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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

#461

Post by __turbobrew__ »

opo wrote: post #182
__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…

>...Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax. This is just Internet mythology. The IRS would go after such arrangements very quickly - the IRS has the Applicable Federal Rate for loans. Though this really isn't an issue with banks as they are not charities and tend to want to make money.

It is called “Buy, Borrow, Die” and it is a very real thing.

Re: How to convert between wealth and income tax

#462

Post by kansface »

chipotle_coyote wrote: post #423

This seems to be willfully eliding that proposed wealth taxes tend to either be taxes on wealth above a certain amount, or (such as California’s) a one-time tax on people with wealth over a certain amount. If I were a mere millionaire -- technically, I am, with a net worth of just over $1.1M, but this would be true if that were $5M or $10M or even $50M -- then under any proposal I’ve seen, my wealth tax would be $0.…

No one believes or acts like this will be a one time event (on any side of the issue). The history of all new forms of taxation is that eventually it will come for you.

Re: How to convert between wealth and income tax

#463

Post by topaz0 »

everfrustrated wrote: post #292
Glyptodon wrote: post #220

Earlier quoted context omitted.

Most FIRE people aren't going to have $50 million plus and be hit by this.

It will never stop at $50M. Once the law is created it is sooo much easier to just lower the threshold. Even if not lowered, in 30 years inflation means it will capture a whole different number of people - maybe you. Maybe it will bankrupt your children.

"taxes only ever go up" is an incredible belief to hold in a historical run of decades of tax cuts.

Re: How to convert between wealth and income tax

#464

Post by lazide »

harimau777 wrote: post #389
lazide wrote: post #310

Earlier quoted context omitted.

The argument was that it was ludicrous to say a wealth tax of x percent > income tax of x percent in actual impact, yes? It is clearly the case if you try to apply the income tax rate as a wealth tax using concrete real world examples. Even a 3% property tax makes it very difficult for many normal people to own those assets in many real world economic circumstances.

I don't think that those issues would be too difficult to fix. The tax could be made progressive so that it doesn't impact people who can't afford it. Someone's primary home and vehicle could be omitted from the tax.

It does change that there is a multiplier. Even 5% is likely a deathknell for all but a couple percent of assets owned by the most aggressive ‘sharks’.

A good way to make owning anything unaffordable though! The carve outs would just defacto set a cap for normal people. No more than one house, etc.

Re: How to convert between wealth and income tax

#465

Post by rurp »

trollbridge wrote: post #245
Glyptodon wrote: post #217

Earlier quoted context omitted.

Lol, that's still totally feasible for normal FIRE/retirement situations, my understanding is that most proposals only start at $50 million or more. You can still have a super cushy retirement with $3mil+ and 3% withdrawal forever.

Sort of like how the income tax in America started with it only applying to the top 1% of earners?

Do you remember when the top marginal tax rate was 90%? Things don't only move in one direction. The effective tax rate on the ultra wealthy has been steadily trending down for decades.

Re: How to convert between wealth and income tax

#466

Post by zzrrt »

abletonlive wrote: post #319
zzrrt wrote: post #297

Earlier quoted context omitted.

If they were saying that kings shouldn't have the unchecked right to execute people, this response would be akin to "Oh, you just wish you could kill anyone. Your argument is invalid."

Not really. The person saying that billionaires shouldn't exist is just failing to describe why that number is so mystical or interesting to them. If billionaires don't exist are we saying that people worth 500 million won't have power? you can keep doing this but the end result is the same. Power is asymmetrical and the system is self balancing. Those that have more wealth have more power. It's that simple. If you w…

Like saying, "There have never been more opportunities for commoners to become kings!" Okay, most of the people who say kings shouldn't exist will still feel that way, even if they could become king.

> You are closer to a billionaire in your capabilities and agency in this society than a peasant was under an actual King.

How much of that is because I live in a democratic republic, and not because billionaires exist? I guess you might say they're the same thing, but I believe there are free-enough societies with less wealth/power inequality than the US. I think I care more about the gap between top and bottom than about my own personal level of power, but of course it's hard to be objective.

It is harder to draw the line with money than with literal kingship, but I don't accept that we should change nothing and let unbounded power disparities exist.

Edit: More to the point of the original article, maybe I can accept their existence if we plugged all the holes they use to pay a very low percentage, as discussed in other comments. They may remain billionaires, but the tax law would treat them more like the rest of us than like kings.

Re: How to convert between wealth and income tax

#467

Post by deeponey »

pzo wrote: post #436
trollbridge wrote: post #387

Earlier quoted context omitted.

Unrealised capital gains tax requires some way to assess the value of assets. This is a lot harder than it sounds. It already exists in the form of property taxes, which are quite unpopular.

at least all financial assets (stocks, etc) are easy to assess value so why not start with that? same with gold, silver etc. Some minimal amount you can make it nontaxable to reduce administrative burden.

this a million times. Land easy, already being taxed. Any regulated financial instrument, also easy, take the minimum average yearly price of held assets. Tricky things like privately held companies, maybe we solve that one later, but even then there are valuations made at various points, anchor to those, be conservative in every case. If the gov primarily exists to enforce property rights... then people should pay in proportion to the rights that are being enforced on their behalf.

Re: How to convert between wealth and income tax

#468

Post by Terr_ »

SoftTalker wrote: post #323
jdasdf wrote: post #276

Earlier quoted context omitted.

> The big flaw in his argument is that a mere 1% which is actually 20% of annual return is still less than the average income tax rate on workers This is untrue btw 50% of people in the US pay effectively no net taxes

No net income taxes. They still pay payroll taxes, state taxes, sales taxes, and various other state or local taxes and fees.

Right, the overall tax burden is closer to flat.

https://itep.org/fairness-matters-chart-book-on-who-pays-sta...

Re: How to convert between wealth and income tax

#469

Post by abletonlive »

booleanbetrayal wrote: post #419
abletonlive wrote: post #243

Earlier quoted context omitted.

[flagged]

You know nothing about me, yet you assume everything. I think having that much money is egregious and I am certainly not envious of people who have an endless void to fill, let alone those who aspire to be like such people. My life is quite full, thank you very much. I think it's a bit ridiculous that these individuals feel the compulsion to min-max their capital at the expense of pursuits that could better be fueled…

The irony of saying that I know nothing about you while saying that you know that billionaires have an endless void to fill, and think that billionaires are simply running on the compulsion of min-maxing capital instead of min-maxing the results of their capital.

Shameful and obvious envy. You're not fooling anybody because your comments betray you

Re: How to convert between wealth and income tax

#470

Post by WalterBright »

dh2022 wrote: post #407
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…

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 o…

Starbucks is moving its headquarters from Seattle to Tennessee.

Many other businesses that are not large enough to interest the newspaper are moving out as well.

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