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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#281

Post by gridlockd »

thomasdullien wrote: post #93

Perhaps notable: Switzerland has a wealth tax (of up to 0.3%), and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland. Other features of the tax system more than offset the 0.3% wealth tax. Personally, I am a bit disappointed by the lack of depth of the discourse: Wealth taxes and their effect have been studied quite a bit in ec…

> Other features of the tax system more than offset the 0.3% wealth tax.

In other words, you can have a wealth tax without detrimental effects, as long as you keep taxes low otherwise? What's the point then?

Re: Modeling a Wealth Tax

#282

Post by raiyu »

The problem isn't the wealth tax but about creating a taxation system and monetary policy that actually helps people.

There is this false assumption that a wealth tax will somehow eliminate wealth inequality.

If you have an already broken economic system you will end up with more money in a broken system and it won't yield better results for the average person.

But this is about marketing and "winning" not about progress.

If you want to actually help people you should start with property taxes.

Increase them to 10% on a sliding scale as property values move further away from the median price of a home sold in a state or city.

This would discourage multiple home ownership, it would drive tax revenue that stays inside of the local community (state level) rather than creating a larger budget for the military. You could use those taxes to improve education and local infrastructure. Impose a system where those collected taxes are then redistributed on an economic basis where the poorer neighborhoods receive a larger percentage of those local taxes.

If you buy a $2M house in just 10 years you would have paid $2M in taxes. By increasing the carrying cost of property you will also reduce property prices as this is no longer an asset that you carry with zero cost.

To further improve the cost of housing make sure that there is a 100-200% tax on foreign buyers buying property in US markets. This will again drive down prices and help people afford houses.

Unlike paying into a large federal tax system where the effects are harder to observe you would see improvements on the local area immediately. Property prices would decrease, poorer neighborhoods would be helped which would lead to a reduction in crime and poverty levels, and your infrastructure that has been classically underinvested will receive more funding.

Low property taxes also lead to higher costs of tuition. By also removing the inability for people to get out of student debt through bankruptcy you would also decrease the price of education. And if we used the additional tax revenue from property taxes to create additional "vocational" schools for the new economy such as computer programming programs you can help people get ahead.

If you want people to be civicly minded you have to show them how their taxes have an impact and that starts at the local level first.

Re: Modeling a Wealth Tax

#283

Post by lordnacho »

thaumasiotes wrote: post #225
lordnacho wrote: post #179

Earlier quoted context omitted.

You'd borrow against it, giving a bank the shares as collateral.

Now you're paying interest. (If you're planning to wink at the bank, pay nothing, and let them keep the stock, that's the kind of thing that won't work if it becomes common. At that point, people will point out that you sold stock to the bank and didn't pay the income tax.)

Interest rates are so low that your income from your job at the startup is probably enough, right? Granted it won't work if rates go back up, and the current environment is a bit special.

Plus you might have some dividends on the whole amount.

Re: Modeling a Wealth Tax

#284

Post by andrewtbham »

learc83 wrote: post #277
andrewtbham wrote: post #238

Earlier quoted context omitted.

You're cherry picking. France imposed a wealth tax and they repealed it. "At least 10,000 wealthy people left the country to avoid paying the tax; most moved to neighboring Belgium" https://www.bloomberg.com/opinion/articles/2019-11-14/france...

1. The French income tax and wealth tax was extraordinary high. 2. France is part of the EU, there are dozens of countries that French millionaires can move to with almost zero friction. Moving to neighboring Belgium is like moving from New York to New Jersey.

Exactly, it is like moving from Los Angeles to Nashville, or from San Francisco to Austin. Which is what people are doing.

Re: Modeling a Wealth Tax

#285

Post by tzs »

I remember in law school my income tax professor recommended a book for those of us who wanted a more tax nerd approach. I can't seem to find my copy right now, so I may be getting some details wrong as the following is from 30 year old memories.

Anyway, there was some discussion in the book of what would be the ideal tax in terms of fairness, effectiveness, minimizing market distortion, and assorted other you want in a good tax if we did not have the constraint of it actually being practical to implement.

