201–210 of 727 posts
How I pay tax on my labor income doesn't have a lot to do with how Paul pays taxes on his investments. Paul makes his money from investment income.
> 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…
That can be quite a lot of people on HN, and also including FIRE people, so I can see why it's unpopular.
> 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'm retired. I hope to get a 3% per year income from my savings every year after inflation and taxes. If my state implemented a 1% wealth tax on savings each year, I would go bankrupt in 20 years. I am hoping that I will live 20 years.
Earlier quoted context omitted.
> 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 thei…
300 years of thinking has established that copyright is the best way to sustain ongoing creation of knowledge and thought, yet the same crowd seem pretty fine gutting that 300 years of understanding because of their judgement that their desired use case for today outweighs the cost to society of lost future knowledge creation, so they seem plenty happy to ignore established thought when it benefits them.
Earlier quoted context omitted.
I think it’s a good point that these taxes don’t apply to most people. Another reason they don’t apply is that most people save for retirement using retirement accounts. But nothing in the article implies that these wealth taxes apply to most people. The argument is that a 1% wealth tax is equivalent to a 20% income tax because, under certain assumptions, the government gets the same amount of money.
Only in theory. In practice it’s not equivalent at all because once you reach a certain (very high) level of wealth, there’s the “buy, borrow, die” strategy that avoids realizing most of your capital gains. I’ve also heard of proposals to tax asset-backed loans above a certain threshold, which is aimed at the “borrow” part of the strategy. But the concern there is that the super wealthy may quickly find a different s…
[0] https://www.sciencedirect.com/science/article/abs/pii/S00472...
Of course there's more complexity than this, but that aspect is a plausible reductive lens.
But the conclusion is silly. We all know the extremely wealthy who'd be subject to a wealth tax basically don't pay taxes and that a 20% tax is totally right around what the typical overall tax burden is for the middle class or median households. The 1% example equating to 20% is basically saying the wealth tax would be in line with a flat tax, not even with a progressive rate tax. The wealthy have turned the tax system into one that's functionally regressive for the most wealthy and then PG complains that a proposal that makes it more like a flat tax is "not understood" by lawmakers?
It sounds ridiculous to me.
Or maybe I'm missing something.
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 g…
How does this make sense? If Johnny sells 5 cars, that means 5 cars were bought. How can Johnny sell more cars than are being bought? Do you mean that Johnny has more cars to sell than are being bought?
Earlier quoted context omitted.
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.