561–570 of 587 posts
Earlier quoted context omitted.
Eh, this would discourage investment. Investment is important.
By the same logic, taxing sweat-of-the-brow income higher than capital gains discourages labor. And, between the two, labor is clearly more important.
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You too are conflating wealth ("rich people") and income ("me").
At a certain point, a high enough income IS wealth. How many american's become millionaires? How many SF software developers can become a millionaire in just a few years? If you make $400k a year, you are rich/wealthy. If you don't feel it, re-examine your lifestyle and whether you are actually spending your money well, maybe you're buying too much avocado toast /s
1. TC numbers (hypothetically ~$400k as you quoted, which generally agrees with levels.fyi) are not real income. We know what happened to (tech) equity this year --- this (unfavorable) gap between grant price/share and vesting price/share has deflated a lot of the TC, much more so if the grant date happens to be right before the onslaught. (Personally I landed almost square in this territory due to a somewhat forced job switch but that's another can of worms I'm not opening today).
2. Whatever is left from that TC number, tax man takes ~40% of it period. Deductions are for most cases a rounding error.
3. TL;DR housing costs scales with salary over here too. Long version: The kind of housing that (transplanted) SWEs and their families would reasonably consider in SFBay has generally been priced (by "the market") right up to the limit of their income-derived affordability, most of which is calculated (by the underwriters) straight from SWE base salary, which we know is constrained by BigTech paybands (which propagates to startups too).
4. Okay, now an inevitable personal finances bullet point: Educated responsible adults as we are, a significant savings (incl. investments) rate surely sounds prudent eh? Say (temporary) goodbye to another xx% of whatever's left at this point.
5. Adding insult to injury, avocado toasts are now about 1.5x to 2x their price compared to early 2020. I feel compelled to add that this agrees with the larger trend of any kind of prepared food.
6. Elephant in the room: Kids.
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I can go on and on, but hopefully I am getting the point across. The "salary man" of today has not only his theoretically big TC "pie" shrink over time, but an increasingly larger slice of it becomes marked as non-disposable. Assuming reasonable (not necessarily optimal) personal finances management and maintaining a reasonably high QotL (nothing excessive), I don't see me or my similarly positioned peers feeling rich / upper-middle-class-y any time soon.
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Come to the Netherlands! 52% kicks in early and plus there is the 2% worldwide wealth tax on all non-real estate investments. Is it worth it, just to live in a shockingly civilized society under a highly functional government?
You mean the shockingly civilized society that is a drug trafficking capital of the world with a recent spate of mafia murders? The one with 1.55 births per woman? I always laugh at dying European societies that consider themselves "civilized" vis-a-vis the rest of the world and can't help but lecture everyone else about how to structure their society. It reminds of Borrell's "Europe is a garden, the rest of the worl…
There are two core insights here that are actually pretty obvious: 1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts. 2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome. As others have pointed out t…
There are two core insights here that are actually pretty obvious: 1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts. 2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome. As others have pointed out t…
Indeed. It's also quite nonlinear. Being able to afford those gambles whole also reserving a cushion that protects your house and apply to eat is very expensive. Not many people can make signify passive income without leveraging anything. But once you can, it becomes a compounding upward curve. Most people die before they get to the second half of the chess board.
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It's not created by those people. It's created by some worker somewhere, and those people collect most of that created wealth as economic rent, solely because they own the capital used in the process.
Without their capital the whole organization where workers are creating would not exist in the first place. So the market is rightly rewarding capital owners for risking it in the first place. Do you think that is easy and just "collecting rent"? What is your experience investing?
For that matter, how did it come to be that capital is so concentrated that most productive people have to rent it to generate wealth?
There are also a lot of bad actors at the upper end that are facilitating a global ponzi scheme at our expense, and they will be bailed out over and over again because they've made it impossible for competing banks to enter the market through lobbied regulation that came as a response to their bad behavior.
Read up about the creation of the fed, what they've done, how many bailouts they've done, how many people were held accountable, you'll find it always ends in their favor. Behaviors that would send individuals to jail for decades are avoided by paying a small piece of the proceeds they get from those frauds disguised as penalties. Its been baked into the system.
Worse, many people immediately jump to something along the lines of "well that's people being greedy and its a downside of capitalism and we have to do something about that".
The problem with those people is, they don't know what they are talking about because its not capitalism, you often get monopolies in socialism, and while capitalistic societies are driven by a division of labor, socialistic economic systems are driven by corruption, and what are our the major issues right now? Corruption.
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Without their capital the whole organization where workers are creating would not exist in the first place. So the market is rightly rewarding capital owners for risking it in the first place. Do you think that is easy and just "collecting rent"? What is your experience investing?
Without the labor, the output wouldn't exist either, so why do the capital owners pocket most of the generated wealth? For that matter, how did it come to be that capital is so concentrated that most productive people have to rent it to generate wealth?
Capital tends to concentrate, indeed - but that is also a good thing as it allows bigger enterprises. However the cost to build a new business has been steadily decreasing over the year together with the cost of capital while its availability has been increasing. Today's most productive people can easily open their own practices and set their price on their own contracts. The "rent" they pay is hugely outweighs by their future profits.
If you want to rail agains something, rail against the fact that financial education and investing is not more widespread so people do not understand that they can participate and invest in capital markets from very low amounts of money. Capitalism is powerful and empowering but requires work and education.
Earlier quoted context omitted.
So your plan to tax wealth instead of income doesn't involve taxing wealth? Sure you can do all that, and that would close some tax loopholes (albeit at a cost), but has nothing to do with taxing wealth instead of income.
See step 4? They should probably add in an increased capital gains tax as well
Intuitively, it seems like everyone is making a fair bet because you're equally likely to win or lose. If you have an initial net worth of $1000 and flip a coin you're equally like to gain or lose $200 and your expected net worth after the flip is still $1000 (50% chance of $1200 or $800) so it's a wash, right? However their simulation kept having me end up poor which confused me, so I ran the same simulation in a Python script. What I found was as the number of flips increases your net worth approaches zero! I found this surprising because if the expected net worth after a single flip is unchanged, I would expect this to stay true for multiple flips. But based on simulations, against my intuition, it seems like this is actually a bad bet in the long term and you'll always lose money. This is still true even if you start to skew the odds and give them a 51% chance to win the coin flip.
So after some googling I found something called the Kelly Criterion which calculates whether a bet is good or bad based on the gains and losses and chance of each and decided to plug in these numbers: https://en.wikipedia.org/wiki/Kelly_criterion#Proof
For the game in the article, the rules are that the poorer person bets 20% of their net worth on a coin flip, so these are the variables:
f=20%
p=50%
q=50%
a=20%
b=20%
r = (1 + f*b) ^ p * (1 – f*a) ^ q
= (1 + 0.2 * 0.2) ^ 0.5 * (1 – 0.2 * 0.2) ^ 0.5
= 0.99919967974
If you forced a rich person to play this same game of repeatedly betting 20% of their money on a coin flip they would also end up losing all their money! When you frame it like this it's obvious that having a poor person play an unfavored gambling game and deposit their losses to a rich person is going to favor the rich people. This doesn't seem like a critique on capitalism or inequality, it's more analogous gambling at a casino.
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However I am still confused how you can have a game where the expected gain after a single match is 0%, but when playing multiple rounds your expected gain is negative (this is what plugging numbers into the expected value formula in the Kelly Criterion wiki seems to prove). I find this counterintuitive and hoping someone can explain this.