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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

#361

Post by oa335 »

nurspouse wrote: post #275

As an aside, in Islam, people have to pay a 2.5% wealth tax annually for charity.[1] This does make retiring a tad bit complicated. Say you've saved $3M and are ready to retire. That means each year you're spending $75K just to satisfy this tax. [1] Depending on how your wealth is structured. Cash is 2.5%, but if you own, say, a business, you pay the tax on the value of the goods, not on the value of the building, ha…

Yeah, in general the principle is that zakat isn't due on fixed assets, but on any inventory or cash you hold. So its a lot less onerous than a blanket wealth tax.

Re: How to convert between wealth and income tax

#362

Post by lurker919 »

abletonlive wrote: post #280
voidhorse wrote: post #268

Earlier quoted context omitted.

I don't think anyone is simply envious. People mean to point out that allowing individual accumulation of wealth to extreme degrees lead to runaway structural problems. Billionaires and companies existing and providing wages are not inextricably intertwined. It's entirely possible to have one while preventing the other. The idea that the only way you can incentivize individuals to start companies is to allow them to…

> I don't think anyone is simply envious. I think most are. > The idea that the only way you can incentivize individuals to start companies is to allow them to accumulate so much wealth that they become tiny kings is patently absurd. The world has thousands of companies and founders who happily sustain their businesses without ever reaching this ungodly and idiotic level of uber wealth. And how many of those companie…

Thank you for spelling out some good points. They always seemed obvious to me but I could never clearly explain them.

Re: How to convert between wealth and income tax

#363

Post by Manuel_D »

SoftTalker wrote: post #356
AnthonyMouse wrote: post #318

Earlier quoted context omitted.

> 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.

This would be an extremely regressive tax regime, effectively a flat tax rate. Worse than a flat tax rate, actually, since consumption rates do not scale linearly with income or wealth.

Re: How to convert between wealth and income tax

#364

Post by abletonlive »

zzrrt wrote: post #339
abletonlive wrote: post #243

Earlier quoted context omitted.

[flagged]

> the idea that nobody benefits from the creations of billionaires has to be questioned Who said that? Not in the post that prompted your reply, nor in the parent post. > Illegal and legal immigrants are being completely supported by Uber right now in NYC. Can you prove that taxis wouldn't have been able to do that, if Uber didn't exist? That wealth taxes wouldn't have been able to support them? > The gate that previ…

> Can you prove that taxis wouldn't have been able to do that, if Uber didn't exist?

Yes, because we only have to go back a few decades to see that the cab industry in NYC were being gatekept by medallions that people were paying 800k+ for just to have the opportunity to drive cab. That was not a system made by billionaires. That was a system made by the government and unions, which is exactly the system that you're fighting for.

> Musk is also erecting new gates, to promote himself and his ideas. I have to admit, I'm surprised what he lets stay up there, but I still don't believe it's an actual free platform.

It's more free and less friction than what we had before. The fact that you can't accept it despite the evidence in front of you and your own observations about being surprised is highlighting that you are failing to be objective.

> Vibecode it; the billionaires tore down the gates that previously blocked your ability to have any software you want -- as long as the billionaires accede to your use of their AI and running your own software against their platforms, of course.

Sure, another capability that billionaires unironically gave me. I do have other more interesting things to work towards.

> ou complain about open platforms filled with people giving you their ideas for free, and you just don't like what they're saying, but you just cited exactly that openness as one of the valuable things that billionaires deserve to have billions for.

Yes, and notice that I didn't say that they should be banned from the platform and their speech oppressed. I turned it around to make it about my own consumption. I have the free will. You're not arguing against me, you're proving my point.

> Maybe the people arguing against billionaires don't believe capital efficiency is paramount, so you'd have to persuade them of that first

Maybe we shouldn't assume the people without capital know what is paramount and what isn't when it comes to capital. It's hilarious to think there's some poor chap out there saying these people are being too efficient with capital and accumulating it while also believing that capital efficiency is not paramount. Hello? The problem you're pointing out is directly related to capital efficiency, yet you think the solution is to be capital inefficient. That has clearly not worked out for you or for anybody else in this society. We have countless examples where capital inefficiency has hurt us badly in this society.

Re: How to convert between wealth and income tax

#365

Post by stymaar »

omoikane wrote: post #346
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…

> pay 40℅ tax Offtopic but I thought your percent looked weird. Turns out, that's the "care of" symbol (℅, U+2105) and not percent (%, U+0025).

Fixed, thanks.

I had noticed something was off when proofreading but I didn't know this symbol and I couldn't explain what I did wrong so I assumed it must have been a graphics glitch.

TIL about the “care of” symbol: https://en.wikipedia.org/wiki/Care_of

Re: How to convert between wealth and income tax

#366

Post by masterj »

pg seems to think we would be scandalized by this math, when all I feel is “so?”.

The language politicians use to sell to a general public does not have any correlation to their understanding of the mechanics. The people proposing this policy entirely understand the ramifications. That is the point of the policy.

The average person is already subject to something like a wealth tax through property taxes, in addition to also needing to pay taxes on their income. Join the club pal.

Re: How to convert between wealth and income tax

#367

Post by Epa095 »

jppope wrote: post #97
__turbobrew__ wrote: post #64

> In fact the conversion rate between them is about 20. A wealth tax of 1% is equivalent to an income tax of 20%. Sure, but you actually have to work for continued income. Wealth accumulates with no input once established. Wealth has the ability to increase (capital gains) without having to pay tax until it changes hands, whereas when income increases it is immediately taxed at a higher rate. Additionally, wealthy pe…

> Wealth accumulates with no input once established. This is incorrect, historically you'll pay a ~2%-3% loss via inflation if you keep your money in cash. If you invest (making it capital) in bonds or securities then you will see accumulation, but thats actually a risk premium. > Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income…

The S&P500 has increased 9.8% annually the last 100 years, roughly 6% annually adjusted for inflation. Yes, past performance is no guarantee for future, but historically a completely passive index placement of wealth into S&P500 would double the real (adjusted for inflation) wealth every 12 years. With absolutely no work.

Re: How to convert between wealth and income tax

#368

Post by bombcar »

votepaunchy wrote: post #351
naijaboiler wrote: post #341

Earlier quoted context omitted.

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.

It’s an income tax wearing the trenchcoat of a retirement annuity- it’s not one for any practical purpose.

Re: How to convert between wealth and income tax

#369

Post by ecshafer »

Wealth and Income taxes are both wrong. What we need is to tax Land and Rents. By taxing land via a Land Value Tax system, and rent seeking monopolistic behavior, this will allow productive labor and productive capital to be exercised for economic growth.

Re: How to convert between wealth and income tax

#370

Post by QuercusMax »

NoMoreNicksLeft wrote: post #357
analog31 wrote: post #249

Earlier quoted context omitted.

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…

Your argument must not be very convincing if need to refer to your opponents using slurs.

Using a wealth tax to nationalize corporations sounds like exactly what we should be doing.

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