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Modeling a Wealth Tax

paulgraham.com

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Re: Modeling a Wealth Tax

#651

Post by kolbe »

cycomanic wrote: post #370
dalbasal wrote: post #332

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…

The question if billionaires are bad for society is pretty much the same question as asking if the aristocracy was bad for previous societies. The existence of billionaires clearly undermines the core principles of democracy which is that all people have essentially the same political power. The existence of many laws which clearly aim to benefit billionaires only is enough evidence that this power balance does not e…

> The existence of billionaires clearly undermines the core principles of democracy which is that all people have essentially the same political power.

Why is this axiomatically good, though? We should not be maximizing adherence to some theoretical democracy, but to a more abstract idea of how to best organize a successful society.

Re: Modeling a Wealth Tax

#653

Post by [deleted] »

grellas wrote: post #551

After being one of the top-rated commenters on HN for some years, I have not commented in a long while. For what it is worth, here is my two cents on a topic - a wealth tax - that may seem on the surface to be benign but that is in fact just the opposite. Silicon Valley was founded in a spirit of freedom and flexibility but that spirit is clearly and dangerously on the wane insofar as the political environment surrou…

[deleted]

Re: Modeling a Wealth Tax

#654

Post by matmann2001 »

What a laughably incomplete model. I don't care whose post this is. It's the epitome of short-sighted.

So the government just takes the money and that's the end of it? Not by a long shot. Every major proponent of a wealth tax in the US has proposed it as a means to fund public programs. Whether that means Medicare for All, Green New Deal style initiatives, tackling affordable housing, support services for the homeless, better child care, and/or increasing the accessibility of higher education, founders and their employees are sure to benefit a great deal. A model that doesn't even attempt to account for those benefits is not useful, and merely serves to shut down the conversation before it can even begin in earnest.

And let's get the government efficiency (i.e. lack thereof) argument out of the way too. Sure, a good portion of these funds will be "wasted" on bureaucracy and plain old corruption. If that's your main argument, try voting and participating in local government instead of being a NIMBY toward progressive ideas. And if you think for a second that these taxed funds would go farther if they remain in the hands of the wealthy, well, look around you and notice all of the socioeconomic issues that go unaddressed every single day.

Of course, the short-term thinking isn't surprising. Today's leaders heavily prioritize short-term benefit over long-term prosperity. It's why our stock market is so disconnected from the actual economy. It's why the nation can't figure out how to escape this pandemic of stupidity. It's why we can't get any real commitment to address climate change which has already reached a level that threatens our very existence as a species.

As a nation, and perhaps a planet, we need to start thinking beyond just the next office term or the next fiscal year, and more toward the scale of the next generation. Otherwise, we aren't going to have one.

Re: Modeling a Wealth Tax

#655

Post by adverbly »

Paul is surely trolling, no? This isn't even close to realistic modeling. Most startups will spend many, many years worth very little. Well under the wealth cap floor. This means that if you don't own a unicorn then you'll likely pay 0 taxes. And because most wealth tax proposals scale up the percentage, the time that a startup isn't making someone a billionaire amounts to time where the tax rate is pretty low.

The net effect from these scaling wealth taxes would be a soft cap on long term net worth, likely somewhere around 1bn to 10bn. The fact that this soft cap wasn't a key output of his modeling is pretty embarrassing...

Re: Modeling a Wealth Tax

#656

Post by cm2187 »

hospadar wrote: post #259

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…

The appreciation of assets doesn't really change anything to the equation. You are still left with approximately the same % vs what you would own without wealth tax, whatever the growth rate you assume. Because the appreciation is taxed too.

Re: Modeling a Wealth Tax

#657

Post by HLSalumin2 »

This just isn't true.

Lets go through an analysis of this looking at a real word scenario, but ignoring Federal Income Tax since that wouldn't change the situation.

Assume you sell your company and earn $10M.

In CA, you're taxed at 13% right away, and so have $8.7M. Lets say you earn 3% returns each year. Modest but not great. You're taxed another 13% on that 3% by California, meaning you actually earn 2.61% returns. After 60 years, if you leave the money untouched and tax laws don't change, you'll have just under $41M.

If there was a state that had no income tax (say, Texas or Florida) and charged a .5% wealth tax, it would go like this. You'd have $9.95M after paying taxes when selling your business. After a year of investing at 3% returns, you'd have $10.248M, on which you'd be taxed .5%. After taxes, you'd have $10.197M. Do that for 60 years, and you'd end up with more than $43M

While PG says that "Even a .5% wealth tax would start to keep founders away from a state or country that imposed it", it hasn't. California state income tax is higher, and that is where Zuck, PG, Larry Paige, Brian Chesky and a bunch of other people live.

Re: Modeling a Wealth Tax

#658

Post by aussir »

The issue with such taxes is that they treat stuff like liquid assests which are subject to rapid change, like stocks, as the same as physical cash.

It also brings along the idea that the goverment taxes you when you: make the money, use the money, or even just keep the money. It's just another way to get more moeny even if it's not doing anything.

And with all taxes, it starts only effecting the top, but then they need more money and soon everyone but the poorest of the poor is paying more every month.

Re: Modeling a Wealth Tax

#659

Post by ex3ndr »

thomasdullien wrote: post #93

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…

Sorry but Switzerland is explicitly is not that good for wealthy and a lot of people are started leaving even 8 years ago.

For example, one of my partners literally hired ex-minister of finance to do taxes and even then they wasn't able to avoid various taxation penalties.

Re: Modeling a Wealth Tax

#660

Post by anon451 »

Anonymous account...

I am actually in the process of moving because of a wealth tax so I wanted to chime in :)

Spain Spain has a wealth tax that is very frustrating. It was designed when savings accounts were paying 5% interest and has not been updated since then. What does this mean in reality?

My family would pay ~75% of our income to live here. Not only because of the wealth tax but also because of the dividend/income taxes on top of it. Part of this is because I am American and America forces dividend payments where as Spain does not on stock ETFs (long story). Due to a loop hole we can stay for a few years, but we plan to leave in 6 months to Portugal.

It is also frustrating as if you do any angel investing you have to pay taxes on the assumed value of that investment (from talking to lawyers/accountants). So if I have a 0.5% stake in startup that is valued at $500k, I pay wealth taxes on that every year, but if it fails I don't get anything back or anything to write off against future capital gains.

It is def impacting investment in Spain.

All the rich people in Spain live in Madrid, as the city zeros out the wealth tax. But it is hampering entrepreneurship in all the other regions. And, because of some of the loopholes in the design of it, it boosts property ownership and lowers returns there because you can stash money in real estate to avoid it. *And, because of this Madrid has huge concentrations of wealth.

Switzerland. I also wanted to move to Switzerland so my wife could get her PHD. Had to skip it as it was going to cost ~$250k USD to be there for that period. In that time I would have started a company in Switzerland and so they lost that and taxes from the eventual exit on that.

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I do not like wealth taxes. I think they are supremely flawed and hard to pull off right. A few countries have. I understand the tax challenge, but I think you are better off taxing dividends progressively and taxing inheritance heavily.

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