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ryandrake 19 hours ago [-]
> To convert between wealth and income tax rates, you have to divide by the rate of return on capital. The conversion rate of 20 comes from assuming that the risk-free rate of return is 5%.
This seems to only be true for people whose income entirely comes from their wealth, rather than their labor. The math doesn't math for someone on the other extreme end of the spectrum who has zero savings or investments and obtains all his income from labor: To him, a N% wealth tax = 0% income tax for all N. Those with -some- savings are somewhere in the middle.
It is a very sneaky way to argue that a wealth tax should be as across-the-board unpopular as a large income tax increase. But Graham's math is only applicable to those flush with investments and with relatively small salaries from labor, so a wealth tax is only unpopular to that particular group.
colinmarc 16 hours ago [-]
I can't tell what's worse: intentionally obscuring the fact that the vast majority of people would pay ~no wealth tax or unintentionally forgetting that the vast majority of people would pay ~no wealth tax.
kccqzy 15 hours ago [-]
On the other hand, almost a majority of people already pay no federal income tax anyways. Mitt Romney mentioned a number of 47% during his presidential campaign and that number was mostly true. https://www.politifact.com/factchecks/2012/sep/18/mitt-romne...
People love to talk about the marginal tax rates but not the average tax rates. And I think that’s right because the conversation should be focused on the wealthiest people.
BugsJustFindMe 14 hours ago [-]
> On the other hand, almost a majority of people already pay no federal income tax anyways.
That's an irrelevant diversion though, because the measure that matters when discussing the fairness of taxes is how much people are left with at the end after paying whatever taxes they pay, including sales tax, income tax, and any other kind of tax. And for those particular people you're talking about the answer is very little, next to none, and for the people for whom a wealth tax would even apply the answer is unimaginable amounts.
credit_guy 12 hours ago [-]
That's not all that matters. The main reason to have taxes is to fund the government, not to make society a more just society. And thinking that billionaires will just take a wealth tax as served, and perhaps will ask "can I have some more" is one way to think about this, but probably not the best way. A better way to think is that action might be followed by reaction. There is no manifest destiny for California to be the epicenter of tech.
m11a 10 hours ago [-]
California already has very high taxes. I think marginal tax rates are higher in California than for UK tax residents, certainly for CGT, and roughly similar for income tax.
I'd say the fact that California remains the epicenter of tech despite its high taxes suggests concentration of talent matters far more than tax rates.
disgruntledphd2 3 hours ago [-]
Yeah, the marginal rates for California are approximately the same as I pay in Ireland. The capital gains taxes are way lower though.
mannanj 12 hours ago [-]
Does the government not have the goal to make society a more just society? When did that stop being a priority of government? Even a teeny, tiny one?
credit_guy 11 hours ago [-]
Sure, the government has that goal too. But the government has many tools, and using taxes for that is using the wrong tool. Or maybe you think that billionaires owe us not only to pay taxes, but also to play nice, and pay those taxes with a smile on their face?
breakyerself 8 hours ago [-]
Billionares shouldn't exist. We shouldn't just tax them for the revenue. We should tax them to limit the undemocratic power that comes with excessive wealth.
ethbr1 11 hours ago [-]
> pay those taxes with a smile on their face
The government's monopoly on punitive violence isn't only intended for the peasantry...
lovelearning 7 hours ago [-]
What are those other tools?
roenxi 12 hours ago [-]
There is no consensus on what is "fair" to tax, you can find people arguing from 0% to 100%. And if we're talking about measures of fairness. A much better measure is something like trying to maximise the median living standard without sacrificing any one demographic.
> And for those particular people you're talking about the answer is very little, next to none...
So... where are the real resources coming from then? Because if these people aren't using them to support their living standards they must be doing something else. If we give one person enough money out of the tax pot to pay rent, that means the resources were redeployed from somewhere else that was about 1-rentworth of something.
Because I agree that the taxes aren't going to come out of the wealthy's living standards, but the implications of that in practice are not good.
ethbr1 11 hours ago [-]
> If we give one person enough money out of the tax pot to pay rent, that means the resources were redeployed from somewhere else that was about 1-rentworth of something.
Yes, and that "somewhere else" is others' excess profit.
That excess profit comes from (a) inventing or investing capital with a return or (b) paying less for goods / labor than they can be sold for.
Capitalist profit has always been equal parts ingenuity and fucking other people over, and as most often implemented makes no discrimination between the two.
The bargain by which this has traditionally been squared is "the person who made the profit gets to keep some of it" + "they pay the rest in taxes to support the society they're successful in and depend on."
Unfortunately over the years this has continually been eroded by capital's invasion into democracy, with the express purpose of neutering the latter part of that bargain.
Those who would be hit with a wealth tax are incensed by it precisely because it would be less avoidable than the myriad of loopholes that have been engineered into income taxes.
roenxi 6 hours ago [-]
And in terms of real resources - who do you expect to have less and what do you expect them to have less of? Because "excess profit" is an economic concept, not a real thing.
cherry_tree 8 hours ago [-]
There is very little debate that you should be taxed proportionally to your total wealth; I.e. that the rich should pay more than the poor. In fact the only people trying to debate this are the rich who want to avoid paying back towards the society that enabled their success.
roenxi 6 hours ago [-]
> I.e. that the rich should pay more than the poor
How else could it work? The poor don't have enough money to tax them. That's why they're poor. Schemes where the rich don't get taxed are systems that tend towards the 0% tax for everyone end of the spectrum.
maxerickson 11 hours ago [-]
Pretty cool that the taxes high earners stop paying are not considered income taxes.
(Social security and Medicare)
didgetmaster 9 hours ago [-]
Social Security tax is the only tax that has a limit. Medicare tax applies to all wages and high earners even pay an extra percentage.
SS tax has a limit because benefits are also limited. It is a forced retirement plan where if you live long enough, you might get back what you paid in.
naijaboiler 14 hours ago [-]
i hate when people bring it up. everybody that works pays payroll taxes which is around 25% when you count both sides.
votepaunchy 14 hours ago [-]
It’s 15.3% counting both sides, and capped. And it’s the only “tax” that is paid back, at progressive rates, because it’s a retirement annuity not an income tax.
bombcar 14 hours ago [-]
It’s an income tax wearing the trenchcoat of a retirement annuity- it’s not one for any practical purpose.
12 hours ago [-]
relium 14 hours ago [-]
Federal payroll taxes in the US are 15.3% (7.65% for each side).
prasadjoglekar 13 hours ago [-]
Social security and Medicare are also payroll "taxes" in that they're not optional and are automatically deducted.
auggierose 13 hours ago [-]
This is called insurance, not tax.
lotsofpulp 12 hours ago [-]
If the government mandates it under threat of violence, it’s called a tax.
It could also be classified as an insurance premium, but a government mandating it is the key characteristic of a tax.
But the fact that the government reduces the annuity amount by increasing retirement age and benefit purchasing power means it is not insurance either. It is wealth redistribution from the working to the non working.
auggierose 11 hours ago [-]
Yeah, that's how insurance works: it is wealth distribution from those who have not become (yet) an insurance case to those who have not.
If you have a car, you need to pay car insurance. Is that also a tax?
The concept of insurance is independent of mandatory or not. That should be obvious, I wonder why it isn't to you. Maybe your ideology prohibits clear thinking and makes you vote Trump?
ethbr1 11 hours ago [-]
Something can be mandatory insurance AND a tax.
lotsofpulp 5 hours ago [-]
>Yeah, that's how insurance works: it is wealth distribution from those who have not become (yet) an insurance case to those who have not.
In the context of differentiating between wealth redistribution and insurance, insurance does not redistribute wealth, insurance redistributes risk since underwriting in a competitive marketplace ensures you only a premium commensurate to your risks.
For example, the government mandates only liability insurance up to $x, for which the premium for the same coverage can be vastly different depending on each person's driving history. While this can be considered a tax because the government mandates it, one can see how this is not wealth redistribution since the "tax" being paid is at least partly dependent on one's risk profile.
Contrast this with a government mandated defined benefit pension contribution equal to a percentage of one's earned income, with a known fact that one's contributions will reflect their benefit less and less as the years go on. That is far more "wealth redistribution" than "insurance".
Another example is in the US, health insurance premiums are more tax than an actuarially calculated premium based on health risk. This is because health insurers are not allowed to price health insurance based on health risks. It is explicitly a redistribution of wealth from the young and healthy to the old and sick, due to the maximum age rating factor and inability to underwrite based on pre-existing health conditions.
bagels 12 hours ago [-]
Homeowners already pay a wealth tax.
throw0101a 11 hours ago [-]
> Homeowners already pay a wealth tax.
If you're talking about property taxes, then renters pay that as well through their rent (which passes through the landlord before getting to the city/county).
Renters will always pay one way or another. You can name it wealth tax or property tax or house tax. It doesn't matter -- the result will be higher rent.
theodpHN 12 hours ago [-]
And even if the house represents negative wealth - same property taxes apply to a house regardless of whether the owner owns it outright with no mortgage (wealthy) or if they're paying 8% interest on an underwater mortgage (negative wealth). And, unlike VCs, property taxes are paid - often for decades - before one even sees if they'll even realize any wealth from the estimated value of their home that they pay tax on.
jppope 15 hours ago [-]
> intentionally obscuring the fact that the vast majority of people would pay ~no wealth tax or unintentionally forgetting that the vast majority of people would pay ~no wealth tax.
