC BY-SA 4.0
2022-06-22T08:51:57.810Z
@erik I did not say bank in the question, I said each bank account. All the accounts which has money.
Creator
CC BY-SA 4.0
2022-06-22T12:12:15.730Z
your new edit has some improvements and some further things that make this question worse and candidate to be closed. 1. Improvent is that you described how the tax would work 2. You are asking too many chatty open ended questions unrelated to main question e.g.  How can we design policies to achieve this both human needs and initiate appropriate morale values? How can we design jobs so that people do what they like or good at. Can we replace the "greed for money" by "love for work"? Is the simple rule below lead towards the above motivation? those are all open ended questions
1muflon1
CC BY-SA 4.0
2022-06-22T18:41:50.430Z
@1muflon1  "How can we design policies to achieve both human needs and initiate appropriate moral values? How can we design jobs so that people do what they like or good at. Can we replace the "greed for money" by "love for work"? "    Those are not questions those are explaining the motivation. The question remain the same as before, Good that the question is clear now as you described in your comment. "economic consequences" is the question.
Creator
CC BY-SA 4.0
2022-06-22T19:54:20.133Z
I agree with AKdemy, the question is incomprehensible. What is point of all that confusing motivation, motivating your question will not change answer and that unnecessary text makes your actual question impossible to understand
WilliamT
CC BY-SA 4.0
2022-06-23T03:44:56.320Z
@WilliamT Comment from1muflon above should be enough for you to restrict IMHO. " 1. Improvent is that you described how the tax would work " Further I removed the questions from the motivation.
Creator
<macroeconomics>
Economic consequences of taxing every dollar in the bank rather than earners alone or taxing worth not income?
Creator
# Economic consequences of taxing every dollar in the bank rather than earners alone or taxing worth not income?

(Asked by: username_0 on 2022-06-17)

**It seems the community did not understand what I mean. So let's simplify the concepts with numbers. There are 330 million people in the USA or let's say 100 million families. Further, let's say the basic need of each family can be met by 100 thousand a year. So the total expenses to cover the basic need for the people of the USA is 100 million times 100 thousand which is 10 trillion. The worth or total assets of the USA is more than 400 trillion. So we only need 3% worth of tax to cover the basic needs of the people.** What are we doing with the present tax system?

**EDIT Motivation**: There is a clear distinction between human's "basic needs" and "wants" if not, every govt should have its own distinctions. The point is, that each Govt should be capable of satisfying the basic needs of the people first, before considering anything else. To achieve this goal, IMHO, one needs to organize the requirement at the source. **For every dollar Govt prints, a percentage needs to go towards providing the basic needs**. A Govt needs to be rich in order to do justice to the people. In addition, human needs to understand that **primary** purpose of the work is to serve humanity, not to earn money for themselves alone.

I am trying to understand the economic consequences if a country decides to tax every bank account but not the earner alone. This means instead of income tax, govt would collect money by having negative interest rates on the people or companies, who have money in their banks. The reason for such action is to reduce inequality. This can have a balance version as well, meaning some amount tax and some negative interest on the saving accounts.

The idea of negative interest is that you pay money to the Govt instead of getting money from the bank as interest. Here, saving is not encouraging as the present crisis is related to an imbalance of money in people's accounts. This is derived from the fact that poor people have no money to do anything but some have all to do anything.

EDIT: Here assumption is work and money are replaceable and a kind of one-to-one bijection and reversible mapping. The present tax system replaces work with money, my question is, can we rotate money with money (or add a map/cycle in the system). Can we have money to the money in the tax system as well (not a job to money alone, which is the present tax system)?

There is no reference to the above, as it is an idea to reduce the imbalance of living standard of people of the world.

EDIT: The question may not be clear because we tend to differentiate money between different accounts. For example money in a savings account is treated differently than in a loan account. My point is this distinction is artificial? Both should be treated as the same. Secondly, any other form of value is not in the picture, so the question has nothing to do with the existing wealth tax.

EDIT: The closest I can think of is sales tax. You pay tax for each sale it does not matter who sells to whom and what it is. Exactly you pay tax on each dollar in the bank.

EDIT: Example: A person/company has different bank accounts for example say Checking accounts, Savings accounts, Money market accounts,(MMAs), certificate of deposit accounts (CDs), and the person/company has 100 dollars in each account so the person/company pays tax on 400 dollars. One can say it is a kind of wealth tax but wealth is related to cash alone.

