Modeling a Wealth Tax • Hacker News Board

Re: Modeling a Wealth Tax

#831

Post by billiam » Tue, Aug 18, 2020, 10:53 PM UTC

microcolonel wrote: post #788

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

Undue† wealth inequality is tied to the sort of rent-seeking that this tax will enable. Given the inordinate ways to classify and exempt movable property from a wealth tax (even greater than the existing insanity in income taxes), it is essentially inevitable that this will invite more lobbying and corruption, net more rent-seeking, and compound existing inequality. † vs. inevitable/natural wealth inequality, associa…

This is sadly true, but we have to fix our libertine taxing authority and corporate law in any case. These are assets that are not adding to overall societal welfare, so I would rather criminalize and tax the thing society needs to change rather than the gains to productivity being taxed in the current system.

Re: Modeling a Wealth Tax

#832

Post by lacerta » Tue, Aug 18, 2020, 10:59 PM UTC

graeme wrote: post #792

Something I haven’t quite wrapped my head around. Many reasonable critiques here say “wealth appreciates about 6% per year, so nobody will lose money with a 1% tax. You gain 5% per year” But Graham’s post talks bout stock . See this: > And at 5% this threshold is getting asymptotically close to being an upper bound on how much of the company you get to keep. We actually have a real life example of such a founder. War…

I believe that is angle Graham was coming from. At a certain point you wouldn't be able to afford to control your own company. You would HAVE to sell your shares to cover the costs of the tax.

Re: Modeling a Wealth Tax

#833

Post by joe463369 » Tue, Aug 18, 2020, 11:04 PM UTC

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…

First they came for Jeff Bezos, and I did not speak out...

Re: Modeling a Wealth Tax

#834

Post by SiFiPi » Tue, Aug 18, 2020, 11:06 PM UTC

Wealth tax me brohe, I dare you. I'll just send all of my money overseas instead of the vast majority of it. :^)

Re: Modeling a Wealth Tax

#835

Post by blacklight » Tue, Aug 18, 2020, 11:07 PM UTC

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.

I can't get why many who advocate against a wealth tax are afraid of raising a single penny on a billionaire amid the fears of scaring him off the country. This is really a bad refuse of Reagan politics that hasn't proved to be true. Moving wealth around while bypassing capital controls is expensive. Relocating a whole business is even more expensive. And if someone really wants to do it to make sure that they don't pay taxes on their billionaire wealth, then they're welcome to go - a developed country has plenty of talent to replace them, and in many cases there will be one less lobbyist to keep inequalities high and politics hostage of his own interests. Lots of taxes have been raised on low-earning classes in the past decades without the blink of an eye, but as soon as someone proposes a tax on the rich some people cry out against the exodus of billionaires.

> 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.

Taxation on real estate isn't that different. As an house owner I pay every year a tax that is proportional to the value of my house. Sure, if I look at how much the tax compounds over 60 years I may get scared, but on a yearly basis I can barely feel its impact on my finances. And I consider it a fair tax as well - having a house in the middle of Amsterdam is a privilege, and I feel that it's fair to pay for my privilege and redistribute that money back to society. I don't get how someone sitting on a $1 billion wealth may consider a $10 million tax unsustainable. A large house, a yacht, $1 billion shares in a company or a luxury car are privileges reserved for few, and it's unfair to just let those few sit on such wealth while the government every year has to raise money from those who earn much less. That inevitably ends up with most of the wealth is accumulated in the hands of few, and that's a scenario that society should avoid at all costs.

Re: Modeling a Wealth Tax

#836

Post by ggreer » Tue, Aug 18, 2020, 11:08 PM UTC

mulmen wrote: post #774

ggreer wrote: post #665

Earlier quoted context omitted.

> 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 I refuse to use Facebook, Mark Zuckerberg can't send men with guns to my home and force me to create an account. Even companies that benefit from network effects (such as social media companies) must build compelling products that people want to use. If this was 2008 you may have an argument. It isn't and in 2020 I have no choice about using Facebook. Even if I delete my account I am still their product just by…

> Last year I was tagged in a photo from a camping trip by a person I met on that trip. That person's brother's girlfriend used to work with a guy I know from a totally different circle of people. He asked me about my camping trip because FB made the connections just based on who is in the picture.

First, most of your ire should be directed at whoever uploaded the photo to Facebook. Second, please notice how far afield you had to go to try and shape this conversation into "Facebook is coercing me": a friend asked you about your camping trip.

Compare that to what happens if you don't do things that the government wants you to do. If I don't go to jury duty, men with guns will come to my home and put me in a cage. If I don't pay 40% of my wages to the government, men with guns will come to my home and put me in a cage. Even though I object to how that money is being spent (such as bombing people in the middle east or developing ever more horrifying weapons of war), I am coerced under threat of violence into funding such atrocities.

But please go on about how terrible it was that your friend asked you about your camping trip.

> You mean like a democracy?

Should a democracy vote on which vehicle we must all drive? Which movies we must all watch? Which jobs we must work? Of course not. Likewise for which businesses each of us patrons. The crowning achievement of our constitution isn't the form of representation (which mostly serves to prevent violent revolution), but the concept of human rights: No matter how much people want to vote for it, the government is forbidden from doing certain things to you.

Re: Modeling a Wealth Tax

#837

Post by greycol » Tue, Aug 18, 2020, 11:11 PM UTC

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…

The difference between an income tax and a wealth tax is that currently those with wealth are able to avoid income taxes. Approaches like negative gearing and other strategies exist.

I'm on the fence on estate taxes as a general rule I'd say it definitely make sense above some threshold but if you look at the mess with Samsung there definitely needs to be some thought in how illiquid stocks are dealt with. I'd put a bit of cash on Lee Kun-hee sill being 'alive' until after my death or at least until a change in South Korean tax law.

Re: Modeling a Wealth Tax

#838

Post by imgabe » Tue, Aug 18, 2020, 11:13 PM UTC

cies wrote: post #778

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…

> 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…

Then why are all the manufacturing jobs in China and other countries without those labor laws?

The remaining jobs in the US are salaried position where "8 hour workday" and "weekend" are often meaningless.

Plus we're talking about a wealth tax in California. You can start a company in Nevada and still access the market of California just fine.

Re: Modeling a Wealth Tax

#839

Post by misun78 » Tue, Aug 18, 2020, 11:14 PM UTC

arthurofbabylon wrote: post #823

This is so simplistic. Favorably simplistic. Think about it this way, in a very similar, live example: It is common practice to pay a fee of 0.5-2% to a wealth manager. In practice for many people this fee is worthwhile and wonderful - the benefit is a safely managed and vigorously growing pool of assets. Is a wealth tax as described by the author really so different? In one case you pay a fee to the manager, in the…

I can easily fire my asset manager, or switch to a plethora of low cost options, or manage my capital myself. How exactly will I have those options with the wealth tax if you like you said, I’m not getting that rate of return justifying the tax?

Re: Modeling a Wealth Tax

#840

Post by sharkmerry » Tue, Aug 18, 2020, 11:16 PM UTC

DINKDINK wrote: post #820

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 balanc…

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

You're sitting on greater than 50 million dollars? That what a wealth tax would most likely target