I consider this fine, because proponents of a wealth tax consistently omit that it will ultimately be the middle class who pays the tax... the ultra-wealthy and wealthy can afford sophisticated strategies to render a wealth tax ineffective against them, and if that doesn't work they can just move somewhere else. Income tax was the same.
harimau777 14 hours ago [-]
Them moving somewhere else is an easy fix. Just put an exit tax on the ultra wealthy.
servo_sausage 12 hours ago [-]
Even that is subject to shenanigans... above a certain level of wealth the overhead of establishing companies, tax residencies, and complex debt arrangements become a rounding error.
Some of the mechanisms are loopholes, that might be closed l. But many start to interact with international business regulations that exist for considered reasons, and are harder to change even if it is serving as a loophole.
You end up with only the small wealth (one lifetime as a skilled professional) group getting caught
cherry_tree 8 hours ago [-]
Sanction them and their companies. Sanction countries that accept these anti-society misanthropes. Bar them from the US and any territories, encourage our allies to bar them as well. Investigate those companies for crimes to the full extent of the law.
Nobody needs these billionaires; we can create new billionaires and new products. They think they bring some sort of ultra speciality but in reality they are doing something millions want to do and their monopolistic success is preventing others from succeeding; knocking these giants down makes rooms for new businesses and products. This is the entire thrust of a capitalistic economy.
JuniperMesos 39 minutes ago [-]
I don't have any more to fear from politically-influential private-sector billionaires than I do from the government enforcing a sanctions regime.
BosunoB 11 hours ago [-]
If you paid attention to proponents of a wealth tax in the US, you would be aware that they only ever suggest it for vast wealths of like $10 million+.
pfannkuchen 8 hours ago [-]
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.
dh2022 13 hours ago [-]
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 off when Russian oligarch parked their money in London in early 2000s? And likewise - was the average Londoner worse off when that money was frozen in Jan 2022 when Ukrainian war started? Not really…
JuniperMesos 37 minutes ago [-]
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 compared to everything else that affects the London housing market.
WalterBright 12 hours ago [-]
Starbucks is moving its headquarters from Seattle to Tennessee.
Many other businesses that are not large enough to interest the newspaper are moving out as well.
dh2022 9 hours ago [-]
Like I said: the sky is not falling.
lambdaphagy 8 hours ago [-]
I don’t think I understand your argument. If a wealth tax causes the wealthy to leave then you have even less tax revenue than before, right?
WalterBright 7 hours ago [-]
You also lose the jobs the wealthy were paying for, and the taxes those employees would have paid, and the sales tax the wealthy are no longer paying, and so on.
dh2022 7 hours ago [-]
There was no tax revenue to begin with-nobody paid income taxes in WA before the millionaire tax. The jobs the rich will take with are few and very specialized: tax accountants, security people, some administrative assistants. When billionaires leave whoever mowed their lawn or cleaned their pool will do the same job - for the next owner.
What the politicians will do with these taxes does not matter to me. The only thing I dispute is this sense of doom because, of my god, Bill Gates and Andy Jassy and Howard Schultz and Ballmer will pick up their toys and leave.
armitron 9 hours ago [-]
The level of delusional wishful thinking here defies belief. Seattle and all other US "left" strongholds are decomposing and falling apart, with parts of these cities worse off than the third world. Instead of realizing that it's ineffective, incompetent and detached from reality politicians that have brought ruin and misery, you want to hand them even more money.
Brilliant.
dh2022 9 hours ago [-]
I don’t really care about whatever taxes the politicians will heap on the rich. My point is that if the rich leave it will not the economic calamity so many pundits forecast. Life will go on without rich people.
Just look at Oregon for example. It’s a lot like WA state but without the billionaires. And it is a really nice place to live. If WA state ends up like Oregon I won’t mind.
armitron 14 hours ago [-]
As has happened in nearly every European state with wealth taxes. But the elephant in the room is that these policies give the same ineffective, corrupt and entirely worthless politicians even more money to "manage". The very definition of delusional wishful thinking.
jppope 13 hours ago [-]
this is the key fact. If a wealth tax were enacted and a responsible group were endowed with the money we might reap some value from a wealth tax. Giving American Politicians more tax money is like giving a heroine addict more heroine.
outside1234 16 hours ago [-]
The ultra rich are desperate to maintain their exclusive access to essentially pay no taxes through their "Buy, Borrow, Die" strategy (if you don't understand what that is you should stop and read this: https://gemini.google.com/share/e230bcecaaeb) and so they are using scare tactics / gaslighting around wealth taxes because a wealth tax would disrupt this essentially zero tax strategy.
scarmig 15 hours ago [-]
"Buy, borrow, die" is a bit of a bogeyman of the Left; it's not a common strategy for HNW or UHNW individuals, and to the extent it is used, there are much better ways to close it than a wealth tax, which is coarse and rife with implementation issues.
kccqzy 14 hours ago [-]
The main implementation issue with a wealth tax is that it doesn’t at all interact with the capital gains tax. It’s easy to fix the implementation issue by integrating the wealth tax into the capital gains tax (call it unrealized capital gains tax for starters), make the tax refundable when an asset loses value, and netting it against the actual capital gains tax.
With this framing, the wealth tax isn’t a new tax; it is only prepaying the capital gains tax instead of allowing it to be deferred forever.
trollbridge 14 hours ago [-]
Unrealised capital gains tax requires some way to assess the value of assets. This is a lot harder than it sounds.
It already exists in the form of property taxes, which are quite unpopular.
vannevar 9 hours ago [-]
>It already exists in the form of property taxes, which are quite unpopular.
For an unpopular tax, the property tax is remarkably ubiquitous. Are there really any popular taxes?
pzo 12 hours ago [-]
at least all financial assets (stocks, etc) are easy to assess value so why not start with that? same with gold, silver etc. Some minimal amount you can make it nontaxable to reduce administrative burden.
deeponey 12 hours ago [-]
this a million times. Land easy, already being taxed. Any regulated financial instrument, also easy, take the minimum average yearly price of held assets. Tricky things like privately held companies, maybe we solve that one later, but even then there are valuations made at various points, anchor to those, be conservative in every case. If the gov primarily exists to enforce property rights... then people should pay in proportion to the rights that are being enforced on their behalf.
lacewing 11 hours ago [-]
> Tricky things like privately held companies, maybe we solve that one later
So I spend 30 minutes to set up an LLC and then transfer my assets to that LLC. Now, I don't hold the assets; I hold a stake in a privately-held company.
Ultimately, the solution you come up with needs to be at least somewhat airtight; otherwise, it just penalizes people who spend less money on tax advisors. The generation of income is a fairly well-defined point where assets change hands and you can apply some quasi-clear rules. Ongoing taxes on the potential to make money are a lot harder. So I buy some gold bars or valuable paintings and stash them in the attic. Gold / Picasso appreciates. How do you tax me on that? Do I submit an inventory of everything I own to the government every year? How does the government check - do they get to rifle through my stuff every December?
And hey, here's a cool one: if my parent owns a company and puts it in their will that it's mine when they die, is that promise an asset I owe taxes on every year? It's clearly worth something: it's potential money down the line.
phil21 5 hours ago [-]
> So I spend 30 minutes to set up an LLC and then transfer my assets to that LLC. Now, I don't hold the assets; I hold a stake in a privately-held company.
Beneficial ownership is a well established concept in law, and this strategy simply would not work. If those assets are easily valued and liquid (stocks or whatever) then the taxes will just end up being passed through as the entity won’t be relevant for tax purposes. Sure you could try to hide assets or offshore them or whatever but you’d be running headlong into outright tax fraud at that point.
You would probably instead see less new public companies, more companies/divisions being sold to various groups under opaque structures and taken private, and a lot more weird borderline legal transactions done between private parties to pretend valuation of private companies or other assets are lower than reality.
> Gold / Picasso appreciates. How do you tax me on that? Do I submit an inventory of everything I own to the government every year? How does the government check - do they get to rifle through my stuff every December?
Yes, of course you would owe taxes on such things assuming they were over whatever exemption limits and such. The government can’t realistically check everyone. They just throw the more obvious offenders in prison when found and keep enough background “random audits” to keep folks scared enough into compliance.
And obviously the government has been making “hiding” such assets harder every year with the ratcheting up of KYC/AML laws. Over time you’d see these requirements for pretty much every major on/offramp for such assets like gold bullion dealers, coin shops, or auctions. A lot already are required to verify your identity and even report transactions. There is no more showing up to a car dealer and paying for a new car with a duffel bag full of cash, much less anonymously. Such a transaction is reported and you’d see this simply expand.
Property taxes exist at least in part because the asset is impossible to hide and more difficult than most to play games with valuation.
> And hey, here's a cool one: if my parent owns a company and puts it in their will that it's mine when they die, is that promise an asset I owe taxes on every year? It's clearly worth something: it's potential money down the line.