The question is if there is a tax i.e. to pay to the Govt, from every bank account (like every job pays tax). whether this would lead to unsustainable "economic consequences"?

**EDIT**: Finally, I think I got the correct terminology. Wikipedia states that the financial position of the United States contains assets of at least 269.6 trillion and debts of 145.8 trillion. I postulate there would be at least that much cash in the USA. This cash may not be in bank accounts but must be in some form, in people's or companies' names? **My whole question was to tax on these amounts not on "income"**.

**Final EDIT**: It is not wealth tax. For example, X has 500K and bought a house from Y. Now X does not pay tax but Y does, as he has 500K. Now if X borrows 200K by mortgaging the house then he has to pay tax on 200K. The general concept is that X should not pay tax as he is taking a loan. The point is paying interest is not a contribution to society so it should not be an excuse for not paying taxes. Proposing to change paying tax on the basis of income but it is based on the worth of a person. I am not saying there should not be a wealth tax I am just explaining in this edit the difference between the wealth tax and the proposed one.

**Tags:** macroeconomics

> **Comments:**
> **username_1**: Can you clarify your tax proposal? You want to abolish all income taxes and replace them by taxes on saving while keeping government revenue constant or what? Also what do you mean by negative interest rates, taxes on savings are not negative interest rates  
> **username_0**: @username_1 Thank you for your interest, I am editing.  
> **username_2**: As worded, your question seems to be asking about the consequences of taxing savings held in banks, but not savings held in other forms, eg company shares, bonds, real estate.  Is that really your intention?  
> **username_3**: "*The reason [...] is to reduce inequality*" Which "inequality"? Income inequality? Wealth ineqaulity?  
> **username_0**: @username_3 Reality is living standard inequality, more probable wealth inequality.  
> **username_3**: The question also seems to rely on some vague assumptions, like the government taxing wealth by charging negative interest rates on savings. How do you charge interest rates on self-owned farmland, a house, intellectual property, or a piece of art? I think it might be best to take some time getting the basic idea straight, gathering information where needed, because currently it is not quite clear what you are asking, and it seems likely that the answer would depend on the details.  
> **username_4**: If interest rates are negative for savers there is no incentive to save. Therefore there is no saving. Therefore no tax revenue from taxing the savers. I don’t see how the suggestion is viable.  
> **username_4**: Secondly, I do not understand the difference between an earner and a saver. These adjectives are not mutually exclusive.  
> **username_0**: @username_3 Art, Farmland, property is not "money in the bank" so no tax on them in the question. Only money in the bank, If one has 100 in the bank and borrows another 50 with those with that deposit of 100, the total worth is 150, so pay tax on 150. The point is to rotate money. –  username_0  10 hours ago  
> **username_0**: @username_4 Here work and money is replaceable and a kind of one-to-one bijection and reversible mapping. The present tax system replaces work with money, my question is can we replace money with money. If money to money was the system, the objection to the present system would have, been "people won't work". Where the money will disappear with the proposed system if govt restricts cash transactions? Present Govt forcing the beggers to pay tax, (they beg as pay is not compatible to price for all jobs).  
> **username_1**: The new edits just make your question more confusing: 1) "Here, saving is not encouraging as the present crisis is related to an imbalance of money in people's accounts." - do you have any reference for such statement? I dont think any serious economist would endorse idea that any economic crisis is related to imbalance of money in peoples accounts, what does that even mean? 2) "The present tax system replaces work with money," what do you even mean by this? The present tax system does not replace anything with anything. Present tax system is a transfer of money from individual to government  
> **username_1**: 3) "my question is, can we replace money with money." again what does this even mean? Money is already money, are you proposing monetary reform where paper notes with another set? 4. "Present Govt forcing the beggers to pay tax, " <- what tax are you talking about beggars are not paying income taxes 5. You ask in your question whether this is right site for questions about taxing savings, and indeed this is correct site, but on any SE site, questions have to be clear, your question reads like text you would get by spilling a bag of alphabet soup on a floor  
