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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#61

Post by sumedh »

cryoshon wrote: post #46

this assumes the weakest possible form of a wealth tax. a progressive wealth tax would tax the increase of wealth on the margin rather than just "wealth". experience equity gains of $1M? you owe an extra $10k in liquid cash at the end of the year. if your equity doesn't grow, you don't get taxed. in any event, the floor for these kinds of laws would likely be above the ceiling of most people's lifetime wealth accumul…

> experience equity gains of $1M?

There is already a capital gains tax.

Re: Modeling a Wealth Tax

#62

Post by marcus_holmes »

logicchains wrote: post #20
paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

>If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy Wealthy people don't just leave their money under a mattress, they invest it in something. Even if they just left it in a bank, the bank is still going to lend that money out and invest it. Taxing wealth just encourages riskier investments, as higher risk is needed to achieve comparable post-tax return.

Startups are high-risk, high-return investments, so following your logic, investment in startups would increase after a wealth tax, right?

Re: Modeling a Wealth Tax

#63

Post by tnr23 »

bitcurious wrote: post #37
tnr23 wrote: post #15

A problem that is usually not noticed with a wealth tax is that you have to pay the wealth tax from money which already has been taxed with some sort of income tax. Means a 2% wealth tax combined with a 50% income tax, dividend tax, capital gains tax or whatever ends up being a 4% wealth tax effectively. Example: You own stock worth $1,000,000 and the government wants 2% wealth tax from you which means $20,000. But t…

>tax combined with a 50% income tax Properly managed capital gains are taxed at ~15% or less. One should hope that by the time you accrue $50 million your capital gains are properly managed.

That was just an example to make the point clear which varies from jurisdiction to jurisdiction. But even in your 15% example the long term effects are very significant.

Re: Modeling a Wealth Tax

#64

Post by toomuchtodo »

jkingsbery wrote: post #43
toomuchtodo wrote: post #4

What percentage of founders experience a liquidity event netting them enough to be impacted by a wealth tax (90% of startups fail [1])? This is arguing against taxing a lottery ticket, while not addressing the issue of existing wealth inequality. “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.” ― Ronald Wright EDIT: @Ap…

I think the point is that if you think you have a chance of accumulating wealth (either through founding a start up, or from stock grants from an established tech company), and you have an option of living in a place with a wealth tax or one without a wealth tax, you will very likely choose to live in a place without a wealth tax. Your right, it is a lottery ticket, but if you are going to buy a really expensive lott…

I suggest tariffs and other cross border financial capture mechanisms to counteract people vacating the jurisdiction while still attempting to capture value from an economy they choose to not pay taxes in. Speaking as a citizen, I don't want my nation to participate to a race to a bottom or not capture the taxes they should because of a vocal minority (startup ecosystem participants). I think this is reasonable, and more important than startup dynamism considering the societal damage excessive wealth inequality causes (which eventually resets with violence or revolution, historically speaking).

Re: Modeling a Wealth Tax

#65

Post by bhupy »

defen wrote: post #57
bhupy wrote: post #28

I’m still not sure why the debate has converged around a wealth tax rather than just making the income tax rate on every dollar above $1 billion 100% (or close to 100%). That way, on the day that the super rich decide to liquidate their assets, they only get taxed on the capital gain, and for billionaires that means they only keep some small portion of it in liquid cash. You also wouldn’t have to amend the Constituti…

They would just take out loans against their assets and pay the interest using relatively small asset sales.

But even if they take out a collateralized loan, they need to be realize some gain somewhere to pay back that loan. Wherever that happens, it is taxed either as income or capital gain.

Nobody is going to loan Bezos billions and expect not to be eventually paid back, and that repayment can only happen if the wealth is realized as income, and then taxed.

> using relatively small asset sales

Those "small asset sales" are ultimately taxed. We can even talk about increasing this tax.

Re: Modeling a Wealth Tax

#67

Post by rel2thr »

paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

I don’t think Paul forgot, it’s why he phrased it in terms of stock not dollars. If you start a company and hold on to ownership for 60+ years, you could be forced to sell X% to cover the wealth tax over the years

Re: Modeling a Wealth Tax

#68

Post by dx87 »

LatteLazy wrote: post #23

What we need is inheritance tax. If you've made money, you can keep it. But you can't live for free just because some guy 100 years ago made money and you won the genetic lottery.

That's rarely the case as it is. The majority of wealthy families lose their money in just a few generations if they aren't actively working to maintain it.

https://money.com/rich-families-lose-wealth/

Re: Modeling a Wealth Tax

#69

Post by loourr »

paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

Change in price of the underlying asset doesn't matter/ change how much the government will take as a % over time.

If I have a 100 shares they'll take 1 share year one, slightly less year 2, etc regardless of the price of a share.

Re: Modeling a Wealth Tax

#70

Post by thoughtstheseus »

gabaix wrote: post #48

Thomas Piketty's Capital in the Twenty-First Century advocates for a wealth tax of up to 2%. This is the only remedy to combat the structural rising inequality in capitalism. He also admits the tax would be difficult to implement. He should know. France wealth tax has existed for more than 30 years. It was not a success, in part because the wealthy found ways to avoid it. It was as simple as moving residence to Belgi…

He also recommended a very small wealth tax to understand what wealth there was to begin with.
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