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American Equity

blog.samaltman.com

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Re: American Equity

#391

Post by eru »

natrius wrote: post #378
RivieraKid wrote: post #46

Earlier quoted context omitted.

The drawback of taxing wealth is that it distorts markets, it discourages saving. EDIT: Can't comment ("You're posting too fast, blah blah blah"). Here are some replies to the comments bellow: > It's encouraging people to make their money be productive instead of stashing it under a mattress. When you have money in the bank, you're effectively lending most of it to other people. Your money is "productive", which is e…

The economy does not care whether you put your money in a bank or under your mattress. The central bank will influence interest rates in response to your actions. What matters is the amount of money that's actually chasing goods and services. If the central bank wants banks to have more reserves for loans, it buys assets from banks in exchange for newly created reserves. Money markets are a command economy.

You are right about monetary offset, if the central bank is well-run. (Which eg the Fed wasn't during the last recession.)

Of course, someone still has to decide whether to consume now or invest. Or whether to invest in economically efficient ways, or in ways that are only economically efficient because of weird tax arrangements (but are actually less productive).

Re: American Equity

#392

Post by eru »

dennis_jeeves wrote: post #363
megaman22 wrote: post #220

Earlier quoted context omitted.

The problem is that eventually you run out of other people's money.

Let me add to the tirade. Somewhere on the web I saw: Taxing income, is like 9 wolves and 1 lamb deciding what's for dinner. Quote (by probably Winston Churchill )- Any man who is not a socialist at age 20 has no heart. Any man who is still a socialist at age 30 has no brain. Please upvote.

Please refrain from asking for upvotes. (You'll even receive more upvotes this way, if that's really what you are after.)

Re: American Equity

#393

Post by oarsinsync »

majormajor wrote: post #386
oarsinsync wrote: post #385

Earlier quoted context omitted.

#define financially independent That phrase means different things to different people. In some parts of the world, $50k could consider you to be financially independent. $500k in others, and in some parts, you'd need $5m - $50m. What if I told you it cost $5/day to rent a luxury hotel room with cleaning, full board, and high speed broadband provided as standard? What if I told you it cost $1500/month for a small stu…

There's a header of "American" on this very post, and it's specifically talking about the US, so I'm starting there. The biggest potential cost of someone in the US, with employer-tied healthcare, seems like medical. You could hit the unlucky jackpot and have a seven-figure+ medical bill over the course of a few years or life. So let's set "able to handle that for yourself and your family" as the baseline for being c…

All fair points, but even within the US, $5m goes as far in some states as $50m does in some cities. Besides that, one person's "personal safety net and toys" is another person's "not enough", is another person's "greed".

Meanwhile, you're getting taxed on the estate you're trying to build as you build it.

Twice.

Every year.

As someone who's currently attempting to build his own personal empire, I'm incredibly glad I don't have a wealth tax to contend with. It's hard enough as it is, without knowing that if I start to draw close, it'll get harder and harder as I go. I might not have started trying if it didn't seem possible in the first place. Then again, I might have done it anyway. Where's a quantum theorist when you need one?

Re: American Equity

#394

Post by eru »

shawnee_ wrote: post #198
derefr wrote: post #176

Earlier quoted context omitted.

From the perspective of trying to get the budget balanced, taxing wealth is probably the single most efficient way to do it. From the perspective of the tax code as an incentive system , taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen! (This is also, for a similar reason, why economists don't like corporate taxes or trade…

> taxing wealth is probably the single most efficient way to do it. It's not taxing wealth so much as taxing the mechanisms that create undue inequality that would work: yes, I'm talking about taxing rental income. The number one driver preventing people from building savings is draining their income through rent. The solution is sort of obvious, but hated by people who love the AirBnB model: https://news.ycombinator…

That proposal is rather complicated, and probably inefficient. Why not just go with a land value tax?

Re: American Equity

#395

Post by majormajor »

oarsinsync wrote: post #393
majormajor wrote: post #386

Earlier quoted context omitted.

There's a header of "American" on this very post, and it's specifically talking about the US, so I'm starting there. The biggest potential cost of someone in the US, with employer-tied healthcare, seems like medical. You could hit the unlucky jackpot and have a seven-figure+ medical bill over the course of a few years or life. So let's set "able to handle that for yourself and your family" as the baseline for being c…

All fair points, but even within the US, $5m goes as far in some states as $50m does in some cities. Besides that, one person's "personal safety net and toys" is another person's "not enough", is another person's "greed". Meanwhile, you're getting taxed on the estate you're trying to build as you build it. Twice. Every year. As someone who's currently attempting to build his own personal empire, I'm incredibly glad I…

Good point, I was making an assumption that this was a wholesale replacement scenario for income and other taxes.

My only other quibble is that I haven't seen healthcare costs or insurance premiums scale to that 10x factor like housing prices do rural-vs-urban, otherwise I'd personally be perfectly happy with moving and retiring early. Get the right cancer or nasty chronic condition and you're gonna be out some serious bucks.

Re: American Equity

#396

Post by geofft »

oarsinsync wrote: post #385
majormajor wrote: post #368

Earlier quoted context omitted.