> **username_1**: my recommendation is to: 1) remove all the assertions you cannot support with sources (e.g. crisis caused by imbalance of money on peoples account), 2) make a coherent proposal with an example, for example if I save 100 euros with bank offering 5% interest what is being taxed? the 5% interest, or separate tax quoted as a percentage of principal? Show some simple example of calculation before and after tax, if you dont know econ terminology just use some simple numeric example, saying that current system replaces work with money and you want to replace it with system that replaces  
> **username_1**: money with money is incomprehensible  
> **username_5**: I downvoted because it's impossible to grasp what you try to ask. In one comment you respond to username_2 username_2 that company shares, bonds, real estate are "finally in the bank" (whatever that means). You also wrote you want to tax savings but you respond to username_3 that property (which is real estate, land ...) is "not in the bank" and suggest if someone borrows money  (which is the opposite of saving) that they should pay taxes on this. Most countries (incl. the US and the UK have capital gains taxes). Also, many countries (US) add capital gains to regular income tax if the holding period is <1y  
> **username_0**: @username_5 I really do not understand what is not clear. There is a tax on "every dollar in the bank" and there is nothing else in the question. The money you borrow or earn does not matter. It is the most simple statement but it has been associated with all other stuff and it becomes unclear. See property is not money in the bank it is a house which has value.  
> **username_1**: @username_0 I dont understand why you cant simply make a numerical example that could be easily understood and instead of that you keep stubbornly describing the tax in a vaguest terms possible and with each edit you just add more vague terms. One cannot evaluate a vague policy. Just describe with a numeric example how the tax would work, plus you can add asset classes it would apply to if you want to make distinction between stocks and houses. Also money in bank is by definition a wealth so if you want to tax it it is a wealth tax, saying it isn't would be akin to saying dolphin isnt mammal  
> **username_6**: If anything, that will greatly increase inequality as opposed to decrease it as you seem to think. You propose to tax also loans (so anyone who cannot buy a house without a loan will pay tax, same for cars, education). Anyone with money will simply buy whatever to avoid being taxed (you wrote yourself that property doesn't matter), while at the same time not having to pay income tax anymore.  
> **username_0**: @username_6 Did you think who is entitled for a loan? The person who already has money. Regarding property tax, it was a clarification that I am not talking about property tax. One can have both, that was not the point. I think most money printed in the last decade or more by Federal reserves is stored in someone's bank accounts in reality and they did not have any obligation, they all took chances, IMHO.  
> **username_0**: @username_1 interest is money to money mapping, is not ir?  
> **username_0**: @username_4 I did not say bank in the question, I said each bank account. All the accounts which has money.  
> **username_1**: your new edit has some improvements and some further things that make this question worse and candidate to be closed. 1. Improvent is that you described how the tax would work 2. You are asking too many chatty open ended questions unrelated to main question e.g.  How can we design policies to achieve this both human needs and initiate appropriate morale values? How can we design jobs so that people do what they like or good at. Can we replace the "greed for money" by "love for work"? Is the simple rule below lead towards the above motivation? those are all open ended questions  
> **username_0**: @username_1  "How can we design policies to achieve both human needs and initiate appropriate moral values? How can we design jobs so that people do what they like or good at. Can we replace the "greed for money" by "love for work"? "    Those are not questions those are explaining the motivation. The question remain the same as before, Good that the question is clear now as you described in your comment. "economic consequences" is the question.  
> **username_7**: I agree with username_5, the question is incomprehensible. What is point of all that confusing motivation, motivating your question will not change answer and that unnecessary text makes your actual question impossible to understand  
> **username_0**: @username_7 Comment from1muflon above should be enough for you to restrict IMHO. " 1. Improvent is that you described how the tax would work " Further I removed the questions from the motivation.  

