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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#231

Post by comicjk »

I_am_tiberius wrote: post #149
thomasdullien wrote: post #93

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 ec…

Switzerland can afford taxing based on wealth because other taxes are very low (e.g. only ~20 % of tax on your salary).

That's a good thing. Taxing wealth more, and income less, helps equalize wealth disparities over time.

Re: Modeling a Wealth Tax

#232

Post by 2OEH8eoCRo0 »

I view the US tax system as unsustainable and they say so themselves if you read the long term outlook that the treasury puts out.

There needs to be a cycle out of large concentrations or it's an unstable system.

Re: Modeling a Wealth Tax

#233

Post by SpicyLemonZest »

theplague42 wrote: post #160
rel2thr wrote: post #67

Earlier quoted context omitted.

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

I don't think he forgot; he's being intentionally misleading. What about dividends? Starting another company? Working as a CEO or board member? The article has a terrible foundation because he's intentionally misleading the reader.

The board is unlikely to agree to give a CEO or board member enough stock to maintain control of the company. I don't even think this is an unintentional goal - most wealth tax proponents I've seen are explicitly trying to prevent situations like with Cargill or Walmart, where the founder and his descendants can control the company forever.

Re: Modeling a Wealth Tax

#234

Post by derivagral »

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…

Your graphic only goes to 2009. Note that long-term capital gains moved up from ~15% to ~24% under Obama, and Biden has another plan to increase it[0].

[0]https://taxfoundation.org/joe-biden-tax-plan-2020/

Re: Modeling a Wealth Tax

#235

Post by tehlike »

I don't support the wealth tax, but this is too simplistic coming from paul (probably meant to be, to hide the facts).

The real picture is incorporating stock growth and probably calculating a $ amount. If you are a founder that made it, and your stock is growing and growing, you can easily take a loan and pay it without having to sacrifice the equity.

Re: Modeling a Wealth Tax

#236

Post by rtx »

calyth2018 wrote: post #121
thomasdullien wrote: post #93

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 ec…

"the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data. It's all 101ism and polemics." It's not strange at all. It's self-interest.

Wealth tax is majoritism and nothing else. And we all know how that ends.

Re: Modeling a Wealth Tax

#237

Post by darkerside »

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…

Slippery slope is a logical fallacy [0], which you likely already knew. Of course, that doesn't make your argument wrong, just fallible.

I think it's arguable that taxes only ever go up. Income taxes on the rich used to be near 90% in the top bracket, so it's not a one way ratchet. That said, I agree government tends to expand and needs to fund that growth somehow. But I think it's much more likely that need manifests as an increase in the wealth tax rate rather than a lowering of the wealth threshold. The billionaires have so much more money than everyone else (and so much more than they need) that it will be much more politically popular to raise the wealth tax on them than it would to expand the pool. Not to mention, there are more of us.

I'm not advocating a wealth tax, and I think it's problematic for other reasons, but I don't think the slippery slope argument is much more than fearmongering in this case.

[0] https://en.m.wikipedia.org/wiki/Slippery_slope

Re: Modeling a Wealth Tax

#238

Post by andrewtbham »

thomasdullien wrote: post #93

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 ec…

You're cherry picking. France imposed a wealth tax and they repealed it.

"At least 10,000 wealthy people left the country to avoid paying the tax; most moved to neighboring Belgium"

https://www.bloomberg.com/opinion/articles/2019-11-14/france...

Re: Modeling a Wealth Tax

#239

Post by erichocean »

crispyporkbites wrote: post #150
Applejinx wrote: post #100

Earlier quoted context omitted.

"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 ero…

I think it’s hard to get people to vote for a tax that will take money they have already acquired away from them. Reducing their potential for future earnings seems a lot more realistic to me.

Most countries phrase it like this: you owe 30% tax on a presumed 4% gain on your 100K.

That's an identical amount to a 1.2% tax on 100K, but phrased in a way that I think meets your objections.

Re: Modeling a Wealth Tax

#240

Post by bhupy »

clairity wrote: post #221
bhupy wrote: post #125

Earlier quoted context omitted.

> money earns money. A conservative drawdown of 3% pay the most commonly proposed wealth tax while still leaving you wealthier at the end of the year. That is only true if your wealth is in diversified ETFs or funds. That is not where most of the wealth of super-rich founders is. If 90+% of your wealth is in a single company (I.e. the one you founded), then there's no guarantee that this wealth will necessarily appre…

no, in a similar vein to my other comment, any founder who's reached millions in personal gain from their single, undiversified startup, will begin to employ financial strategies to diversify some of that gain into other instruments to reduce risk. there's a whole industry eager to help the rich and the getting rich do so.

> any founder who's reached millions in personal gain from their single, undiversified startup, will begin to employ financial strategies to diversify some of that gain into other instruments to reduce risk

This is literally not true for the wealthiest founders. The vast majority of billionaires (and even high $100M) only enjoy that net worth because the vast majority of their wealth is in a single stock: their own company. Even if 10% of their wealth is in diversified portfolios, that isn't nearly enough to offset the tax required to pay off the remaining 90% of their wealth.

Second of all, even for those that have decided that they no longer care about maintaining a majority of their net worth in their own company, they have to liquidate their existing holdings in order to buy into diversified portfolios, at which point the wealth is taxed. And then any appreciation within their new portfolio is ultimately taxed when any capital gains are realized.

In the US, we do not tax wealth, we tax income, dividends, and capital gains, because wealth is not money.

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