Presumably your parents would already be paying the wealth taxes owed on the asset in question. That someone might loan you money against a future inheritance seems immaterial but perhaps I’m missing something here?
vannevar 9 hours ago [-]
If you properly taxed real estate in a progressive way, you wouldn't have to bother with taxing paper wealth at all---the collective value of paper is already reflected in the price of land. People with large paper fortunes inevitably buy real estate, and when they do, their paper wealth inflates the price. This is why median residential housing prices have dramatically outpaced median wage increases, along with anything else tied to real estate, like sports and concert tickets.
rileymat2 11 hours ago [-]
We already value private companies with a 409a valuation.
WalterBright 12 hours ago [-]
The value of stocks fluctuates every second. Sometimes wildly.
vineyardmike 11 hours ago [-]
Weakest of the many weak arguments.
Let’s do the bog-standard obvious and sane thing and pick a single point in time, once a year and use the value then. Maybe, i don’t know, close of market on the last trading day of the year. At which point it won’t fluctuate again until the new tax year. Then, we can call it “mark to market” because we’re marking the value to the market at a point in time.
Finally, we stop with silly bad faith arguments because fluctuations in stock have been successful taxed for decades. This is how day-traders pay taxes, and it’s not even a little challenging to do.
kccqzy 11 hours ago [-]
Not an issue. If you trade section 1256 contracts, the current tax code already requires you to report unrealized gains by calculating the gains as if they are sold on the last day of the tax year. Brokers have no issues calculating that and reporting that single number to the IRS.
13 hours ago [-]
WalterBright 12 hours ago [-]
There's a federal estate tax of 40%. WA state has an estate tax of 20%.
slowmovintarget 14 hours ago [-]
You seem to forget that given the way taxes work, eventually, anyone, with any amount of money, will be considered "wealthy" because we'll keep running out of other people's money.
You're wealthy, or the definition will change to include you. The spice must flow.
Barrin92 14 hours ago [-]
>because we'll keep running out of other people's money.
that doesn't make a whole lot of sense, for two reasons. For one, as even Paul points out in the piece, a wealth tax below what's practically a risk free return on capital (~5%) doesn't eat into the capital stock, it simply means wealth grows slower, but still increases.
Secondly, there's no monotonous historical direction towards higher wealth taxes, in fact the opposite. We're living in an age of low wealth taxation, with only half a dozen countries or so, if I'm not mistaken, imposing one at all.
sokoloff 13 hours ago [-]
The risk free rate of return is usually only a point or two above inflation, and I’d argue that real wealth, rather than nominal wealth, is the true measure to look at to determine whether someone’s position has improved, stayed flat, or decreased.
philipallstar 13 hours ago [-]
> it simply means wealth grows slower, but still increases
But what does this mean? If you have a load of money in some companies, that's helping to fund their activities, and the companies' share price goes up a bit, you haven't gained any money. And you won't gain any until you sell some shares, which is already taxed.
greedo 12 hours ago [-]
They never sell their shares. They borrow against them, write off the interest, and then when they die, their heirs get a stepped up cost basis.
topaz0 12 hours ago [-]
Rich people have been borrowing with their stock as collateral to access their wealth tax free for decades.
WalterBright 12 hours ago [-]
The debt doesn't just go away, and interest is paid on it. It's not "free". Etrade's best rate is 10.45%. If your stocks go bust, you're still on the hook for the margin debt.
jonhohle 4 hours ago [-]
That’s not how it works, though. Buy, borrow, die doesn’t rely on retail margin rates. It’s closer to 3-5%.
Assets are used as collateral for loans that don’t require any repayment until death. Generally the borrower can borrow up to 75% of their collateralized asset, and that loan is not taxed. When they die the assets are passed to heirs and stepped up to their current value as the new cost basis. They’re sold to repay the loan and interest. No taxes paid on the loan “income”, no taxes paid on the capital gains, 3-5% interest paid for the outstanding balance of the loan and I’m sure some of that gets taxed. Because the collateralized asset stays invested the entire time, it usually grows faster than the interest that will eventually be paid.
harimau777 14 hours ago [-]
Running out of billionaire's money would be a good thing[1].
If they don't have money then they can't buy elections and aren't insulated from the consequences of their actions.
[1] Note: I don't really think we should literally take all their money. Just enough to reduce some of the power imbalance.
philipallstar 13 hours ago [-]
All their "money" is in business ownership percentages. It's not money.
wsng 12 hours ago [-]
It's ok if they pay their taxes in shares, in case they ran out of money.
underlipton 12 hours ago [-]
That's even better. You just transfer beneficial ownership and route dividends to a different bank account. And now you have a LOT more Americans literally invested in Amazon/X/Meta's success. But poor Jeff, he did have to sell his yacht (no, the other one).
breppp 13 hours ago [-]
If most people you meet will pay a wealth tax how can you remember those who don't
nkmnz 15 hours ago [-]
Don't speak to loudly of this fact, otherwise some leftist politician could come to the conclusion that human capital – the discounted cash flow of one's future labor income – should be taxed as wealth, too.
Glyptodon 16 hours ago [-]
On top of that it seems to imply that a 20% effective tax rate is outrageous even though that's totally normal for most. Maybe it's not what you're used to as really wealthy person who avoids realized income and has a 0 or 5 or 10 percent effective rate. But it's totally normal for most middle and median income folks who actually pay income taxes.
SoftTalker 15 hours ago [-]
It's 20% equivalent income tax rate if you have no conventionally taxable income. Otherwise it's 20% on top of your marginal rate. In his $100 example, you'd pay $1 in wealth tax on the $100 and $1 in tax on the $5 income earned, so your total tax is $2 on $5 of income, an effective tax rate of 40%.
But any real wealth tax is going to have exemptions, only apply to wealth above some threshold, and for the wealthy who structure their finances so as to have little or no taxable income, well they end up paying 20% like all the rest of us do.
Dylan16807 14 hours ago [-]
> an effective tax rate of 40%.
It's not. That calculation would say that if you have $1000 of wealth and $5 of income your effective tax rate is 220%. It's bad math.
Your conventional income is taxed separately.
A wealth tax sort of stacks with capital gains, but capital gains is way too low anyway.
SoftTalker 14 hours ago [-]
Yes it is.
($1,000 * 1%) + ($5 * 20%) = $11 tax due on $5 income. They are separate taxes but he's expressing them both in terms of an effective income tax rate.
In this case, since you owe more taxes than income you've earned, you'll need to sell off some of your wealth to pay up.
If you have no income at all, but do have wealth, then you get a division by zero error so I do get that it's maybe absurd to frame it this way, but the premise of TFA was "how to convert between a wealth tax and an income tax" and the context is a presumed 5% return on capital.
philipallstar 13 hours ago [-]
But when you liquidate assets you... pay tax! Capital gains tax. So you liquidate, pay capital gains, and use the proceeds to pay a wealth tax?
SoftTalker 13 hours ago [-]
In the contrived example, the 5% return was "risk free" so assume it was something like CDs, no capital gains.
golem14 11 hours ago [-]
CDs generate interest, which is taxed as income, higher than capital gains. Just sayin ...
Dylan16807 13 hours ago [-]
It's not an effective tax rate, it's an absurd parody of an effective tax rate.
If that $5 of ""income"" is actually capital gains, then it won't be taxed very highly, and adding another 20% is fine. The discussion of 37% + 4.5% + 20% is misdirection.
If that $5 is honest to goodness income, then on average you're also getting $5 of unrealized capital gains, which means you're not paying $2 on $5, you're paying $2 on $10. Or maybe you realize part of the gains and you're paying somewhere between $2 and $3 on $10. A much smaller impact, and that's only if someone in a medium tax bracket with 20x their income in wealth is even affected by the wealth tax at all.
scottmcmac 12 hours ago [-]
Yes, but more specifically, it's 20% on top of your marginal rate on your capital income which maxes out at 20% federal in the U.S. for long term gains However, it is much closer to 0% for the most wealthy Americans because they never realize their gains, which is the only time the U.S. taxes capital gains. They just fund their lifestyles with debt against their assets. Then when they die, their heirs get a basis step up at death.
Graham gets this totally wrong, adding the 20% to 37%+4.75%, which are rates applicable to labor income (and short term capital gains, but those are very rare among the most wealthy Americans). That is such a major error it is hard to take any of the argument seriously.
Edit: Updated account for short term gains.
lazide 16 hours ago [-]
20% tax on wealth (aka the potentially liquidatable value of an asset) would absolutely destroy anyone using an asset. For a classic example, look at property taxes which are a classic wealth tax. Grandma’s, people on pensions, and even middle class folks who own a home but have relatively low rates of salary increases get destroyed (and have to sell and move out) in places like Texas where property taxes aren’t capped/controlled like California under prop 13 when property prices go up.
Having your house get ‘too expensive to live in’, in fact, is a classic issue with property taxes, and was happening in California - which is exactly why prop 13 happened. And most of those locations the maximum tax is around 1-3%!