And the marginal effects of having 100M in the bank over 10M in the bank over 1M over 100K are all still huge for any feasible tax scheme I could imagine. What does your world look like where you'd be too taxed to bother wanting to be financially independent?

#define financially independent That phrase means different things to different people. In some parts of the world, $50k could consider you to be financially independent. $500k in others, and in some parts, you'd need $5m - $50m. What if I told you it cost $5/day to rent a luxury hotel room with cleaning, full board, and high speed broadband provided as standard? What if I told you it cost $1500/month for a small stu…

> If you work a 40 hour week already and make a decent living at 40-50%, and now get told that anything above that will get taxed at 75%, unless you're going to somehow generate more than double, you're going to spend that time doing more productive things (like spending it with your family).

Hold up -

1. Why is this about working more hours, instead of working harder / more effectively? There are 168 hours in a week; even if you don't sleep, you cannot maximize your income beyond about 4x just by working more. I am currently making about 15x the lowest hourly rate I ever worked for, and I'm still fairly early in my career and feel like there's a lot of room for my salary to increase as I become more skilled.

2. I'm reading the discussion was about a tax on wealth, not a tax on income (dwealth/dt). If you're making a decent living and want to make more money so you can spend it on things that are not investments (consumer goods like video games, services like vacation travel/hotels, charity, raising more children, sending them to college), a tax on wealth will not affect you, because your wealth stays right where it is. And doing all that is net-positive for the economy.

'majormajor is clearly talking about wealth in the sense of static assets, not change in assets over time: I'm worried about having a single medical emergency, not having one every year. Make enough for your (static) safety net, then stop making more money.

Re: American Equity

#397

Post by eru »

hvo wrote: post #232
RivieraKid wrote: post #46

Earlier quoted context omitted.

The drawback of taxing wealth is that it distorts markets, it discourages saving. EDIT: Can't comment ("You're posting too fast, blah blah blah"). Here are some replies to the comments bellow: > It's encouraging people to make their money be productive instead of stashing it under a mattress. When you have money in the bank, you're effectively lending most of it to other people. Your money is "productive", which is e…

Frankly,the trickle-down economics is not working.Plain and simple. Giving the rich lower tax and expecting them to invest the money back to the economy has been proved not to be working. And we know now that the ultra-rich folks tend to take the money,windfall from lower tax, and hide it in Virgin-Island, Panama,Cayman Island and other offshore tax havens.

To have this discussion properly, we would need to talk about tax incidence. (https://en.wikipedia.org/wiki/Tax_incidence)

It's a relatively well known fact that eg it doesn't really matter too much whether officially the employer or the employee is required to pay the employees income tax---the money comes out of the same pot.

Similar things happen for other taxes. Eg VAT in European countries seems to be paid for by the shops, but it wouldn't make a difference (apart from convenience in collection) if you'd levied it directly on the shoppers.

Any discussions about 'trickle-down economics' is incomplete without tax-incidence.

Re: American Equity

#398

Post by BenoitEssiambre »

alasdair_ wrote: post #374

I like the general idea. However, the problem with giving people a share of the GDP is that GDP is a terrible measure of useful economic production. As a trivial example: GDP goes up if I sneak into a car lot one night and set fire to all the cars. We need a better measure of "useful" economic production.

GDP does not go up on destruction. That's the broken window fallacy.

https://www.investopedia.com/ask/answers/08/broken-window-fa...

Reconstruction after destruction becomes part of GDP if it is performed but this reconstruction usually takes production resources that would have gone elsewhere otherwise. The person to pay for the reconstruction will spend less elsewhere.

Re: American Equity

#399

Post by eru »

ThomPete wrote: post #134
RivieraKid wrote: post #46

Earlier quoted context omitted.

The drawback of taxing wealth is that it distorts markets, it discourages saving. EDIT: Can't comment ("You're posting too fast, blah blah blah"). Here are some replies to the comments bellow: > It's encouraging people to make their money be productive instead of stashing it under a mattress. When you have money in the bank, you're effectively lending most of it to other people. Your money is "productive", which is e…

Discouraging savings is actually the point. We should tax money that sits idle and provides tax benefits to money invested. If you can build wealth around being active rather than just reaping the benefit of interest of interests then that should be encouraged rather than just grabbing and keeping.

Thanks to fiat money there's no money sitting idle: if you stuff your paper bills under a mattress, the central bank is just gonna print more money (temporarily) to reach its eg inflation targets. (And if you take your money out from under your mattress, they will print less money for a while.)

Re: American Equity

#400

Post by kelnos »

shawnee_ wrote: post #360
user5994461 wrote: post #216

Earlier quoted context omitted.

Pardon me but the solution you claim is already in place, well understood and totally ineffective. Income is already taxable, including rental income. On top of that there are various taxes for owning/occupying a property. It varies with what state/country you live in. Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a fe…

"Pardon me" but rental income is deductible more than it is taxable; everything to do with owning a property and generating "investment income" from it is incentivized to be deductible; it's a great and super fast way to make lots of money. I don't know what you do for a living, but I have two graduate degrees in accounting and economics, as well a decade and a half researching and studying this very problem. The sol…

If we remove deductions on rental income, wouldn't that just cause property owners to charge higher rent? If so, then yes, that would of course generate more tax revenue, but at the expense of the renters.
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