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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#101

Post by hajile »

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? Penalizing static value seems almost reasonable.

We already do that via inflation. Leave your money uninvested and we tax it 2% or more per year, every year.

Re: Modeling a Wealth Tax

#102

Post by sethbannon »

Let's look at what a 1% US wealth tax would mean for Jeff Bezos.

He founded Amazon 26 years ago.

A 1% wealth tax means he keeps 99% of Amazon stock each year.

.99^26 = .77 = 77%

So he'd currently be worth $145B instead of $188B.

PG is saying Bezos would have left the US because of that?

Edit after twitter conversation with PG:

He doesn't believe Bezos would have not started Amazon in the US if there was a wealth tax. He thinks a US wealth tax might marginally reduce the number of founders that choose to come to the US to start a company.

I still disagree.

I think great founders will start companies in the place that maximizes the chance they create an Amazon-level success, not in the place with the lowest taxes.

At some point taxes may be too aggressive but a low single digit wealth tax isn't that.

Re: Modeling a Wealth Tax

#103

Post by yread »

himlion wrote: post #8
cvaidya1986 wrote: post #3

Are there counter example countries who impose a high wealth tax that have a great startup ecosystem?

The Netherlands maybe? Our "BOX 3" is effectively a 1.2% wealth tax (30% tax on a 4% assumed return). The startup ecosystem is pretty good I'd say.

Over 75k (equity so savings - debts). Example calculation here (993 eur tax from 125k savings)

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/...

and 17k tax from 1.25M equity.

Re: Modeling a Wealth Tax

#104

Post by influx »

crispyporkbites wrote: post #60
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…

This has been downvoted, can someone add a counter-argument for this? I.e. why should someone with higher wealth be able to pay less tax (in absolute and relative figures) than someone with lower wealth?

How does one pay a wealth tax on an inherited house? Do they have to sell the house?

Re: Modeling a Wealth Tax

#105

Post by jschwartzi »

bengotow wrote: post #12

Wow, this ignores both the "floor" below which you would not be subject to the wealth tax (in the US, most recently by Elizabeth Warren, this has been discussed as $50M+), and ALSO fails to take into account that you would be growing your principal at ~3-8% a year through investment, etc. Sure, I guess with no floor on the tax and with your money just literally sitting in a pile, the government would eventually take…

The problem is that as you get older you need to reduce risk in your investments in order to rely on them more. As you de-risk your rate of return goes down. The lowest risk accounts are fdic insured, and at that point you’re losing money every year. Sure if there’s a floor on it I’d support it. But with no floor I’d be watching my savings dwindle year over year.

Re: Modeling a Wealth Tax

#106

Post by bitdivision »

stickyricky wrote: post #96
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 rema…

Because if your asset is growing at 5% and the wealth tax is taking 1%, your asset is still growing overall

Re: Modeling a Wealth Tax

#107

Post by logicchains »

supercanuck wrote: post #86
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.

Government Spending is included in GDP and government services have value to a society. It is not simple just a management fee because instead of being used to purchase a luxury goods it may be used to improve healthcare, infrastructure or regulating industry. If it wasn’t for government investing into DARPA none of these startups would even exist.

In the US the vast majority of government spending is on defence and welfare: https://www.cbo.gov/publication/56324 .

Re: Modeling a Wealth Tax

#108

Post by another-dave »

bitcurious wrote: post #26

I'm highly skeptical of the claim that such tax would discourage startup founders. Wealth tax proposals I've seen don't kick in until $50 million or $100 million. This means that there is a floor on how "poor" the government can make you via a wealth tax. This has two implications: 1. Most "successful" startup founders don't break that threshold of personal wealth. 2. For most startup founders, the startup is the onl…

Exactly — I've always thought that what drives multi-millionaires and billionaires isn't really the monetary value of the extra money that they make. To the extent they care about money at all anymore, surely it's only as a relative measure of success?

I can't see many people that have already accrued personal wealth of $50M but choose to keep working suddenly being turned off because of a wealth tax.

Re: Modeling a Wealth Tax

#109

Post by nemo44x »

bitcurious wrote: post #26

I'm highly skeptical of the claim that such tax would discourage startup founders. Wealth tax proposals I've seen don't kick in until $50 million or $100 million. This means that there is a floor on how "poor" the government can make you via a wealth tax. This has two implications: 1. Most "successful" startup founders don't break that threshold of personal wealth. 2. For most startup founders, the startup is the onl…

> Wealth tax proposals I've seen don't kick in until $50 million or $100 million. This means that there is a floor on how "poor" the government can make you via a wealth tax.

That’s just the starting point. Once people begin to figure out how to avoid it or have been tapped then the qualifier will be lowered to 40m. And then eventually 30m and do on until anyone above average is paying it. And then anyone above median.

The state will, as always, become reliant on it and find ways to expand it to wield more power and pay debts that were taken on to “collect/spend in advance” as they’ve done countless times.

This is why people that will likely never meet today’s threshold are against these schemes. These things always get a wider, and wider net until anyone just starting to get ahead is caught in it.

Re: Modeling a Wealth Tax

#110

Post by alexpetralia »

bulka wrote: post #77
bitcurious wrote: post #26

I'm highly skeptical of the claim that such tax would discourage startup founders. Wealth tax proposals I've seen don't kick in until $50 million or $100 million. This means that there is a floor on how "poor" the government can make you via a wealth tax. This has two implications: 1. Most "successful" startup founders don't break that threshold of personal wealth. 2. For most startup founders, the startup is the onl…

> I'm highly skeptical of the claim that such tax would discourage startup founders. Discourage starting a company at all? Probably not, but the article does not suggest that. Do you think it might influence where they start it? Looks reasonable to me, at least qualitatively.

Yes, but other factors likely influence it more. Are you going to start it in Barcelona or SF, just because of the tax rate? Surely there is something to be said for startup experience, investor networks, founder communities, etc...
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