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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#161

Post by controversy »

bitcurious wrote: post #131
nemo44x wrote: post #109

Earlier quoted context omitted.

> 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 media…

>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 hasn't been true for the income tax [0], nor the capital gains tax [1], nor (at least in Silicon Valley) for real estate taxes[2], which are closest to a wealth tax. It's a reasonable thing to consider, but given the eviden…

Here is an article that directly contradicts your assert. It discusses how congress promised to only tax the really rich and then through drift and power grab we’re all paying taxes. https://soundmindinvesting.com/articles/view/promises-made-p...

Re: Modeling a Wealth Tax

#162

Post by chadash »

I disagree with a wealth tax, but for a completely different reason[1]: it's very hard to value assets and any attempt to do so will lead to weird distortions of the market.

Let's say I'm a billionaire looking to avoid paying higher taxes. Well, first thing I'll do is avoid having my money in public stocks, because those are inherently easy to value. So I'll try to keep my money in private investments and then hire plenty of accountants and lawyers to argue that those private investments are worth as little as possible.

If I really want to get crafty, I go out and buy hard-to-value assets like paintings and Romanian forest land. Valuing a company with cash flow is hard enough, but certainly my team of experts can find a way to say that I vastly overpaid on my new picasso and that it's now worth much much less (even if that's not true). And in any case, are we really gonna have tax assessors enter people's homes to evaluate their art collections? And if not, what's to stop me from claiming that the painting got damaged and isn't worth much anymore?

To take another example, let's use WeWork as an example. At it's height, WeWork was "valued" at $47 billion. That means that Adam Neumann, as 30% owner, was "worth" ~$16 billion. With a 1% wealth tax, he'd owe $160M in taxes on a valuation that was probably 10x higher than reality. Of course, in a world with wealth taxes, you'd always find a way to structure a deal so that you can effectively claim that it's worth less, but the point is that any wealth tax is inevitably going to be unfairly applied because of the shenanigans some people will go to to pretend that their wealth is worth much less.

[1] I'm not inherently against higher taxes on the wealthy, particularly estate/inheritance taxes, but I do want to see them applied reasonably.

Re: Modeling a Wealth Tax

#163

Post by karl11 »

Incentives are powerful, and typically get the result they are incentivizing in the end. All taxes are a form of incentive, we should always be careful of taxing things that we want more of.

If you favor a wealth tax, you are implicitly arguing in favor of incentives to create less wealth. If you tax investment, there will be less investment. If you tax the rewards from great risk taking, there will be less great risk taking. So every tax is a trade-off: are we better off with less of the thing we're taxing and more in the hands of whomever is collecting the tax?

A related point would be that wealth can be created from nothing. It is not zero sum. My sense is that many people advocating for a wealth tax do not understand this conceptually.

Re: Modeling a Wealth Tax

#164

Post by epanchin »

mrfusion wrote: post #52
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.

I’d gladly pay 100% inheritance tax on exchange for zero taxes during life. Would anyone else go for a deal like that?

No chance. Deciding when to retire would be a nightmare. Many would retire too early. Most on death would donate 100% to the charity of their choice.

Re: Modeling a Wealth Tax

#165

Post by mpolichette »

It makes it seem really bad when you say "Government takes".

The truth is, you're contributing back to people and the system which let you make and run a business that makes millions starting in your 20s.

Re: Modeling a Wealth Tax

#166

Post by weaksauce »

arnvald wrote: post #129
stickyricky wrote: post #96

Earlier quoted context omitted.

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…

Let's say you have 1% wealth tax and $1,000. Without asset growth, after 1 year you have $990. If you include let's say 5% asset growth, after 1 year you have $1,000 * 1.05 * 0.99 = $1,039. Then after another year, without growth you have $980.1 With %5 growth you have $1,040 * 1.05 * 0.99 = $1,080. So the article claims that with 1% wealth tax you'll lose 45% of your assets over time. With any growth above 1% every…

except the wealth tax is not at anything other that the most ridiculously wealthy people in society. the wealth tax is proposed for precisely the reason that it slows down the growth of the ultra elite ruling class type society in favor of a more equitable one that is, you know, a society. bezoar shouldn’t have billions of dollars and influence society like he does... it’s obscene.

Re: Modeling a Wealth Tax

#167

Post by LandR »

mrfusion wrote: post #52
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.

I’d gladly pay 100% inheritance tax on exchange for zero taxes during life. Would anyone else go for a deal like that?

No.

The amount I will get in inheritance is more than the tax I will pay in my life.

Re: Modeling a Wealth Tax

#168

Post by dannyw »

nemo44x wrote: post #109
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 media…

Just for some historical context: US income tax rates started at 1% and ended at 6%, and applied to an extremely small amount of the population.

Re: Modeling a Wealth Tax

#169

Post by bhupy »

marcinzm wrote: post #111
bhupy wrote: post #34

Earlier quoted context omitted.

12 states have an inheritance/estate tax. Definitely worth replicating in the others, too.

As I see it, those just penalize people with moderate amounts of money (ie: trying to build generational wealth) while the truly rich simply find loopholes.

> while the truly rich simply find loopholes

You'll have to walk through how exactly, otherwise this is just a hand-wavy and unfalsifiable assertion.

Re: Modeling a Wealth Tax

#170

Post by theplague42 »

cascom wrote: post #148
ralmidani wrote: post #71

I see no reason to be alarmed. It’s highly unlikely the government would be taking from your stock directly. Requiring shareholders to pay cash equivalent to a percentage of their shares is reasonable, although with hyper-growth companies that don’t pay dividends, this could get tricky. Maybe it would incentivize more investment in dividend-paying companies? Also, FWIW, I think it would be better to impose a wealth t…

I honestly think your underestimating the amount of wealth stored in private companies, real-estate, art and other il-liquid assets

Dividends? Rental income? People own these things for a reason and it's not necessarily just raw capital appreciation.
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