$10 million is enough that you can take 2.5% every year as $250k of income, and spend 0.5% on the fiduciary wealth manager's fees, and still have investment distributions and interest on the principal that outpace inflation in the long term. A household of one or two people can live its entire lifespan on that, without ever trading hours of labor for cash again, and then pass the same privilege down to a single heir, until civilization collapses.
$250k/year is a reasonable and sufficient retirement income. $10M is a plausible sum to accumulate through labor-selling alone, for one or two people each working for 2000 hours/year over 40 years, at an average combined rate of $175/hr, all while spending $100k/year on expenses and devoting $250k/year to savings. It does not blatantly flaunt the "diligent and/or intelligent work generates wealth" story.
The temporarily embarrassed millionaires all around the US can plausibly get there, if nothing else goes wrong, and they don't even have to cut expenses down, if they get paid enough per hour.
$250k/year is about 4x the median household income in the US. It can support most lifestyles less profligate than a person addicted to luxury travel, high-stakes gambling, top-shelf companionship-for-hire, or ultra-pure cocaine. And $250k/year can still be spent wisely and effectively by one household.
The thing about the government spending the money poorly is that they are still actually spending it. Spending is better for the poor than investing. When you spend money, the person you trade it to can go on to spend all of it themselves. When you loan it to them, or invest it, they have to give it back someday; it has strings attached. So the advantage of the wealth tax is in taking money that is not being spent, and putting it back into genuine circulation.
So then I take this reasonable number, and pad it by one order of magnitude, to absorb the edge cases that are still reasonable in person, but look bad on paper. Start the tax at $100 million in accumulated wealth, and tax 2.5% of everything in excess of that. Then deduct from that tax the payer's total spending (not loans or investments) in excess of $2.5 million, which is money that will count as someone else's income. If they can spend that much, the government doesn't have to spend it for them, and that spending will get taxed at a higher rate anyway, as income.
I think of the economy as a giant lazy river. A large quantity of life-critical fluid circulates endlessly, in a wide loop.
Most people spend 9 hours a day walking down to the river (commuting), filling their vessels (working), and carrying them back home (commuting). Some people also have an at-home cistern that they pour their vessels into (savings) that provides a buffer beyond the home's immediate needs.
A smaller number of people have gigantic reservoirs (rich). They don't go down to the river themselves to fill up. There's no way they could carry enough with their own buckets to fill even a fraction of the volume of their reservoir. Instead, other people pour in a little every time they make a trip to the river, perhaps as part of a deal to supply larger buckets, or shoulder yokes, or carts.
The big private reservoirs remove water from the normal water cycle. When people use the water, it flows back into the river somewhere downstream. Sometimes different stretches of the river experience droughts or floods, and that is what those little at-home cisterns are good for. During a drought, the river narrows, and not everyone is able to fill their vessels all the way. And those giant reservoirs--which aren't actually being used, but instead protected against leakage, siphoning, and evaporation--each slightly reduce the water flow downriver.
During a drought, some people may resort to begging water from a private reservoir owner. And if they have stout legs and shoulders, the owners agree: you can take a little of my water, if you promise to give more of it back later (loans). Sometimes, even in good times, someone will get water from a reservoir, because the reservoir is closer, and they need more than they can personally carry, and they promise to put more water back into the reservoir later (investment).
But as the water is locked up in private reservoirs, the river slows to a trickle, and only the rich can drink without pledging some of their future water-carrying capacity to someone else. The reservoirs grow larger; the river shrinks smaller.
Water that is used returns to the river. The poor and middle class need the river, as it is their only way to drink without mortgaging their future away to a rich person.
You might already see the problem here. The river comes from water that has been used and recirculated (spent!). When someone uses reservoir water, and pledges interest or investment return on it, they are committing to put more of the circulating public river into the unmoving private reservoir.
The only way to refill the river from the reservoirs, and keep it in circulation, is for their owners to use more water. Or for armed river rangers to order them at gunpoint to drain some of it back into the watershed. There is a little natural rainfall, and a little from people melting glaciers a little bit at a time by holding chunks of ice under their armpits, amounting to about 2% or 3% of the known volume of liquid water, but all those existing reservoir pledges have already exceeded that influx.
Wealth gets you access to the levers of power. A mere phone call from the likes of Gates, Buffett, or Zuckerberg will open more doors than most of us can dream of, and they don't have to spend a penny to do it.
The rich and powerful also tend to associate mostly with their own kind, which will skew their world view and priorities.[1]
The unspent money can also be used as collateral or leverage to earn more money.
Finally, the unspent money can be passed on to heirs to create an aristocratic class who inherit their status -- something the US founders were explicitly trying to avoid when founding the country. Unfortunately, the wealthy have found ways of subverting their intent.
[1] - For an example, see the excellent Born Rich documentary, made by one of the heirs to the Johnson and Johnson fortune, where he interviews all his friends, who were also born in to extremely wealthy families.
$10 million is enough that you can take 2.5% every year as $250k of income, and spend 0.5% on the fiduciary wealth manager's fees, and still have investment distributions and interest on the principal that outpace inflation in the long term. A household of one or two people can live its entire lifespan on that, without ever trading hours of labor for cash again, and then pass the same privilege down to a single heir, until civilization collapses.
$250k/year is a reasonable and sufficient retirement income. $10M is a plausible sum to accumulate through labor-selling alone, for one or two people each working for 2000 hours/year over 40 years, at an average combined rate of $175/hr, all while spending $100k/year on expenses and devoting $250k/year to savings. It does not blatantly flaunt the "diligent and/or intelligent work generates wealth" story.
The temporarily embarrassed millionaires all around the US can plausibly get there, if nothing else goes wrong, and they don't even have to cut expenses down, if they get paid enough per hour.
$250k/year is about 4x the median household income in the US. It can support most lifestyles less profligate than a person addicted to luxury travel, high-stakes gambling, top-shelf companionship-for-hire, or ultra-pure cocaine. And $250k/year can still be spent wisely and effectively by one household.
The thing about the government spending the money poorly is that they are still actually spending it. Spending is better for the poor than investing. When you spend money, the person you trade it to can go on to spend all of it themselves. When you loan it to them, or invest it, they have to give it back someday; it has strings attached. So the advantage of the wealth tax is in taking money that is not being spent, and putting it back into genuine circulation.
So then I take this reasonable number, and pad it by one order of magnitude, to absorb the edge cases that are still reasonable in person, but look bad on paper. Start the tax at $100 million in accumulated wealth, and tax 2.5% of everything in excess of that. Then deduct from that tax the payer's total spending (not loans or investments) in excess of $2.5 million, which is money that will count as someone else's income. If they can spend that much, the government doesn't have to spend it for them, and that spending will get taxed at a higher rate anyway, as income.