Modeling a Wealth Tax • Hacker News Board

Re: Modeling a Wealth Tax

#401

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

foogazi wrote: post #97

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 does not matter here since the wealth tax is setup as a percentage - the government will still take 45% over time

45% of wealth OVER 50 million. How do you not see the difference? The idea is that you wont discourage anyone from doing anything because they're already a multi millionaire. Who is going to be bitter about being a multi millionaire?

Re: Modeling a Wealth Tax

#402

Post by throwaway7281 » Tue, Aug 18, 2020, 3:29 PM UTC

travisoneill1 wrote: post #396

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.

It's not necessary, just as it is not necessary that a much more "individualistic" approach would lead to better country (take US as an example).

Re: Modeling a Wealth Tax

#403

Post by giantg2 » Tue, Aug 18, 2020, 3:29 PM UTC

I'd like to see a one time wealth tax followed by a restructuring of the capital gains tax to promote capital investment with the middle class while more heavily taxing the capital gains of the wealthy. The current system allows a runaway effect at the higher levels due to such a low tax rate on substantial sums of money. Even earning 5% in an index fund is huge for someone with $100M, yet due to the capital available they also have access to investment opportunities (private equity) that have a good chance to return much more.

Re: Modeling a Wealth Tax

#404

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

The real problem with wealth taxes is that they really can't raise very much revenue. In the US, even an extremely aggressive wealth tax, like, say, Elizabeth Warren's proposal of 2% over $50M and 3% over $1B, would only increase federal revenue by around $250B/year, or around 6%. It wouldn't even come to covering the federal deficit, let alone big social programs like free healthcare or college. And this is assuming zero capital flight and new tax avoidance, which is impossible.

Re: Modeling a Wealth Tax

#405

Post by KaiserPro » Tue, Aug 18, 2020, 3:30 PM UTC

_most_ people pay a wealth tax, its just they normally pay it to their pension provider.

Management fees are all over the place. In the UK pensions are capped at .75% (it used to be be as high as 2%)

in the US, 401k mangement fees are ~1% (https://www.investopedia.com/articles/personal-finance/06191...)

obviously I'm in the UK, and therefore my views are unlikely to be shared by those in the US. However I pay a good 35-45[1]% of my total income in taxes. I don't mind so long as we have a system that supports my fellow man.

So it smacks to me of pearl clutching. I don't see why a multimillionaire who has the option to hide their wealth should be exempt from paying a reasonable amount of tax. Man up and pay your fair share, its not like its ever going to be as higher percentage as what someone on $70-170k is.

[1] do the math of total loss of income on that....

Re: Modeling a Wealth Tax

#406

Post by bitcurious » Tue, Aug 18, 2020, 3:30 PM UTC

thrasibule wrote: post #318

bitcurious wrote: post #37

Earlier quoted context omitted.

>tax combined with a 50% income tax Properly managed capital gains are taxed at ~15% or less. One should hope that by the time you accrue $50 million your capital gains are properly managed.

How do you get to your 15%? Long term capital gains in the US are taxed at 20% + 3.8% net income tax + state tax. In a city like New York, you're talking close to 40% depending on your tax bracket.

.

Re: Modeling a Wealth Tax

#407

Post by jefftk » Tue, Aug 18, 2020, 3:30 PM UTC

Note that the US already effectively has a wealth tax, because of how long-term capital gains tax is computed.

Let's say you had $100M from a successful startup in the first dotcom bubble (2000-08-14). You sell all your stock (unrealistic, but ok), put it in VTSMX (33 -> 83), and you're up to $250M twenty years later. Then you sell it all. Nominally that's a 4.7% annual return, but there was also inflation: your $250M today would have been worth $167M in 2000, not $100M. That's about a 2% inflation rate, and your real return was 2.7%.

Another way to think of this is, you had 100M DOLLAR_2000s, which is equivalent to 150M DOLLAR_2020s. Your real gain was from 150M DOLLAR_2020s to 250M DOLLAR_2020s. The IRS ignores inflation, however, and charges you capital gains on the whole nominal gain. Instead of taxing you on a gain of 100M DOLLAR_2020s they tax you on 150M DOLLAR_2020s.

This is nearly equivalent to:

* Tax people only on their real gains, after inflation.

* Charge a 0.4% wealth tax (2% inflation * 20% long-term capital gains)

Which makes me think that "even a .5% wealth tax would start to keep founders away from a state or country that imposed it" is probably overstating the claim, since the US is very popular for startup founding and has an effective wealth tax nearly that high.

Re: Modeling a Wealth Tax

#408

Post by cranekam » Tue, Aug 18, 2020, 3:31 PM UTC

dominotw wrote: post #345

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…

Here in India Switzerland is mainly famous for their bank accounts where all the corrupt politicians store their ill gained wealth. Everyone here knows the phrase "swiss bank". wondering if 0.3% a good tradeoff for secrecy?

1) Banking secrecy in Switzerland isn't what it was:

https://en.wikipedia.org/wiki/Banking_in_Switzerland#Banking...

2) The Swiss wealth tax is only charged on Swiss tax residents, so corrupt politicians who stash their money there won't be paying it unless they are Swiss resident (which is pretty unlikely).

Re: Modeling a Wealth Tax

#409

Post by 3pt14159 » Tue, Aug 18, 2020, 3:31 PM UTC

What I want is a tax on wealth gain, even unmaterialized, with a floor based on what you've previously paid. Essentially a capital gains tax as it is implemented in most developed countries but applied to unrealized gains as well.

So if your wealth goes from $60m to $100m I want the tax to apply to the $40m delta. If the next year you lose $20m, then make it back the following year, no tax applied. I also want it to be progressive and to mirror the top marginal tax rate for people earning over $1m a year.

It's not perfect, since companies like Space X aren't publicly traded, so the financial sector would need to create new instruments to allow someone that is cash poor to afford this tax, but the present situation is insane. Buffet and Bezos should not be paying less in tax than a doctor or lawyer.

Re: Modeling a Wealth Tax

#410

Post by nradov » Tue, Aug 18, 2020, 3:31 PM UTC

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.

The S&P has a long-term annualized return of only 7.41% since the end of the Bretton Woods system (beginning of the modern financial system). And that ignores investment costs such as trading and mutual fund fees; actual annualized returns will be lower for real investors.