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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#751

Post by handoflixue »

stickfigure wrote: post #743
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…

> Wealth doesn't grow for everyone

Yeah, but it does generally grow for people who have millions of dollars, especially over the course of the 60 year period that the original essay is discussing. In the short term, the stock market fluctuates and has recessions, but in the long term it's only ever gone up.

> How about we just enforce inheritance taxes and call it done?

Because having a semi-predictable tax base is good? It's a lot easier to manage the government budget if you get 2% of the value every year, versus 100% of the value in a lump sum at some unpredictable point in the future. There's only 630 billionaires in the US, so it doesn't seem like statistics helps even this out, either.

Re: Modeling a Wealth Tax

#752

Post by [deleted] »

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…

[deleted]

Re: Modeling a Wealth Tax

#753

Post by lazulicurio »

twblalock wrote: post #734
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.

> 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. So now we should be penalizing unproductive assets? When did we all decide that was ok? Based on that logic, wouldn't I be justified in draining someone's savings account in order to invest it more productively in stocks? Maybe it's ok to steal land from pe…

> So now we should be penalizing unproductive assets? When did we all decide that was ok?

We already do that---it's called inflation. And the justification used by economists is that the economy will collapse without inflation to incentivize spending money.

Re: Modeling a Wealth Tax

#755

Post by patmcc »

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(!…

I'm not saying that people won't leave, I'm sure some will. I'm saying worrying about some people leaving is silly. What disaster befell Sweden because the IKEA founder left?

Re: Modeling a Wealth Tax

#756

Post by handoflixue »

beaner wrote: post #726
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 t…

> Taking this money and spending it on things doesn't increase anybody's quality of life.

This would seem a general argument against the entire economy, or at least the concept of taxation. Why is spending this cash any different from spending any other cash? Why can't we spend this money creating a ton of new jobs, that will then create new goods?

We have tons of spare stuff just sitting in warehouses right now. There is plenty of slack in the system. Investing cash in to more jobs means pulling some of that stuff out of warehouses and temporarily reducing our slack, yes, but that also motivates people to go do whatever productive thing you're paying them to do - such as creating even more stuff to sit in warehouses.

Re: Modeling a Wealth Tax

#757

Post by joe463369 »

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…

If Americans are temporarily embarrassed millionaires, then many of the good people on HN are temporarily embarrassed tech billionaires.

Re: Modeling a Wealth Tax

#758

Post by macspoofing »

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…

>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).

Uh huh.

>Second, taxes don't disappear into nothingness - they pay for civilization.

But there are bad taxes. There is such a thing as too much tax. So you have to justify the wealth tax on its own merits instead of trying to pull a motte-and-bailey fallacy by pushing a wealth tax and then arguing for the necessity of taxes when challenged. Taxes are a necessary part of a functioning modern economy. Wealth tax is not.

>Yes, over the long term they'll lose some wealth, but not necessarily control of their company, unless that's the decision they make.

No. What are you talking about? The math is very simple. You will lose control at some point, because there's only so many ways you can rearrange the deck chairs.

And no, dividends are not an option because issuing a dividend may not be in the best interest of the company. Dividends are also taxed separately.

That you think taking out debt to cover wealth taxes is a solution is insanity.

>Fifth, the idea that people "will just move to another country" is very silly

But that's exactly what happens. We have data on this from various experiments. It doesn't bring the revenue you expect it to because there is capital flight and brain drain from the country in response - and when that is taken into account, you may end up with a net loss in tax revenue. It's also expensive to administer and enforce because net-worth is not easy to calculate. It's no coincidence that this form taxation has been falling out of favor.

>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,

No. That is a strawman if I ever seen one. Could Mr. Graham not be against this tax because it's an objectively bad tax with many unintended consequences?

Re: Modeling a Wealth Tax

#759

Post by edoceo »

patmcc wrote: post #746
OliverGilan wrote: post #735

Earlier quoted context omitted.

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 gove…

I'm sure you meant to RAISE the standard of living.
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