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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#921

Post by controversy »

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…

Why cut that check to the Feds? They have destroyed schools. Look at the American placement in international tests since the Feds took over in the 1970s. Downhill.

Why have them control health? They've shown they are incompetent with Medicare (look at the waste, fraud, abuse, and anger by doctors due to red tape).

Why not have the States set the wealth tax? Be like Switzerland. The cantons and municipals set the wealth tax.

Ultimately, for me, this entire topic throws into stark relief the fact that the Federal government needs to be brought to heel. It is too large. Too incompetent. Too impossible. Look at the EU (the closest thing in the West to the US by population and economic scope). The EU doesn't set an EU wealth tax. They do not set an EU health service. They set regulatory requirements that the individual countries (from a GDP perspective equal to US States) implement.

Re: Modeling a Wealth Tax

#922

Post by pessimizer »

imgabe wrote: post #861
mrwww wrote: post #738

Earlier quoted context omitted.

People in the USA somehow think that having a huge amount of loosers in society will turn out ok. Enjoy your ever growing prison population, crime, unemployment and inequality. But hey! You can become the next Bezos! Isn't that grand? Freedom baby!

You don't help losers by knocking down the winners. Cutting off Usain Bolt's legs isn't going to make you run any faster.

That's exactly why it's not a good metaphor. The wealthy aren't especially talented, and redistributing their wealth does make everyone else faster.

Re: Modeling a Wealth Tax

#923

Post by dmode »

imgabe wrote: post #838
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…

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.

Due to lower labor cost and relatively stable government. Nobody even knows what China’s tax rates are. These jobs are also not in Chad or Central African republic

Re: Modeling a Wealth Tax

#924

Post by elchupanebre »

The reason for rising inequality in the States is very clear: offshoring and automation. Historically, the rest of the world had much lower wages while it was difficult to move US jobs to other countries for political and logistical reasons. Once that was solved, manufacturing jobs were gone. US population shifted from manufacturing to service. Now the service jobs are being outsourced and automated in turn. The real picture is a bit more complex of course but it does not change the logic.

The right approach to taxation would be to tax the exact cause of the problem: offshoring and automation. It can be done as a progressive per-employee Value Added Tax. The normal VAT is a fixed percentage on the difference between revenue and non-labor expenses. The new P-VAT would grow with the added value per US employee. For instance, if a pizzeria has added value of $50k per employee per year, the P-VAT could be zero. For the likes of Google and Apple with millions of dollars of added value per employee it could be 50% or more.

It would create an incentive to keep the jobs in the US. Also, it would be very hard to avoid if a company wants access to US market.

Re: Modeling a Wealth Tax

#925

Post by comex »

CryptoPunk wrote: post #880
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 exasperated/condescending tone of your comment is really inappropriate, given the number of specious and economically fallacious arguments contained in it. Let's go through each: >>There's a reason failed states and unstable/developing countries generally aren't where people are looking to startup the next big tech company. There's a negative correlation between government spending levels as a percentage of GDP,…

> The exasperated/condescending tone of your comment is really inappropriate, given the number of specious and economically fallacious arguments contained in it.

Your own comment is considerably more condescending. As for speciousness...

> There's a negative correlation between government spending levels as a percentage of GDP, and economic growth rates. Your implication, that society is better off with high levels of taxation, is not supported by the science on the matter.

That correlation is disputed, to say the least. Even if it weren't, economic growth rates, while important, are not the be-all and end-all of society being "better", especially when a large amount of the wealth is concentrated in a few hands.

>>Fourth, this effectively ignores that wealth is a thing that grows and compounds. If your wealth is increasing at 4% a year (very attainable for the class of people a wealth tax would affect) a 1% wealth tax really doesn't have as big an impact on your long term wealth as this makes it seem. > Wrong. The losses also have to be compounded. That 1%, had it remained invested, would have grown at a compounding rate as well. So you lose the 1% and all compounded gains on it.

