How to convert between wealth and income tax • Hacker News Board

Re: How to convert between wealth and income tax

#251

Post by thrance » Fri, May 22, 2026, 7:12 PM UTC

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…

This nefarious logic has been used for 50 years to justify ever worse austerity and tax breaks for the wealthy. And look at the situation today: pedophile oligarchs rule the world while we fight for scraps. The West has no future, unless we start aggressively redistributing wealth.

Re: How to convert between wealth and income tax

#252

Post by wat10000 » Fri, May 22, 2026, 7:13 PM UTC

meta_gunslinger wrote: post #240

mrguyorama wrote: post #162

Earlier quoted context omitted.

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 influent…

“Money is that power.” That’s the stupidest thing I’ve ever read. Power is power. Members of the Communist Party in the USSR were as wealthy as their subjects, their power differential was enormous.

Not all power is money, but money is power.

Re: How to convert between wealth and income tax

#253

Post by smallmancontrov » Fri, May 22, 2026, 7:13 PM UTC

gruez wrote: post #222

smallmancontrov wrote: post #184

Earlier quoted context omitted.

Oh good! I was worried that trickle down economics was self-serving nonsense pushed by think tank economists on behalf of their benefactors. Since it is economic fact rather than self-serving fiction, when I review its track record I will find that it caused an upward inflection in real wages, right? Right? https://wtfhappenedin1971.com/ Oops!

>Since it is economic fact rather than self-serving fiction [...] You deride the weak justification for trickle down economics, then proceed to link wtfhappenedin1971.com, a site that tries to argue for the reintroduction of the gold standard through a gish-gallop of random charts?

The gap between productivity and wages is striking, isn't it?

I'm not perfectly aligned with gold bug politics. Their faith in the Kindleberger world is misplaced and their tax aversion can make them useful to my opponents, but at the same time they tend to take the Cantillon Pump and Balance of Payments mechanisms seriously while my traditional allies do not.

No, I don't mind borrowing their charts. Why? Do you have a better go-to link for The Wedge?

Re: How to convert between wealth and income tax

#254

Post by malfist » Fri, May 22, 2026, 7:14 PM UTC

zardo wrote: post #218

smallmancontrov wrote: post #184

Earlier quoted context omitted.

Oh good! I was worried that trickle down economics was self-serving nonsense pushed by think tank economists on behalf of their benefactors. Since it is economic fact rather than self-serving fiction, when I review its track record I will find that it caused an upward inflection in real wages, right? Right? https://wtfhappenedin1971.com/ Oops!

As long as capital doesn't get involved in some kind of highly financialized spiral getting further and further divorced from the real economy, we should be good.

That could never happen here. We have a history of strongly regulating capital and banks. Why look at all the executives we jailed for the 2008 financial crisis!

Re: How to convert between wealth and income tax

#255

Post by voidhorse » Fri, May 22, 2026, 7:14 PM UTC

yawn hack writer issues wealth-hoarding and inequality apologia.

Economics is simple. Resources are finite, and money plus markets preserve that finitude as an invariant (that's why it works as a store of value). If you sit on more money and accumulate more money a natural consequence is that someone else has less access to the finite resources available (either in actuality or in potentia), period, because you can accumulate enough to begin to dictate how much they can access (by having decision power around wages). There is no reason to assume private individual wealth-hoarders have public interest in mind, and indeed they have often proven that they don't. They want to maximize value at specific points in the system, which is the literal definition of instability and eventual collapse in chaos theory. You need to bring the system back to stability through structural intervention and regulation. Tax the rich. Cap individual accumulation. It's that simple. The world does need or benefit from kings, whether minted through politic or finance.

Re: How to convert between wealth and income tax

#256

Post by malfist » Fri, May 22, 2026, 7:16 PM UTC

tyleo wrote: post #98

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 feel the same way. I hear a lot of complains about wealth tax but it always seems like the problems mainly pertain to billionaires. I don't see why we should optimize for that small minority. If we moved to a wealth tax I'd be the first in line to pay it. So long as everyone else had to pay it too.

