Live data from Hacker News

Modeling a Wealth Tax

paulgraham.com

841–850 of 1001 posts

Re: Modeling a Wealth Tax

#841
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 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.

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

Those who advocate for a wealth tax seem to only care about money too, don't they? Why taxing wealth in particular? How about "taxing" beautiful and healthy? There's a huge prettiness gap in this country.

Re: Modeling a Wealth Tax

#842
Property tax is already 1-2%, and it doesn't even depreciate! Yes, that means you don't get to keep your propery forever. That's the point. Use it or lose it.

Re: Modeling a Wealth Tax

#843
post #762

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…

I think you are forgetting the major difference between now and 70s - massive wealth concentration, and the complete destruction of sustainable middle class jobs. Look at the pandemic. 40 mn people were unemployed, but billionaire wealth continued to grow. Most people in the US are one paycheck away from bankruptcy. Poverty rates among minority population have soared, and the impact is starkly reflected in COVID rela…

People can question all they want about why wealth is not trickling down but that doesn’t change the underlying analysis or outcomes around why this is a bad idea. You may get income redistribution and trickle down but if it changes the underlying systems that create wealthy, those same people will just end up poorer but more equitable.

Re: Modeling a Wealth Tax

#844

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?

If you're a citizen of a country, you automatically get all of the benefits that come with it: personal safety, transportation networks, infrastructure, etc.—all things that enable your business to be successful. Since you can't opt out of these benefits (without leaving the country), it makes sense that you shouldn't be able to opt out of their cost.

Re: Modeling a Wealth Tax

#845

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://libr…

What are you trying to imply here?

This is about income tax. 6% on someone making 13mill (2020$'s) a year seems fine

Re: Modeling a Wealth Tax

#846
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).

The floor is adjustable. As more tax money is squander, the floor will be adjusted for greater taxation.

>Second, taxes don't disappear into nothingness

They actually do. The return on your tax dollar in California is abysmal.

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

They can move to another state. Schwab is moving to TX. The tax savings will build their new corporate HQ in Westlake. How many Hedge Funds have left Conn, NY, NJ, etc for Florida?

I don't have a dog in this fight. Taxes are necessary but when the State is not held accountable for their spending and continues to squander tax dollars, there is no amount of money that will ever satiate them.

I hope California goes through with their plan. It will be an interesting to see the outcome.

Re: Modeling a Wealth Tax

#848
The mistakes pro/con proponents of "wealth taxes" make is:

Proponents of wealth taxes argue that by institutionalizing theft to a broader degree, everyone will live in a utopia, the man at the margin will prosper. In essence: "The farmer keeps a hoard of seeds in his silo! The seeds collect dust year round until he decides to plant. There is great want and famine in the world! If we go and take the seeds, we can end hunger, the laborer can eat better!" Which is to ignore that once you consume capital, it's gone -- in our example, no more food gets produced because all the seeds were eaten. This is precisely why political systems that institutionalize theft appear to be prospering temporarily, their consumption is being subsidized by capital consumption before their unavoidable demise. Often people get confused or abuse the methods of how economies account for these factors (capital, allocation, prices) but the brass-tacks reality is unavoidable.

"Ah ha!" says the taxation wonk, "We will be smart about how much we take. We will only take just enough so that the farmer will have just enough seeds to keep farming. We will call it 'normal profits' or 'reasonable profits'" And what happens when the farmer has a few bad harvests (or say a global pandemic disrupts the taxation-wonk's plan)? The farmer (and country) stop producing food because 'normal profits' or 'reasonable prices' don't exist in the real world. Mandating charity (welfare taxation), savings rates (interest rate manipulation), or service allocation (defense spending, roads etc) always blow up.

The opponents of wealth taxes argue that 100% of their purchasing power is due to their own work/negotiation which ignores that much of asset-price inflation is due to government-monies being perpetually diluted to appease in-groups. You choosing to pay to go to a Beyonce concert and increasing her 1/2 billion net worth isn't the action causing the musician down the street to starve (it's the fact that no one is willing to trade his music services for what he wants). Some amount of Jeff Bezos's wealth is warrantied. If someone wants to trade a money for a certificate of stock, no one has been robbed. But if individuals are forced into buying certificate of stock to escape the dilution of purchasing power by money dilution, that is an undue benefit to Bezos's portfolio. It's also an undue benefit to allow the money issuers to control who gets access to lending/credit -- rather than the worker who decides to lend out their past labor in money form (creditor) and debt holder.

The reason why people are starving isn't because the farmer refrains from consuming or planting seeds -- it's because the price of labor rendered in the past is stolen from workers by the money they've been paid being diluted by money printing.[1] By taking from the farmer who consumes the least seeds and produces the most food (the most profitable) to give to the farmer who consumes the most seeds and produces the least food (less profitable) is a method of subsidizing consumption.

This isn't to say that economic collaboration/unions/co-ops cannot be profitable nor that they will be profitable. If the union renders certain offerings and charges listed prices, individuals can choose to join that union (say "sign up for a box of farm produce for X price) if it's profitable for them to do so -- Which is an economic calculation only an individual can make not a central planner decided if a group should join such a union, as profits are local.

But to bastardize collaboration/co-operation and insist that everyone will be better off if they are force through compulsion (often through violence, sometimes social isolation) to pay into the union and take out of the union and force the union the accept members which are unprofitable for it to serve, is to ensure that those who take the most and contribute the least to the union will eventually subsume the membership from those who take the least and contribute the most.

Read more about the Cantillon effect here: [1] https://www.austriancenter.com/cantillon-effect-populism/

Re: Modeling a Wealth Tax

#849

Earlier quoted context omitted.

Nobody sits on cash. Even cash on deposit in a bank isn't in the bank - a multiple of it gets loaned out to businesses and home buyers.

Sort of and sort of not. Companies do sit on cash. Their cash equivalent accounts are designed so that they can be reliably liquidated in under 30, 60, and 90 days and have no chance of a reduction in principal amount. The kinds of "investments" that allows for are thus quite limited to things such as treasury bonds, certificates of deposit, and some very special case derivative instruments. Those are not the sort of…

Cash equivalent accounts are NOT cash. The cash has been loaned out.

If you deposit $100 in the bank, you do NOT have cash in the bank. The bank loans it out 9 times over, that's right, your $100 turns into $900 of loans handed out to people and businesses who spend/invest it.

It's the magic of fractional reserve banking.

A massive clue that it is not idle cash is when interest is paid on the balance. That can only happen if the cash is "put to work", i.e. it is NOT cash.

Re: Modeling a Wealth Tax

#850

Earlier quoted context omitted.

"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://libr…

What are you trying to imply here? This is about income tax. 6% on someone making 13mill (2020$'s) a year seems fine

I'm answering a rant about how unreasonable it is for a nonwealthy person to care about a wealth tax. The income tax was sold to us as a tax on only very high earners, a tiny percent of everyone.

(I think it's fair to characterize rhetoric that starts with "disingenuous whining" and goes on from there as a rant.)

Post reply on HN