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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

#351

Post by votepaunchy »

naijaboiler wrote: post #341
kccqzy wrote: post #241

Earlier quoted context omitted.

On the other hand, almost a majority of people already pay no federal income tax anyways. Mitt Romney mentioned a number of 47% during his presidential campaign and that number was mostly true. https://www.politifact.com/factchecks/2012/sep/18/mitt-romne... People love to talk about the marginal tax rates but not the average tax rates. And I think that’s right because the conversation should be focused on the wealthi…

i hate when people bring it up. everybody that works pays payroll taxes which is around 25% when you count both sides.

It’s 15.3% counting both sides, and capped. And it’s the only “tax” that is paid back, at progressive rates, because it’s a retirement annuity not an income tax.

Re: How to convert between wealth and income tax

#352

Post by js2 »

stymaar wrote: post #300

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…

> In fact, to make them pay as much tax as their employees, there should be a 2% wealth tax, not 1%.

Indeed.

Andrew Mellon writing in 1924 "Taxation: The People’s Business.": "The fairness of taxing more lightly incomes from wages, salaries and professional services than the incomes from business or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it, and old age diminishes it. In the other, the source of income continues; the income may be disposed of during a man’s life, and it descends to his heirs."

https://en.wikipedia.org/wiki/Andrew_Mellon

Via "Our Tax System Should Make You Furious" (interview with a Boston College Law School professor who specializes in tax law and estate planning):

https://www.nytimes.com/2026/04/17/opinion/ezra-klein-podcas...

Re: How to convert between wealth and income tax

#353

Post by oa335 »

abletonlive wrote: post #243
booleanbetrayal wrote: post #227

Earlier quoted context omitted.

Billionaires gonna billionaire, I guess.

[flagged]

... you read an awful lot into that comment, I think you are being a bit uncharitable.

Though I agree with many of your points, what I think the OP was gesturing at was the idea that billionaires are more avaricious than the average person; hence we shouldn't be surprised that Paul Graham is wary about paying an effective tax rate that would put him on par with majority of tax payers in this country.

This isn't an new or particularly controversial observation: e.g. "Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one." Benjamin Franklin

"The love of money grows as the money itself grows." Juvenal

Having worked for several billionaires and seen them in their day-to-day, those quotes resonate with me.

Re: How to convert between wealth and income tax

#354

Post by slowmovintarget »

colinmarc wrote: post #164
ryandrake wrote: post #8

> To convert between wealth and income tax rates, you have to divide by the rate of return on capital. The conversion rate of 20 comes from assuming that the risk-free rate of return is 5%. This seems to only be true for people whose income entirely comes from their wealth, rather than their labor. The math doesn't math for someone on the other extreme end of the spectrum who has zero savings or investments and obtai…

I can't tell what's worse: intentionally obscuring the fact that the vast majority of people would pay ~no wealth tax or unintentionally forgetting that the vast majority of people would pay ~no wealth tax.

You seem to forget that given the way taxes work, eventually, anyone, with any amount of money, will be considered "wealthy" because we'll keep running out of other people's money.

You're wealthy, or the definition will change to include you. The spice must flow.

Re: How to convert between wealth and income tax

#355

Post by tony69 »

jeffreyrogers wrote: post #322
BugsJustFindMe wrote: post #169

Earlier quoted context omitted.

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.

Perpetual trusts are different from irrevocable trusts, which have legitimate use cases. I don't really see how irrevocable trusts would be gotten rid of. In most states all trusts are irrevocable by default and there is a huge body of law dealing with trusts. Getting rid of them is essentially impossible without huge changes in the political/legal system.

By “raising death taxes”, I meant comprehensively, eliminating loopholes, as the sources I linked discuss more at length.

Re: irrevocable trust, a cursory search revealed no legitimate use case imo, all use cases I see are proxies to skirt taxes or hide income/wealth. What would you consider a legitimate use case for one?

Your point re: case law is well taken, but per [2] up until a few decades ago there was a cat-and-mouse game between laws and tricks regarding inheritance wealth transfer. This stopped and it’s easier than ever to transfer > 10M tax free at or death, which has massive implications for wealth inequality.

That said I agree it’s extremely unlikely and have no hope that any of this will change.

Re: How to convert between wealth and income tax

#356

Post by SoftTalker »

AnthonyMouse wrote: post #318
Manuel_D wrote: post #309

Earlier quoted context omitted.

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 imple…

> I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax. Neither of these would really work against the people you actually want it to work against. If you don't have a basis reset then they just do a transaction that has the same effect, e.g. create a new corporation owned by the recipient and then have it repeatedly enter into slightly favorable transactions with the one owned b…

I'd like to see all taxes replaced by consumption, sales, and/or value-added taxes, with an automatic rebate to offset the regressiveness. It would kind of end up being UBI with a vastly simpler tax code.

