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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#811

Post by patmcc »

macspoofing wrote: post #758
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…

Do any wealth taxes being seriously discussed not have floors/exemptions for primary residences/marginal rates/whatever?

Why is a wealth tax a bad tax? Why is it worse than income tax or a VAT or anything else we currently do? Many places currently have property taxes (a type of wealth tax) and they tend to work well.

You need to redo your math. If your net worth is $10+ million and isn't increasing by at least ~4% a year you're doing something very wrong. So ~1% of your wealth going to taxes is eminently affordable. No need to lose control.

Capital flight can be handled with exit taxes and restrictions on foreign ownership. Brain drain is usually high income (not high net worth) individuals leaving. The reason net-worth based taxation has been "falling out of favour" is because billionaires have an outsized impact on media and politics, and that very clearly suits their interests.

He could be - but if that was the case he'd have better arguments. Why didn't he talk about capital flight and brain drain, and how other taxes would be more appropriate? He's a skilled essayist; he chose his words carefully, and he used language around stocks, founders, and ownership specifically to appeal to tech geeks who expect to start successful companies.

Re: Modeling a Wealth Tax

#812

Post by pfooti »

patmcc wrote: post #791
waterhouse wrote: post #750

Earlier quoted context omitted.

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…

The wealth taxes being talked about, broadly, would impact people with wealth of tens of millions of dollars and above. But PG talks about what they would "mean in practice for a startup founder." Already he's made a clever rhetorical move and conflated startup founders (a large group) with very successful startup founder (a much much smaller group), in attempting to broaden the people who look like they're impacted…

One could perhaps argue that billionaires moving to other countries (and therefore taking their political lobbying that creates environments where becoming a billionaire is possible) might be a net gain for the country losing the billionaires. As other people have said in one form or another, becoming a millionaire is a reason for celebration, but billionaires are policy failures.

Re: Modeling a Wealth Tax

#813

Post by AnimalMuppet »

bfieidhbrjr wrote: post #793
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…

> Second, taxes don't disappear into nothingness - they pay for civilization You've never worked in government it sounds like. It's a bonfire of money.

Both are true. It's a bonfire of money. And it gives us civilization. It's horribly inefficient and wasteful, and yet very few of us want to live without it. (But more efficiency would absolutely be welcome.)

Re: Modeling a Wealth Tax

#814

Post by abecedarius »

throwaway936482 wrote: post #510

This is not modelling a wealth tax. This is disingenuous whining because it fails to take into account that wealth taxes kick in at the point that where people have become wealthy. Lets say it kicks in at 100 million. So you still get to keep 100 million before you pay any tax on that wealth? Or in other words you still get to be incredibly, obscenely wealthy, you just reduce the chance to become wealthy beyond the d…

"Congress re-adopted the [first modern] income tax in 1913, levying a 1% tax on net personal incomes above $3,000, with a 6% surtax on incomes above $500,000." https://en.wikipedia.org/wiki/History_of_taxation_in_the_Uni...

(1913 $3k -> roughly $80k 2020 in standard inflation adjustments. At a time when a recent-graduate civil engineer made ~$1k, or with 10 years experience in the low $2k's, according to https://libraryguides.missouri.edu/pricesandwages/1910-1919. A person making $3k was loaded.)

Re: Modeling a Wealth Tax

#815

Post by didibus »

> The reason wealth taxes have such dramatic effects is that they're applied over and over to the same money.

This seems in bad faith. A wealth tax is just an idea that wealth should be taxed. Paul is implying some concrete implementation of it that would have such behavior. But there could be many such schemes.

For example, you could deduct what you previously paid, and then it wouldn't double tax the same. Like if this year your wealth was 1 million and got taxed 1% at 10000$. Next year if your wealth was 2 million taxed at 1% thus 20000$ but with a 10k deduction from all prior paid wealth tax, thus you'd again just be taxed 10000$ on the difference.

Another scheme could be to deduct prior worth. So in this example it be the same outcome, but it's applied differently, in second year your wealth is 2 million, but last year it was 1 million, thus 2m - 1m = 1m and you are this year taxed 1% on that remaining 1 million.

And that's just what I came up with on the spot. I'm sure there's many other possible schemes.

Re: Modeling a Wealth Tax

#816

Post by bruckie »

networkimprov wrote: post #732
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…

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…

I think most people who pay a tithe base(d) it on income, not wealth, so it doesn't have the snowball effect that a wealth tax does. Islam's zakat is the only exception I know of, but IIUC even that is paid only on excess wealth.

Re: Modeling a Wealth Tax

#817

Post by ivalm »

bhupy wrote: post #45
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.

But a wealth tax also targets owners of assets that don’t appreciate. It taxes both the winners and the losers, and for the latter it’s nothing but a forced divestiture of their ownership stake. A capital gains tax, on the other hand, strictly targets those whose assets have appreciated in value. Wealth is always eventually taxed when it’s liquidated. And if it is never liquidated, then it arguably doesn’t really mat…

Wealth tax proposals target only very high nw people. There is no inherent right to be very high net worth, if you are not productive with your wealth then it is more efficient for the society if that wealth is reallocated. This is what wealth tax does.

Re: Modeling a Wealth Tax

#818

Post by X6S1x6Okd1st »

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…

> When did we all decide that was ok?

When we went off the gold standard?

Re: Modeling a Wealth Tax

#820

Post by DINKDINK »

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.

>Penalizing static value seems almost reasonable.

Ah yes, the economic argument of "punish savers and people refraining from consumption will lead us to our Centrally Planned Utopia"

>If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy?

Do you and I live in the same reality? When a global pandemic has shown almost every single person on earth that cash balances should have been higher -- enough to sustain unexpected periods of inactivity -- it seems a little tone deaf to say saving money is unproductive. There's already a tax on holding central-bank money -- it's called engineer inflation and it's what's exacerbated the economic repercussions. Your Central ~~Bankers~~ Planners convince you taxing fiat money holdings (price inflation) and artificially reducing the cost of bringing future production to the present (downward interest-rate manipulation) will lead us to utopia when it's actually cause over consumption, over production, and a planned economy on the precipice of collapse.

I'll keep the "unproductive" savings, thanks.

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