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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

#131

Post by vessenes »

arh5451 wrote: post #120
ceejayoz wrote: post #116

Earlier quoted context omitted.

> I'd be really surprised to see a 0.1%-er (or 0.001%-er) post $0 income tax. Bezos did, in 2007. https://www.propublica.org/article/the-secret-irs-files-trov... > Consider Bezos’ 2007, one of the years he paid zero in federal income taxes. Amazon’s stock more than doubled. Bezos’ fortune leapt $3.8 billion, according to Forbes, whose wealth estimates are widely cited. How did a person enjoying that sort of wealth ex…

Yeah and he lost money for a decade or more. Blame the system that you can loss harvest. Or call it fair that we don’t penalise business for having bad years.

This. The paragraph might have backed up and said "Bezos, after sustaining over 95% capital losses in the prior decade,.."

Re: How to convert between wealth and income tax

#132

Post by vessenes »

ceejayoz wrote: post #111
vessenes wrote: post #108

Earlier quoted context omitted.

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…

> does not count the taxes paid by the companies these people owned Why should they? Should I get to count the taxes paid by my local water treatment plant workers because I shit in the toilet? > nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds They get taxed on that!

> They get taxed on that!

The funds don't get taxed on unrealized gains. Nor do the pensioners. They do get taxed on spendable income they get out of the fund's investments, just like the other owners of the company.

> [Should we look at the benefits to society of corporations paying taxes?]

I think so.

Re: How to convert between wealth and income tax

#133

Post by Hongwei »

I appreciate PG's writing as always.

I'm skeptical that the super-rich are only generating 5% on their money. My anecdotal experience is that it's usually north of 15%. They have access to investments that main-street does not.

If we plug in 15% instead of 5% in PG's reasoning, the effective income tax increase is quite a bit lower.

Re: How to convert between wealth and income tax

#134

Post by juancn »

There's a secondary side effect of wealth taxes: they redirect investments (I'm Argentinian and we have wealth taxes).

Investments shift to things whose tax value updates slowly, for example property which typically adjusted more slowly than other financial assets. This tends to rise property prices and concentrate ownership.

It causes other distortions in allocation depending on the tax details, but wealthy people tend to adjust more aggressively to changing conditions.

Re: How to convert between wealth and income tax

#136

Post by julianozen »

I think a lot of ink has been spilled on the problems with the proposed California Wealth tax, the main points being:

1- Is this in fact a 1-time tax or is that a dishonest narrative to make the proposal easier to swallow?

2- How do you prevent capital flight to other states?

3- How do those with paper money or more voting shares than equity shares cover their tax bill?

That being said, I think more creative energy needs to be spent on the problem itself.

What do we do about individuals with $100M+ of unrealized capital gains that through various methods will never have to realize those gains to live an extraordinary lavish lifestyle, and their children will inherit the money with a step-up in basis? For those who make all their money from W2s, they pay very high tax burdens, while those who strictly have capital gains generally pay at most around ~20% for LTCG.

To those criticizing the California Wealth Tax, how do we solve this? How do we make billionaires pay more and lawyers/doctors/software engineers pay less?

Re: How to convert between wealth and income tax

#137

Post by keernan »

Completely ignores the true distinction between wealth and income taxes.

Person A has one billion dollars. Holds it in cash in a vault deep in a mountain he owns. He does not earn any wages.[1]

20% income tax: $0.00

01% wealth tax: $10,000,000.00

[1] Every billionaire controls their taxable income. Unlike wage earners, billionaires have 100% control over how much taxable income they have each year. They make choices.

They can have the vault in the cave. Or they can put money into artwork that grows in value and only generates income upon sale. Or a million other ways they can choose to control taxable income.

Re: How to convert between wealth and income tax

#138

Post by tadfisher »

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]

That literally happened, Amazon got sued, Amazon apologized: https://www.bbc.com/news/world-us-canada-56628745

Re: How to convert between wealth and income tax

#140

Post by [deleted] »

blanched wrote: post #28
philipallstar wrote: post #13

Earlier quoted context omitted.

This seems like such a poor understanding of reality. If you want to rank order people who contribute net taxes, you would put billionaires at the top, as they not only pay taxes themselves, but their businesses pay taxes, and their employees pay taxes, and their customers potentially pay taxes (VAT) as well. The bottom of the list would be anyone who works for the state, as they are a massive net tax negative, follo…

In what reality does a business owner get to claim their customers’ taxes as their own contribution?

[deleted]
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