‘Wealth’ is not the same as income, because wealth is potential money, if you can sell - and if you sell, you lose access to it.
A 20% wealth tax would mean any asset which doesn’t earning free cash flow returns of at least 20% a year, or which isn’t appreciating at least 20% a year in a risk free way would be impossible to hold for anyone except the most rich people. And even they couldn’t do it for long.
I can’t think of anything which that realistically describes.
A 20% income tax reduces actual cash in hand to 80% of what you’d otherwise have, which isn’t great. But you still get the actual 80% cash in hand right now, and can use it.
You can’t have ‘80% control/ownership for the year’ of a house in a meaningful way, and especially for people actually using/relying on the asset to live, they can’t find 20% (or in most cases even 5%!) of the value in cash for the asset every year. They’d go bankrupt.
analog31 15 hours ago [-]
All of the people I mention wealth tax to give me the same two counter cases: Grandma and Elon.
I think there's no reason why a wealth tax can't be progressive. Just making up numbers here, it could be zero for your first 30 million, and rise to some palpable amount for your first billion.
This would protect granny from being taxed out of her house, and in fact would affect relatively few salary earners.
I'm not overlooking the possibility that such a tax structure could create an effective wealth cap at some level.
The problem in California is that it's very hard to change laws. Likewise in my state, where many aspects of the tax system are constrained by the state constitution.
lazide 15 hours ago [-]
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.
harimau777 14 hours ago [-]
You could peg the numbers to inflation.
Personally, I see a big benefit of a wealth tax being lowering wealth inequality; even if the money isn't actually used for anything useful. That would at least help prevent the ultra wealthy from being able to unilaterally ruin society.
pzo 12 hours ago [-]
I compare ultra wealthy to blackholes - overtime they accumulate more and more mass and reduce mass elsewhere. But even in nature we have Hawking radiation (which leads to black hole evaporation). So for me wealth taxation is similar like this slow black hole evaporation which seems fair.
philipallstar 13 hours ago [-]
They can't ruin society unilaterally, unless you're talking about Vladimir Putin, who can only do it because he's the head of an autocratic socialist state as well as potentially being the richest man in the world. But the rich bit isn't what does it.
analog31 13 hours ago [-]
Yeah, I appreciate the sentiment. Being a liberal, perhaps I was assuming that competent governance was possible. At the same time, the opposite tack, "starve the beast" was a failure.
Epa095 14 hours ago [-]
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.
lazide 11 hours ago [-]
You have my vote!
NoMoreNicksLeft 14 hours ago [-]
>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 supposed to pay that in cash?
How does this even really work? He could try to sell $200 million in stock, I suppose (if that's even legal according to the SEC, though that stuff could be loosened up), 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"?
What if instead, he just gives 20% of the shares to the government, and they get to sell them, would that count? They wouldn't even have to sell them... the government could become the shareholder, until it controlled every corporation out there. The grift and graft would be massive, nothing to go wrong there. CEOs and other top positions basically appointed by whoever gets to be on the Congressional committee. The Democrats no doubt are certain they'll be in control of it, but then they'll be hysterical when it turns out they miscalculated. Could be fun to watch while eating popcorn, at least until there is no more popcorn left because the corporation that distributed popcorn melted down.
Wealth taxes are the domain of angsty teenage marxists and other retarded children.
How much does a wealth tax collect in the US, does anyone know? Does anyone care? Is it that they've identified a need for the government have revenue and devised a fair way of having the entire nation pay for that need, or are they just hoping it will be confiscatory in the most punitive way possible?
Dylan16807 12 hours ago [-]
> 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 million now, and the money he owes drops to $60 million.
Though I don't see why it would tank that much.
lazide 11 hours ago [-]
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.
Dylan16807 9 hours ago [-]
That sounds like a one-time thing. Once things stabilize you wouldn't see a big fluctuation every time a CEO has to pay taxes.
Also normal people and the mildly rich and retirement funds and many other big sources of ownership wouldn't be taxed, so I don't see prices actually crashing.
NoMoreNicksLeft 9 hours ago [-]
>That sounds like a one-time thing.
Repeatedly pushing the "destroy the world economy" multiple times per day is most likely not going to be a "one-time thing". But who knows... maybe you're right and economics doesn't work like it has been documented to work by the world's experts for the last 100 years or so.
Dylan16807 7 hours ago [-]
Because that's not what the button does...
Especially because every push shrinks the number of people affected by the button.
analog31 10 hours ago [-]
If someone sells the stock, someone else buys it. The value is still the net present value of future earnings. This is a redistribution of wealth, not a decimation. The wealthy can still earn more if they want to.
lazide 9 hours ago [-]
When market cap goes down because overall valuation does, what do you think is happening?
Valuation hasn’t been tied or related to earnings for top stocks in at least a decade.
It isn’t ’wealth redistribution’.
Removing half or more of market demand isn’t going to be pretty.
analog31 7 hours ago [-]
Market cap and valuation are the same thing.
lazide 6 hours ago [-]
That’s what I said, yes.
QuercusMax 14 hours ago [-]
Your argument must not be very convincing if need to refer to your opponents using slurs.
Using a wealth tax to nationalize corporations sounds like exactly what we should be doing.
NoMoreNicksLeft 13 hours ago [-]
>Using a wealth tax to nationalize corporations sounds like exactly what we should be doing.
You want Trump and company in charge of it all? Or are we finally back to "the next time Democrats win it will be forever!" wishful thinking? I mean, even if you want to nationalize everything, it's as if you dreamt up the worst possible way to go about doing that so that they've cratered first and started hemorrhaging all their talent in the leadup.
QuercusMax 13 hours ago [-]
So let's not even think about how to build a better world because the administration we have right now is garbage?
We need a wealth tax, ONLY public financing of elections (no PAC money, no "I'm a billionaire so I can spend as much as I want on myself"), and many other reforms. Nationalizing critical industries and sectors is also something we should be pursuing.
randallsquared 13 hours ago [-]
From the standpoint of 1926, we built the better world and you're living in it. It's hard to imagine how much better off we all are, but it's not a law of nature, and with enough damage to markets and production, we can get back there again!
sokoloff 13 hours ago [-]
> no "I'm a billionaire so I can spend as much as I want on myself"
To me, that would seem extremely difficult for Congress to pass a law restricting individual speech in this particular way that would pass First Amendment muster, and I don’t think we should be at “let’s just set aside the Constitution when it clearly says something we don’t like” because I don’t think that ends well in today’s political climate (or any other, but it’s especially bad now).
vineyardmike 11 hours ago [-]
We already have laws that limit how much you can give to someone else’s campaign. We’ve already crossed that threshold in terms of “free speech”.
sokoloff 11 hours ago [-]
Passing a law that restricts the amount of my own money that I can spend talking about myself seems especially directly a 1A violation.
NoMoreNicksLeft 9 hours ago [-]
An old law, belonging to a set of laws which have been eroded over the decades such that it's surprising this one hasn't been set aside already. Both Congress and the courts have changed in ways that won't ever let that be passed again, or let it stand if it somehow is snuck into law. That era is over, you will never succeed in bringing it back.
And if you think anything's going to change in November, you're going to be really disappointed.
malfist 15 hours ago [-]
These wealth taxes are not proposed to apply to everyone evenly, that would be a regressive tax policy. There is a wealth cutoff, most commonly proposed to be around $50M.
If grandma has $50M in her house and pension, she can afford to pay a tiny tiny tiny fraction of her wealth to make sure her grandkids still have a place to live that's not falling apart.
naijaboiler 14 hours ago [-]
whats all this talk about 20% wealth tax. We are asking for 1% per year, and the rich are still screaming. damn
I pay more than that on my house.
pessimizer 15 hours ago [-]
> 20% tax on wealth
Thank god no one is talking about this, then. According to Graham, a 20% wealth tax is equivalent to a 400% income tax.
lazide 15 hours ago [-]
Read my comment - it likely would be equivalently impossible. That is my point.
pessimizer 15 hours ago [-]
Read my comment - it is completely irrelevant to the discussion being had about the linked article, and no one on the planet is suggesting a 20% wealth tax. That is my point.
lazide 15 hours ago [-]
The argument was that it was ludicrous to say a wealth tax of x percent > income tax of x percent in actual impact, yes?
It is clearly the case if you try to apply the income tax rate as a wealth tax using concrete real world examples.
Even a 3% property tax makes it very difficult for many normal people to own those assets in many real world economic circumstances.
harimau777 13 hours ago [-]
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.
lazide 12 hours ago [-]
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.
Dylan16807 11 hours ago [-]
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.
lazide 11 hours ago [-]
It depends on the asset and the ability to earn income from it.
The higher the rate, the harder it will be to do.
At some point, only speculators with deep pockets and the desperate with enough cash flow could do it.
Glyptodon 16 hours ago [-]
You obviously didn't read the thing. 20% is not on wealth. The argument in the piece is that 1% on wealth is the same as 20% on income, and therefore 1% on wealth is obscene.
