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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

#491

Post by Dylan16807 »

lazide wrote: post #464
harimau777 wrote: post #389

Earlier quoted context omitted.

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.

What's your definition of affordable here?

You can still own millions and billions of dollars of things, but you'll have to shrink your money pile over time to pay for those things if you don't have a source of income.

Re: How to convert between wealth and income tax

#492

Post by greedo »

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…

Consumption taxes are regressive in general and in particular with the 1%, they simply don't spend enough to have it impact their lifestyles.

Re: How to convert between wealth and income tax

#493

Post by notahacker »

gruez wrote: post #231
notahacker wrote: post #172

Earlier quoted context omitted.

Well for a start it pressurises asset holders to sell their assets. But the point isn't to increase stakeholdership so much as to stop privileging stakeholders with very low effective tax bills relative to mere workers, which means that there's a lot less cause for concern about those workers not owning their means of production

>Well for a start it pressurises asset holders to sell their assets. Even assuming this is true, then what? Do you think the average joe is going to suddenly buy alphabet or meta stocks because bill ackman or ken griffin sold their shares to buy bigger yachts?

Perhaps you could direct this strawman upthread, to the person who implied that to enable the average joe to obtain a share in the means of wealth creation it would be necessary for the HNW individuals who currently own it to be able to maintain that ownership without paying tax on it...

All I pointed out was that at the margin, HNW individuals needing to liquidate 1% of their portfolio every year (and also HNW individuals not being disincentived from realising their capital gains as under the current system) actually works in favour of people trying to buy shares in means of production (by increasing liquidity and lowering prices), as well as obviously against wealth concentration.

There are arguments against wealth taxes that are actually credible, like those concerning capital flight, but this thread seems like a magnet for bad ones. Like, AMZN valuation dropping slightly at the margin from Bezos at al's forced divestment of portions of their stock actually being a bad thing for the economy as a whole is a defensible position; the utopian scenario involving delivery drivers ending up with a decent sized stake in Amazon somehow being impeded by wealth taxes isn't....

Re: How to convert between wealth and income tax

#494

Post by accrual »

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…

> but people with extreme wealth are not bidding up sandwiches, studio apartments

They are, though. Private equity continues to buy apartments and increase rates. States with increasing PE ownership also have increasing rates of cost-burdened renters spending more than 30% of income on rent and utilities, e.g. in Tampa, Phoenix, DFW, and Atlanta. Maybe not specific people, but the ultrawealthy nonetheless drive these changes.

Re: How to convert between wealth and income tax

#495

Post by abletonlive »

booleanbetrayal wrote: post #476
abletonlive wrote: post #469

Earlier quoted context omitted.

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

I've met a few and they have all been solely focused on maximizing their wealth with little consideration for the second+ order effects. It's anecdotal, but I'll take first hand information over self-serving comms-fodder. Speaking of comments, I've seen yours on here. So much hate; so much toxicity. What exactly are you contributing here beyond discord? Maybe get your own demons in check and stop projecting.

> What exactly are you contributing here beyond discord?

Well I'm not on here very much and don't comment very much but sure I'll give this a shot:

The rejection of populist ideas that have pushed many into celebrating political violence and death. Want examples?

The rejection of the vicious cycle of envy that has been brewing in these comments and other platforms like this one that is the path that directly leads to above.

Re: How to convert between wealth and income tax

#496

Post by lazide »

Epa095 wrote: post #345
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.

Then let's bake it into a compromise, we add a wealth tax and decrease income tax with the same amount of money. Labour is what actually creates value in society, let's tax it less and ownership more.

You have my vote!

Re: How to convert between wealth and income tax

#497

Post by frmersdog »

SoftTalker wrote: post #414
DontBreakAlex wrote: post #405

Earlier quoted context omitted.

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…

Easiest thing would be to not have any tiers of consumption. The stuff people "need" to spend money on such as food and housing would be handled by an automatic rebate, effectively a UBI. No other welfare, assistance, etc. What you earn you keep, unless you spend it, then you pay tax.

Boy, that's going to suck for people whose credit situation has shut them out of most traditional housing situations. Or people who rely on what other people don't consider food for sustenance, for whatever reason (protein powder? multivitamins? supplies to grow/produce your own foodstuffs?). Just as examples.

Re: How to convert between wealth and income tax

#498

Post by lazide »

Dylan16807 wrote: post #485
NoMoreNicksLeft wrote: post #357

Earlier quoted context omitted.

>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…

> No one has a billion in cash that I've ever heard of. What's the biggest amount anyone has in treasury bonds or gold? You could easily liquidate a ton of that. > 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"? If the stock tanks that much while he's selling, then the company is only worth about $300 mill…

If owning stock (passively) all the sudden got taxed to any notable degree, you’ve just dramatically changed the value calculus for most of the world economy at this point. It would be shocking if the price didn’t crash.

Re: How to convert between wealth and income tax

#499

Post by frmersdog »

Manuel_D wrote: post #434
dh2022 wrote: post #412

Earlier quoted context omitted.

Debt is usually rolled over if the billionaire is still rich (banks will do that for fees). The only expenses are the interest charges- which were small 3 years ago but larger now because of how interest rate increased. Re: estate taxes - almost no ultra rich pays them, even without surviving wife. According tom Garry Cohn (former big kahuna at Goldman Sachd and former treasury something or other in the first Trump a…

As per your linked article, they mainly either give away their money to charity, or they set up trusts. When beneficiaries receive money from the trust, it's taxed as income.

You could also just... not pay. And then lawyer-up when the IRS comes after you. (They will not come after you, because they know you've lawyered-up and aren't going to make it easy.)

IIRC this is part of how they avoid taxes in general. Penalties don't hurt enough for the ones who do eventually face them.

Re: How to convert between wealth and income tax

#500

Post by keernan »

robertoandred wrote: post #334
keernan wrote: post #137

Completely ignores the true distinction between wealth and income taxes. Person A has one billion dollars. Holds it in cash in a vault deep in a mountain he owns. He does not earn any wages.[1] 20% income tax: $0.00 01% wealth tax: $10,000,000.00 [1] Every billionaire controls their taxable income. Unlike wage earners, billionaires have 100% control over how much taxable income they have each year. They make choices.…

Except they already paid taxes on that one billion in cash. The receipt of that cash is taxable income.

Every citizen should bear the same burden of paying for the cost of running a modern society. The taxes Musk pays should cause him to experience the same impact to his financial life as experienced when a worker earning $75,000 a year pays his taxes.

It's a fairness and moral issue. If we changed from income taxes to wealth taxes, everyone will have the same issue. The billionaire will experience paying taxes on money that was previously taxed as income; as will the $75,000 worker who saved every dime he could spare to create life savings.

What isn't ethical or moral is for the wealthy to create the rules of who bears the burden of paying for the cost of running society; only to later complain when those who got the short end of that stick want to create a fair system.

Moreover, the vast majority of wealth held by billionaires has never been taxed.

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