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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#801

Post by 1123581321 »

alkonaut wrote: post #782
macspoofing wrote: post #758

Earlier quoted context omitted.

>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…

> But there are bad taxes. There is such a thing as too much tax. Having a wealth tax doesn't mean the total tax goes up. Normally when discussing the merits of a certain kind of tax it's best to assume another tax is cut, otherwise it invariably becomes a discussion about whether high/low/more/less taxes are good.

Historically a wealth tax has been an increase in taxes that ironically led to increased regressive taxes as the projected gains failed to materialize due to business restructuring.

Re: Modeling a Wealth Tax

#802

Post by thephyber »

waterhouse wrote: post #750
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…

> 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.

This is an incredibly simplistic take.

When choosing a USA with a hypothetical wealth tax versus other existing countries, the contrasts are far larger than just a wealth tax. The USA has increasingly bad health/medical costs, university tuition costs, cost of living in affluent areas, deteriorating infrastructure, political strife, etc. It's important to talk about this hypothetical wealth tax as a weighted component of all of the likely decision points.

Re: Modeling a Wealth Tax

#803

Post by cjslep »

macspoofing wrote: post #784
cies wrote: post #778

Earlier quoted context omitted.

> the idea that people [read: super rich] "will just move to another country" is very silly. This is a recurring theme in owners/investors: they always have some story that they will be forced to leave or close shop if some labour-proteaction-laws (like weekends, or 8h days, or banning of child labour), or taxes are implemented. It's a very old story, there's a history to it. Please note that we have weekends/8h work…

This is a great illustration that the wealth tax is not about rational policy. It's based on nothing but emotion and ideology. We're not debating here the need for taxes, or labor protections. You don't get to justify bad policies by pointing that there are places where government regulation is called for. Wealth tax is bad policy. Justify it on its own merits.

Your absolutist statements ("based on nothing but emotion and ideology") do nothing but betray your own ignorance.

As an American living in Switzerland, a "good policy" (whatever that means) here has resulted in: 1) no capital gains tax, nor any capital losses and certainly no carryover loss shenanigans but 2) using a wealth tax in lieu of capital gains tax to collect any sort of tax on those who have presumably been using their capital to beget more capital.

Switzerland does not have any flight of capital, still actively is sought after for parking wealth (which is actually an economy-distorting problem as foreign investors seek to buy stable assets in the Swiss market), and definitely still has an ultra-rich class residing here or moving here.

So, if you thought wealth tax alone was bad policy, how does wealth tax plus removing everything-capital-gains (especially the carryover losses which the current US President likes to excessively utilize) sound as effective policy?

Re: Modeling a Wealth Tax

#804

Post by afpx »

waterhouse wrote: post #750
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…

Of course all "developed" countries (i.e. countries with the high levels of education, health, and safety that can support development of high-margin industries) will institute a wealth tax. And, for the lucky ones that thrive without one, they'll eventually adopt it, too.

Re: Modeling a Wealth Tax

#805

Post by billiam »

macspoofing wrote: post #784
cies wrote: post #778

Earlier quoted context omitted.

> the idea that people [read: super rich] "will just move to another country" is very silly. This is a recurring theme in owners/investors: they always have some story that they will be forced to leave or close shop if some labour-proteaction-laws (like weekends, or 8h days, or banning of child labour), or taxes are implemented. It's a very old story, there's a history to it. Please note that we have weekends/8h work…

This is a great illustration that the wealth tax is not about rational policy. It's based on nothing but emotion and ideology. We're not debating here the need for taxes, or labor protections. You don't get to justify bad policies by pointing that there are places where government regulation is called for. Wealth tax is bad policy. Justify it on its own merits.

I don't see why. There's a huge body of work that shows that taxing wealth versus capital income is likely to increase productvity while reducing income inequality, which is a hug source of our current economic problems and polarization: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3454385. Two MIT economists just won a Nobel prize for showing the benefits not just in a developed economy but globally.

Re: Modeling a Wealth Tax

#806

Post by viraptor »

blaisio wrote: post #721
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.

