Modeling a Wealth Tax

The facebook not forcing you to create account does not sound that good on a day when they force Oculus users to log in with one. Unless you live totally off the grid you are forced to interact with corporations and at every turn they have more power.

This is simplistic to the point of absurdity, and doesn't model how any sensible wealth tax would be implemented or paid.

First, any wealth tax being seriously discussed has a floor and/or has marginal rates, probably starting at 1 or 5 or 10 million (or higher).

Second, taxes don't disappear into nothingness - they pay for civilization. It is clearly beneficial to everyone to live in a society where people are well cared for and have healthcare, public education, welfare, etc. There's a reason failed states and unstable/developing countries generally aren't where people are looking to startup the next big tech company.

Third, any smart founder isn't going to just sell 1% of their stock every year and pay the wealth tax with that. They'll take dividends, or take out a loan against the value of the stock, or use some cash from other investments, or whatever, and maintain control of their company. Yes, over the long term they'll lose some wealth, but not necessarily control of their company, unless that's the decision they make.

Fourth, this effectively ignores that wealth is a thing that grows and compounds. If your wealth is increasing at 4% a year (very attainable for the class of people a wealth tax would affect) a 1% wealth tax really doesn't have as big an impact on your long term wealth as this makes it seem.

Fifth, the idea that people "will just move to another country" is very silly. If some people do leave, or start companies only in other jurisdictions, that just means there's a market opportunity for the many people who remain. Unless this supposes that no one wants to take advantage of one of the richest markets in the world because they might have to pay a small fraction of their wealth to the government. Not to mention that even very wealthy people likely want to live in a good society - we don't see many people starting companies on boats in international waters for a number of reasons (left to the reader).

I suspect that Mr. Graham is wringing his hands over potentially having to cut a large (in absolute terms, but small in relative ones) cheque to the government in the future, and I certainly feel for him, but I'd much rather we have well funded schools and welfare for those who need it.

If you compare this to how many people on this site talk about music ("You shouldn't expect to live off of your recorded music forever, you need to tour and sell merchandise, etc."), I don't understand the problem. Why should you be able to live for 60 years off of a company you founded in your 20s?

Oh no! France lost Gerard Depardieu! Whatever will they do! /s

In seriousness, I did have a number of French clients fleeing to California after France proposed a wealth tax. One of them famously said (of California): "I love it here! Your taxes are so low!"

The downside of a wealth tax compared to other taxes is that it drains a corpus every year. It creates "financial anxiety" in the people it would target, similar to range anxiety in EVs. Even if the target could afford to pay the wealth tax and live comfortably for the rest of their lives of their children's lives, they are suddenly terrified that they will be taxed into the poorhouse if they misspend their money, and that anxiety drives them toward places without a wealth tax.

Switzerland isn't a good example of why a wealth tax would work, since it's openly acknowledged that nobody actually pays the correct tax on their wealth; it is the same reason that Swiss banks were the financial institutions of choice for criminals and dictators for decades. (If I was being too subtle: the Swiss are notorious for under-reporting financial assets, and their banks are even more notorious for hiding the assets of account holders.)

Middle class Texan here. I pay more to the government each year in wealth tax than I do in all other taxes combined including income tax. A lot of Americans do. It’s called a property tax, but since a lot of my wealth is in my home it’s actually a wealth tax.

So although I’m a libertarian, this makes it hard for me to get too worked up over Jeff Bezos or Musk getting taxed the same way.