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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#721

Post by blaisio »

ChuckMcM wrote: post #707

I would much prefer a 'cash on hand' tax that would tax yearly the cash on hand that exceeds $1B. That private companies can just sit on all this capital rather than putting it to work in the economy is a real problem. It harms GDP and it harms working class people. By some estimates its $325B[1]. If we forced companies to invest that cash in new ventures rather than sit on it, it would be a win. [1] https://www.inve…

Are you sure it's really a bad thing for a company to keep cash on hand? The airlines this year were bailed out because they chose not to keep cash on hand, and then they suddenly lost most of their revenue. So maybe it's actually a good thing for companies to keep some savings available, so inefficient bailouts aren't necessary.

Re: Modeling a Wealth Tax

#722

Post by refurb »

WalterBright wrote: post #719
ChuckMcM wrote: post #707

I would much prefer a 'cash on hand' tax that would tax yearly the cash on hand that exceeds $1B. That private companies can just sit on all this capital rather than putting it to work in the economy is a real problem. It harms GDP and it harms working class people. By some estimates its $325B[1]. If we forced companies to invest that cash in new ventures rather than sit on it, it would be a win. [1] https://www.inve…

Nobody sits on cash. Even cash on deposit in a bank isn't in the bank - a multiple of it gets loaned out to businesses and home buyers.

Indeed. On most balance sheets it's "cash and cash equivalents". Apple owns treasuries and other "highly liquid assets" that are regarded as cash equivalents.

Apple had $12B in true cash at the end of Q3'19.[1] But the "cost of revenue" was $163B. So they had ~7% of expenses available as cash, which makes sense since you don't want to be selling short-term investments to make payroll. You'd need to keep cash on hand to pay expenses.

[1]https://finance.yahoo.com/quote/AAPL/financials?p=AAPL

Re: Modeling a Wealth Tax

#723

Post by m463 »

paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

What if you had a large static asset, like land a parent left you? or the family farm?

Re: Modeling a Wealth Tax

#724

Post by hanniabu »

sebmellen wrote: post #709
ChuckMcM wrote: post #707

I would much prefer a 'cash on hand' tax that would tax yearly the cash on hand that exceeds $1B. That private companies can just sit on all this capital rather than putting it to work in the economy is a real problem. It harms GDP and it harms working class people. By some estimates its $325B[1]. If we forced companies to invest that cash in new ventures rather than sit on it, it would be a win. [1] https://www.inve…

How would you overcome loopholes like the $1 Trillion+ that Apple stores in the Channel islands after funneling it through Ireland and the Netherlands?

Tax money leaving the country and have a foreign entity tax.

Re: Modeling a Wealth Tax

#725

Post by stevemadere »

I'm pretty sure Paul Graham is not mathematically stupid. the alternative is that he is being extremely disingenuous here.

He himself mentioned in the article a threshold of wealth at which the wealth tax kicks in.

However his calculations then completely ignore that threshold. no wealth tax is going to take away 95% of anybody's startup company unless their startup company is infinitely valuable.

Re: Modeling a Wealth Tax

#726

Post by beaner »

ChuckMcM wrote: post #707

I would much prefer a 'cash on hand' tax that would tax yearly the cash on hand that exceeds $1B. That private companies can just sit on all this capital rather than putting it to work in the economy is a real problem. It harms GDP and it harms working class people. By some estimates its $325B[1]. If we forced companies to invest that cash in new ventures rather than sit on it, it would be a win. [1] https://www.inve…

You can deduce that cash on hand harms nobody by doing a thought experiment.

If there were a company sitting on $100 trillion in cash - enough to make everyone else's money just a small fraction of the total - how would that hurt anybody?

It wouldn't. Idle cash harms no one. You could make the argument that the cash has the potential to be spent in large influential harmful ways, like on elections or something, but that's a very different topic.

Taking this money and spending it on things doesn't increase anybody's quality of life. It just moves resources from the natural flowing economy to the people who take the money and spend it first (like newly printed money/inflation).

Taking $100 trillion and spending it doesn't create $100 trillion worth of goods if the physical mechanics of the economy are not established to create those goods. It just makes the existing physical capital 100x more expensive in dollar terms, and shifts their distribution to where the politicians want it.

You can't increase quality of life by wider availability of goods through the economy by playing money games. Money isn't anything, it's just a matter of accounting.

The only thing that actually creates more is the removal of barriers from creating more.

Re: Modeling a Wealth Tax

#727

Post by hanniabu »

m463 wrote: post #723
paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

What if you had a large static asset, like land a parent left you? or the family farm?

There's already property tax.

Re: Modeling a Wealth Tax

#728

Post by WalterBright »

refurb wrote: post #722
WalterBright wrote: post #719

Earlier quoted context omitted.

Nobody sits on cash. Even cash on deposit in a bank isn't in the bank - a multiple of it gets loaned out to businesses and home buyers.

Indeed. On most balance sheets it's "cash and cash equivalents". Apple owns treasuries and other "highly liquid assets" that are regarded as cash equivalents. Apple had $12B in true cash at the end of Q3'19.[1] But the "cost of revenue" was $163B. So they had ~7% of expenses available as cash, which makes sense since you don't want to be selling short-term investments to make payroll. You'd need to keep cash on hand…

They still don't have any cash. None. Cash on deposit isn't cash, either. It is not in the bank, it is loaned out. That's how banks make money, and why they pay you to deposit cash in the bank. They're not a charity, they want your cash so they can loan it out 9x to other people.

> selling short-term investments to make payroll

Payroll is usually met by establishing a "line of credit" with the local bank, because a business's revenue is not on the same schedule as its payroll obligations. Selling short-term investments to make payroll is inefficient (as you imply) but also quite unnecessary.

Re: Modeling a Wealth Tax

#729

Post by [deleted] »

ggreer wrote: post #665
mazspork wrote: post #583

Earlier quoted context omitted.

Inequality in your country has risen dramatically the past 30 years. That's what your legislators are trying to address. A lot of value is created in the early stages. Should that be exempt? Remember, companies don't exist primarily to pay back investors, their first objective is to contribute to society. My €0.05

> Remember, companies don't exist primarily to pay back investors, their first objective is to contribute to society. If a company does pay back investors, that almost always means that it has contributed to society on net. Let me explain. If people don't pay for a company's products, that company will go out of business. Unlike a government, a company has little coercive power. If I refuse to use Facebook, Mark Zuck…

[deleted]

Re: Modeling a Wealth Tax

#730

Post by [deleted] »

m463 wrote: post #723
paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

What if you had a large static asset, like land a parent left you? or the family farm?

[deleted]
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