321–330 of 727 posts
I'm not an expert in this, but I thought one of the biggest arguments for why a wealth tax is needed the whole "buy, borrow, die" thing where the ultra rich can use their assets as collateral to take out a never ending series of ultra low interest loans until they die and then have most of the tax burden of selling assets to pay off those loans wiped out because the tax code is much more favorable to selling assets t…
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There are all kinds of irrevocable trusts that exist to remove assets from your taxable estate so that they can be passed to heirs without paying estate tax. Raising the estate tax (which is already 40%) would just make planning to use these techniques more attractive.
The existence of perpetual trusts is solvable in a world that has decided to fix the insanity caused by intergenerational wealth transfer instead of propping it up. "This thing we could also eliminate stops us from eliminating this other thing" is a silly platform. Just eliminate them both.
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The big flaw in his argument is that a mere 1% which is actually 20% of annual return is still less than the average income tax rate on workers, levied on people who have a lot more money and in some cases don't do anything resembling work. It's trivially true that 1% wealth taxes represent something in the region of a fifth of the average annual return on wealth, it's rather less convincing when it's suggested that…
> The big flaw in his argument is that a mere 1% which is actually 20% of annual return is still less than the average income tax rate on workers This is untrue btw 50% of people in the US pay effectively no net taxes
They still pay payroll taxes, state taxes, sales taxes, and various other state or local taxes and fees.
It's funny, because even though he got the math right, PG got the reasoning completely wrong. > Each 1% of wealth tax is equivalent to 20% of income tax. Yes, this is the right part. Taxing wealth at 1% is equivalent to taxing income at 20-25% (depending on which return you count as baseline) > It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of…
I guess the simplest approach is, if you're making money, it should be taxed fairly, regardless of how you're making it.
It's funny, because even though he got the math right, PG got the reasoning completely wrong. > Each 1% of wealth tax is equivalent to 20% of income tax. Yes, this is the right part. Taxing wealth at 1% is equivalent to taxing income at 20-25% (depending on which return you count as baseline) > It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of…
That's exactly it. I've been really shocked at the willful ignorance (or deceit) coming from the billionaire class on this. I mean, OBVIOUSLY the practical operation of the tax regime is unfair at the top end. If you put a billion dollars in assets somewhere, almost any asset (including e.g. stock in a company you can't sell because you need to own it), growth of that asset is (1) trivially liquid via loans[1] or deals and (2) COMPLETELY UNTAXABLE IN PRACTICE because there's never (ever!) going to be a point where it's traded or converted in such a way that it becomes a "capital gain".
[1] e.g. Bezos goes to Citi or whoever and writes up a contract for a $100M loan to be collateralized with ever-appreciating AMZN shares, likely at a deeply discounted rate (low risk, plus the "keep Jeff in the rolodex" benefit to the bank) then pays it back on schedule with another loan taken out on his now-even-larger stake in AMZN. Who pays the tax here? It's not "income"!
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On top of that it seems to imply that a 20% effective tax rate is outrageous even though that's totally normal for most. Maybe it's not what you're used to as really wealthy person who avoids realized income and has a 0 or 5 or 10 percent effective rate. But it's totally normal for most middle and median income folks who actually pay income taxes.
It's 20% equivalent income tax rate if you have no conventionally taxable income. Otherwise it's 20% on top of your marginal rate. In his $100 example, you'd pay $1 in wealth tax on the $100 and $1 in tax on the $5 income earned, so your total tax is $2 on $5 of income, an effective tax rate of 40%. But any real wealth tax is going to have exemptions, only apply to wealth above some threshold, and for the wealthy who…
It's not. That calculation would say that if you have $1000 of wealth and $5 of income your effective tax rate is 220%. It's bad math.
Your conventional income is taxed separately.
A wealth tax sort of stacks with capital gains, but capital gains is way too low anyway.
Here's a crucial mechanism that Paul Graham did not mention: With a wealth tax using his calculation, the higher your returns, the lower the comparable income tax would be. If your returns are 10% you'll pay $1 on $10 capital gains which is 10% and you end up with $109. Conversely someone achieving a mere 1% cap gains would be essentially taxed for 100% of his return. With income taxes it's usually the opposite: the…
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Nobody is talking about a wealth tax on someone with a net worth of ~$200k or ~$400k.
When income tax was first implemented, less then 1% of people had to pay it. Taxes are a slippery slope, and that number will slide down.
The "example" discussing paying income tax on your $5 of return on your capital is similar nonsense. You don't pay anything on that gain unless it's income, which it isn't unless it's realized. So (assuming the various parameters of a wealth tax meant this mythical $100 person would indeed pay a wealth tax), the comparison is between zero income tax and some nonzero amount of wealth tax.
> None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Plenty of politicians (e.g., Bernie Sanders, AOC) have pointed out that the top income tax rate during the 1950s was over 90%, and have suggested raising rates back or near to that level, which would be well more than a 20% increase in the income tax rate.
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 a…