Please read before making replies that don't make sense in context. When I refer to 20% I'm referring the PG's characterization of a 1% wealth tax as an effective 20% income tax, not a 20% wealth tax.
lazide 15 hours ago [-]
I read it, and was replying in context.
ximm 17 hours ago [-]
Corrected version:
A wealth tax of 1% is equivalent to an income tax of 20% on capital gains.
Glyptodon 16 hours ago [-]
With different issues than the ones caused by deferring gains forever through shenanigans.
outside1234 16 hours ago [-]
It isn't, because the ultra rich have no capital gains. They get ultra low interest rate loans against assets so they never have to sell assets and trigger capital gains. Google "Buy, Borrow, Die" if you don't understand this strategy.
Manuel_D 15 hours ago [-]
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 implementing a wealth tax.
AnthonyMouse 14 hours ago [-]
> 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 by the donor until the new one has all the assets, or any of a hundred other things.
If you try to do a wealth tax then their assets end up in another country under whatever arrangement is necessary to give them de facto control but not formal ownership.
The best way to solve the "buy, borrow, die" thing is actually a consumption tax because then borrowing money in order to spend it doesn't avoid the tax.
SoftTalker 14 hours ago [-]
I'd like to see all taxes replaced by consumption, sales, and/or value-added taxes, with an automatic rebate to offset the regressiveness. It would kind of end up being UBI with a vastly simpler tax code.
Manuel_D 14 hours ago [-]
This would be an extremely regressive tax regime, effectively a flat tax rate. Worse than a flat tax rate, actually, since consumption rates do not scale linearly with income or wealth.
DontBreakAlex 13 hours ago [-]
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 other's basic needs, but I wonder if there's been serious research on the implications of such system.
SoftTalker 13 hours ago [-]
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.
frmersdog 11 hours ago [-]
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.
AnthonyMouse 32 minutes ago [-]
> Boy, that's going to suck for people whose credit situation has shut them out of most traditional housing situations.
There are lots of apartments available with no credit check. They're more often of lower quality, but if your situation is such that you want to spend less on rent and have more left for something else (like paying off your debts), why is it a problem for people to be able to choose that?
It's the status quo that screws them, because the government often pays out $1000/month or more in housing assistance but it's required to go directly to the landlord, and then if you have money problems but could live with family or are willing to take in a crappy low-rent studio apartment for a while, you can't take that money and use it to fix your situation instead because if you tried to do that the government takes it away.
> 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?).
Isn't this the opposite? If you give them a UBI then they can buy whatever they want. If you give them paternalistic micromanaged benefits like SNAP then they can buy carbonated high fructose corn syrup in a can but not vitamins or farming supplies.
Manuel_D 13 hours ago [-]
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 going to shift to something else. Consumption taxes give billionaires the option to drastically reduce their tax burden by consuming less. The lifestyle of someone with a $20 million net worth is not that much worse than someone with a $2 billion net worth.
AnthonyMouse 16 minutes ago [-]
> 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 of air travel.
> Consumption taxes give billionaires the option to drastically reduce their tax burden by consuming less.
Isn't that what we want? An incentive for the money to go to creating jobs or charitable donations rather than private jets and third mansions?
MeherunJessi 13 hours ago [-]
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greedo 11 hours ago [-]
Consumption taxes are regressive in general and in particular with the 1%, they simply don't spend enough to have it impact their lifestyles.
AnthonyMouse 5 minutes ago [-]
This is what parrots continuously say while ignoring that the original problem was that in the existing system they not only don't pay taxes on the money they don't spend, they don't even pay taxes on the money they do spend, because they can borrow what they want to spend instead of using taxable income and then defer capital gains or keep assets in shell corporations.
Getting from that to where they at least pay the same taxes as anyone else on the money they actually spend would be a marked improvement.
Manuel_D 14 hours ago [-]
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 mechanism.
Consumption taxes are regressive: a sales tax is a flat tax that taxes a billion on their $10 latte the same as a poor person. Consumption also doesn't scale linearly with wealth: most billionaires don't consume 1000x as much as a millionaire.
AnthonyMouse 49 minutes ago [-]
> 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 the country in which "profit" is earned in an international supply chain, or value non-fungible assets not undergoing transactions, are easy to game. "You pay a given percentage when you buy something" is hard to game.
> Consumption taxes are regressive: a sales tax is a flat tax that taxes a billion on their $10 latte the same as a poor person.
The existing "progressive" income tax and benefits programs do worse than that: 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.
> Consumption also doesn't scale linearly with wealth: most billionaires don't consume 1000x as much as a millionaire.
Only if you're looking for it in the wrong place. A billionaire isn't going to buy a billion dollars in lattes, they're going to invest in some business ventures, which in turn are going to spend the money on equipment and vehicles and utilities and so on, i.e. consumption. You don't get a return on capital by sticking it in a mattress, you get a return by spending it to build or operate something.
madaxe_again 14 hours ago [-]
Lol nah. The assets are held by a trust. The trust, being a friendly bunch, loan you capital which it gets by liquidating assets, at a rate of 0% with “don’t worry about it” default terms. You’ll probably pay a management fee for each loan.
You croak, your heirs become the beneficiaries of the trust. Rinse, repeat.
Manuel_D 13 hours ago [-]
In this case, the beneficiaries of the trust pay income tax on the money they receive from the trust.
madaxe_again 3 hours ago [-]
You don’t pay income tax on loans, and the trust exists in a place with no CGT.
dh2022 13 hours ago [-]
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 admin) only morons pay estate taxes : https://www.cnbc.com/2017/08/29/only-morons-pay-the-estate-t...
Manuel_D 13 hours ago [-]
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.
frmersdog 11 hours ago [-]
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.
dh2022 9 hours ago [-]
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.
15 hours ago [-]
irchans 16 hours ago [-]
I'm retired. I hope to get a 3% per year income from my savings every year after inflation and taxes. If my state implemented a 1% wealth tax on savings each year, I would go bankrupt in 20 years. I am hoping that I will live 20 years.
Glyptodon 16 hours ago [-]
Lol, that's still totally feasible for normal FIRE/retirement situations, my understanding is that most proposals only start at $50 million or more. You can still have a super cushy retirement with $3mil+ and 3% withdrawal forever.
chasd00 15 hours ago [-]
> only start at $50 million or more
curious how they came to that number. There's probably plenty of voters willing to cast a vote for $0.5M+ and plenty ready to cast a vote for $100M+. How was the line drawn?
SoftTalker 15 hours ago [-]
The minimum net worth of the top 1% of households is roughly $13.7 million[1]. So at $50 million they can say "we're only taxing the top of the top 1%" as a way to sell it.
"The top 1%" is a popular target for these schemes because 99% of people might be convinced to support it, since it won't affect them (at least not directly).
A wealth tax will affect the distribution of investments. It might make higher risk investments like stocks more attractive as compared to bonds, it might make them less attractive. More likely it might make publicly available instruments less attractive in general, as private investments have more flexibility in how they are evaluated. In any case, there will be winners and losers as the investment landscape shifts, which affects everyone. If equity becomes more attractive, it could force less wealthy people into equity, which means they will take on more risk. If private investments become more attractive, less wealthy people will lose out. It might not affect those with no assets, but that is not certain either. So, everyone will be affected, in some way. Impossible to model due to unintended side effects.
frmersdog 11 hours ago [-]
Yeah, "It won't affect the 99%," is the wrong framing. The entire point is for it to affect the 99% (by undoing the effect disproportionately high wealth among the wealthiest and disproportionately low wealth among the middle and least wealthy).
I think your assumptions are off, though; less wealthy people might not be "forced" into investment at all, but given the "opportunity" to pay off debt or increase/diversify consumption. In the end, the important part is the wealth transfer downward, wherever it ends up. No trickle, but you can pump it.
ashdksnndck 11 hours ago [-]
In 2020, there was a campaign (prop 15) to legalize increases on the property tax rate in California that only applied to commercial and industrial properties. Intuitively, the constituency for prop 15 should be very similar to a wealth tax on $0.5M+, since the set of people owning commercial/industrial real estate in California are mostly a subset of people with $0.5M+ wealth. What actually happened is there was heavy opposition and prop 15 was narrowly rejected by the voters. Organizations opposing the proposition included the American Legion, the NAACP, and California Beer and Beverage Distributors.
Arguably, there’s a disconnect where the people who lead civic organizations don’t have a great deal in common with the median member. They might be wealthier and generally more plugged in to power structures. They might not support policies that are in the best interest of members they represent, especially people who have a hard time representing themselves.
Anyway, if your goal is to get a policy enacted, it’s not enough for your policy to be theoretically good for the median voter. You need a winning political coalition.
Glyptodon 11 hours ago [-]
There are probably good argument for it being lower (maybe circa $10 or $12 million. But I have a feeling they do want to try and not hit land-rich-but-otherwise-maybe-not "family farms" that have hundreds or thousands of acres.
15 hours ago [-]
trollbridge 15 hours ago [-]
Sort of like how the income tax in America started with it only applying to the top 1% of earners?
rurp 12 hours ago [-]
Do you remember when the top marginal tax rate was 90%? Things don't only move in one direction. The effective tax rate on the ultra wealthy has been steadily trending down for decades.
tengbretson 14 hours ago [-]
Today, sure. In 30 years I wouldn't expect to be able to retire with less that $50 million in savings.
scientator 16 hours ago [-]
I'm sure any wealth tax would only apply to wealth above a certain amount. For instance, inheritance tax only applies to $15mil and above. Likewise, when you sell a house the first $500K (I believe) in capital gains from the sale is tax free.