Re: How to convert between wealth and income tax

#357

Post by NoMoreNicksLeft »

analog31 wrote: post #249
lazide wrote: post #224

Earlier quoted context omitted.

20% tax on wealth (aka the potentially liquidatable value of an asset) would absolutely destroy anyone using an asset. For a classic example, look at property taxes which are a classic wealth tax. Grandma’s, people on pensions, and even middle class folks who own a home but have relatively low rates of salary increases get destroyed (and have to sell and move out) in places like Texas where property taxes aren’t capp…

All of the people I mention wealth tax to give me the same two counter cases: Grandma and Elon. I think there's no reason why a wealth tax can't be progressive. Just making up numbers here, it could be zero for your first 30 million, and rise to some palpable amount for your first billion. This would protect granny from being taxed out of her house, and in fact would affect relatively few salary earners. I'm not over…

>I'm not overlooking the possibility that such a tax structure could create an effective wealth cap at some level.

No, I think what that does is create an effective corporate decimation. No one has a billion in cash that I've ever heard of. When you say "tax the billionaires of their wealth" because this billionaire has $1 billion, you're talking about his shares right? Maybe in one company, maybe across many. Is he supposed to pay that in cash?

How does this even really work? He could try to sell $200 million in stock, I suppose (if that's even legal according to the SEC, though that stuff could be loosened up), but what happens when he only gets $70mil for it because the stock price tanked? Should he sell more, until he comes up with that original 20% of his "billion"?

What if instead, he just gives 20% of the shares to the government, and they get to sell them, would that count? They wouldn't even have to sell them... the government could become the shareholder, until it controlled every corporation out there. The grift and graft would be massive, nothing to go wrong there. CEOs and other top positions basically appointed by whoever gets to be on the Congressional committee. The Democrats no doubt are certain they'll be in control of it, but then they'll be hysterical when it turns out they miscalculated. Could be fun to watch while eating popcorn, at least until there is no more popcorn left because the corporation that distributed popcorn melted down.

Wealth taxes are the domain of angsty teenage marxists and other retarded children.

How much does a wealth tax collect in the US, does anyone know? Does anyone care? Is it that they've identified a need for the government have revenue and devised a fair way of having the entire nation pay for that need, or are they just hoping it will be confiscatory in the most punitive way possible?

Re: How to convert between wealth and income tax

#358

Post by pipes »

What mostly bothers me is that this is likely to start out as "tax the wealth of the rich" and it will become tax all wealth. Including my pension pot! In the UK the only people safe from that kind of nonsense will be public sector employees. Because guess what, their pension pots don't exist, they are just tax payer / debt funded liabilities.

Heck, it's even started in the UK with labour killing off salary sacrifice pensions, everyone one I know was reliant on those to be able to retire, but who gives a shit, we are private sector and we have no union!

I'm on a rant here, forgive me.

Re: How to convert between wealth and income tax

#359

Post by Epa095 »

solidsnack9000 wrote: post #274
Havoc wrote: post #23

I think the assumption that we're looking for an equivalence here is fundamentally flawed and with it the entire post. For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth. The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income…

I'm not sure how there is a societal problem with "run-away levels of wealth". We have societal problems around food costs, housing costs, healthcare costs, &c; but people with extreme wealth are not bidding up sandwiches, studio apartments, &c, &c. If we "solve" their wealth by taking it from them and giving it to the government, what does that help? What good is the government going to do with that? Allocating mone…

Money is votes into the economy and what it shall produce. The more money you have, the larger vote you have. Taxes are the way the government takes controll over a fraction of the votes. Then the government can use this power to make good or bad decisions. One thing which is clear is that the billionaires is not using their power over the economy to fix any of the deep fundamental problems we are facing

Re: How to convert between wealth and income tax

#360

Post by i_cannot_hack »

solidsnack9000 wrote: post #274
Havoc wrote: post #23

I think the assumption that we're looking for an equivalence here is fundamentally flawed and with it the entire post. For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth. The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income…

I'm not sure how there is a societal problem with "run-away levels of wealth". We have societal problems around food costs, housing costs, healthcare costs, &c; but people with extreme wealth are not bidding up sandwiches, studio apartments, &c, &c. If we "solve" their wealth by taking it from them and giving it to the government, what does that help? What good is the government going to do with that? Allocating mone…

> Allocating money through the government has not been a particularly successful strategy for improving the overall standard of living.

What are you even basing this assumption on? Just quickly comparing the highest ranking countries by Human Development Index with the highest government budgets per capita and the highest income tax rates would, if anything, support the opposite conclusion.

https://en.wikipedia.org/wiki/List_of_countries_by_Human_Dev...

https://en.wikipedia.org/wiki/List_of_countries_by_governmen...

https://tradingeconomics.com/country-list/personal-income-ta...

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