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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#501

Post by throwaway13337 »

afthonos wrote: post #429
throwaway13337 wrote: post #310

It's important to note that leaving the United States to avoid future taxation is not an option for even upper middle class without serious penalty. The US is the only country in the world that taxes their citizens who are residing in other countries. Even if you move to another county, you still pay US taxes every year. If you'd like to renounce your citizenship to avoid that, the US has that covered. There is also…

This is somewhat misleading, especially the "30% of your wealth bit". What the expatriation tax does is tax you as if you had sold all your property for cash on the day you renounce your citizenship, though it does apply a $600k+ exclusion to the proceeds of the "sale". Put another way, it's the US saying "you don't get to accumulate wealth in the US and then leave without paying taxes on it." It's not great (I'm an…

I appreciate the details here.

You're right that it is more complicated. I had to refresh my understanding.

Apparently, the income requirement rises with inflation and the last number the IRS states is 160k. The 2 million net worth does not appear to rise with inflation. Leaving the US with these amounts creates the assumption of expatriation being for tax avoidance in the US.

With respect to your comment, though, all holdings are deemed as sold for the purpose of taxation at a market value so you do have to pay a very large lump sum on the date of expatriation if I understand correctly. This would be a pretty significant tax though you're right that what I stated above about expatriation was not complete.

I've also been an expatriate for a number of years. Owning a company in another country without being double taxed is nearly impossible as an American citizen with new rules pertaining to foreign-owned businesses. It ended up being a lot less hassle for my finances to simply move back to the US so here I am trying to plan my permanent escape. All the information is clear as mud.

It's also my understanding that getting a visa to come back to the US to visit family after renouncing your citizenship is difficult. It's like being excommunicated from a fanatical religious organization.

https://www.irs.gov/individuals/international-taxpayers/expa...

https://www.law.cornell.edu/uscode/text/26/877A

Re: Modeling a Wealth Tax

#502

Post by Certhas »

bhupy wrote: post #198
Certhas wrote: post #171

Earlier quoted context omitted.

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.

But none of the people you are trying to target with the wealth tax have their holdings in the S&P500. Instead they have close to 100% of their holdings in a single asset represented by the more diversified S&P500. There is no guarantee that the single individual super-wealthy founder whose wealth derives from the ownership of their own company will appreciate at an annualized rate of 10%. The two most pervasive myth…

So what? That just means that you get ahead if the company you own grows ahead of the broader economy and that you lose out if you fall behind.

Re: Modeling a Wealth Tax

#503

Post by tempsy »

The tax should really be tied to the risk free rate - the real issue is sitting on a ton of unproductive cash not necessarily forcing the wealthy to shy away from riskier investments.

Re: Modeling a Wealth Tax

#504

Post by tjpd »

I'm not a fan of this proposal but I think this line of argument is pretty flimsy and pretty specious.

In the Bay Area you're already subject to a form of wealth tax called property tax. And it's substantial. If you live in San Francisco you'll get charged 1.1801% every year [1] on the value of your wealth (property). If I bought a house in SF and live for another 60 years I would be taxed 60 times on that same asset. Does that mean the government will over the course of my life take 33.6% of my house?

It's not as if property tax has kept a damper on Bay Area house price inflation.

[1] https://sftreasurer.org/property/understanding-property-tax

Re: Modeling a Wealth Tax

#506

Post by centimeter »

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…

Billionaires are a necessary consequence of having a scale-free market structure in a wealthy society, which is itself necessary for efficient resource allocation in the absence of (hypothetical well-implemented) dictatorial central planning.

Re: Modeling a Wealth Tax

#509

Post by godelski »

edouard-harris wrote: post #337
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…

> I tried to ask @rabois for the source of a claim, and got crickets in return. It looks like Keith did in fact reply to that tweet with a source, yesterday: https://twitter.com/rabois/status/1295357875187904512

Came here to say this. If I have the time stamps right it looks like rabois even replied before this HN post even existed, which makes the comment a little dubious. I'm sure it was a mistake, but rabois only took 5hrs to reply. Please give someone an appropriate amount of time to reply and check before posting on other social media calling them out.

Re: Modeling a Wealth Tax

#510

Post by throwaway936482 »

This is not modelling a wealth tax. This is disingenuous whining because it fails to take into account that wealth taxes kick in at the point that where people have become wealthy. Lets say it kicks in at 100 million. So you still get to keep 100 million before you pay any tax on that wealth? Or in other words you still get to be incredibly, obscenely wealthy, you just reduce the chance to become wealthy beyond the dreams of avarice. Not seeing how this is particularly demotivating to people want ting to found startups. Lets say it kicks in at 10 million instead. Again you still have the chance to become extremely wealthy before you have to pay it. And if you don't think being worth £10 million is extremely wealthy that's because youre comparing yourself to billionaires. Even if it kicks in a £1 million you still get the chance to become wealthy! Sure maybe at this point to you're reducing the number if people willing to put in 80 hour weeks in the hope of winning the startup lottery but given the number of people who pour their heart and soul into passion projects without the chance of becoming billionaires I don't see that as a problem. Seriously this idea that if we tax the wealthy to the point where they can only afford a single yacht and a modest private island they'll all go on some terrible Randian strike and well somehow lose the value they create is bollocks.
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