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How to convert between wealth and income tax

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Re: How to convert between wealth and income tax

#401

Post by cyberax »

gruez wrote: post #273
smallmancontrov wrote: post #253

Earlier quoted context omitted.

The gap between productivity and wages is striking, isn't it? I'm not perfectly aligned with gold bug politics. Their faith in the Kindleberger world is misplaced and their tax aversion can make them useful to my opponents, but at the same time they tend to take the Cantillon Pump and Balance of Payments mechanisms seriously while my traditional allies do not. No, I don't mind borrowing their charts. Why? Do you have…

>The gap between productivity and wages is striking, isn't it? It's not. The (in)famous epi.org is flawed for all sorts of reasons, from excluding noproduction/supervisory workers (the highest compensated ones!), to excluding non-wage compensation (eg. benefits), to different deflators for compensation vs productivity. If you adjust for all of that, the chart is unremarkable. https://www.piie.com/blogs/realtime-econo…

There are deep problems with _both_ arguments. Your "happy fun chart" does not include negative effects from the _types_ of jobs that are available now.

Nearly all good jobs are now concentrated in dense city cores, in the ever-dwindling set of large cities. This drives up the _cost_ of having these jobs. For example, the median ratio of rent to income is rising: https://www.moodyscre.com/insights/cre-trends/housing-afford...

And this "cost of work" is not only monetary but also psychological and physical (it takes longer to commute). You also don't get nearly the same amount of job security as your parents.

From the epi.org chart - it indeed misses that a lot of stuff is now cheaper. Clothes, electronics, toys and even appliances - they are so cheap that we now treat them as disposable!

Re: How to convert between wealth and income tax

#402

Post by whodidntante »

SoftTalker wrote: post #295
chasd00 wrote: post #257

Earlier quoted context omitted.

> only start at $50 million or more curious how they came to that number. There's probably plenty of voters willing to cast a vote for $0.5M+ and plenty ready to cast a vote for $100M+. How was the line drawn?

The minimum net worth of the top 1% of households is roughly $13.7 million[1]. So at $50 million they can say "we're only taxing the top of the top 1%" as a way to sell it. "The top 1%" is a popular target for these schemes because 99% of people might be convinced to support it, since it won't affect them (at least not directly). [1] https://www.investopedia.com/financial-edge/1212/average-net...

A wealth tax will affect the distribution of investments. It might make higher risk investments like stocks more attractive as compared to bonds, it might make them less attractive. More likely it might make publicly available instruments less attractive in general, as private investments have more flexibility in how they are evaluated. In any case, there will be winners and losers as the investment landscape shifts, which affects everyone. If equity becomes more attractive, it could force less wealthy people into equity, which means they will take on more risk. If private investments become more attractive, less wealthy people will lose out. It might not affect those with no assets, but that is not certain either. So, everyone will be affected, in some way. Impossible to model due to unintended side effects.

Re: How to convert between wealth and income tax

#403

Post by Dylan16807 »

SoftTalker wrote: post #343
Dylan16807 wrote: post #326

Earlier quoted context omitted.

> an effective tax rate of 40%. 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.

Yes it is. ($1,000 * 1%) + ($5 * 20%) = $11 tax due on $5 income. They are separate taxes but he's expressing them both in terms of an effective income tax rate. In this case, since you owe more taxes than income you've earned, you'll need to sell off some of your wealth to pay up. If you have no income at all, but do have wealth, then you get a division by zero error so I do get that it's maybe absurd to frame it th…

It's not an effective tax rate, it's an absurd parody of an effective tax rate.

If that $5 of ""income"" is actually capital gains, then it won't be taxed very highly, and adding another 20% is fine. The discussion of 37% + 4.5% + 20% is misdirection.

If that $5 is honest to goodness income, then on average you're also getting $5 of unrealized capital gains, which means you're not paying $2 on $5, you're paying $2 on $10. Or maybe you realize part of the gains and you're paying somewhere between $2 and $3 on $10. A much smaller impact, and that's only if someone in a medium tax bracket with 20x their income in wealth is even affected by the wealth tax at all.

Re: How to convert between wealth and income tax

#404

Post by philipallstar »

harimau777 wrote: post #384
lazide wrote: post #284

Earlier quoted context omitted.

