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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#321

Post by gotoeleven »

darkerside wrote: post #237
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…

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 manifest…

Ahh the classic HN logician that spots someone mentioning slippery slopes and reflexively calls it a logical fallacy.

The history of taxes in the US (and especially California--remember the "temporary" 13.3% highest marginal rate?) has more slippery slopes than 6 flags fiesta Texas. It's not fear mongering, its a very solid argument against new taxes.

Re: Modeling a Wealth Tax

#322

Post by karl11 »

doukdouk wrote: post #300
karl11 wrote: post #163

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 ris…

An important point here would the magnitude of those effects: how much a 1% wealth tax would reduce wealth creation? Whether it is by .0000001% or by 99%, it would be "incentives to create less wealth" but in the former case it is all but negligible and in the latter case it is a catastrophe. Capital tax opponents seem to always use the elasticity of wealth creation with respect to the wealth tax rate is extremely hi…

Of course. As I stated, it is a trade-off. I think the most important thing is that everyone is honest about this fact - nothing is free.

Re: Modeling a Wealth Tax

#323

Post by jFriedensreich »

This kind of naive wealth tax has all kinds of unwanted sideffects and bureaucracy monsters that come with it. Especially if you imagine holding non public stock and estate, this quickly becomes absurd. To reach the original goals of a wealth tax it makes much more sense to:

- Prevent inheritance to an agreed maximum (the dead does not care and the children basically should not complain to get a capped inheritance. 1 million or 10 or whatever society agrees to be max is still not equal opportunity but closer, family owned paintings and jewlery etc. Can be lended and bought back from the state

- tax luxury purchases by 50% to 100%, this is really what we want: a buddhist billionaire who spends nothing is not bothered by the tax office until after death and an asshole who buys a yacht, gulfstream and rolex is forced to give back to society in significant amounts

- make luxury tax apply for moving whealth outside of the country imediately

Re: Modeling a Wealth Tax

#324

Post by dfxm12 »

GCA10 wrote: post #243

We already have extensive experience in the U.S. with a particular type of wealth tax -- called property taxes. I've been paying them in California for 23 years, and they haven't ruined me yet. (The nominal rate on those tends to be about 1%, too.) Many people with personal wealth of $50m+ start steering significant money into foundations of their own devising. There's a good debate to be had about whether society is…

I'd rather see individual strategies proliferate, on the belief that the government doesn't always know best.

I don't understand this argument because you get the opportunity to vote in government representatives who do know best every couple of years. They are accountable to you. You can even run yourself if it's really that important to you. This is a huge feature of government.

The same can't really be said about individual-owned foundations with no accountability by design: https://en.wikipedia.org/wiki/Donald_J._Trump_Foundation#Leg...

Re: Modeling a Wealth Tax

#325

Post by mathraki »

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 shocked people think a wealth tax on startup founders is OK. Let's think of a scenario for instance:

ACME startup raises Series C @500M. Founder equity is worth 100M on paper. Founder needs to borrow money every year to pay 'wealth' tax. After 10 years of struggles, company sells for $100M, VCs get money back, founder makes no money. But now founder is millions in debt for past 'wealth' tax payments. Founders will be declaring bankruptcy in those cases. And interest rates for wealth tax loans will skyrocket as a result, making effective wealth tax rate much higher.

Problem is startup founder 'millionaires' and 'billionaires' are only that on paper. Any asset that is volatile (like startups) will become impossible to own long term even with a small wealth tax.

Re: Modeling a Wealth Tax

#326

Post by rodw »

Isn't this model is ignoring the fact that the proposed wealth tax plans are _marginal_ rates?

Take Sanders' plan [1] for instance:

* 1% annual tax on net worth above $32M

* 2% above $50M

* 3% above $250M

* 4% above $500M

* 5% above $1B

Also note that based on those numbers this tax would impact the wealthiest 180,000 households in the US (out of 129M, which is roughly the top 0.1%).

Warren's plan [2] is less aggressive:

* 2% above $50M

* 4% above $1B

I'm not actually a fan of the wealth tax (more for logistical reasons) and I don't have the time right now to work out the math for a more accurate model, but I'm pretty sure 0.99^60 is not it.

[1] https://berniesanders.com/issues/tax-extreme-wealth/

[2] https://elizabethwarren.com/plans/ultra-millionaire-tax

EDIT: If my quick math is right then your wealth needs to be roughly $100M before you're paying 1% ($1M) in wealth tax, but that number would shrink as your net wealth does.

EDIT 2: Taking Bernie's plan, and assuming a net worth of $100M that's stuffed in your mattress (hence earning nothing from investment or interest), after 60 years you'd be left with $59,279,504, having paid a total of $41,086,086 in wealth tax (roughly 41% of the original $100M) over 60 years. (Note that this still leaves you with much more wealth than 99.9% of American households.)

Of course, if you can get a 1% return on your initial $100M then your net worth is still $100M after 60 years.

Re: Modeling a Wealth Tax

#327

Post by mschuster91 »

learc83 wrote: post #277
andrewtbham wrote: post #238

Earlier quoted context omitted.

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...

1. The French income tax and wealth tax was extraordinary high. 2. France is part of the EU, there are dozens of countries that French millionaires can move to with almost zero friction. Moving to neighboring Belgium is like moving from New York to New Jersey.

> 2. France is part of the EU, there are dozens of countries that French millionaires can move to with almost zero friction.

Which is why taxing the rich and wealthy, as well as their companies, is something that desperately needs EU intervention.

Re: Modeling a Wealth Tax

#328

Post by mlyle »

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…

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

vs. the article

"Even a .5% wealth tax would start to keep founders away from a state or country that imposed it."

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

Well, here you missed all the nuance, so...

Re: Modeling a Wealth Tax

#329

Post by logicchains »

anoonmoose wrote: post #269
BobbyJo wrote: post #194

At what point can we all stop and say the federal government is 'big 'enough'? We can always find more for it to do, but I think most people here will agree the market is better, for most things, than bureaucracy. I'm all for trying different tax strategies to be more fair and efficient, but I think we need a line in the sand we won't cross before we add another potential slope to slide down.

Most people here not in the US will tell you that there are two things that are incredibly expensive in the US because they are controlled by the market instead of by the government like they are in almost every other country (healthcare and higher ed).

Healthcare is controlled by the government because it enforces licensure artificially limiting the number of doctors. Prior to the AMA's lobbying for such restrictions in the early 1900s, medical care was cheap and plentiful; people even had doctors go to their houses.

Education is also artificially influenced by the government because it gives out special loans and makes it illegal to declare bankruptcy on them, allowing colleges to keep raising prices because they know students will always be able to pay via student loans.

Re: Modeling a Wealth Tax

#330

Post by exabrial »

I can't fathom another tax in the USA. 30% of _MY_ income is removed forcefully. If I refuse, someone would show up with a gun eventually to force me to pay.

We have an enormous budget already. We need to tighten ship first.

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