---

## 3 answers

### Answer by username_8 on 2022-06-22. Score: 4

Here are a couple easy ones off the top of my head:

1. Let's say you have a negative interest rate at the bank. You do not have a negative interest rate under your mattress. So, rather than keeping your money in the bank, where it accrues negative interest, you take your savings and put it, in cash, under your mattress. Boom, you've suddenly avoided the negative interest rate. Meanwhile, the banks are unable to do business because they have no loans from customers with which to invest and produce returns. Essentially, you've put commercial banking out of business.
2. You say that the idea of a negative interest rate would be to reduce income inequality, by redistributing the money of the rich to the poor. However, it almost never actually works like that. Governments may, for a time, earmark money collected by various taxes to fund various programs, but over a sufficient timescale that rarely holds. Eventually, the government will start to use this money for other purposes and funding other projects, some (many) of which may not be anywhere close to the original goal of the tax. One famous example of this was [the Federal Income Tax in Canada](https://www.thecanadianencyclopedia.ca/en/article/income-tax#:%7E:text=Federal%20income%20tax%20was%20initiated,from%20conscription%20triggered%20its%20need.), which was originally intended to be a temporary measure to fund World War 1. Last I checked, World War 1 was over, but Canadians are still paying income tax. I wonder why that is...

---

EDIT: I just thought of a third reason why this is a bad idea.

3. There is a concept known as a "regressive tax". A regressive tax is a tax that has a higher effect on people of lower income, in that the percentage of money paid to this tax is inversely proportional to the income of the taxpayer (the lower your income, the higher a percentage of it you pay in tax). Most "sin taxes" (e.g. gas tax, tobacco tax, alcohol tax) are regressive in this way, as are most forms of sales tax. This proposed scheme is also regressive. Let's say you are a smart, rich person and you don't keep that much money in the bank (from a personal finance perspective, unless you are planning a large purchase, it's unwise to keep more than 5 figures worth of money in the bank at a time). So your net worth may be 1M but your bank account may be 20K (2% of your net worth), of which 1% is 200, or 0.02% of your net worth. Say you're a poor person who doesn't have a lot of money, and in order to pay your bills you have to put almost all your net worth, let's say $10k, in the bank, of which 1%, or 100, is taxed. The rich person pays a tax rate, relative to wealth, of 0.02%, the poor person pays 1%. The rich person pays more tax in dollars, but who is paying their fair share in this scenario?

---

I'm sure someone else can provide a much more comprehensive and rigorous answer than this, but here are a couple simple reasons why this is a bad idea.

> **Comments:**
> **username_0**: Quite naive to point out hide cash.. under the mattress, lol, if Govt restricts cash transactions like many these days? What was the purpose of mentioning world war policies which is not related to negative interest rates? I downvoted.  
> **username_3**: @username_0 "*Quite naive to point out hide cash.. under the mattress, lol, if Govt restricts cash transactions like many these days?*" I simply do not understand what you mean here, Ertai's point 1. is spot on.  
> **username_0**: @username_3 You mean you can buy a house paying cash to some people? There is no fear of robbery to keep cask all around. How much money is there in bank accounts at present and do you expect everything to go back to cash transactions? All people will prefer to pay cash instead of 1% tax? In my opinion (NOT sure) 1% of total money in the bank will be 30% income tax.  
> **username_8**: @username_0 Your comment is confusing.  Under what basis do you believe 30% income tax is equal to 1% of money in the bank?  You believe there is 30x more money not stored in banks, than there is in the bank?  That seems like a rather strong assumption that needs more than an "opinion" if you want to be rigorous about it.  This site is for people who want rigorous answers, not people who want their opinions validated, so I hope that's your goal.  
> **username_8**: And yes, unless you live in a country with restrictions on financial transactions, of which the only one I know is China, you can pay for literally anything in the world using cash.  It's not common to pay for real estate using cash (mostly because banks don't have negative interest rates), but there's no reason not to do it, strictly speaking.  The problem is, getting a mortgage to buy a property would be prohibitively difficult if the bank is out of business, but that's not in scope of the question.  
> **username_0**: @username_8 I mean 30 times more money stored in the bank, so a negative interest rate would be very low compared to income tax rate.  
> **username_8**: @username_0 You assume by this, that people will have the same spending habits under a negative interest rate scheme as they have now.  Literally nobody would do that, though.  The primary reason for putting your money in the bank is to accrue predictable interest on it while maintaining liquidity.  If you couldn't accrue interest on your money, you would either invest the money, or you would store it in cash or cash-equivalents like precious metals.  Therefore, your scheme would have to include a way of taxing investments (obviously you can't tax cash), but that opens a whole other can of worms.  
> **username_8**: I should say, "saving" habits, not "spending" habits.  
> **username_8**: @username_0 In general, people who are wealthy do not hold much cash.  Almost all rich people have almost all their money in investments.  For example, Elon Musk, currently valued in the tens of billions of dollars, has almost all his net worth in Tesla stock.  Were he to sell out his Tesla holdings, he would actually get far, far less than his supposed "net worth".  Jeff Bezos is the same with Amazon; I don't know what Bill Gates does these days but he used to be the same with Microsoft.  Rich people hold almost all their money in investments, not the bank.  
> **username_8**: The solution, therefore, if you want to have "rich people pay their fair share", is to tax not bank accounts, but investments.  Forewarning: I'm going to butcher finance terminology by using "capital gain" to refer to unrealized increases in value of investment portfolio, and "capital loss" to refer to unrealized losses (generally those terms are only used for realized gains/losses, not unrealized ones, and I apologize to anyone who just vomited for reading that).  The problem is, using fancy math and accounting, it's easy to make a capital gain look like a capital loss, and this happens often  
> **username_8**: So the question becomes, what to do about capital losses?  If you give a tax credit for capital losses, then rich people can (and will, and in fact do, under current capital gains tax laws) exploit those tax credits to pay lower rates of tax.  If you don't give a tax credit, then you can completely fuck an "ordinary" (not "rich") person who happens to have a stock that was a solid winner, but also a stock that was a huge loser; they get taxed on their small gain, then also get fucked on their huge loss.  Then next year when that loser stock recovers, boom here's a tax bill for that.  
> **username_8**: But actually it gets even worse than that.  Let's say you are an average person who holds a stock like NorTel (which went from roughly 180 to roughly 1.80 in a matter of months a couple decades ago).  Let's say you bought NorTel at 150, it went to 180, and then to 100.  So you're down 50/share.  You sell out and buy, say AMZN for 100/share.  Then your AMZN goes from 100 to 150, so you're back where you started.  But you get taxed on that 50 gain, even though it wasn't actually a gain!  The incentive here is to not sell NorTel and let it crash, losing all your money, to avoid tax.  That's bad.  

