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How to convert between wealth and income tax

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Re: How to convert between wealth and income tax

#161

Post by amanaplanacanal »

arh5451 wrote: post #54
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…

If you mean that a person with 0 savings pays 0 wealth tax, then sure. Most people when they earn income save some of it. Therefore it is wealth taxed.

It seems fairly simple to have a standard deduction so that only folks with wealth over a certain amount get taxed.

Re: How to convert between wealth and income tax

#162

Post by mrguyorama »

meta_gunslinger wrote: post #59
wat10000 wrote: post #31

Earlier quoted context omitted.

I can't speak for others, but this doesn't match my thinking at all. I want to heavily tax the ultra rich because money is power, and vast inequality in power is undemocratic and just plain dangerous. I don't really care if somebody buys ten massive yachts. It's annoying and seems wasteful but it's not worth too much of my attention. But it's another matter if somebody buys politicians, laws, social change. The issue…

Easily solved, remove the power centers and then the billionaires will have no power to buy or influence with their money.

There's no such thing as "Power centers".

Money is that power.

You cannot have billionaires and them not be immensely, structurally powerful.

That's the entire point of capitalism, that resources, including labor, be directed by those with capital.

Believing you can have a single human being in control of a non-negligible percentage of all resources of a country, and they wont somehow be actually powerful or influential is moronic.

Taking the power away from billionaires literally IS taking their money.

Re: How to convert between wealth and income tax

#163

Post by zozbot234 »

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…

> 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?

This is exactly why economic models broadly show that taxing capital assets makes workers worse off in the long run. An abundance of capital means that workers will be more productive on the margin, so their wage will be higher. This extends to the capital-income taxation involved in income taxes: pure labor taxes or consumption taxes are inherently more efficient. There are countervailing effects (taxing capital income works as an effective way of indirectly taxing the unearned value of resource-like assets, or of idiosyncratic skills that happen to correlate with holding more capital-like assets) but they can only roughly justify the current income tax arrangement, not some extra tax on assets.

Re: How to convert between wealth and income tax

#164

Post by colinmarc »

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…

I can't tell what's worse: intentionally obscuring the fact that the vast majority of people would pay ~no wealth tax or unintentionally forgetting that the vast majority of people would pay ~no wealth tax.

Re: How to convert between wealth and income tax

#165

Post by notahacker »

Havoc wrote: post #23

I think the assumption that we're looking for an equivalence here is fundamentally flawed and with it the entire post. For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth. The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income…

The big flaw in his argument is that a mere 1% which is actually 20% of annual return is still less than the average income tax rate on workers, levied on people who have a lot more money and in some cases don't do anything resembling work. It's trivially true that 1% wealth taxes represent something in the region of a fifth of the average annual return on wealth, it's rather less convincing when it's suggested that this is harsh compared with income tax when people who pay more than half their much lower income in overall taxes whilst working 60 hour weeks and actually worrying about paying bills.

There are arguments about wealth taxes inducing capital flight and investment disincentives, the difficulty of paying tax bills from illiquid intangible wealth or even quantifying it, and whether it's really a good thing to pressure people building a company to sell much of it off, but telling income tax payers that an effective tax rate of 20% is high isn't one of them...

Re: How to convert between wealth and income tax

#166

Post by svachalek »

tengbretson wrote: post #125
ryandrake wrote: post #110

Earlier quoted context omitted.

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.

I'm not disputing the claim that few people are able to save and invest into having a stake in the means of production. However, if your goal is to increase stakeholdership, how would a policy that explicitly disincentivizes that behavior fix anything?

How does it disincentivize "stakeholdership"? Are people expected to say, please don't make me rich, because I'd have to pay 1% of it?

Re: How to convert between wealth and income tax

#167

Post by smallmancontrov »

tengbretson wrote: post #125
ryandrake wrote: post #110

Earlier quoted context omitted.

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.

I'm not disputing the claim that few people are able to save and invest into having a stake in the means of production. However, if your goal is to increase stakeholdership, how would a policy that explicitly disincentivizes that behavior fix anything?

Why do I get the feeling that you would never field the structurally identical complaint against disproportionately taxing labor and consumption, even though that's a much more prominent feature of our current tax policy?

In any case, taxes do not go into a black hole, no matter how much the right likes to encourage this self-serving fiction. Taxes generally get spent down the economic ladder and move people up the economic ladder, increasing their marginal propensity to save. People must have money if you want them to save money.

Even more concretely: reversing the policies which dissolved the middle class might reasonably be expected to restore the middle class, or at least slow their demise.

Re: How to convert between wealth and income tax

#168

Post by svachalek »

dheera wrote: post #159
Havoc wrote: post #23

I think the assumption that we're looking for an equivalence here is fundamentally flawed and with it the entire post. For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth. The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income…

> you do need something more extreme That's how you end up with an over-regulated country where people doing great things for the country's economy start choosing a different country to build their dreams in. It's also how you drive the currently-wealthy to other countries to spend and invest their fortunes in. The possibility of being ultra-wealthy is a huge reason to build awesome shit in the US that creates millio…

How is rent-seeking and monopolizing "doing great things for the country's economy"?

Re: How to convert between wealth and income tax

#169

Post by BugsJustFindMe »

jeffreyrogers wrote: post #69
tony69 wrote: post #22

Wealth tax is highly impractical. Very high and inescapable death taxes is what we need. Like 80% after an initial exemption amount. https://www.yesigiveafig.com/p/the-summer-slide-part-3-the-t... https://m.youtube.com/watch?v=mX5U5DNUfBc

There are all kinds of irrevocable trusts that exist to remove assets from your taxable estate so that they can be passed to heirs without paying estate tax. Raising the estate tax (which is already 40%) would just make planning to use these techniques more attractive.

The existence of perpetual trusts is solvable in a world that has decided to fix the insanity caused by intergenerational wealth transfer instead of propping it up. "This thing we could also eliminate stops us from eliminating this other thing" is a silly platform. Just eliminate them both.

Re: How to convert between wealth and income tax

#170

Post by zozbot234 »

shmolyneaux wrote: post #81

There is a bit more to the story than a 1% wealth being "equivalent" to a 20% income tax. The primary difference is that unrealized gains are taxed by a wealth tax. We need a mechanism for assets to be sold by the richest in society. If those with assets keep accruing more assets the median person will suffer. When we're talking about real assets (housing, retail shops, warehouses, land) we don't need to be concerned…

When more assets are sold than are bought, that leads to the destruction of assets on a broad scale. It's the economic equivalent of eating one's seed corn. This would not be good for the median person. You can and should tax land (meaning the land value component of real estate in general) and natural resources more generally, but that's an entirely different game: it has next to nothing to do with wealth taxes as generally understood.
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