Thread by @michael_stiefel

Looking forward to the webinar by @Florian_Scheuer
at the #UBSCenterForum today at 4pm (link ). Some insights about his research on the topical issue of the taxation of the superrich are also highlighted in this thread by @SamuelSkoda 👇 .

https://twitter.com/SamuelSkoda/status/1169272133060632577

Interesting fact on income inequality differences between Switzerland and the US: While in the US, the top 1% has increased its share of pre-tax national income from 12 to 20% (largely at the expense of the bottom 50%), the top share is more modest in Switzerland with 13%.

Wealth inequality, on the other hand, is relatively high in Switzerland. The share of the top 1% almost reaches 40% of total wealth.

Interesting statistics from this paper

https://twitter.com/Florian_Scheuer/status/1168416767145914368?s=20

1) The persistence of top wealth in the Forbes 400 has increased over time.

2) Huge differences in the top tax rate across OECD countries: From roughly 15% to roughly 55%

3) Only Switzerland, Spain and Norway impose a wealth tax, and only Switzerland imposes a non-trivial tax on wealth (but then, CH also does not tax capital gains)

4) The superrich earn a strikingly larger part of their income through capital gains in the US. Roughly half of those capital gains avoids taxation (because only realized capital gains are taxed). This preferential treatment calls for a reform of taxation.

What is the theoretical rational for taxing wealth? First, it is a tax on pre-existing wealth and thus (if not anticipated and done in a one-time lump-sum fashion) avoids distortionary taxation.

Second, (also a permanent) wealth tax can be equivalent to a capital gains tax. From this perspective, it incentivizes the productive use of capital. On the other hand, capital gains taxation captures "hidden" labor income (say through shares in a startup)

One way to fix capital taxation would be through a taxation of accrued capital gains instead of realized capital gains. However, this possibly runs into valuation problems and might force investors to reduce their holdings if the underlying assets increase in value.

Therefore, @Florian_Scheuer suggests a retrospective accrual tax, where the statutory tax rate rises with the holding period, but the tax is only assessed upon realization of capital gains.

More on this can be found in the paper linked here:

https://twitter.com/chris_de92/status/1323653666616889344?s=20

Interesting answer in Q/A session: To avoid creating incentives to shift between labor and capital incomes, Florian Scheuer suggests that both factors should be similarly treated (which seems to be the case in the proposal of Joe Biden)

Thanks to @ubscenter for those interesting + informative events, and establishing new ways to communicate research findings!