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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#91

Post by logicchains »

jcfrei wrote: post #84
logicchains wrote: post #20

Earlier quoted context omitted.

>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.

Evidence points to the contrary: Taxes reduce profitability and therefore limit risk taking behaviour by companies. Same is most likely true for individuals because it reduces their income.

>Same is most likely true for individuals because it reduces their income.

A wealth tax does not reduce income, it reduces wealth! Income taxes and capital gains taxes reduce income.

Re: Modeling a Wealth Tax

#92

Post by aww_dang »

Miner49er wrote: post #73
aww_dang wrote: post #54

Earlier quoted context omitted.

From the bottom of the page: >"Even a .5% wealth tax would start to keep founders away from a state or country that imposed it. That's more than a quarter of your stock."

The point is that he arrived at this conclusion by building up a strawman. That 26% is over 60 years, ignores the fact that the stock will appreciate over time, ignores the fact that all wealth taxes have high floors, etc.

I read it as deterring start up founders from investing in a region. If they plan for success, then they should plan to exceed the floor.

Re: Modeling a Wealth Tax

#93

Post by thomasdullien »

Perhaps notable: Switzerland has a wealth tax (of up to 0.3%), and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland.

Other features of the tax system more than offset the 0.3% wealth tax.

Personally, I am a bit disappointed by the lack of depth of the discourse: Wealth taxes and their effect have been studied quite a bit in economics literature, and there are various peer-reviewed papers that attempt to measure the effects, but the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data. It's all 101ism and polemics.

See also https://twitter.com/halvarflake/status/1295283922117566464?s... - I tried to ask @rabois for the source of a claim, and got crickets in return.

I'd like to see a more nuanced and thorough discussion, to be honest. Perhaps that's a bit much to ask.

Re: Modeling a Wealth Tax

#94

Post by influx »

Molpot wrote: post #66

>Even a .5% wealth tax would start to keep founders away from a state or country that imposed it. Yeah, that's why nobody ever started a company in France, which had a wealth tax from 1981 to 2018: https://en.wikipedia.org/wiki/Solidarity_tax_on_wealth .

What are the most successful French companies founded in that time?

Re: Modeling a Wealth Tax

#95

Post by epistasis »

bhupy wrote: post #45
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.

But a wealth tax also targets owners of assets that don’t appreciate. It taxes both the winners and the losers, and for the latter it’s nothing but a forced divestiture of their ownership stake. A capital gains tax, on the other hand, strictly targets those whose assets have appreciated in value. Wealth is always eventually taxed when it’s liquidated. And if it is never liquidated, then it arguably doesn’t really mat…

Wealth hoarding matters immensely for things like land, which is why the most common wealth tax is a tax on real estate holdings.

It can also matter for other resources which are finite, but land is one of the most crucial one in our current times, and why we are seeing such ridiculously large gains in housing costs in the past few decades after a century of housing costs remaining fairly constant.

Re: Modeling a Wealth Tax

#96

Post by stickyricky »

barretts wrote: post #33

For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post. He ignores asset growth and the fact that all the wealth tax proposals have a very high floor for the tax. Saying the government will take 45% of your wealth above $100M is very different than saying the government will take 45% of your wealth.

Why does asset growth matter if you're taking n% no matter what?

Edit: After reading the responses, I think people are confusing themselves with dollar amounts. If I have 100 units of X. The government takes 1 unit in the first year, 0.99 units the next, and so on. Over time my total number of units decreases. The notional value of those units can fluctuate but the absolute number of units owed to the government remains the same.

My original question, which I suppose has been answered, centered on this concept that the notional value claimed by the government is the only thing of value being lost. A unit of wealth is lost and wealth compounds over time.

Disclaimer, I'm not advocating for or against a wealth tax. Just trying to understand an argument and now apparently teaching it.

Re: Modeling a Wealth Tax

#97

Post by foogazi »

barretts wrote: post #33

For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post. He ignores asset growth and the fact that all the wealth tax proposals have a very high floor for the tax. Saying the government will take 45% of your wealth above $100M is very different than saying the government will take 45% of your wealth.

Asset growth does not matter here since the wealth tax is setup as a percentage - the government will still take 45% over time

Re: Modeling a Wealth Tax

#98

Post by eythian »

This seems to me to be a very weird and overly simplistic modelling.

Where I live has a wealth tax, and it's in exchange for a capital gains tax, dividend tax, withholding tax, that sort of thing.

The way it works here is that it's a tax based on fictitious returns from you having invested your money, i.e. based on your wealth, a certain return is assumed and you're taxed on that. The first €30k is ineligible for tax, then there are a few bands: €0-€72k, €72k-€99k, €99k+ (numbers rounded.) The effective tax for these bands ends up being 0.58%, 1.34%, and 1.68%. These are last year's numbers, I'm not sure if they're different this year.

The idea is that if you have more than €30k sitting in a savings account, you ought to be doing something with it to get a return on investment. The issue I have with it is that it's not very responsive to changing markets, like at the moment where savings interest rates are near enough to zero and the stock market is complicated, it doesn't account for that sort of thing well compared to a regular withholding tax.

There are also exemptions, I think the value of your primary residence isn't counted for example, though I haven't yet had to deal with it, so I'm not totally sure.

Re: Modeling a Wealth Tax

#99

Post by bhupy »

epistasis wrote: post #95
bhupy wrote: post #45

Earlier quoted context omitted.

But a wealth tax also targets owners of assets that don’t appreciate. It taxes both the winners and the losers, and for the latter it’s nothing but a forced divestiture of their ownership stake. A capital gains tax, on the other hand, strictly targets those whose assets have appreciated in value. Wealth is always eventually taxed when it’s liquidated. And if it is never liquidated, then it arguably doesn’t really mat…

Wealth hoarding matters immensely for things like land, which is why the most common wealth tax is a tax on real estate holdings. It can also matter for other resources which are finite, but land is one of the most crucial one in our current times, and why we are seeing such ridiculously large gains in housing costs in the past few decades after a century of housing costs remaining fairly constant.

Agreed. As you said, the solution to that is either a Georgist Land Value Tax or a Land Appreciation Tax, not a blanket wealth tax.

Re: Modeling a Wealth Tax

#100

Post by Applejinx »

crispyporkbites wrote: post #13

Wealth should be taken into account when income tax is calculated. It's not fair that someone who earns 100k with no assets pays as much tax as someone who earns 100k but also inherited a 1mn house and has a whole load of cash reserves from not paying rent/mortgages for years. It's doubly not fair when the wealthier individual can divert most of their salary into a pension and not pay tax on it, because they can affo…

"Someone's wealth should not be eroded by tax"

Why not? They are paying for something. Should someone's wealth not be eroded by rent? The cost of food?

Absolutely someone's wealth should be eroded by tax. If they're so damn clever they'll make more. If they're not, the erosion will quickly diminish along with the wealth, making their future efforts much more significant.

Lazy shiftless wealth absolutely should be eroded. Erosion is the nice way: you can also try for the nasty way if you like.

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