WSJ Opinion Piece: "Why It'd Be A Mistake To Inconvenience Billionaires" -Some Other Billionaire

Re: How to convert between wealth and income tax

#257

Post by chasd00 » Fri, May 22, 2026, 7:16 PM UTC

Glyptodon wrote: post #217

irchans wrote: post #179

Earlier quoted context omitted.

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.

Lol, that's still totally feasible for normal FIRE/retirement situations, my understanding is that most proposals only start at $50 million or more. You can still have a super cushy retirement with $3mil+ and 3% withdrawal forever.

> only start at $50 million or more

curious how they came to that number. There's probably plenty of voters willing to cast a vote for $0.5M+ and plenty ready to cast a vote for $100M+. How was the line drawn?

Re: How to convert between wealth and income tax

#258

Post by avidiax » Fri, May 22, 2026, 7:17 PM UTC

jandrewrogers wrote: post #205

qzw wrote: post #198

Earlier quoted context omitted.

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…

There is no evidence[0] that the wealthy use the "buy, borrow, die" strategy in any significant way. The underlying financial math doesn't make sense if the goal is to maximize wealth so it isn't surprising that wealthy people don't actually do it. [0] https://www.sciencedirect.com/science/article/abs/pii/S00472...

That paper is looking at the top 1%. Buy, borrow, die is the realm of the top 0.1 % or 0.01%.

Are you saying that billionaires are actually realizing capital gains to afford yachts, private jets, and mansions?

Re: How to convert between wealth and income tax

#259

Post by AnthonyMouse » Fri, May 22, 2026, 7:18 PM UTC

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…

> 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.

Not quite, because you're using the opposite extreme where someone has no assets. Meanwhile the median net worth in the US ~$200k, which would be $2000/year in tax for every 1% in wealth tax. That's certainly enough for ordinary people to notice.

On top of that, the conversion is even worse than that implies for ordinary people, because the primary reason the median is ~$200k isn't that the median person has $200k their whole lives, it's that they have ~$0 when they're 18 and ~$400k when they retire and the median person is about halfway to retirement age. If you transfer tax burden from income tax to wealth tax then that means they'll be paying more in wealth tax in the second half of their life, which means they need to be saving rather than spending the money not paid in income tax, including during the first half of their life. But that causes their net worth to go up on paper by more/sooner, because they're essentially holding extra money they'll only have to pay in tax later, which in turn causes them to pay more in tax for a tax on holding assets.

Moreover, then you can't say that Alice always benefits because she has no assets and Bob always pays more because he has $400,000 because what's actually happening is that Alice pays less when she's 20 and more when she's 60. That's going to be unpopular because the 20 year olds are generally expecting to be 60 someday but the 60 year olds never expect to be 20 again.

Re: How to convert between wealth and income tax

#260

Post by _DeadFred_ » Fri, May 22, 2026, 7:18 PM UTC

jandrewrogers wrote: post #205

qzw wrote: post #198

Earlier quoted context omitted.

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…

There is no evidence[0] that the wealthy use the "buy, borrow, die" strategy in any significant way. The underlying financial math doesn't make sense if the goal is to maximize wealth so it isn't surprising that wealthy people don't actually do it. [0] https://www.sciencedirect.com/science/article/abs/pii/S00472...

"Focusing on the top 1 %, while total borrowing is substantial, new borrowing each year is fairly small (1–2 % of economic income) compared to their new unrealized gains"

"1 % of wealth-holders (above $14 million in 2022)"

1-2% of $14,000,000 is $140,000 to $280,000 a year. The median personal income is $45,140. They are benefiting untaxed to the tune of 3-6 times the median American income.

1-2% of 100 million is 1-2 million dollars a year untaxed benefit (44x median income). That is substantial. That their wealth is growing so fast that that is fairly small to them and makes the median American income seem small doesn't sell me.

How is an untaxed benefit of 3-44X the median income insignificant? I would love to benefit annually by that 'insignificant' amount. By this argument why should we not then exclude all economic income below $140,000 to $2,000,000 from taxation? Since it's 'insignificant'. Oh, right, because it's only insignificant in the context of 'they are so obscenely rich it's insignificant to them'.