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### Answer by username_1 on 2022-07-17. Score: 1

Other answers do good job covering original question so this answer will focus only on new sub-question:

> It seems the community did not understand what I mean. So let's simplify the concepts with numbers. There are 330 million people in the USA or let's say 100 million families. Further, let's say the basic need of each family can be met by 100 thousand a year. So the total expenses to cover the basic need for the people of the USA is 100 million times 100 thousand which is 10 trillion. The worth or total assets of the USA is more than 400 trillion. So we only need 3% worth of tax to cover the basic needs of the people. What are we doing with the present tax system?

Total assets are the total sum of value of all assets accumulated by country from its birth till present day. That includes all factories, buildings, cars all past investments into productive capacity of a country, peoples retirement accounts all the military bases US has around the world etc.

First, it is absolutely not feasible to have indiscriminate 3% wealth tax on a value of all assets in economy. That would mean government would have to figure out market value of every car, even second hand, every house heck even every garden shack, every old piece of machinery etc. That would require too much auditing. I also can't imagine how government would manage to find out how much cash holdings each household has without some sort of extremely invasive gestapo style IRS auditors knocking on peoples doors. Politically such tax would be probably infeasible, people might support wealth taxes on rich, but I don't know of many people of any political persuasion that would support taxing all wealth period. Moreover, every tax has both administrative burden and deadweight loss, it would be absurd to tax the value of a car of some low income family just to later send them a check. Also, it would be absurd for government to tax its own assets.

In practice to make any such tax to be feasible it would have to be only limited to certain high value assets (e.g. more expensive real estate) or financial wealth of millionaires/billionaires. In such cases expensive auditing would be feasible however in that case the tax would not raise much revenue.

According to [Huntley and Ricco 2021](https://budgetmodel.wharton.upenn.edu/issues/2021/3/15/budgetary-effects-of-senator-warren-wealth-tax) estimates a 3% billionaire wealth tax, coupled with 2% millionaire tax applied at 50 million (the most closest tax proposal to just flat 3% I could find) would require additional 100 billion in auditing/enforcing costs and would raise about 225 billion per year.

Hence, using the above example of realistic 3% wealth tax and assuming you want to distribute the revenue directly to 100 million families, you would only be able to give each family about \$2250 per year.

What even more, government cannot decide what the incidence of a tax is. That is decided by endogenous interactions throughout the economy. Large part of the wealth tax (which is implicit capital tax) incidence is shifted to labor as labor is less elastic in the long-run ([Chamley, 1986](https://www.jstor.org/stable/1911310?seq=1#metadata_info_tab_contents); [Judd, 1985](https://eml.berkeley.edu//%7Esaez/course/Judd_JPubE(1985).pdf)). For example, [Huntley and Ricco (2021)](https://budgetmodel.wharton.upenn.edu/issues/2021/3/15/budgetary-effects-of-senator-warren-wealth-tax) estimate the above mentioned tax would in long run lead to 1% drop in wages compared to scenario where the tax is not adopted, so in the end once you would net it out average family would end up with less than \$2250 extra per year.

