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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#741

Post by hanniabu »

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…

> If a company does pay back investors, that almost always means that it has contributed to society on net.

It sounds like you're saying that profit is all that matters and you can't contribute to society without making a profit.

Re: Modeling a Wealth Tax

#742

Post by didibus »

patmcc wrote: post #704

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…

I agree with you, but I do think something has to be discussed about the the issue with shares. Selling shares to pay tax does seem strange, the impact of losing ownership just to pay tax is weird to me.

Seems it make more sense to tax when the shares are sold, but with a percentage based not on your taxed income, but your whole asset holding. Or just to tax the companies themselves more heavily.

Re: Modeling a Wealth Tax

#743

Post by stickfigure »

patmcc wrote: post #704

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…

There's a lot of assumptions in there that the economy is rapidly proving wrong right now. Wealth doesn't grow for everyone - and an income tax is more fair because people whose wealth is going up pay more than people whose wealth is going down.

We live in a world where remote work is rapidly becoming not just acceptable, but standard. Post-coronavirus geographic mobility will be high.

Look, we already have a wealth tax. Instead of dinging you every year and guaranteeing plenty of billable hours for accountants, we bundle it up in a big charge at the end. Everyone dies. How about we just enforce inheritance taxes and call it done?

Re: Modeling a Wealth Tax

#744

Post by ianmobbs »

lazyjones wrote: post #740
patmcc wrote: post #704

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…

> 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. You're just name-calling here, it's not "silly" just because you don't like the fact. If they leave, they actually leave, period. Sweden's left-wing majority abolished the inheritance tax(!…

It is silly. Your example isn't even about a wealth tax, it's about an inheritance tax. Sweden has a 30% Capital Gains tax (likely the vehicle for any form of future wealth tax) and seems to be doing much better than the US.

Re: Modeling a Wealth Tax

#745

Post by Cyph0n »

Zak wrote: post #737
networkimprov wrote: post #732

Earlier quoted context omitted.

A long time ago the Western world had a voluntary wealth tax of sorts, the tithe . That's 10% of your income and/or property to your church. Admittedly taxes were then much lower, but whatever else you may think of them, churches poured vast energy and resources into social services. Now that it's an elected government instead of an opaque non-profit providing social services, they've become unpopular with the wealth…

That's an income tax, not a wealth tax.

The zakat in Islam is a wealth tax. It is calculated based on how much wealth you have continuously controlled over the last year.

Re: Modeling a Wealth Tax

#746

Post by patmcc »

OliverGilan wrote: post #735
patmcc wrote: post #704

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…

Right so the government that already has enough money to fund all those good public services will suddenly stop funding the military to a ridiculous degree and finally use taxes for the best interest of the people?

Oh, I don't disagree at all! Government spending is currently not how I would allocate things. But somehow I expect that wherever taxes were going, rich people would be displeased with the amount of taxes they were being told to pay. And honestly, I don't blame them, it's a very natural feeling, I'd rather not pay taxes either.

Here's my thinking: as a society, we should decide on what needs to be handled by the government. Defense, roads, pandemic response, scientific research, welfare, healthcare, whatever. Make your own list, we can all hash that out. Then we figure out how much that costs, then we figure out the best taxation method to pay for all of it. I think the goals of that tax system should be to encourage beneficial habits, support economic growth, lower people's standard of living as little as possible, and generally maximize utility. It seems pretty clear that in this kind of system, a progressive system that taxes the wealthy more is a clear winner.

Re: Modeling a Wealth Tax

#747

Post by didibus »

lazyjones wrote: post #740
patmcc wrote: post #704

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…

> 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. You're just name-calling here, it's not "silly" just because you don't like the fact. If they leave, they actually leave, period. Sweden's left-wing majority abolished the inheritance tax(!…

This does seem a bit of a chicken and egg issue. If more countries followed suit, same as much of them followed suit on almost all other taxation schemes that were put in place in the past, then it's just a matter of time.

And the US is not Sweden. If the US blocks your company's access to its market for leaving or not paying taxes, you'll most likely lose more money than the tax.

Not saying I'm pro wealth tax, I'm still having to think about it, but I do feel the US is in a position to be able to protect itself from founders leaving.

Re: Modeling a Wealth Tax

#748

Post by patmcc »

didibus wrote: post #742
patmcc wrote: post #704

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…

I agree with you, but I do think something has to be discussed about the the issue with shares. Selling shares to pay tax does seem strange, the impact of losing ownership just to pay tax is weird to me. Seems it make more sense to tax when the shares are sold, but with a percentage based not on your taxed income, but your whole asset holding. Or just to tax the companies themselves more heavily.

Right, but I'm saying no one would actually sell off their shares to pay the wealth tax (I mean, maybe some would in some years). They'd borrow against the assets, or take dividends, or whatever.

Re: Modeling a Wealth Tax

#749

Post by defnotashton2 »

ianmobbs wrote: post #744
lazyjones wrote: post #740

Earlier quoted context omitted.

> 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. You're just name-calling here, it's not "silly" just because you don't like the fact. If they leave, they actually leave, period. Sweden's left-wing majority abolished the inheritance tax(!…

It is silly. Your example isn't even about a wealth tax, it's about an inheritance tax. Sweden has a 30% Capital Gains tax (likely the vehicle for any form of future wealth tax) and seems to be doing much better than the US.

Not in terms of class mobility. Yes the floor is higher but try accumulating wealth in Sweden.

Re: Modeling a Wealth Tax

#750

Post by waterhouse »

patmcc wrote: post #704

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…

Your first point doesn't really apply, because PG is talking about someone who starts a successful startup, which—at least for Silicon Valley levels of success—would be above the relevant floor. (And he specifies: "over the threshold at which the tax starts".)

Your second point isn't really relevant for a founder who can choose between one developed country with a wealth tax and another one without. Unless you think all developed countries are going to implement the wealth tax.

I don't think your third point speaks to the issue. The article didn't mention control of the startup, only finances, and I don't think the successful 28-year-old startup founder who's looking at the impact of a wealth tax 60 years in the future is primarily concerned with control of the company at age 88.

Your fourth point also makes no difference. Suppose you make $1 billion, and you earn zero interest on it. The wealth tax takes away 45.3% of that over 60 years. Suppose you make $1 billion and compounded interest at 4% would increase it to $10.5 billion over the course of 60 years. The 1% wealth tax still takes away 45.3% of that over 60 years, leaving you with 54.7% of the $10.5 billion. Multiplication is commutative.

To your fifth point—well, does anyone leave for tax havens, or arrange for as much as possible of a company to be officially inside a tax haven? I think they do. A wealth tax that ends up making a large difference over the long term might make a large difference in how many people leave.

I don't think you've shown that PG "doesn't model how any sensible wealth tax would be implemented or paid" in any significant way.

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