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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#341

Post by kgwgk »

Schweigi wrote: post #244
bluelu wrote: post #146

Earlier quoted context omitted.

That's not true. In some cantons, the very rich get extra deals, called Lump-sum tax, independently of their revenues. E.g. the Ikea founder only paid around 165000$ in total taxes in 2014 on a fortune of 46.5 billion US $ and all his revenues which he had. Source: https://www.20min.ch/story/so-wenig-steuern-zahlte-der-ikea-... )

The lump sum tax is only possible for non-citizens, who do not have direct W2 income from Switzerland. Local governments (if the state allows it) can use it as a shortcut to estimate the tax amount. Nevertheless wealthy Swiss citizen don’t leave Switzerland either. Probably also because there is no capital gains tax which offsets the wealth tax easily.

> there is no capital gains tax

As long as capital gains are less than half of your income.

Re: Modeling a Wealth Tax

#342

Post by throwawaysea »

Sorry but a wealth tax is simply morally unacceptable. I don’t think it is appropriate at all to have worked hard, made choices, committed time/stress/etc, earned wealth, paid all taxes along the way, only to have it confiscated after the fact, in effect as an undisclosed but retroactive penalty. What does ownership and private property mean in such a system? Wealth taxes more closely resemble theft than a typical tax, and it erodes fundamental rights in our society.

Re: Modeling a Wealth Tax

#343

Post by NovemberWhiskey »

To everyone who is saying "this doesn't take into account asset growth": please simulate this for yourself to understand that it does.

If you have shares of a company and, assuming that you have to liquidate stock to pay the wealth tax, then it doesn't matter what the growth in the value of the company is.

i.e. if the growth rate is 10% p/a, then after 40 years the value of the original stock is about $4500. A 1% wealth tax will have taken about 33% of the stock away from you at this point.

If the growth rate is 50% p/a, then the value of the original stock is over $1bn. That 1% wealth tax will still have taken about 33% of that stock away from you.

Obviously, with the higher growth rate, you'll be wealthier, but the proportion of your wealth that the government will have taken is the same.

Re: Modeling a Wealth Tax

#344

Post by logicchains »

alex_young wrote: post #175

Having familiarity only with Switzerland’s wealth tax, I know that it is instead applied only over a given bound, and then very progressively so the impact at even somewhat large sums is lower than what is quoted here. Sure it goes up when we’re talking about billions, but shouldn’t it? Isn’t the idea to make the wealth of huge excess fund something more of our society?

> Isn’t the idea to make the wealth of huge excess fund something more of our society?

You think the US government is going to make better use of that money than someone like Musk or Bezos? The vast majority of the budget is spent on warfare and welfare: https://www.cbo.gov/publication/56324.

Re: Modeling a Wealth Tax

#345

Post by dominotw »

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…

Here in India Switzerland is mainly famous for their bank accounts where all the corrupt politicians store their ill gained wealth. Everyone here knows the phrase "swiss bank".

wondering if 0.3% a good tradeoff for secrecy?

Re: Modeling a Wealth Tax

#346

Post by dublidu »

bhupy wrote: post #45
paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

But a wealth tax also targets owners of assets that don’t appreciate. It taxes both the winners and the losers, and for the latter it’s nothing but a forced divestiture of their ownership stake. A capital gains tax, on the other hand, strictly targets those whose assets have appreciated in value. Wealth is always eventually taxed when it’s liquidated. And if it is never liquidated, then it arguably doesn’t really mat…

Currently, capital gains is on taxed on sale. Even on sale there are ways to reduce or defer it (opportunity zone investments for example). Some also donate appreciated shares to charities that are suspect (Trump comes to mind). Most billionaires don’t sell most of their stock during their entire lifetime.

Re: Modeling a Wealth Tax

#347

Post by s17n »

mathraki wrote: post #325
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…

I'm shocked people think a wealth tax on startup founders is OK. Let's think of a scenario for instance: ACME startup raises Series C @500M. Founder equity is worth 100M on paper . Founder needs to borrow money every year to pay 'wealth' tax. After 10 years of struggles, company sells for $100M, VCs get money back, founder makes no money. But now founder is millions in debt for past 'wealth' tax payments. Founders wi…

This is a problem for startup employees, too, and should be solved in both cases by allowing you to defer the taxes on your paper gains until you can actually realize them (yeah, there would be issues here, but the issues are solvable).

Re: Modeling a Wealth Tax

#348

Post by auggierose »

That's ridiculous. This calculation only makes sense if you assume that the wealth generates no additional wealth. I'd just set the wealth tax at half of what is generated by investing that wealth.

Re: Modeling a Wealth Tax

#349

Post by gridlockd »

hospadar wrote: post #259

Boooooooo This is just bad (bad == misleading) math. Where's the appreciation of the assets? Where's the real examples from other countries that have tried wealth taxes? I don't know what he's _trying_ to do, but the effect of his rhetoric certainly seems to me that "If you won the lottery, you this would be bad for you! [but if you don't, it'd be great for you, and really only bad for ultra-rich people like me]" I'd…

The problem is that a wealth tax of just 1% doesn't actually raise that much money, a proposed wealth tax of 2-3% (Warren) would be the highest in the world.

If you have that kind of money, why would you not just take it elsewhere? Think about it, if that capital is actually creating returns to make up for the depreciation, it must be working capital. Removing it from the economy would be damaging.

What if the money is in government bonds? Those return below 1% right now, so you just dump them, putting more pressure on the Fed to keep stable rates.

Which brings us to the next topic: Dollar depreciation. You already need ~2% returns just even out the CPI inflation rate, but asset inflation is way higher than that.

So you're basically begging rich people to dump dollars, dump US bonds and move working capital to safer countries. Good Luck with that.

Re: Modeling a Wealth Tax

#350

Post by mac01021 »

paulhart wrote: post #9

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

It doesn't matter how much your shares appreciate. You can't retain control of your company if you have to give up a significant fraction of your votes every year.
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