Furthermore, such tax could arguably negatively affect economic growth, although research on this topic is not conclusive, in some models it would in some it wouldn't. In case, such tax would affect economic growth it would make it even worse proposition. With 3% economic growth standards of living of people double every 24 years about every generation, with 1% economic growth standards of living double only about once in every 70 years so about once per life time. Even for many poor families it would likely be preferable for them to have their standards of living double 2-3 times during their life time rather than just 1 time in their lifetime even if this comes at a cost of not getting extra \$2250 welfare check *per year*.

Now we currently do not know how much would growth be affected by wealth tax if large country like US would implement it, if it would be affected at all. However, given this uncertainty it would be responsible to start with limited experiment with small wealth tax of lets say 0.01-0.05% and research the effects rather than immediately trying to set it as high as 3%.

> **Comments:**
> **username_1**: @username_0 that is just estimate, for that you can use various statistical techniques to try to provide best guess. For example, you can examine value of car of representative family and then assume all families in that class have car with the same value. Also you cannot use historical records, values of things change over time. Taxing estate that someone purchased in 1800s for \$10000 at it historical value would be absurd, even after you would adjust for inflation you would get widely inaccurate value because housing in the US got more expensive then just inflation  
> **username_1**: also what are you even talking about working poor people paying 10 to 30%, 10 to 30% of what and where is a data source for that claim?  
> **username_0**: How it is estimated that nearly 400 trillion is there now? All the records are there we do not have to do anything else to find or go to houses. Not sure what you mean. One needs to understand the difference between 30% and 3%. Working poor people are paying 10% to 30% income tax, they would love to pay 3% on their worth instead. In fact, more than 90% population will love it. Further, a very low percentage of property may be hard to give a value.  
> **username_1**: @username_0 I dont know you tell me you claim that is the estimate. I am just giving you an example of an estimate could be made. You tell me where you found that estimate, if I have time I might have look at bits of it to give you some examples of how it would not be directly applicable to taxing. First, any rational working person would rather prefer 10% income tax than 3% wealth tax, they would pay much less with the wealth tax since wealth tax applies to all their accumulated possessions repeatedly year after year. Paying 3% on a \$1000 car every year is preferable than paying 10\% once on  
> **username_1**: single wage of \$1000 yet the 1000 car and single wage check have equivalent value, with the 3% wealth tax over a life time the working person (assuming 80 years life span) would pay \$2400 which is much higher than 10% income tax from 1000 dollar paycheck.  
> **username_1**: @username_0 Also it is simply false to claim that poor working people in the US pay between 10\%-30% of their income as tax. **The average tax rate on income for bottom 50% of income distribution** is **3.5%** according to the latest estimates, so where did you get your  10-30%? poor people are already paying about 3% of their income on average as taxes. If you want it to be lower that is fine, but you should not make false claims about it https://taxfoundation.org/publications/latest-federal-income-tax-data/  
> **username_0**: It is not the amount, it is who is paying? The present system is exploiting the poor and giving benefits to the rich. The present system is leading to inequalities.  Please see who is paying more in the proposed system. This should lead to equilibrium rather than a one-sided affair, rich only to richer. I mean 10% to 30% individual tax rate.  
> **username_1**: @username_0 under the present tax system of USA bottom 50% of all people pay only 3.5% income tax on average and top 10% of richest people pay 20% on average.... so I can clearly see richer people are paying more of their income under present system. Again it is fine if you believe that poor people should pay less than 3.5% and rich people more than about 20% but dont blatantly lie and say paying 20% of all income on average is less than paying 3.5%... I mean common  
> **username_0**: https://www.bankrate.com/taxes/tax-brackets/  
> **username_1**: @username_0 but those are tax brackets, people dont actually pay those rates, people can deduct kids etc. If you want to see how much people are actually paying you have to look at average rates  
> **username_0**: Further, the present system is collecting the 3.5% income tax from people who may not have anything in the bank and a net worth of nothing.  It is simply not fair.  
> **username_1**: no it does not income tax is always paid as % of income so someone with no income pays no tax. That 3.5% is average someone with no income pays 0% tax, that’s why 3.5% is as low as it is many poor people pay 0% of their income in taxes some poor people pay 1% some 2% some 3%, some 5% that 10% is maximum possible tax rate someone in that bracket could pay if they cannot deduct anything but in US everyone can deduct something most poor people end up paying only few % points and the average for people at the bottom half of income distribution is 3.5%  
> **username_0**: The main purpose of the proposal is to make the Govt rich and create jobs as required, rather than looking for the rich to create jobs.  
> **username_0**: "According to Huntley and Ricco 2021 estimates a 3% billionaire wealth tax, coupled with 2% millionaire tax applied at 50 million (the most closest tax proposal to just flat 3% I could find) would require additional 100 billion in auditing/enforcing costs and would raise about 225 billion per year"  What you have just said that lots of job will be created and money flow would go towards equilibrium, that's exactly was the point and what is wrong in that direction was the question.. Humans are here not to make money but to survive together.  

