Modeling a Wealth Tax • Hacker News Board

Re: Modeling a Wealth Tax

#391

Post by jpttsn » Tue, Aug 18, 2020, 3:23 PM UTC

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…

By this reasoning you’d “break even” on income tax if you got promoted?

Re: Modeling a Wealth Tax

#392

Post by nindalf » Tue, Aug 18, 2020, 3:24 PM UTC

I usually like how in-depth PG gets into topics he discusses. I felt like he barely scratched the surface here. For example, any proposed wealth tax only applies to the wealthy. The number proposed by Senator Warren ("just two cents!") is wealth above $50 million [1]. PG says that startup founders would lose a majority of their wealth meaning there wouldn't be much point to starting up. But they'd have $50 million at least, and would lose up to half of wealth above that.

Is this really such a terrible outcome that people would avoid working on their startup? Are there founders out there who think "if I'm going to have less than $100 million when I'm 60, it's not worth it. I'll go elsewhere to start my business."

PG is actually in a great place to tell us how many startup founders leave their startup with greater than $50 million of wealth. If I had to guess I'd say not many, but it would have been nice to get hard data.

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

Re: Modeling a Wealth Tax

#393

Post by saikat » Tue, Aug 18, 2020, 3:25 PM UTC

The math on this is incorrect. This is not how a marginal tax works. I have not seen any proposals for wealth taxes that are not marginal after a certain (usually very high) level of wealth.

For example, the Warren wealth tax only kicked in after $50 million.

Re: Modeling a Wealth Tax

#394

Post by saikat » Tue, Aug 18, 2020, 3:26 PM UTC

I have seen no proposal for a wealth tax that is not a marginal wealth tax, in which case the math in this essay is wrong. The Warren wealth tax, for example, is for wealth over $50 million.

Re: Modeling a Wealth Tax

#395

Post by dalbasal » Tue, Aug 18, 2020, 3:26 PM UTC

cycomanic wrote: post #370

dalbasal wrote: post #332

Earlier quoted context omitted.

I'm not sure european examples are a great comparison. First, most european wealth taxes (including recently defunct ones) have much lower floors than US proposals. $1m instead of $100m. That changes a lot. France did experience "capital flight," famously Gerard Depardieu. Second, "capital flight" has always been present in Europe. There's a long history of it, and practical realities make it relevant. I do agree abo…

The question if billionaires are bad for society is pretty much the same question as asking if the aristocracy was bad for previous societies. The existence of billionaires clearly undermines the core principles of democracy which is that all people have essentially the same political power. The existence of many laws which clearly aim to benefit billionaires only is enough evidence that this power balance does not e…

> is pretty much the same question as asking if the aristocracy was bad for previous societies.

Well... that's stacking the deck somewhat. We were talking about how to add nuance. Nuance would be "what do we expect the economic result to be" or "this is a matter of right and wrong, not money."

>I find it ironic that the US which was largely founded by people who left their home because of entrenched economics

This gets abstract, but... The individuals most influential in the Revolution itself were mostly high ranking colonial officials from British nouveau aristocracy families of the empire. Granting voting rights only to property owners was the default position. "Universal" suffrage limited to european males was the radical position.

Not a criticism of them. Just... we can't solve these things with history. If you think billionaires are harmful, why? Equality? Economics?

Re: Modeling a Wealth Tax

#396

Post by travisoneill1 » Tue, Aug 18, 2020, 3:27 PM UTC

throwaway7281 wrote: post #112

Oh my, more state money would mean probably a more equal society - more money for roads, schools, teachers, research labs, health care, infrastructure and much more. All things by the way any entrepreneur is happy to "take" or accept as given. Forgive me, but watching extremely privileged people's viewpoint, that they are so genius is so much missing the point (of luck, and of course a society that nourishes and carr…

Why would you assume that a richer more powerful state would mean those things? Look around the world and you will see that is not necessarily the case. Look at California, and specifically SF right here in the US for a counterexample.

Re: Modeling a Wealth Tax

#397

Post by anoonmoose » Tue, Aug 18, 2020, 3:28 PM UTC

logicchains wrote: post #329

anoonmoose wrote: post #269

Earlier quoted context omitted.

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, all…

Those issues are still the result of the market responding to the government's actions/policies; remove the market (make both single payer) and the government will have much more incentive to fix the problems.

Re: Modeling a Wealth Tax

#398

Post by ineptwriter » Tue, Aug 18, 2020, 3:29 PM UTC

Like others have said, this ignores reinvesting wealth and returns to invested wealth. Here is a table like PG's for each wealth tax %, but calculating wealth after 60 years with 4% annually compounding interest (i.e. 60 years later after annual taxes and 4% annual returns):

0.1% 993% 0.5% 788% 1.0% 589% 2.0% 328% 3.0% 182% 4.0% 100% 5.0% 55%

Sure, with a 0.5% annual wealth tax and no returns, the government would have taken 26% of a founder's initial wealth over 60 years. But if a founder reinvested and got a reasonable rate of return (4%), they'd have 788% of their initial wealth after that annual tax. Just like "small tax rates produce such dramatic effects", compounding interest produces dramatic effects that more than offset such taxes.

Re: Modeling a Wealth Tax

#399

Post by ibigb » Tue, Aug 18, 2020, 3:29 PM UTC

Would a wealth tax benefit society? It would seem that if an individual was creating wealth, other individuals would be wise and say: "you keep going!" How would it profit society to interfere with the genius who was creating lots of wealth?

Perhaps a better way to add richness to society would be to examine the use of an inheritance tax. When a genius wealth producer dies wouldn't it be in society's best interest to find a way to funnel that wealth so that other individuals with good potential can use it to create economic activity which could benefit everybody.

Right now so much money can be funneled to descendents, perhaps some of whom never knew the economic genius it created the wealth. These descendents then don't need to apply themselves in life, but instead can lead a life of leisure which often is not beneficial to them or society. Witness what happened to Max Factor's grandson, who I believe is still in prison.

It would seem funneling the wealth from a deceased economic genius into capital for individuals with great potential to realize their ideas would enrich all of us. Right now there are probably many individuals who could create amazing things if they had access to the right education and capital.

Re: Modeling a Wealth Tax

#400

Post by odyssey7 » Tue, Aug 18, 2020, 3:29 PM UTC

We should think about the amount of equity a founder gives to investors to get their company started. UBI changes the dynamic a fair amount.

Twenty-somethings with dreams often have one thing between themselves and bringing their products to market. That is, how to feed themselves and stay in a decent living situation until they get some basic revenue?

Well, right now founders can solve this by raising seed capital. Instead of having guaranteed housing and healthcare from the government, founders today can trade pieces of their company to investors in installments, until they have revenue and a better negotiating position.

UBI could actually end this investing model. Seed investing might not happen as much in a UBI country because there would simply be no need for it.