How to convert between wealth and income tax
paulgraham.com
How to convert between wealth and income tax
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Re: How to convert between wealth and income tax
#2If you want to understand why someone would even propose taking from the rich and complain about inequality, this post titled "Inequality Talk Is About Grabbing
" is illuminating: https://www.overcomingbias.com/p/inequality-is-about-grabbin...
Re: How to convert between wealth and income tax
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Re: How to convert between wealth and income tax
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Re: How to convert between wealth and income tax
#5If you want to understand why someone would even propose taking from the rich and complain about inequality, this post titled "Inequality Talk Is About Grabbing " is illuminating: https://www.overcomingbias.com/p/inequality-is-about-grabbin...
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.
If you count luck, maybe.
> But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be just as eager to tax them to reduce unfair inequality?
Yes, I would.
> But if those few very rich folks had real physical super-powers, we would be a lot more afraid of their simple physical retaliation. They might be very effective at physically resisting our attempts to take their stuff.
Yes, and this is why a lot of superhero movies involve fighting the greedy superpowered villain.
Re: How to convert between wealth and income tax
#6I think 1% wealth tax should be a replacement for income tax. That way only the wealthy will pay taxes.
Re: How to convert between wealth and income tax
#7There's a related calculation you can do -- what percent of your net worth is your employability? Take your salary, divide by 0.05 (or multiply by 20) -- if you had that much additional wealth earning 5%, you could replace your job's income.
For most people their ability to earn is by far their largest asset. You can kind of get a feel for how difficult it is to bootstrap into generational wealth if you think about the math -- it takes time to replace that earnings portion of your own balance sheet, and even more to well replace it; a lot has to go right in the interim.
Re: How to convert between wealth and income tax
#8> To convert between wealth and income tax rates, you have to divide by the rate of return on capital. The conversion rate of 20 comes from assuming that the risk-free rate of return is 5%.
This seems to only be true for people whose income entirely comes from their wealth, rather than their labor. The math doesn't math for someone on the other extreme end of the spectrum who has zero savings or investments and obtains all his income from labor: To him, a N% wealth tax = 0% income tax for all N. Those with -some- savings are somewhere in the middle.
It is a very sneaky way to argue that a wealth tax should be as across-the-board unpopular as a large income tax increase. But Graham's math is only applicable to those flush with investments and with relatively small salaries from labor, so a wealth tax is only unpopular to that particular group.
Re: How to convert between wealth and income tax
#9If you want to understand why someone would even propose taking from the rich and complain about inequality, this post titled "Inequality Talk Is About Grabbing " is illuminating: https://www.overcomingbias.com/p/inequality-is-about-grabbin...
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context. If you count luck, maybe. > But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be j…
Right, as presented, these people are closer to Lex Luthor than Superman.
And I would still want to tax Superman.
Re: How to convert between wealth and income tax
#10A much more interesting formula would be how to convert between income and income tax - you'd think it worked according to the superficial bracket system, but in fact, it works along the lines of going to 0 at the top.
P.S. a wealth tax is a property tax. They have existed in the US since before the income tax (which was originally considered unconstitutional by its opponents).