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### Answer by username_5 on 2022-06-23. Score: 1

I believe the idea is to make society more equal (reduce imbalance of living standards)?

You make some bold statements like

**Statement 1**

> In my opinion (NOT sure) 1% of total money in the bank will be 30%
> income tax.

I work as a risk manager for a reasonably large internationally operating bank. I have a good understanding of what percentage of money our clients hold in bank accounts and what their income is. Obviously I cannot share that data but
here are some official figures that aren't that different.

* [Peter G. Peterson Foundation](https://www.pgpf.org/blog/2021/11/income-and-wealth-in-the-united-states-an-overview-of-data)  
  2019 US white, not Hispanic median household income was \$77,007  
  2019 US white, not Hispanic median household wealth (that figure takes all assets into consideration, not simply money in a bank account) was \$181,440  
  That is only 2.35x the income. For other ethnicities these figures are even lower according to this source.
* [Wikipedia](https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult#By_region) using data from Credit Suisse's [Global Wealth Databook](https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/global-wealth-databook-2021.pdf) shows similarly low numbers for regions and countries.

**Statement 2**

> For example money in a savings account is treated differently than in
> a loan account. My point is this distinction is artificial? Both
> should be treated as the same.

A loan is fundamentally different from a savings account, in any measure I can think of (accounting, balance sheet, cashflows, net wealth, taxation,...). Moreover, large corporations would almost surely not use loans at all anymore (they can deduct interest expenses and therefore pay less tax now, as opposed to pay tax on them). Since you exclude all other assets, they would simply issue bonds.

While we (the bank I work for) do have some accounts where we charge negative interest rates (mainly wholesale, a few retail), many account holders tend to switch to alternatives (bonds, stocks, art, collectibles, structured products.. ). There was a bit of an exception in the months after COVID 19 started, potentially because savings rates went up so much due to lack of alternatives (many places were closed and people couldn't spend their money). Also it is not even legally applicable in all jurisdictions - e.g. in Austria, there was a supreme court ruling that made it illegal to charge interest on bank deposits for retail clients because (original German ruling)

> ... den elementaren und gesetzlich angelegten Zwecken einer
> Spareinlage (Gewinn- und Vermögensbildungsfunktion) diametral
> widerspricht.“

which essentially means that

> "(negative interest) ... diametrically contradicts the elementary and
> statutory purposes of a savings deposit (profit and capital formation
> function)."

The ruling was originally for zero interest, but naturally encompasses negative interest as well.

Leaving aside legal obstacles (in some countries), the by far biggest problem (based on my banking experience only) is that you would predominantly charge this tax for low income people.

**Statement 3**

> @username_6 Did you think who is entitled for a loan? The person who already
> has money.

you completely ignore that most people can in fact afford a house. You can look at [home ownership rates](https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate). So you either only care for the very poor (who anyhow do not pay taxes apart from some taxes like VAT that apply to everyone who can buy stuff - but than again, they must have money to buy stuff after all).

In reality, your proposal would make renting a lot more attractive for most people because if you had say \$20,000 (assume in a bank account for simplicity) and take out a loan of \$380,000 (borrowing a conventional loan — one available through or guaranteed by a private lender or either of two government-sponsored entities, Fannie Mae or Freddie Mac — requires a down payment of 5 percent or higher) your tax basis would all of a sudden increase to \$380,000 if you paid \$400,000 for a house based on your proposed scheme. Add a student loan, a car loan and a few other things the average John and Jane Doe have, and you end up paying a lot of tax, despite being highly indebted.

The people or firms that would remain to be home owners will be the more wealthy fraction of society. However, hardly any wealthy person has considerable amounts of their wealth as money in a bank account. In a simply example, if they had the \$400,000 in a bank account and would have bought a house for it, they would in fact no longer pay taxes (as opposed to the unfortunate individual that needed to take out loans, and now not only pays interest on the loans but also taxes on top of it) You can have a look at the current [composition of wealth in the US](https://www.visualcapitalist.com/composition-of-wealth/). Combined with my simple example of buying a house, it should be clear that the wealthy will pay very little tax under your proposed scheme (even if you assume they would not change the composition - in reality they would avoid holding money in bank accounts). If you want to tax assets (everything from houses, cars stock ownership, art,..) you actually are proposing a wealth tax.

