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How to convert between wealth and income tax

paulgraham.com

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Re: How to convert between wealth and income tax

#101

Post by ceejayoz »

meta_gunslinger wrote: post #95
blanched wrote: post #90

Earlier quoted context omitted.

Politicians, by definition , have power. How do you easily remove or withhold it?

It's the degree of power they hold, not a binary. A politican in Switzerland has much less power than a politician in China. When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power. But when it is e.g printing money the calculus is massively different.

> When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power.

I take it you've never encountered a homeowner's association.

Re: How to convert between wealth and income tax

#102

Post by ceejayoz »

futter9 wrote: post #92
ceejayoz wrote: post #26

Earlier quoted context omitted.

> What motivates this? An element of fairness. > Why can't you just leave people be? Because they're making employees piss in bottles to survive the workday? They're buying up the representatives who are supposed to represent me? They're driving services we rely on into austerity? They get bailouts when they fuck up?

[flagged]

> you can't complain when sociopathic billionaires decide that it's "fair" you piss in bottles for minimum wage

Why not? They already did it.

Re: How to convert between wealth and income tax

#103

Post by vessenes »

blitzar wrote: post #78
vessenes wrote: post #11

Earlier quoted context omitted.

Please make higher quality posts -- what in specific do you think pg has missed or does not understand?

If he can phone it in why cant I? His entire framing. Income (or revenue), what is left over freom the paycheque (profits) and net worth (market cap) - applying a simple ratio to companies of revenue to market cap doesnt work, why would applying a simple ratio of income to net worth for people who live hand to mouth and billionaires work any better.

I think you may have missed the background: US tax rhetoric -- he's doing what I think is pretty fair math with a fair take -- the math is supposed to break down what percent income tax you need to get the same dollars in tax revenue as a 1% wealth tax (on the wealthy). I think you could quibble with his risk free rate of return number, but most conservative planners would recommend a 4 - 5 % budget for risk free rate of return.

It's not about companies - it's about showing an equivalency between a Piketty-style tax of wealth setup and what we're used to thinking about in the US, an income-style tax setup on individuals.

Re: How to convert between wealth and income tax

#104

Post by tengbretson »

ryandrake wrote: post #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 obtai…

> 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.

Productivity comes from labor AND assets though. You need the farmer and the tractor. Why would we create a tax system that encourages people to divorce themselves from having a stake in the means of production?

Re: How to convert between wealth and income tax

#106

Post by flyingcircus3 »

vessenes wrote: post #16
lowbloodsugar wrote: post #4

[flagged]

This just isn't true, unless you're the president. Who is the single largest taxpayer in US history? I'll wait while you google it.

According to Google, this claim is sourced to a person rather famous for baseless claims, from the founding of companies he owns, to the capabilities of his products, to cash prizes for registering to vote, to when he will send humans to mars.

Continuing to accept this person as a credible source of information isnt a reasonable thing to do.

Re: How to convert between wealth and income tax

#107

Post by arh5451 »

Supermancho wrote: post #24
blitzar wrote: post #3

[flagged]

The post goes out of it's way to mischaracterize the strategy (and purpose) of wealth taxes being proposed. > Each 1% of wealth tax is equivalent to 20% of income tax. Mathematically sound. > Politicians understand that an additional 20% income tax would be a lot. And indeed a US state that added 20% to its top income tax rate would have extraordinarily high taxes. That's the point. > In the median case, US state pol…

I live in Switzerland. All residents are assessed a wealth tax. It would not be just the top x%. Wealth taxes are a bad idea tried in Europe and then later repealed.

Re: How to convert between wealth and income tax

#108

Post by vessenes »

ceejayoz wrote: post #68
vessenes wrote: post #47

Earlier quoted context omitted.

Nope. Just not post things like "billionaires pay no taxes."

They don't pay zero tax, for sure. But they certainly get clever about techniques to keep it as low as possible, for shockingly low effective tax rates. https://www.propublica.org/article/the-secret-irs-files-trov... has a whole bunch of examples.

I have some quibbles about the ProPublica definitions -- for instance market liquidity matters when calculating public company stock wealth -- and even if you're going to borrow against it, there are additional costs and pledges that must be made that significantly reduce the available capital.

The propublica number was like 4.5% or so if I recall, and does not count the taxes paid by the companies these people owned, nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds, nor does it reduce for effective wealth, nor does it reduce for unutilized wealth, e.g. if the stock price goes up and you don't sell or borrow against it, have you received benefit that makes sense to tax?

But if you net all those out and told me the effective rate was 12-15% on utilized capital, I wouldn't be surprised. I would be really surprised if it was $0 though.

Re: How to convert between wealth and income tax

#110

Post by ryandrake »

tengbretson wrote: post #104
ryandrake wrote: post #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 obtai…

> 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. Productivity comes from labor AND assets though. You need the farmer and the tractor. Why would we create a tax system that encourages people to divorce themselve…

The current system without wealth taxes already largely divorces labor from equity stake. Unless you're one of the relatively few tech or office workers who get equity compensation or have a large savings rate, you currently don't have much of a stake in any means of production.
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