Sure. The issue I’d see is in 20 years inflation might mean that applies to almost everyone, like AMT, but that is a future us issue. The biggest personal complaint I have is why should the government be getting more tax money when all they seem to use it for is blowing up random countries in the Middle East and spying on law abiding citizens for whatever random reason.

You could peg the numbers to inflation. Personally, I see a big benefit of a wealth tax being lowering wealth inequality; even if the money isn't actually used for anything useful. That would at least help prevent the ultra wealthy from being able to unilaterally ruin society.

They can't ruin society unilaterally, unless you're talking about Vladimir Putin, who can only do it because he's the head of an autocratic socialist state as well as potentially being the richest man in the world. But the rich bit isn't what does it.

Re: How to convert between wealth and income tax

#405

Post by DontBreakAlex »

Manuel_D wrote: post #363
SoftTalker wrote: post #356

Earlier quoted context omitted.

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.

I think he meant that you'd have the brackets apply to types of consumption instead of income level, so no tax on food, low tax on restaurants, medium tax on high-end electronics, insane tax on planes and yachts. I mean it sounds like it would be easier to maintain/enforce such tiering system than constantly fight with people trying to not technically be wealthy. Downside of course is that some people's luxuries are other's basic needs, but I wonder if there's been serious research on the implications of such system.

Re: How to convert between wealth and income tax

#406

Post by MeherunJessi »

DontBreakAlex wrote: post #405
Manuel_D wrote: post #363

Earlier quoted context omitted.

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.

I think he meant that you'd have the brackets apply to types of consumption instead of income level, so no tax on food, low tax on restaurants, medium tax on high-end electronics, insane tax on planes and yachts. I mean it sounds like it would be easier to maintain/enforce such tiering system than constantly fight with people trying to not technically be wealthy. Downside of course is that some people's luxuries are…

[dead]

Re: How to convert between wealth and income tax

#407

Post by dh2022 »

jppope wrote: post #312
colinmarc wrote: post #164

Earlier quoted context omitted.

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.

> 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. I consider this fine, because proponents of a wealth tax consistently omit that it will ultimately be the middle class who pays the tax... the ultra-wealthy and wealthy can afford sophisticated strategies to render a wealth tax ineffectiv…

If the ultra wealthy move out a few people will lose their jobs (their family office, some accountants, some property managers will work the same job for someone else). But overall people will not be worse off.

We have been doing this exact experiment in Seattle sine 2024 when Bozos moved out. And last month Howard Schultz moved out as well. The sky did not fall.

Another example- did the average Londoner get better off when Russian oligarch parked their money in London in early 2000s? And likewise - was the average Londoner worse off when that money was frozen in Jan 2022 when Ukrainian war started? Not really…

Re: How to convert between wealth and income tax

#408

Post by twoodfin »

avidiax wrote: post #258
jandrewrogers wrote: post #205

Earlier quoted context omitted.

There is no evidence[0] that the wealthy use the "buy, borrow, die" strategy in any significant way. The underlying financial math doesn't make sense if the goal is to maximize wealth so it isn't surprising that wealthy people don't actually do it. [0] https://www.sciencedirect.com/science/article/abs/pii/S00472...

That paper is looking at the top 1%. Buy, borrow, die is the realm of the top 0.1 % or 0.01%. Are you saying that billionaires are actually realizing capital gains to afford yachts, private jets, and mansions?

Of course they are. You can read reports to the SEC on executive stock sales all day.

Here’s billionaire Tim Cook last month:

https://m.investing.com/news/insider-trading-news/apple-ceo-...

Re: How to convert between wealth and income tax

#409

Post by themafia »

Cool, now I just need: "How to convert between silicon valley bloviating and normal human dialog."

> None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.

Income tax is progressive. So, not really.

Re: How to convert between wealth and income tax

#410

Post by jppope »

armitron wrote: post #378
jppope wrote: post #312

Earlier quoted context omitted.

> 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. I consider this fine, because proponents of a wealth tax consistently omit that it will ultimately be the middle class who pays the tax... the ultra-wealthy and wealthy can afford sophisticated strategies to render a wealth tax ineffectiv…

As has happened in nearly every European state with wealth taxes. But the elephant in the room is that these policies give the same ineffective, corrupt and entirely worthless politicians even more money to "manage". The very definition of delusional wishful thinking.

this is the key fact. If a wealth tax were enacted and a responsible group were endowed with the money we might reap some value from a wealth tax. Giving American Politicians more tax money is like giving a heroine addict more heroine.
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