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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#201

Post by ghiculescu »

Loughla wrote: post #117
bulka wrote: post #77

Earlier quoted context omitted.

> 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.

>Do you think it might influence where they start it? This has always been the argument, and I've never bought it. Now, more than ever, is the time to start a company remotely, thanks to Mr./Mrs. Covid. Have we seen a massive move away from SV and other tech centers? Have we seen a massive wave of startups in 'flyover' country?

It’s been 6 months and the whole world is mad. Check in 2 years and you’ll probably see a yes to at least the first question.

Re: Modeling a Wealth Tax

#202

Post by czbond »

Unpopular opinion: Near 50% of American pay ZERO tax whatsoever. The top 10% of all Americans pay 69% of all taxes currently. This is a point 'left out' of current discussions.

How about instead of increasing entitlements and stealing more from people that created wealth - we lower the size of the government spending UNTIL it matches where most people pay for the services received in a more scaled manner.

https://taxfoundation.org/summary-latest-federal-income-tax-...

Re: Modeling a Wealth Tax

#203

Post by dfilppi »

Certhas wrote: post #171
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…

The money ears money thing is key. A wealth tax that equals the money you can earn from having money would prevent runaway inequality due to the "rich getting richer" effect. S&P 500 has a long term annualized return of 10%. If you have a 5% wealth tax on stock you have in S&P 500 then you are still earning 5% returns (well above long term average inflation) without actually lifting a finger.

Yeah but it causes the much worse 'government getting richer' effect.

Re: Modeling a Wealth Tax

#204

Post by erichocean »

arconis987 wrote: post #74

The 50% tax that pg dislikes for startup founders is basically what I experienced during our startup’s liquidity event. I imagine that a fairly large number liquidity events are the same. The acquirer paid us out in cash, which meant we were taxed at the highest marginal federal income tax rate of 37%. California taxed 10%, making the total 47%. I only kept a little more than half of the upside, but it was still life…

> The wealth tax seems fine to me.

It's not a replacement, it's in addition to all of the other taxes you already owe.

And if it's anything like the income tax in the United States, the percentage owed will increase dramatically over time and the floor will be lowered dramatically over time. The goal right now is just to establish the principle.

Re: Modeling a Wealth Tax

#205

Post by shin_lao »

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 is taxed by capital gains tax.

Re: Modeling a Wealth Tax

#206

Post by epistasis »

thaumasiotes wrote: post #183
epistasis wrote: post #95

Earlier quoted context omitted.

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.

> 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. If we were being restricted by land availability, we could fix that easily by putting more housing on the same amount of land. That problem was so…

> we could fix that easily by putting more housing on the same amount of land

As somebody who has been watching the process for this for years, let me tell you that it is the exact opposite of easy, and nearly impossible.

And it's nearly impossible because current wealth holders are able to stop it from being built. And in most areas where there are housing shortages, locals and local governments consider the current land "built out" meaning that the zoning does not permit more housing or more height than is already built, an the notion of changing these arbitrary restrictions is so inconceivable that it almost never happens.

This is what has really changed over the past yes decades to make housing prices soar: refusal to allow more housing to be built on existing land.

Re: Modeling a Wealth Tax

#207

Post by clairity »

bhupy wrote: post #157
another-dave wrote: post #108

Earlier quoted context omitted.

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.

> 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. That's not the argument. If you accrue a wealth of $50M because you own half of your $100M company (or 100% of your $50M company), then a wealth tax will — over time — force you to give up ownership in your own company. An income tax or a capital gains tax on the ot…

no, that's an intentional misdirection by pg, that you'd lose control of your company over time because you'd have to sell shares to pay the tax. what would more likely happen is that loan products and other financial instruments and techniques would pop up so you could pay the taxes in a whole host of ways without actually losing the underlying shares that are used as collateral. it already happens in a more limited, and sometimes private, context today.

Re: Modeling a Wealth Tax

#208

Post by thedufer »

logicchains wrote: post #126
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…

This is exactly what happened with the US federal income tax. It was originally only a small amount, and only on the wealthy. Now it's gradually been expanded to everyone.

> It was originally only a small amount, and only on the wealthy.

This is a bit misleading. The first income tax of 1861 was on incomes over $800, which inflation-adjusted is about $23000. The next year the threshold was lowered to $600 or about $17,000 in today's dollars. Currently the standard deduction is $12,200. Certainly some creep, but it doesn't quite fit the described jump from only the wealthy to everyone, except perhaps to the degree that nearly everyone in the US today is wealthy compared to the average citizen in the 1860s.

Rates have certainly gone up since then (originally a 3% rate), but top rates today are quite low by modern standards - they were higher than today from the 1930s through the late 80s. Typical average rates have been on a slow downward trend since WWII.

Re: Modeling a Wealth Tax

#209

Post by NPMaxwell »

The life concept here is so different from the recent post about the MIT media lab. "I watched two brilliant students organize two massive hackathons to improve the breast pump, challenging assumptions about who gets to invent the future and what problems are worth solving. Another student launched a remarkably successful movement against facial recognition technologies by demonstrating that they often embed significant racial biases. ...And late one night, I saw a young woman walk past my door wearing a massive pair of delicate, filigreed copper angel wings" http://www.ethanzuckerman.com/blog/2020/08/15/to-the-future-...

Re: Modeling a Wealth Tax

#210

Post by SpicyLemonZest »

dcolkitt wrote: post #158
marcus_holmes wrote: post #62

Earlier quoted context omitted.

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

That effect would make startups more attractive. But it would be completely cancelled by a countervailing effect: the wealth tax strongly incentives liquid investments. Which of course heavily penalizes investing in startups as they're small, speculative privately-held, hard-to-value companies. Currently investment is only taxed on a "realized basis". No tax bill is due until the investor realizes a cash profit, eith…

Most wealth tax proposals include provisions for owners of assets which can't easily be sold or valued to defer payments for a decade or two.
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