I think that the conclusion was that a tax on changes to net wealth was the best. Each tax period, subtract your net wealth at the start from your net wealth at the end, and that difference is what you are taxes on. (Whether it should be a flat rate or depend on on the size of the difference is a separate question). If that's positive, you owe tax. If that's negative, you get a refund.

Unfortunately, it is not practical because wealth (1) is often heard to determine, and (2) is often in forms that can be efficiently converted to cash or cash equivalents to actually pay taxes with.

Income taxes kind of approximate this for the large number of people that do not have a significant amount of money in real estate or in personal property (other than investments such as mutual funds). For them, most of additions to wealth come from income, and the standard deduction kind of approximates subtractions from wealth, leaving taxable include roughly matching net change in wealth.

Re: Modeling a Wealth Tax

#286

Post by donw »

ashtonkem wrote: post #260
calyth2018 wrote: post #121

Earlier quoted context omitted.

"the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data. It's all 101ism and polemics." It's not strange at all. It's self-interest.

It’s often not even self interest; fairly often it’s obvious that some participants in these discussions are searching for arguments to validate pre-held beliefs and policy positions. Although sometimes self interest is also a factor.

I hate to break it to you, but literally all of humanity does that, most of the time: https://en.m.wikipedia.org/wiki/Confirmation_bias

This includes me. And you. And everybody else here.

Changing your mind is actually really hard.

Re: Modeling a Wealth Tax

#287

Post by TheCoelacanth »

czbond wrote: post #202

Unpopular opinion: Near 50% of American pay ZERO tax whatsoever. The top 10% of all Americans pay 69% of all taxes currently. This is a point 'left out' of current discussions. How about instead of increasing entitlements and stealing more from people that created wealth - we lower the size of the government spending UNTIL it matches where most people pay for the services received in a more scaled manner. https://tax…

> Near 50% of American pay ZERO tax whatsoever.

As stated, that is completely and unequivocally false.

Near 50% of Americans pay no "Federal income tax" where "Federal income tax" is arbitrarily defined to not include payroll taxes despite them being a Federal tax on income. They still pay payroll taxes, state income tax, sales tax, etc.

Re: Modeling a Wealth Tax

#288

Post by ddpg »

For some that has a day job meddling investments this is a surprisingly shallow model. The proposed wealth taxes start at 50m and 1b - there will not be many modern startup founders that achieve those numbers is the first year.

Re: Modeling a Wealth Tax

#289

Post by beagle3 »

bitcurious wrote: post #26

I'm highly skeptical of the claim that such tax would discourage startup founders. Wealth tax proposals I've seen don't kick in until $50 million or $100 million. This means that there is a floor on how "poor" the government can make you via a wealth tax. This has two implications: 1. Most "successful" startup founders don't break that threshold of personal wealth. 2. For most startup founders, the startup is the onl…

A) history shows these things eventually apply to everyone. E.g. FATCA was originally relevant to a few hundred people, no it applies to almost all Americans living outside the US (hundreds of thousands). It’s just a reporting requirement, but one that can potentially cost you 3%-50% of your net worth per year if not filed or improperly filed.

B) I know people who were bankrupted by existing tax laws - had shares in internet companies during the dot com boom; company IPOd making them paper millionaires, thus owing millions in taxes, but had 6 months lockup. By the time the lockup expired, company went bust, nothing to sell to cover the tax bill. Any law that takes valuations into account (as a wealth tax law is bound to) is likely to wrong some people in a similar way, especially entrepreneurs and early employees.

Re: Modeling a Wealth Tax

#290

Post by jimbokun »

ashtonkem wrote: post #260
calyth2018 wrote: post #121

Earlier quoted context omitted.

"the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data. It's all 101ism and polemics." It's not strange at all. It's self-interest.

It’s often not even self interest; fairly often it’s obvious that some participants in these discussions are searching for arguments to validate pre-held beliefs and policy positions. Although sometimes self interest is also a factor.

> fairly often it’s obvious that participants in these discussions are searching for arguments to validate pre-held beliefs and policy positions.

This is true of discussion of almost any topic by almost anyone ever.

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