Perhaps. But a 4% rate of increase would still belie the contention in pg's post that "by 5% [the threshold at which the tax starts] is getting close to being an upper bound on how much of the company you get to keep". It seems probable that pg simply did not take interest into account.

> Government spending as a percentage of GDP has increased from 25% in the 1950s to 40% today. Social welfare spending increased by an average of 4.8%, EVERY YEAR, between 1972 and 2010.

Over the same period, the share of income going to the top 1% doubled.

> How much more do you think government spending should increase? What share of private economic output should be non-consensually redistributed for social welfare programs in your mind? > Will there ever reach a stage where you think the negative effects on capital formation, from further tax hikes, will outweigh the positive effects of a greater share of economic output being available to the poor in the form of cash payments and social services?

Ever? Certainly, if you keep cranking up the number. But the United States isn't necessarily at or even near that stage, considering that several large European countries have strong economies despite much higher government spending as a percentage of GDP.

Re: Modeling a Wealth Tax

#926

Post by old-gregg »

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. It is clearly beneficial to everyone to live in a society where people are well cared for and have healthcare, public education, welfare, etc.

Or, and that's another possibility we should consider, taxes disappear into the pockets of bureaucrats and a handful of rent seekers with very little effect on civilization.

Before arguing for additional taxes, one must first show some evidence that we're getting reasonable ROI on what we're already paying, and https://transparentcalifornia.com/ shows exactly the opposite.

I am 100% in support for public healthcare, for example, but it will continue to look like a financial absurd as long as a knee MRI is 3x of any other country. Same thing with the higher education, public housing, etc.

Re: Modeling a Wealth Tax

#927

Post by failuser »

rjbwork wrote: post #898
agensaequivocum wrote: post #874

Earlier quoted context omitted.

> Inequality in your country has risen dramatically the past 30 years. Why should I or anyone care?

Because historically, excessive inequality doesn't end well for the haves.

They are usually fine. The inequality was way higher for most of the history and hungry peasants are no match for the army. We just remember the cases when the revolution won because it’s a good story. And the result was usually worse conditions for the poor.

I’m afraid that social equality peaked in XX century. Automation makes imposing social order so much easier, we might be stuck with this one for a while.

Re: Modeling a Wealth Tax

#928

Post by vieles »

filoeleven wrote: post #907
imgabe wrote: post #838

Earlier quoted context omitted.

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.

This is about startups, which are very rarely about manufacturing. Most of the “information economy” startups are still in the US.

start-ups are even easier to Geo-arbitrage than manufacturing. I think we would definitely see an increase in companies moving abroad. That trend already exist with small companies in the "information economy". See the book "Nomad Capitalist"

Re: Modeling a Wealth Tax

#929

Post by taneq »

old-gregg wrote: post #926
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. It is clearly beneficial to everyone to live in a society where people are well cared for and have healthcare, public education, welfare, etc. Or, and that's another possibility we should consider, taxes disappear into the pockets of bureaucrats and a handful of rent seekers with very little effect on civilization. Before arguing for addition…

While we're considering new possibilities, maybe there should be a wealth tax AND more accountability in allocation of government funds.

Re: Modeling a Wealth Tax

#930

Post by refurb »

dragonwriter wrote: post #855
nordsieck wrote: post #851

Earlier quoted context omitted.

> Please note that we have weekends/8h work day/ban on child labour and also still have the super rich. They never left. Some didn't leave. There's a reason why Singapore has the highest concentration of millionaires in the world, and it's not because of their school system. I'm not saying that all will leave, or even that most will, but some will.

> There's a reason why Singapore has the highest concentration of millionaires in the world, and it's not because of their school system. No, it's because it's a city-state, and millionaires tend to be urban, so comparison with countries with lower urbanization is misleading. New York City (which has a population not much larger, so it's a community of roughly comparable scale that, like Singapore, is 100% urban) has…

Then how do you explain all the millionaires taking up residency in Florida to avoid NYC taxes? They obviously vote with their feet.
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