I don't think people with savings of $15mil and above (assuming that would be the cutoff) are in danger of going bankrupt in 20 yrs from a 1% wealth tax. Assuming your 3% return, they'd be earning $450,000 a year that wouldn't be touched by the wealth tax.
bombcar 14 hours ago [-]
Sale of a house isn’t a wealth tax - that would be the property tax you pay, and the exclusions are pennies on the dollar on those.
harimau777 13 hours ago [-]
No one is proposing a wealth tax on anyone other than the ultra-wealthy. If you are in a position where a 1% wealth tax would bankrupt you, then you probably aren't someone that it would apply to.
16 hours ago [-]
topaz0 12 hours ago [-]
A sane taxation scheme should of course be paired with a humane social safety net that could pay you a comfortable pension.
blmarket 16 hours ago [-]
But why wage earners should support you by paying more taxes? Reduce your spending by 33% to keep up.
MattPalmer1086 16 hours ago [-]
I can't tell if this is sarcasm or a serious point.
Obviously people who have retired and based their entire life plan on making that work have many fewer options than those who are still working. You are arguing that nobody can plan for any kind of secure retirement, including you.
blmarket 14 hours ago [-]
It depends on the net wealth we're discussing. I'm sorry if I touched someone who lives with $1M saving. But should I be sorry for someone with $10M, which might be way more than 30 years of lifetime earnings of p80 population? Wealth tax is obviously targeting the latter.
Having progressive tax rate might be a better way to discuss, instead of blaming whole points.
tengbretson 18 hours ago [-]
> The math doesn't math for someone on the other extreme end of the spectrum who has zero savings or investments and obtains all his income from labor: To him, a N% wealth tax = 0% income tax for all N. Those with -some- savings are somewhere in the middle.
Productivity comes from labor AND assets though. You need the farmer and the tractor. Why would we create a tax system that encourages people to divorce themselves from having a stake in the means of production?
zozbot234 16 hours ago [-]
> Productivity comes from labor AND assets though. You need the farmer and the tractor. Why would we create a tax system that encourages people to divorce themselves from having a stake in the means of production?
This is exactly why economic models broadly show that taxing capital assets makes workers worse off in the long run. An abundance of capital means that workers will be more productive on the margin, so their wage will be higher. This extends to the capital-income taxation involved in income taxes: pure labor taxes or consumption taxes are inherently more efficient. There are countervailing effects (taxing capital income works as an effective way of indirectly taxing the unearned value of resource-like assets, or of idiosyncratic skills that happen to correlate with holding more capital-like assets) but they can only roughly justify the current income tax arrangement, not some extra tax on assets.
smallmancontrov 16 hours ago [-]
Oh good! I was worried that trickle down economics was self-serving nonsense pushed by think tank economists on behalf of their benefactors. Since it is economic fact rather than self-serving fiction, when I review its track record I will find that it caused an upward inflection in real wages, right? Right?
As long as capital doesn't get involved in some kind of highly financialized spiral getting further and further divorced from the real economy, we should be good.
malfist 15 hours ago [-]
That could never happen here. We have a history of strongly regulating capital and banks. Why look at all the executives we jailed for the 2008 financial crisis!
zozbot234 16 hours ago [-]
Total labor compensation has in fact grown. Unfortunately, much of the non-wage compensation involves services like healthcare that has become a lot more expensive over time due to burdensome overregulation and an overall lack of price transparency.
JuniperMesos 6 minutes ago [-]
Also the wages of the fairly-large number of people who work in the health care industry itself.
smallmancontrov 16 hours ago [-]
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gruez 16 hours ago [-]
>Since it is economic fact rather than self-serving fiction [...]
You deride the weak justification for trickle down economics, then proceed to link wtfhappenedin1971.com, a site that tries to argue for the reintroduction of the gold standard through a gish-gallop of random charts?
smallmancontrov 15 hours ago [-]
The gap between productivity and wages is striking, isn't it?
I'm not perfectly aligned with gold bug politics. Their faith in the Kindleberger world is misplaced and their tax aversion can make them useful to my opponents, but at the same time they tend to take the Cantillon Pump and Balance of Payments mechanisms seriously while my traditional allies do not.
No, I don't mind borrowing their charts. Why? Do you have a better go-to link for The Wedge?
gruez 15 hours ago [-]
>The gap between productivity and wages is striking, isn't it?
It's not. The (in)famous epi.org is flawed for all sorts of reasons, from excluding noproduction/supervisory workers (the highest compensated ones!), to excluding non-wage compensation (eg. benefits), to different deflators for compensation vs productivity. If you adjust for all of that, the chart is unremarkable.
That incidentally, is the exact problem with the site. It presents a barrage of charts, without regard to relevance or rigor, and tries to persuade through sheer volume alone. Yet, if you scrutinize any of them, it quickly falls apart. That's probably why the site doesn't even bother justifying the charts, or even state the thesis, for that matter.
cyberax 13 hours ago [-]
There are deep problems with _both_ arguments. Your "happy fun chart" does not include negative effects from the _types_ of jobs that are available now.
Nearly all good jobs are now concentrated in dense city cores, in the ever-dwindling set of large cities. This drives up the _cost_ of having these jobs. For example, the median ratio of rent to income is rising: https://www.moodyscre.com/insights/cre-trends/housing-afford...
And this "cost of work" is not only monetary but also psychological and physical (it takes longer to commute). You also don't get nearly the same amount of job security as your parents.
From the epi.org chart - it indeed misses that a lot of stuff is now cheaper. Clothes, electronics, toys and even appliances - they are so cheap that we now treat them as disposable!
smallmancontrov 15 hours ago [-]
This smells like the think-tank "CEO comp justifies worker underpayment" and "health care inflation is wages" arguments, I'll look into your source but I can't pretend to have high hopes.
As for "gish gallop," right back atcha: those billionaire-funded think tanks firehose a lot of nonsense into the economic discourse (and curricula!)
_DeadFred_ 16 hours ago [-]
What percentage of increased productivity has gone back to the workers as increased financial health during the last say 20 years? Not increased wages. Their increase in end of day actual financial health versus end of day increase in actual financial health of the owning class? Not some Peter/Paul highlighting Peter 'wages have gone up' while ignoring any stealing from Paul 'actual financial health' has gone down metric.
300 years of thinking has established that copyright is the best way to sustain ongoing creation of knowledge and thought, yet the same crowd seem pretty fine gutting that 300 years of understanding because of their judgement that their desired use case for today outweighs the cost to society of lost future knowledge creation, so they seem plenty happy to ignore established thought when it benefits them.
zozbot234 15 hours ago [-]
People at the bottom end of the income scale are sharply deterred from holding any meaningful amounts of savings, because this can exclude them from 'means tested' benefits. This is effectively a disguised ~100% "wealth tax" that hits many among the most heavily disadvantaged and marginalized. We're essentially telling people that they have to be living literally hand-to-mouth before they're deemed to deserve any kind of broader social support.
ryandrake 18 hours ago [-]
The current system without wealth taxes already largely divorces labor from equity stake. Unless you're one of the relatively few tech or office workers who get equity compensation or have a large savings rate, you currently don't have much of a stake in any means of production.
tengbretson 18 hours ago [-]
I'm not disputing the claim that few people are able to save and invest into having a stake in the means of production.
However, if your goal is to increase stakeholdership, how would a policy that explicitly disincentivizes that behavior fix anything?
smallmancontrov 16 hours ago [-]
Why do I get the feeling that you would never field the structurally identical complaint against disproportionately taxing labor and consumption, even though that's a much more prominent feature of our current tax policy?
In any case, taxes do not go into a black hole, no matter how much the right likes to encourage this self-serving fiction. Taxes generally get spent down the economic ladder and move people up the economic ladder, increasing their marginal propensity to save. People must have money if you want them to save money.
Even more concretely: reversing the policies which dissolved the middle class might reasonably be expected to restore the middle class, or at least slow their demise.
16 hours ago [-]
svachalek 16 hours ago [-]
How does it disincentivize "stakeholdership"? Are people expected to say, please don't make me rich, because I'd have to pay 1% of it?
notahacker 16 hours ago [-]
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
gruez 16 hours ago [-]
>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?
notahacker 11 hours ago [-]
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....
tengbretson 14 hours ago [-]
> Well for a start it pressurises asset holders to sell their assets.
To whom are the selling? The buyers would be only those that can make efficient enough returns to offset this tax due to their existing systemic advantages, like economies of scale or regulatory lobbying. This would accelerate consolidation.
> 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
At this point I think there is ample evidence that policy in this country does not move forward without the consent of these so-called privileged stakeholders. If you take that as a given, why would you support handing these people an economic machine gun to point at your future self?
notahacker 11 hours ago [-]
> To whom are the selling? The buyers would be only those that can make efficient enough returns to offset this tax due to their existing systemic advantages, like economies of scale or regulatory lobbying. This would accelerate consolidation.
