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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#541

Post by throwaway0a5e »

helen___keller wrote: post #264
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…

Not that you're necessarily wrong, but I find it fascinating that the state of social trust is so low in the united states that the most powerful and resonant arguments against potential laws are even if the law is good, a future law in the same vein might go too far and thus even the good law should be shot down. You can see this on a variety of topics. Gun control legislation, immigration reform, healthcare reform,…

What you find "fascinating" is a culture that is over 200yr old. What you are complaining about has been a constant part of our culture since the 1770s and ingrained in Federal law in 1789.

Re: Modeling a Wealth Tax

#542

Post by RIMR »

Geez, the article reads like an amazing success story for wealth taxes. Each year only an insignificant portion of your wealth is taken, but over the course of your career a substantial portion of your acquired wealth goes back to the community that helped make you wealthy.

And then in the last paragraph he dismisses the idea with a lazy argument that the profit motive is singularly important to the economy.

I know capitalism is pretty universal, but it has cult-like properties sometimes.

Re: Modeling a Wealth Tax

#543

Post by prepend »

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…

> The question if billionaires are bad for society is pretty much the same question as asking if the aristocracy was bad for previous societies

I think the main difference is that aristocracy was zero sum and rent seeking where billionaires aren’t necessarily (and with recent tech ones not) zero sum. Bezos having a billion dollars doesn’t limit anyone else from having a billion dollars.

Only the king was allowed to hunt in the king’s forest. Aristocracy owning 50% of land (or whatever) means no else could own it and more land wasn’t (usually) created.

If someone is king, then that means no one else can be.

There’s some similarities with aristocracy, especially with generation after generation. But theoretically we have estate taxes and laws against perpetuity that help some and could be prevented.

Perhaps half of billionaires are “self made” [0]. I don’t like that term, but I wish we had “how many billionaires weren’t born to millionaires?”

But Bill Gates being born to a middle class lawyer and making billions is very different from Bill Gates being born to the Earl of Orkney and selling all the potatoes in Ireland to make billions.

[0] https://www.cnbc.com/2019/05/10/wealthx-billionaire-census-m...

Re: Modeling a Wealth Tax

#544

Post by eanzenberg »

rockinghigh wrote: post #523
eanzenberg wrote: post #420

Earlier quoted context omitted.

I never understood..what’s the fascination in turning one county into another? We have Switzerland, France, Belgium, Germany. Why force America to become one of these? Those countries already exist. Turning one country into another doesn’t make sense and isn’t what makes America unique. Imagine I moved to Germany and kept stating “Germany should be more like America because X Y and Z.” Can you imagine how offensive t…

It's not about turning the US into a European country, it's about decreasing wealth inequality. The US is doing a lot worse than the countries you mention--Gini of 41 for the US, vs 27-32 for Switzerland, France, Belgium, Germany. The poverty rate and poverty gaps are also a lot higher in the US. https://data.oecd.org/inequality/poverty-gap.htm

Perceived wealth inequality. The US has less wealth inequality because most of it is already wealthy. The shrinking middle class is shrinking because most of them are moving to the upper middle class.

Re: Modeling a Wealth Tax

#545

Post by enragedcacti »

eanzenberg wrote: post #420
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 never understood..what’s the fascination in turning one county into another? We have Switzerland, France, Belgium, Germany. Why force America to become one of these? Those countries already exist. Turning one country into another doesn’t make sense and isn’t what makes America unique. Imagine I moved to Germany and kept stating “Germany should be more like America because X Y and Z.” Can you imagine how offensive t…

I'm American and want America to be more like Germany. Is that offensive?

Re: Modeling a Wealth Tax

#546

Post by theptip »

Isn't this model naively assuming that you just put the money in the bank (or under your mattress) and don't do anything with it? I'm struggling to see how this model is a useful contribution to the discussion. Is there some unspoken assumption here such as "startup founder gets wealth-taxed before their stock is liquid"? The "over the next 60 years" part seems to suggest that's not what he's going for here, and you'd expect some special treatment like an 83(b) to cover this case in the illiquid window anyway.

Here's how I would model this: the S&P has returned 7% / year (inflation-adjusted) and if you have millions you can invest in higher-yield instruments like hedge funds and startups, so I'd expect a billionaire to be yielding north of that. This more than covers any realistic value of a wealth tax for even the biggest whales like Zuckerberg.

For context Warren's plan [1] was 2%/year for wealth above $50m but below $1b, and 6%/year on wealth above $1b, so perhaps worst-case this wealth tax would prevent billionaires from accumulating more wealth through unsophisticated passive income. Founders with "only" $100m would net 5%/year instead of 7%/year of passive income from investing in the S&P. Ok, say you put half in T-bills and dilute your return, even then you're still netting 2.5%/year.

Honestly I don't think that's a terrible impact; if billionaires have to beat the market and/or invest their wealth above $1b in more risky assets in order to net a return, that means they will be driving lots of startups and other economic activity. (And remember, you can still invest the sub-$1b portion of your portfolio more conservatively in treasury bonds and whatnot, it's just the wealth above $1b that is taxed aggressively.)

I'm fine with a social contract that says "if you happen to win the lottery and earn $1b, you don't get to re-invest that money to make more money and build a dynasty".

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

Re: Modeling a Wealth Tax

#547

Post by Joeri »

jakelazaroff wrote: post #339
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...

You're cherry picking as well. There are other European countries with a wealth tax [1] — notably Belgium, to which these wealthy people allegedly fled to avoid wealth taxation. [1] https://www.businessinsider.com/4-european-countries-wealth-...

Belgium is a notorious tax haven for the wealthy, because of all the tax loopholes that they can use.

https://www.brusselstimes.com/news/magazine/47926/belgium-ta...

Re: Modeling a Wealth Tax

#548

Post by RIMR »

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.

He also seems to be assuming that business owners earn 100% of their wealth at the beginning of their careers and that the government will be chiseling away at their lump sum earnings for their entire working life...

I think it's safe to call this propaganda.

Re: Modeling a Wealth Tax

#549

Post by jkinudsjknds »

I always felt it would be better to have an additional income tax based on wealth. That is, set the rate on income tax by the weighted average of wealth at the start and end of the year. The fundamental problem we're trying to solve is the rich getting richer by economic rent, when really that surplus should be captured by society as a whole.

Re: Modeling a Wealth Tax

#550

Post by gnopgnip »

zaroth wrote: post #412
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…

Think about how hard Founders work to efficiently divide up the equity pool of their company in order to entice and retain top talent. Consider that the State and Federal government is already a silent partner to the tune of ~20% of the company profits, and then again ~20% on capital gains. Every little bit more carved out for the government is just reducing the portion left which has to justify the risk/return propo…

The CA wealth tax (that is only .4% a year) addresses liquidity. The taxes can be delayed until there is a sale for illiquid assets.
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