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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

#301

Post by moralestapia »

SoftTalker wrote: post #290
AnthonyMouse wrote: post #259

Earlier quoted context omitted.

> 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 not…

Nobody is talking about a wealth tax on someone with a net worth of ~$200k or ~$400k.

We don't know, actually. If the threshold for "wealth" is set to be >100k, then we are.

Re: How to convert between wealth and income tax

#302

Post by bo1024 »

What's wrong with a 20% tax? We who make a living from labor instead of capital pay more than that.

Paul tries to frame it as an increase of 20% in the tax rate, but in reality the increase is from 0% to 20%, and it's hard to see why that's unfair.

The reason I say it's currently 0% is of course that for the wealthy most of these 5% gains are unrealized (e.g. inflation in the value of their assets) and untaxed.

Re: How to convert between wealth and income tax

#303

Post by smallmancontrov »

gruez wrote: post #273
smallmancontrov wrote: post #253

Earlier quoted context omitted.

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…

>The gap between productivity and wages is striking, isn't it? It's not. The (in)famous epi.org is flawed for all sorts of reasons, from excluding noproduction/supervisory workers (the highest compensated ones!), to excluding non-wage compensation (eg. benefits), to different deflators for compensation vs productivity. If you adjust for all of that, the chart is unremarkable. https://www.piie.com/blogs/realtime-econo…

This smells like the think-tank "CEO comp justifies worker underpayment" and "health care inflation is wages" arguments, I'll look into your source but I can't pretend to have high hopes.

As for "gish gallop," right back atcha: those billionaire-funded think tanks firehose a lot of nonsense into the economic discourse (and curricula!)

Re: How to convert between wealth and income tax

#304

Post by pessimizer »

lazide wrote: post #269
pessimizer wrote: post #261

Earlier quoted context omitted.

> 20% tax on wealth Thank god no one is talking about this, then. According to Graham, a 20% wealth tax is equivalent to a 400% income tax.

Read my comment - it likely would be equivalently impossible. That is my point.

Read my comment - it is completely irrelevant to the discussion being had about the linked article, and no one on the planet is suggesting a 20% wealth tax. That is my point.

Re: How to convert between wealth and income tax

#305

Post by [deleted] »

chasd00 wrote: post #257
Glyptodon wrote: post #217

Earlier quoted context omitted.

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?

[deleted]

Re: How to convert between wealth and income tax

#306

Post by AnthonyMouse »

SoftTalker wrote: post #290
AnthonyMouse wrote: post #259

Earlier quoted context omitted.

> 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 not…

Nobody is talking about a wealth tax on someone with a net worth of ~$200k or ~$400k.

> Nobody is talking about a wealth tax on someone with a net worth of ~$200k or ~$400k.

If that were the case the criticism of Paul Graham's reasoning would be wrong to begin with because the only people paying it would be the people who do get most of their income from investments.

Moreover, your proposal doesn't actually work. If corporations don't pay a wealth tax then rich people just put their assets into corporations that they control but don't formally own (there are many ways to do this). But if they do then ordinary people with ordinary retirement savings can't be spared, since it doesn't change your finances to have the companies your retirement savings are invested in give you lower returns by the amount they pay in wealth tax than to have you pay a wealth tax out of the returns.

Re: How to convert between wealth and income tax

#307

Post by stymaar »

bo1024 wrote: post #302

What's wrong with a 20% tax? We who make a living from labor instead of capital pay more than that. Paul tries to frame it as an increase of 20% in the tax rate, but in reality the increase is from 0% to 20%, and it's hard to see why that's unfair. The reason I say it's currently 0% is of course that for the wealthy most of these 5% gains are unrealized (e.g. inflation in the value of their assets) and untaxed.

> most of these 5% gains are unrealized (e.g. inflation in the value of their assets) and untaxed.

The worst part is that even when they need to realize their profits, they have schemes that allow them to avoid taxes (guess how much taxes Musk paid for his $20B realized profits from his Tesla shares he sold to buy Twitter).

Re: How to convert between wealth and income tax

#308

Post by [deleted] »

outside1234 wrote: post #237
ximm wrote: post #155

Earlier quoted context omitted.

Corrected version: A wealth tax of 1% is equivalent to an income tax of 20% on capital gains .

It isn't, because the ultra rich have no capital gains. They get ultra low interest rate loans against assets so they never have to sell assets and trigger capital gains. Google "Buy, Borrow, Die" if you don't understand this strategy.

[deleted]

Re: How to convert between wealth and income tax

#309

Post by Manuel_D »

outside1234 wrote: post #237
ximm wrote: post #155

Earlier quoted context omitted.

Corrected version: A wealth tax of 1% is equivalent to an income tax of 20% on capital gains .

It isn't, because the ultra rich have no capital gains. They get ultra low interest rate loans against assets so they never have to sell assets and trigger capital gains. Google "Buy, Borrow, Die" if you don't understand this strategy.

They have to sell eventually to pay off the loans. And if they die, their estate has to sell the assets to pay off the loans, and then their heir will pay inheritance taxes on top of that.

Unless their spouse is still alive. In the US, assets' cost bases are reset when a spouse dies. That is the main way that rich people avoid capital gains taxes. I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax.

Re: How to convert between wealth and income tax

#310

Post by lazide »

pessimizer wrote: post #304
lazide wrote: post #269

Earlier quoted context omitted.

Read my comment - it likely would be equivalently impossible. That is my point.

Read my comment - it is completely irrelevant to the discussion being had about the linked article, and no one on the planet is suggesting a 20% wealth tax. That is my point.

The argument was that it was ludicrous to say a wealth tax of x percent > income tax of x percent in actual impact, yes?

It is clearly the case if you try to apply the income tax rate as a wealth tax using concrete real world examples.

Even a 3% property tax makes it very difficult for many normal people to own those assets in many real world economic circumstances.

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