Thread by @SBachTax

A global minimum 2% wealth tax on the world’s superrich,
as proposed by @gabriel_zucman on behalf of the Brazilian G20 Presidency @g20org.
Implications for Germany – a thread 🧵(1/25) ⬇️

https://x.com/gabriel_zucman/status/1805603448857182708

@gabriel_zucman @g20org Main takeaways:
➡️ A global minimum taxation on the world’s huge fortunes
(pers. wealth above $1 billion or $100 million)
could restore tax progressivity at the top, without any major tax evasion & avoidance, tax competition & economic disadvantages (2/25)
ft.com/content/1f1160…

@gabriel_zucman @g20org ➡️ It could raise substantial tax revenue,
in Germany up to €6bn per year from resident billionaires,
or up to €17bn from resident centimillionaires,
depending on the extent of the income tax credit

For details see below (3/25)

@gabriel_zucman @g20org The idea behind minimum taxation is to restore effective tax progressivity at the very top of the distribution:
Superrich mostly retain profits in their firms, or stockpile dividends & capital gains in holdings, family offices, or similar vehicles (4/25)
taxnotes.com/featured-analy…

@gabriel_zucman @g20org Therefore, they only pay corporate income taxes, but hardly any capital or personal income tax
insofar as capital gain realizations & distributions to the shareholders are avoided (5/25)
theguardian.com/business/2023/…

@gabriel_zucman @g20org Thus, the effective tax burden on three-digit million capital income is often only around 15-25%,
and sometimes even lower, according to effective corporate tax burden (in the target countries of investments) incl. tax planning opportunities (6/25)

https://x.com/gabriel_zucman/status/1805603451994517583

@gabriel_zucman @g20org See some evidence for Germany.
Superrich apparently only pay low tax rates, which have fallen significantly over the last decades (7/25)


netzwerk-steuergerechtigkeit.de/der-steuersatz…
netzwerk-steuergerechtigkeit.de/reichtum-wiede…
dw.com/en/how-good-is…

@gabriel_zucman @g20org In contrast, upper middle class & higher earners often pay similar or even higher income tax rates on earned income,
not to mention high social contributions as in Germany, some of which are effectively taxes due to redistributive social security (8/25)
oecd.org/content/dam/oe…

@gabriel_zucman @g20org Some years ago, @WarrenBuffett complained that his tax rate is lower than his secretary's (9/25)


abcnews.go.com/blogs/business…

@gabriel_zucman @g20org @WarrenBuffett Against this background, @gabriel_zucman proposes an international coordinated minimum effective taxation standard for huge fortunes,
based on a 2% wealth tax.
With a 6% rate of return this corresponds to an implicit income tax rate of 33.3% (10/25)

https://x.com/gabriel_zucman/status/1805603448857182708

@gabriel_zucman @g20org @WarrenBuffett To avoid double taxation, existing capital income taxes paid on the returns could be credited against the wealth tax.
Corporate income taxes, property taxes, or other business-level & indirect taxes would not be considered (11/25)
, p.19taxobservatory.eu//www-site/uplo…

@gabriel_zucman @g20org @WarrenBuffett Internationally coordinated introduction of this minimum taxation, at least between the USA, EU and other G20 countries, largely avoids tax evasion and tax competition,
and basically ensures capital export neutrality (12/25)

https://x.com/gabriel_zucman/status/1805603464304902485

@gabriel_zucman @g20org @WarrenBuffett Rough estimates of the German billionaire’s wealth could be based on the @manager_magazin rich list of 2022-23,
well edited & extended by @steuergerecht.
We divide the fortunes by the households reported for the respective business families & clans (13/25)
netzwerk-steuergerechtigkeit.de/milliardenverm…

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht According to the data 255 German households own more than $1bn, €0.93bn.
The overall wealth of German billionaires amounts to €630bn.
Excluding obvious non-residents results in fortunes of €482bn (14/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht Taxing these fortunes above the threshold at 2% could raise an annual revenue of €12.6bn, or €9.6bn for residents only.
If an allowance of €0.93bn is applied, the revenue still amounts to €7.9bn, or €5.7bn for residents only (15/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht Reducing the threshold or allowance to dollar centimillionaires (€0.093bn) markedly increase the number of taxpayers, taxable wealth, and potential tax revenue (16/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht Crediting existing capital income taxes would probably only slightly reduce the additional revenue
as dividends to households only account for a small proportion of total effective income of billionaires, see above (17/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht However, if also corporate taxes were considered for credit, the additional revenue is likely to decline significantly and probably halve,
in line with the effective corporate tax rates of the investments concerned (18/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht Asset valuation remains a major challenge of any wealth taxation, especially when companies are not listed,
which is often the case with the #HiddenChampions of the advanced #GermanMittelstand (19/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht Inheritance tax law in Germany provides for industry-standard methods of company valuation which basically work well in practice.
However, many large company estates remain tax-free due to extensive privileges for company succession (20/25)
finanzamt-bw.fv-bwl.de/,Len/5262835

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht .@gabriel_zucman suggest simplified comparative valuation methods related to returns, cashflow, or sales.
But this is likely to lead to inaccuracies & could cause distortions & tax avoidance.
Ultimately, one must take a pragmatic approach (21/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht The proposal implies a noticeable tax burden on the superrich, as intended.
With a 6% return (after corporate taxes), a 2% wealth tax rate corresponds to an implicit rate on corporate income of 23.3%,
see the “death table” (@pm_steinberg) below (22/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht @pm_steinberg So, the combined statutory tax rate on corporate income in Germany for a resident superrich investor would increase to 53%,
instead of being reduced to 25% for retained profits, as demanded by business associations and conservative-liberal parties (23/25)
zew.de/en/press/lates…

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht @pm_steinberg This will inevitably put a strain on the self-financing opportunities of the taxpayers concerned.
The government might provide relief for investments, if necessary, e.g. tax credits or depreciation allowances (24/25)

@gabriel_zucman @g20org @WarrenBuffett @manager_magazin @steuergerecht @pm_steinberg And this will undoubtedly trigger strong resistance from the influential lobbyists of the wealthiest family businesses in the country, which has always been a major challenge for left-wing parties:
“A wealth tax affects everyone” (25/25)
vermoegensteuer-trifft-alle.de