They got bailed out due to lack of savings, but it doesn't mean the savings needed to be in cash. The issue took months to resolve - enough to take money out of various investments.

Re: Modeling a Wealth Tax

#807

Post by twblalock »

lazulicurio wrote: post #753
twblalock wrote: post #734

Earlier quoted context omitted.

> 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.

Inflation was not intentionally invented as a tax. It is a characteristic of a monetary economy. Economists prefer it to deflation because it deflation is worse, but that doesn't mean that we invented inflation on purpose as some kind of social engineering tool.

Re: Modeling a Wealth Tax

#808

Post by dharma1 »

lazyjones wrote: post #761
dharma1 wrote: post #714

Earlier quoted context omitted.

4 - Spain, Norway, Switzerland, and Belgium. I don't think it has stopped very wealthy people living in Switzerland or Norway in particular - but also I'm not sure how significant revenue it raises for the state. I think it's becoming quite clear though that we need some more taxation on capital, particularly the rent-seeking kind, and more levelling of the playing field particularly in the field of education, which…

Switzerland has a wealth tax, but it offers an interesting option for wealthy people - lump-sum taxation based on cost of living rather than wealth and income: https://home.kpmg/ch/en/blogs/home/posts/2020/04/lump-sum-ta... So, their wealth tax is just for their "normal" earners. Don't glorify it or ignorantly use it as an argument.

Lump-sum tax only applies to foreigners, not Swiss nationals. Swiss wealth tax might be somewhat leaky, but still accounts for a non-trivial amount of tax revenue. https://voxeu.org/article/wealth-taxation-swiss-experience

I'm aware of Swiss taxation differences between different cantons, as well as the ability to negotiate your taxes. The OP mentioned wealth tax in Europe and my comment was in reference to that.

I'm personally not sure wealth tax is the best way to tax capital, but I wouldn't rule it out either.

I must have hit a nerve to warrant accusation of ignorance.

Re: Modeling a Wealth Tax

#809

Post by cies »

lemmsjid wrote: post #797
macspoofing wrote: post #784

Earlier quoted context omitted.

This is a great illustration that the wealth tax is not about rational policy. It's based on nothing but emotion and ideology. We're not debating here the need for taxes, or labor protections. You don't get to justify bad policies by pointing that there are places where government regulation is called for. Wealth tax is bad policy. Justify it on its own merits.

Here's my own-merits justification: Holding on to wealth is an inherently risky prospect. Let's say you are very wealthy but live in an unstable country. You're like a dragon sleeping on its pile of gold. Your wealth is a target. You need to hire considerable amounts of security, stockpile weapons, etc. in order to preserve that wealth. In a stable country, your wealth is not under that risk and you do not need to pa…

Stability is one thing. But super rich like growth opportunity even more.

Now what about you can grow your wealth a lot faster if some laws change, would it justify a lobby campaign? Stability is one, but favourable laws for super rich have been passed and are upheld for so long.

The fact that fines are not wealth and/or income dependent is a testimony to the dysfunction of democracy. The absolute fines implemented in most countries enable certain "high net worth individuals" to ignore fine all together.

Re: Modeling a Wealth Tax

#810

Post by misev »

dharma1 wrote: post #714
grellas wrote: post #551

After being one of the top-rated commenters on HN for some years, I have not commented in a long while. For what it is worth, here is my two cents on a topic - a wealth tax - that may seem on the surface to be benign but that is in fact just the opposite. Silicon Valley was founded in a spirit of freedom and flexibility but that spirit is clearly and dangerously on the wane insofar as the political environment surrou…

4 - Spain, Norway, Switzerland, and Belgium. I don't think it has stopped very wealthy people living in Switzerland or Norway in particular - but also I'm not sure how significant revenue it raises for the state. I think it's becoming quite clear though that we need some more taxation on capital, particularly the rent-seeking kind, and more levelling of the playing field particularly in the field of education, which…

The Netherlands too as far as I know?
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