You don't need "systemic advantages" to earn more than 1% average annual return on your wealth. And strangely enough, not paying tax on their wealth accumulation whilst everyone else pays it on their earnings and trades doesn't reduce prospective buyers' advantages...
> At this point I think there is ample evidence that policy in this country does not move forward without the consent of these so-called privileged stakeholders. If you take that as a given, why would you support handing these people an economic machine gun to point at your future self?
Using pretty phrases like "economic machine guns" doesn't somehow make an argument of the form that wealth taxes somehow make wealthy people more powerful actually make sense.
frmersdog 11 hours ago [-]
>The buyers would be only those that can make efficient enough returns to offset this tax
Or people who aren't wealthy enough to have to pay it.
thrance 16 hours ago [-]
Regular people have less and less savings to buy "stakes in the means of production". Capital is getting more and more concentrated in fewer and fewer hands: the top 10% of the country owns almost 80% of it all. Wealth needs to be taxed and redistributed.
skybrian 18 hours ago [-]
I think it’s a good point that these taxes don’t apply to most people. Another reason they don’t apply is that most people save for retirement using retirement accounts.
But nothing in the article implies that these wealth taxes apply to most people. The argument is that a 1% wealth tax is equivalent to a 20% income tax because, under certain assumptions, the government gets the same amount of money.
qzw 16 hours ago [-]
Only in theory. In practice it’s not equivalent at all because once you reach a certain (very high) level of wealth, there’s the “buy, borrow, die” strategy that avoids realizing most of your capital gains. I’ve also heard of proposals to tax asset-backed loans above a certain threshold, which is aimed at the “borrow” part of the strategy. But the concern there is that the super wealthy may quickly find a different strategy for tax avoidance, so a blanket wealth tax should be harder to circumvent. But as with anything to do with the tax code, those with the best tax accountants and lawyers seldom end up losing.
pwg 16 hours ago [-]
> because once you reach a certain (very high) level of wealth, there’s the “buy, borrow, die” strategy that avoids realizing most of your capital gains
If that is what is being targeted, then why not actually target that. Apply some percent taxation on the current value of all assets transferred because of death. And, if they want, only apply it to estates over some X threshold in size.
Performing the taxation at time of probate makes the valuation easy (unlike a 'wealth tax') because the valuation could be one of "value at time of death" or "value at time of transfer". And, if the ultra wealthy are using this angle to avoid taxes, then this taxes some of that transferred value.
Of course, just like with subscriptions, to the politicians a yearly wealth tax is far more valuable than a one time tax on the total value of the estate.
jdasdf 15 hours ago [-]
>If that is what is being targeted, then why not actually target that. Apply some percent taxation on the current value of all assets transferred because of death.
That already exists. The rate is 40% of the asset value.
jandrewrogers 16 hours ago [-]
There is no evidence[0] that the wealthy use the "buy, borrow, die" strategy in any significant way. The underlying financial math doesn't make sense if the goal is to maximize wealth so it isn't surprising that wealthy people don't actually do it.
"Focusing on the top 1 %, while total borrowing is substantial, new borrowing each year is fairly small (1–2 % of economic income) compared to their new unrealized gains"
"1 % of wealth-holders (above $14 million in 2022)"
1-2% of $14,000,000 is $140,000 to $280,000 a year. The median personal income is $45,140. They are benefiting untaxed to the tune of 3-6 times the median American income.
1-2% of 100 million is 1-2 million dollars a year untaxed benefit (44x median income). That is substantial. That their wealth is growing so fast that that is fairly small to them and makes the median American income seem small doesn't sell me.
How is an untaxed benefit of 3-44X the median income insignificant? I would love to benefit annually by that 'insignificant' amount. By this argument why should we not then exclude all economic income below $140,000 to $2,000,000 from taxation? Since it's 'insignificant'. Oh, right, because it's only insignificant in the context of 'they are so obscenely rich it's insignificant to them'.
avidiax 15 hours ago [-]
That paper is looking at the top 1%. Buy, borrow, die is the realm of the top 0.1 % or 0.01%.
Are you saying that billionaires are actually realizing capital gains to afford yachts, private jets, and mansions?
twoodfin 13 hours ago [-]
Of course they are. You can read reports to the SEC on executive stock sales all day.
Australia is proposing a CGT tax of 30% on "capital gains" .. essentially taxing the _income_ from wealth.
This is more of a fair comparable to reason about when comparing taxing wealth and taxing wages.
In nerd-speak, taxing the Derivative of Wealth is comparable to taxing Income.
You could argue that a fair comparison of wages and wealth would first subtract the minimum cost of living, so that wage tax is effectively a tax on the growing wealth of wage-earners. This would arguably be a fairer tax comparison - in both cases it is the derivative of wealth that is being taxed.
If a large portion of the populace spends all their income on basic food, rent and petrol then they have no chance of wealth increase, and perhaps should fairly be charged 30% of their $0 growth in annual wealth.
hedora 12 hours ago [-]
Also, this seems to ignore a major problem with how progressive income tax rates are figured in the US.
You can work for years at a startup at a depressed wage, then have a windfall that makes up for it on average.
That windfall (in California) will be taxed at a marginal rate of 52%. The only people that ever pay nearly that much are middle class. Some sort of time averaging would help.
Anyway, the US tax code is complicated. Personally, I’d prefer a flat tax with universal basic income. This could replace income, capital gains and inheritance taxes in their entirety. (Along with a lot of social services bureaucracy).
tyleo 18 hours ago [-]
I feel the same way. I hear a lot of complains about wealth tax but it always seems like the problems mainly pertain to billionaires. I don't see why we should optimize for that small minority.
If we moved to a wealth tax I'd be the first in line to pay it. So long as everyone else had to pay it too.
malfist 15 hours ago [-]
WSJ Opinion Piece: "Why It'd Be A Mistake To Inconvenience Billionaires" -Some Other Billionaire
closeparen 12 hours ago [-]
Is this situation so uncommon? Almost everyone who lives in a house in California, for example, is living primarily off the unrealized gains on their home equity. Very few have the wage income to qualify for a mortgage on what their lifestyle is worth now.
California contains a lot of houses!
arh5451 19 hours ago [-]
If you mean that a person with 0 savings pays 0 wealth tax, then sure. Most people when they earn income save some of it. Therefore it is wealth taxed.
amanaplanacanal 16 hours ago [-]
It seems fairly simple to have a standard deduction so that only folks with wealth over a certain amount get taxed.
16 hours ago [-]
qzw 16 hours ago [-]
Almost all wealth tax proposal I’ve seen start at the level of 8-9 figures of wealth. Why are we now talking about it as if it’s going to apply to your average person’s savings account? If we’re just going to accept these billionaire-invented narratives around the wealth tax, then there’s really no point in discussing the actual pros and cons of these proposals.
tclancy 15 hours ago [-]
Because it’s the standard playbook for dealing with even the slightest suggestion of fairer taxation. Trot out an old dude in a suit from a Foundation, make sure to avoid anyone knowing exactly what that foundation does or who funds it and have him suggest it’s a really nice idea, but the unforeseen consequences will actually hurt “working people like you and me”. Present as fact, job done.
tclancy 15 hours ago [-]
>Most people when they earn income save some of it. Therefore it is wealth taxed.
This is one of those “check your privilege” moments and one where it is best to look at the median and not just the average when talking about household wealth in the US. Between 57% and 67% of U.S. adults are estimated to live paycheck to paycheck. They aren’t saving it, they’re going into debt because the only local grocery store is a Dollar General and it’s just a clever name nowadays.
bombcar 14 hours ago [-]
Do they still live paycheck to paycheck after receiving a raise?
If so, the problem likely isn’t the paycheck.
topaz0 12 hours ago [-]
At most times during the last 50 years, wages have been growing slower than inflation.
raincole 8 hours ago [-]
In other words, PG is so rich now that he forgets the existence of less fortunate citizens.
whodidntante 13 hours ago [-]
As I commented elsewhere, everyone gets affected by a wealth tax, as it will affect how assets are priced and how businesses operate across the board.
For those who have little hope of the wealth tax applied to them (me for example), but as as someone who has investments and need them for retirement, I need to decide if this will affect bond prices or equity prices in a positive or negative way as their attractiveness will change in relative terms, or if publicly accessible funds will get devalued in favor of private investment opportunities and all public assets get devalued. Oh, wait, I am not wealthy, so I do not have the option of private equity, and cannot participate in what would be an attractive investment opportunity when investments shift towards more opaque assets.
For those that have zero assets, I do not think that a shift by the wealthy to private equity is a good thing, unless you want to work for a private equity company. A government job would be your best bet. And a shift to private equity would have a downward pressure on tax collections, so whatever projections for how much a wealth tax would generate, I am suspect.
A lot of people complain about private equity. This scourge was, to a small or large degree depending on your viewpoint, an unintended side effect of SOX compliance, meant to protect investors, and in the end narrowed down the amount of public companies, and created more opportunities/demand for PE. I think it is debatable how much protection investors actually received.
