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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

#651

Post by jbs789 »

wyre wrote: post #208
zozbot234 wrote: post #170

Earlier quoted context omitted.

When more assets are sold than are bought, that leads to the destruction of assets on a broad scale. It's the economic equivalent of eating one's seed corn. This would not be good for the median person. You can and should tax land (meaning the land value component of real estate in general) and natural resources more generally, but that's an entirely different game: it has next to nothing to do with wealth taxes as g…

> When more assets are sold than are bought How does this make sense? If Johnny sells 5 cars, that means 5 cars were bought. How can Johnny sell more cars than are being bought? Do you mean that Johnny has more cars to sell than are being bought?

For a given transaction after the fact that’s true.

But consider 5 people wanting to buy Richards 1 car.

I think that’s actually what they meant… although I agree w you.

Re: How to convert between wealth and income tax

#652

Post by SoftTalker »

golem14 wrote: post #505
SoftTalker wrote: post #421

Earlier quoted context omitted.

In the contrived example, the 5% return was "risk free" so assume it was something like CDs, no capital gains.

CDs generate interest, which is taxed as income, higher than capital gains. Just sayin ...

Right, but you don't trigger additional taxable income by redeeming them to pay your wealth tax, unlike e.g. selling stock shares.

Re: How to convert between wealth and income tax

#653

Post by dh2022 »

JuniperMesos wrote: post #618
dh2022 wrote: post #407

Earlier quoted context omitted.

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…

London is a highly housing-constrained city, so the most important way of answering this question is, what affect did freezing Russian oligarch money in Jan 2022 have on the London housing market? If it made housing cheaper or otherwise more available, it was good for the average Londoner; and if it did the opposite it was bad. I have no idea which effect dominated or if it even made an appreciable difference compare…

So I guess the influx , followed by the outflow, of the Russian billionaires did not have much bearing on ordinary Londoners . Which was my point.

Re: How to convert between wealth and income tax

#654

Post by anon291 »

mbgerring wrote: post #616
anon291 wrote: post #278

Earlier quoted context omitted.

Yes let's encourage more risky behavior! Absolutely braindead takes. This sort of proposal would establish a minimum 35 % return in any project. Thus halting investment entirely Let's put this in perspective. I'm currently going to collaterize a few hundred thousand in equity to take a loan to develop homes in my very housing short city of Portland. My calculated return is 40%. This is an excellent return.. It this w…

If I buy a home, I’m likely going to use saved post-tax income. What makes the money you’re using special?

Im building more homes in a market lacking homes where no outside group wants to invest. If you're building more homes on your property, by all means. No one is though and people are being priced out.

Re: How to convert between wealth and income tax

#655

Post by snapplebobapple »

So you guys can figure this out but you can't figure out that a wealth tax today is just a destruction of future income tax? You trade the government wasting the money tomorrow for the government wasting the money today and if you think the investment growth will be higher than the government discount rate (which is pretty much gauranteed), then you are paying a potentially large premium to waste it today.

Re: How to convert between wealth and income tax

#656

Post by Manuel_D »

AnthonyMouse wrote: post #622
Manuel_D wrote: post #426

Earlier quoted context omitted.

What "high end electronics" would be taxed at a medium rate? Do billionaires not just use iPhones? Most high end private planes are the same models as regional jets (e.g. Embraer ERJ line), so a tax on them would still be mostly impacting normal folks' plane tickets. The core problem remains the same: consumption does not scale with wealth. If we limit taxes go a handful of goods and services, then demand is just goi…

> Most high end private planes are the same models as regional jets (e.g. Embraer ERJ line), so a tax on them would still be mostly impacting normal folks' plane tickets. Planes are the things airlines buy, not the things economy passengers buy. If you're conceding that taxes corporations pay get passed on to consumers then what does that imply about corporate income tax? Also, poor people don't generally buy a lot o…

Correct, corporate tax rates are generally regressive in their effect.

Building jets and houses creates jobs though. A more likely outcome of a consumption tax is that wealthy people simply spend less.

Re: How to convert between wealth and income tax

#657

Post by Manuel_D »

AnthonyMouse wrote: post #615
Manuel_D wrote: post #349

Earlier quoted context omitted.

That scheme still wouldn't work. When that new corporation is first formed, it's near worthless. After the series of favorable deals, the value of each share in that corporation goes up. Thus it still incurs capital gains taxes. Of course people will try to cheat taxes, but they'll try to cheat any form of tax: income, capital gains, inheritance taxes, etc. People are good to try and evade taxes regardless of the tax…

> After the series of favorable deals, the value of each share in that corporation goes up. Thus it still incurs capital gains taxes. Only if you sell the shares, which they easily resolve by not doing. > People are good to try and evade taxes regardless of the tax mechanism. Which is why you should use the ones that are less susceptible to it rather than the ones that are more susceptible to it. Trying to identify t…

> The billionaire pays less on $10 in marginal income than a poor person, because the taxes and benefits phase outs result in absurdly high marginal rates on the poor.

This is just patently false. The highest marginal income tax rate is 37%.

If you've read articles claiming that billionaires pay some absurdly low tax rate, those articles are counting their capital gains as income. Which is just a flat out lie, since those gains don't actually get taxed until the gains are realized, and the value of that capital can go down.

Re: How to convert between wealth and income tax

#658

Post by Manuel_D »

dh2022 wrote: post #565
Manuel_D wrote: post #434

Earlier quoted context omitted.

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 missed this part in the article: “ Estate tax planning has become so effective that wealthy families can now easily pass large portions of their estates to their heirs without paying the tax” The beneficiaries then set up their own tax avoidance schemes. With the effect only rich people with poor tax planning skills, to quote Gary Cohn again, end up pay the estate tax.

Without paying the estate tax, but when those heirs draw money from the trust it's not taxed as income.

Re: How to convert between wealth and income tax

#659

Post by Manuel_D »

madaxe_again wrote: post #611
Manuel_D wrote: post #433

Earlier quoted context omitted.

In this case, the beneficiaries of the trust pay income tax on the money they receive from the trust.

You don’t pay income tax on loans, and the trust exists in a place with no CGT.

It doesn't matter where the trust exists, what matters is that the people drawing from the trust pay income taxes on that money.

Re: How to convert between wealth and income tax

#660

Post by pfannkuchen »

acdha wrote: post #635
pfannkuchen wrote: post #585

Earlier quoted context omitted.

That’s like 2 pretty good houses in the bay area. Hardly “vast wealth”, and these sorts of things are rarely inflation adjusted over time.

The Bay Area is one of the most expensive parts of the United States and $10M still means you own half a dozen houses. I’d say that’s reasonably “wealthy” from the perspective of the majority of the population who struggle to afford even one. https://vitalsigns.mtc.ca.gov/indicators/home-values

Sure, I’d agree with “reasonably wealthy”, just not “vast” wealth.
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