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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#311

Post by LatteLazy »

The table PG uses, but with growth added in at 6% (average) and 4% (conservative estimate):

Tax_____|_Gov_Take__|_You_Keep_(6%)___|_You_keep_(4%)

.1%_____|__6%_____|__3117%_________|__993%

.5%_____|_26%_____|__2484%_________|__788%

1%______|_45%_____|__1868%________|__589%

2%______|_70%_____|__1052%________|__328%

3%______|_84%_____|___589%________|__182%

4%______|_91%_____|___328%________|__100%

5%______|_95%_____|___182%________|___55%

(forgive the underscores, I can't make tables otherwise...)

Re: Modeling a Wealth Tax

#312

Post by Loughla »

AussieCoder wrote: post #88

Every proposal I have seen kicks in after $100m. That's a level of wealth where even paying a 5% tax is likely to result in an annual net increase in wealth, as when you have that amount of money to invest achieving 5%+ returns is not unusual. The net result is that wealth would still increase, just at a slower rate. Additionally, even amongst the general population, let alone startup founders, the number of people w…

I know it's cliche, but these arguments always seem to boil down to the - Americans don't view themselves as poor, merely temporarily embarrassed millionaires. Though, I would make that 'billionaires' in today's world.

It's just the strangest thing to me.

Re: Modeling a Wealth Tax

#313

Post by goodluckchuck »

karl11 wrote: post #163

Incentives are powerful, and typically get the result they are incentivizing in the end. All taxes are a form of incentive, we should always be careful of taxing things that we want more of. If you favor a wealth tax, you are implicitly arguing in favor of incentives to create less wealth. If you tax investment, there will be less investment. If you tax the rewards from great risk taking, there will be less great ris…

> we should always be careful of taxing things that we want more of.

And yet we tax income of all things.

Re: Modeling a Wealth Tax

#314

Post by logicchains »

54mf wrote: post #267
jmcgough wrote: post #178

This is such a straw man argument. No one is proposing something like that - most wealth tax proposals have a floor of like $100m, and a 1% tax seems extremely reasonable when most people can get 4-10% returns just from parking their money in a index fund. I'm of the opinion that no one should have north of $100M. The difference in lifestyle between $100M and $1B isn't going to magically halt entrepreneurship or inno…

Agreed. If someone's barrier to creating a startup is "but when I get unimaginably rich, the government is going to take some of my money!" then good riddance. Take that self-centered, unethical nonsense elsewhere.

>Take that self-centered, unethical nonsense elsewhere.

You're the one who feels you have a right to other people's hard-earned wealth merely by virtue of being born, and you're calling other people self-centred and unethical? What on Earth is ethical about envy-driven tax policy?

Re: Modeling a Wealth Tax

#315

Post by thomasdullien »

andrewtbham wrote: post #238
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…

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...

s/cherry picking/showing an example with interesting properties that is different from France/g

So this is actually where the discussion should go: What properties does the Swiss wealth tax have (particularly in the wider taxation system) that the French wealth tax did not have?

What is needed for a wealth tax to have no negative effects? What about income and capital gains tax at the same time? Etc. etc.

I am not trying to make an argument pro wealth taxes, I am trying to make an argument against shallow and non-empirical arguments.

Re: Modeling a Wealth Tax

#316

Post by doukdouk »

TheCoelacanth wrote: post #287
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.

The extreme case of this is France, where the "income tax" (90B€/year, progressive) is not the largest income tax. Rather, it is the "generalized social contribution" (124B€/year, flat rate). Of course, public discourse is focused on the income tax (50% of households don't pay any tax whatsoever!), not the main tax on income.

Re: Modeling a Wealth Tax

#317

Post by logicchains »

54mf wrote: post #257
nybble41 wrote: post #224

Earlier quoted context omitted.

> It makes it seem really bad when you say "Government takes". Sure, but it's also perfectly accurate. > … you're contributing back … You contribute back by running the business successfully and providing things that people value. Any taxes you pay are above and beyond that. Society creates government, not the other way around, though the government loves to blur the line between itself and society and thus claim cre…

"Society creates government, not the other way around..." And government supports and enriches society. It's symbiotic, not parasitic. "claim credit for what people have created on their own" Nobody creates anything on their own. Full stop. Every single citizen is supported by countless public infrastructure initiatives, from transportation to safety to education to etc etc, without which no significant achievement w…

>Nobody creates anything on their own. Full stop. Every single citizen is supported by countless public infrastructure initiatives, from transportation to safety to education to etc etc, without which no significant achievement would be possible.

America's fastest growth rate was in the 1800s, when public spending was extremely small compared to today, so clearly the current level of spending isn't necessary for achievement. Especially given most of the US budget is spent on military and welfare.

Re: Modeling a Wealth Tax

#318

Post by thrasibule »

bitcurious wrote: post #37
tnr23 wrote: post #15

A problem that is usually not noticed with a wealth tax is that you have to pay the wealth tax from money which already has been taxed with some sort of income tax. Means a 2% wealth tax combined with a 50% income tax, dividend tax, capital gains tax or whatever ends up being a 4% wealth tax effectively. Example: You own stock worth $1,000,000 and the government wants 2% wealth tax from you which means $20,000. But t…

>tax combined with a 50% income tax Properly managed capital gains are taxed at ~15% or less. One should hope that by the time you accrue $50 million your capital gains are properly managed.

How do you get to your 15%? Long term capital gains in the US are taxed at 20% + 3.8% net income tax + state tax. In a city like New York, you're talking close to 40% depending on your tax bracket.

Re: Modeling a Wealth Tax

#319

Post by hyperpape »

nemo44x wrote: post #109
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…

> 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. That’s just the starting point. Once people begin to figure out how to avoid it or have been tapped then the qualifier will be lowered to 40m. And then eventually 30m and do on until anyone above average is paying it. And then anyone above media…

This is not what actually happened in several European countries that had wealth taxes. In fact, they found the taxes ineffective at collecting revenue, and abandoned them. This isn't exactly a recommendation of wealth taxes (which I'm skeptical of), however it is evidence that your assumptions about what would happen are not inevitable.

Re: Modeling a Wealth Tax

#320

Post by Naac »

bhupy wrote: post #198
Certhas wrote: post #171

Earlier quoted context omitted.

The money ears money thing is key. A wealth tax that equals the money you can earn from having money would prevent runaway inequality due to the "rich getting richer" effect. S&P 500 has a long term annualized return of 10%. If you have a 5% wealth tax on stock you have in S&P 500 then you are still earning 5% returns (well above long term average inflation) without actually lifting a finger.

But none of the people you are trying to target with the wealth tax have their holdings in the S&P500. Instead they have close to 100% of their holdings in a single asset represented by the more diversified S&P500. There is no guarantee that the single individual super-wealthy founder whose wealth derives from the ownership of their own company will appreciate at an annualized rate of 10%. The two most pervasive myth…

>> Instead they have close to 100% of their holdings in a single asset represented by the more diversified S&P500

What do you mean by that? Can you give examples of that single asset?

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