**Statement 4**

> @username_1 interest is money to money mapping, is not ir?
>
> @username_4 Here work and money is replaceable and a kind of one-to-one
> bijection and reversible mapping. The present tax system replaces work
> with money, my question is can we replace money with money.

I guess you think of [mathematical maps](https://en.wikipedia.org/wiki/Map_(mathematics)), but that statement simply makes no sense and no one working in finance, banking or law firms would understand what you mean in my humble opinion. Also, taxing income is taxing money because income is paid in "hard earned dollars" (that directly go into your bank account, after it was taxed - at least in most circumstances - in some cases taxation may happen afterwards).

**Statement 5**

> Here, saving is not encouraging as the present crisis is related to an
> imbalance of money in people's accounts.

I am not sure what crisis you are referring to? Also, what is an imbalance of money in people's accounts? From an accounting perspective, a balance sheet always balances, because for every debit, there is an equal and opposite credit. Lastly, discouraging saving is economically troublesome as well because lower savings rates lower the level of output (you can look at any [growth model](https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model) really). That unfortunate character needing a loan for his / her house may in fact not get a loan if no one saves. Taken to the extreme, all machinery and investment will also go to zero and we will end up as hunter-gatherers again.

**Statement 6**

> If money to money was the system, the objection to the present system
> would have, been "people won't work". Where the money will disappear
> with the proposed system if govt restricts cash transactions? Present
> Govt forcing the beggers to pay tax, (they beg as pay is not
> compatible to price for all jobs).

I read this several times, and I still have no clue what you really mean to be completely honest. People will work, even if taxed because it is the only way to earn a living (apart from the relatively few who decided that long term unemployment benefits are enough to get by). If you beg and earn more than the tax free allowance, why should you not pay tax? What makes income from begging different from any other income? Since you write that pay is not compatible to price for all jobs, I assume you think the beggars chose their "profession" over a lousy alternative. If so, it makes even more sense to tax them, as they do something that is deemed more worthy than the alternative sources of income and are hence better off that way.

**At least one statement is actually correct (for some countries)**

> if Govt restricts cash transactions like many these days?

It depends a lot on the [country](https://www.europe-consommateurs.eu/en/shopping-internet/cash-payment-limitations.html) you are from though. Many countries do not have restrictions and the reason for these restrictions is to fight black markets and underground / illicit activities.

**Summary**   
I have no idea how you can think this would have the potential to reduce inequality.

Wealth, ultimately comes from income earned. It is harder than you think to maintain wealth across generations. It [seem](https://www.wsj.com/articles/SB10001424127887324662404578334663271139552) that 70% lost their wealth by the end of the second generation, and 90% by the end of the third. The research is from a wealth consultancy The Williams Group and may not be 100% accurate but there are other studies, like from the top 1%, less than 15% comes from [wealth transfers](https://www.washingtonpost.com/blogs/wonkblog/post/research-desk-did-the-top-1-percent-inherit-its-wealth/2011/11/04/gIQA4T8kmM_blog.html) (mainly inheritances, but also including gifts).

> **Comments:**
> **username_0**: Thank you so much for such an explained answer. My assumption was that there are so many properties in the world and it is only growing so the value of those properties must be hidden somewhere in cash or "another form". Hence if all taxes are based on those (not income) inequality would reduce because that would reduce wealth accumulation by the wealthy.  
> **username_0**: The financial position of the United States from Wikipedia states:  includes assets of at least $269.6$ trillion and debts of $145.8$ trillion. Would you please just tell me are not these amounts in people's or companies' bank accounts in some form?  My whole question was to tax on these amounts not on "income". Would you please tell me? I want to edit the question but not sure it is appropriate. Please help.  
> **username_5**: An asset is everything, from houses, to cars, and potentially even intangibles like trademarks etc (I did not look up the definition the article uses). You can look at the link I provided above for the composition of wealth. If you want to tax this, you are talking about a wealth tax not a tax on bank accounts. Ideally you should also exclude loans (debt), otherwise you disproportionately tax people with low net worth.  
> **username_0**: Not wealth tax, edited.  
> **username_0**: I downvoted because all your point was rich will buy this and that but you have failed to understand that "someone will have the money? "We do not destroy money", it is there with the humans.  

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