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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#591
post #413

Earlier quoted context omitted.

I'm not sure european examples are a great comparison. First, most european wealth taxes (including recently defunct ones) have much lower floors than US proposals. $1m instead of $100m. That changes a lot. France did experience "capital flight," famously Gerard Depardieu. Second, "capital flight" has always been present in Europe. There's a long history of it, and practical realities make it relevant. I do agree abo…

> One point that PG does address which is often skipped over is that a wealth tax is a "deplete billionaires" policy It has long been my impression that eliminating or reducing billionaires is the primary goal of wealth tax advocates other than those whose advocacy primarily consists of sharing memes on social media. Raising revenue is largely a red herring.

What I meant was the opposite.

Reducing billionaire wealth, or limiting its growth is st stated aim. Piketty and like minded economists argued for it directly. The political proposals (eg Warren's) were also straightforward.

It is a red herring, but money always is when it comes to politics. They all have stuff they want to fund.

By Picketty's math, 2%-2.5% is roughly break-even. That is, average billionaire wealth will grow in proportion to the economy & wages. Less, they will grow more slowly relative to the economy. Above 2.5%, millionaire wealth will decrease, relative to the size of the economy.

Re: Modeling a Wealth Tax

#592
He is not modeling the threshold below which wealth is not taxed. The wealth tax being proposed in California is 0.4% on amounts over $30MM, so the lifetime percentage taken by the government on a $30MM stock cash-out via the proposed wealth tax would be 0%.

So the proposal boils down to $30MM tax free, and then 21.4% on the amount over that. But you're also likely to invest that money making, say, 7%. So your return each year on the first $30MM is 7.0% and is 6.6% on the rest after paying this tax.

Re: Modeling a Wealth Tax

#593
Haha, come on. If you're going to model compound losses you should at least try and address compound growth. Wealth taxes are desirable because they erode dynastic wealth. That's a feature, not a bug. This is the same kind of dubious, selective accounting that I expect to see in a face-gram meme from a grandparent.

Re: Modeling a Wealth Tax

#595
I think the wealth tax and the wealth ceiling should be a function of population, water & groundwater health and safety, food price, real estate price, transportation cost, communications cost, and air quality. I think we should heavily dis-incentivize wealth accumulation through human predation, mooching, and looting. I think that we should set this function to gracefully break down in catastrophe so as not to run contrary to survival and means itself, and so that the cost of real catastrophe is clear and apparent to all, while simultaneously destroying the incentives to harm future and potential interests.

Re: Modeling a Wealth Tax

#596

Boooooooo This is just bad (bad == misleading) math. Where's the appreciation of the assets? Where's the real examples from other countries that have tried wealth taxes? I don't know what he's _trying_ to do, but the effect of his rhetoric certainly seems to me that "If you won the lottery, you this would be bad for you! [but if you don't, it'd be great for you, and really only bad for ultra-rich people like me]" I'd…

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Re: Modeling a Wealth Tax

#597

Boooooooo This is just bad (bad == misleading) math. Where's the appreciation of the assets? Where's the real examples from other countries that have tried wealth taxes? I don't know what he's _trying_ to do, but the effect of his rhetoric certainly seems to me that "If you won the lottery, you this would be bad for you! [but if you don't, it'd be great for you, and really only bad for ultra-rich people like me]" I'd…

> I don't know what he's _trying_ to do He's trying to justify policies that keep himself rich.

No other way to read it, unfortunately.

Re: Modeling a Wealth Tax

#599
There are a host of reasons both, practical and philosophical, to oppose a wealth tax. The impact on founders and startups is at best a second or third order one and ultimately is a distraction more than anything.

Re: Modeling a Wealth Tax

#600

Perhaps notable: Switzerland has a wealth tax (of up to 0.3%), and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland. Other features of the tax system more than offset the 0.3% wealth tax. Personally, I am a bit disappointed by the lack of depth of the discourse: Wealth taxes and their effect have been studied quite a bit in ec…

You are right that the discourse is not nuanced, but it highlights a very basic problem with taxing an asset again and again, especially on unrealized gains.

We gladly support this idea, because it affects "the billionaires" but not when it comes to everyone else and for good reason. Repeated taxation on an asset can erode your wealth really quickly. Here in California, your house gets taxed on the purchase price, but not the current valuation. Therefore you have people sitting on more than one multi million dollar houses that they bought for low 6 figures 3 decades ago. (Ironically this is one of the main contributor to sky high real estate prices and housing crisis) But we don't tax people on those unrealized gains, that too again and again, because if we do, most people would lose all their wealth in a matter of couple of years.

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