We live in a system, and making a fundamental change to one part of that system has effects on all parts. Raising the amount of taxes under the current system ? That is one thing. Introducing a whole new tax concept, difficult to predict. Especially if this is done by states, which could cause capital movements with their own unexpected consequences.
satvikpendem 16 hours ago [-]
> But Graham's math is only applicable to those flush with investments and with relatively small salaries from labor, so a wealth tax is only unpopular to that particular group.
That can be quite a lot of people on HN, and also including FIRE people, so I can see why it's unpopular.
Glyptodon 16 hours ago [-]
Most FIRE people aren't going to have $50 million plus and be hit by this.
satvikpendem 7 hours ago [-]
I said on HN including those who are FIRE, where the net worth of the average individual here is much higher than the average and some do, yes, have $50 million or more in assets.
everfrustrated 15 hours ago [-]
It will never stop at $50M. Once the law is created it is sooo much easier to just lower the threshold. Even if not lowered, in 30 years inflation means it will capture a whole different number of people - maybe you. Maybe it will bankrupt your children.
topaz0 12 hours ago [-]
"taxes only ever go up" is an incredible belief to hold in a historical run of decades of tax cuts.
throwaway173738 13 hours ago [-]
30 years is plenty of time to change the law. We change the tax code all the time. In 2020 or so it was recently amended to substantially increase the standard deduction. Slippery slope is a fallacy unless you can prove the pattern already exists.
booleanbetrayal 16 hours ago [-]
Billionaires gonna billionaire, I guess.
abletonlive 15 hours ago [-]
It's so funny to me how many people have taken envy up as their core personality. Billionaires happened to have created the most opportunities for everybody. Amazon is amazing for the consumer that seeks convenience, but it's also amazing if you want to dropship and make your living off of that. Independent sellers make up 65% of all sales on Amazon. So somewhere the idea that nobody benefits from the creations of billionaires has to be questioned.
Illegal and legal immigrants are being completely supported by Uber right now in NYC. If you lived here you would know that this is their primary source of income for many of them.
The gate that previously blocked your ability to disseminate your ideas to a wide audience and create a living off of it has been completely torn down by the billionaires that create platforms like Tiktok. There are scores of people that have made a living off of this, which was virtually impossible before. The barrier to entry to start from grass roots and build a following and then monetize it has been erased.
It's completely banal at this point to just point at billionaires and say they are the problem just because of envy. I wish there was a plugin for it so I can erase it from my consumption.
The premise that billionaires are less efficient than the government at deploying capital to serve society is incongruent with reality, but sure, they are a convenient scapegoat if your heart is poisoned by envy and lack. That's really all it is and it needs to be called out more often because it's a mind virus that is easy to infect others with. Your life is not served by being clouded by envy and lack, and spreading it is detrimental to all consciousness.
There is objectively more paths to success than ever before. Being preoccupied with what you don't have currently and pointing the finger to blame at some boogeyman billionaire is not going to change anything for your personal life. The buck is on the person with the finger to improve their life and take advantage of the opportunities that are presented to them. Spending your time being mad that people have created something society deems worthwhile and are being rewarded for it is spending your time being envious about something that has nothing to do with your own problems.
tclancy 15 hours ago [-]
It is less amusing how many of our brethren think the Landed Gentry got there by merit and deserve to live in their castles untroubled by the rabble.
randallsquared 13 hours ago [-]
Some 20% of US billionaires grew up poor, or at least without well-off parents. 60+% were upper middle class or below. So, I think we can note that they've created enough value for the rest of us and deserve to keep the fraction of that value that they were able to negotiate.
nullocator 6 hours ago [-]
What is the demographics breakdown on those statistics? How much is old vs new wealth vs generational wealth?
A lot has changed in the U.S. in the last 20-40 years.
Also I'm not really convinced that the existence of individuals with over a billion dollars in wealth is a net positive for society or really anyone except that individual.
abletonlive 13 hours ago [-]
Another comment that's clearly coming from a place of envy, entirely framed about what billionaires deserve rather than having any sort of introspection.
booleanbetrayal 13 hours ago [-]
You know nothing about me, yet you assume everything. I think having that much money is egregious and I am certainly not envious of people who have an endless void to fill, let alone those who aspire to be like such people. My life is quite full, thank you very much.
I think it's a bit ridiculous that these individuals feel the compulsion to min-max their capital at the expense of pursuits that could better be fueled by it, specifically for the collective good. I think it is shameful behavior and not something we should be promoting in society.
abletonlive 12 hours ago [-]
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
booleanbetrayal 12 hours ago [-]
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.
abletonlive 11 hours ago [-]
> 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.
booleanbetrayal 11 hours ago [-]
Is this a Peter Thiel smurf account or something? I'm going to disengage from you and whatever brand of twisted sychophantic (re: "envious") proselytism this is, now. It's boring and certainly not engendering any support for your cause. Quite the opposite. Maybe you should try to post even less, as it would do more for your cause.
abletonlive 10 hours ago [-]
Please disengage if you're not getting anything out of it. I'm sure letting random billionaires live rent-free in your head is deriving much more value for your life. It's not a rocket launch, you don't need to announce that you're disengaging.
zzrrt 14 hours ago [-]
> the idea that nobody benefits from the creations of billionaires has to be questioned
Who said that? Not in the post that prompted your reply, nor in the parent post.
> Illegal and legal immigrants are being completely supported by Uber right now in NYC.
Can you prove that taxis wouldn't have been able to do that, if Uber didn't exist? That wealth taxes wouldn't have been able to support them?
> The gate that previously blocked your ability to disseminate your ideas to a wide audience and create a living off of it has been completely torn down by the billionaires that create platforms
Musk is also erecting new gates, to promote himself and his ideas. I have to admit, I'm surprised what he lets stay up there, but I still don't believe it's an actual free platform.
> I wish there was a plugin for it so I can erase it from my consumption.
Vibecode it; the billionaires tore down the gates that previously blocked your ability to have any software you want -- as long as the billionaires accede to your use of their AI and running your own software against their platforms, of course.
You complain about open platforms filled with people giving you their ideas for free, and you just don't like what they're saying, but you just cited exactly that openness as one of the valuable things that billionaires deserve to have billions for.
> The premise that billionaires are less efficient than the government at deploying capital to serve society is incongruent with reality
Nobody said that, explicitly. Maybe the people arguing against billionaires don't believe capital efficiency is paramount, so you'd have to persuade them of that first, otherwise you're just saying "But capitalism is the right way, of course!"
abletonlive 14 hours ago [-]
> Can you prove that taxis wouldn't have been able to do that, if Uber didn't exist?
Yes, because we only have to go back a few decades to see that the cab industry in NYC were being gatekept by medallions that people were paying 800k+ for just to have the opportunity to drive cab. That was not a system made by billionaires. That was a system made by the government and unions, which is exactly the system that you're fighting for.
> Musk is also erecting new gates, to promote himself and his ideas. I have to admit, I'm surprised what he lets stay up there, but I still don't believe it's an actual free platform.
It's more free and less friction than what we had before. The fact that you can't accept it despite the evidence in front of you and your own observations about being surprised is highlighting that you are failing to be objective.
> Vibecode it; the billionaires tore down the gates that previously blocked your ability to have any software you want -- as long as the billionaires accede to your use of their AI and running your own software against their platforms, of course.
Sure, another capability that billionaires unironically gave me. I do have other more interesting things to work towards.
> ou complain about open platforms filled with people giving you their ideas for free, and you just don't like what they're saying, but you just cited exactly that openness as one of the valuable things that billionaires deserve to have billions for.
Yes, and notice that I didn't say that they should be banned from the platform and their speech oppressed. I turned it around to make it about my own consumption. I have the free will. You're not arguing against me, you're proving my point.
> Maybe the people arguing against billionaires don't believe capital efficiency is paramount, so you'd have to persuade them of that first
Maybe we shouldn't assume the people without capital know what is paramount and what isn't when it comes to capital. It's hilarious to think there's some poor chap out there saying these people are being too efficient with capital and accumulating it while also believing that capital efficiency is not paramount. Hello? The problem you're pointing out is directly related to capital efficiency, yet you think the solution is to be capital inefficient. That has clearly not worked out for you or for anybody else in this society. We have countless examples where capital inefficiency has hurt us badly in this society.
oa335 14 hours ago [-]
... you read an awful lot into that comment, I think you are being a bit uncharitable.
Though I agree with many of your points, what I think the OP was gesturing at was the idea that billionaires are more avaricious than the average person; hence we shouldn't be surprised that Paul Graham is wary about paying an effective tax rate that would put him on par with majority of tax payers in this country.
This isn't an new or particularly controversial observation:
e.g.
"Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one." Benjamin Franklin
"The love of money grows as the money itself grows." Juvenal
Having worked for several billionaires and seen them in their day-to-day, those quotes resonate with me.
voidhorse 15 hours ago [-]
I don't think anyone is simply envious. People mean to point out that allowing individual accumulation of wealth to extreme degrees lead to runaway structural problems. Billionaires and companies existing and providing wages are not inextricably intertwined. It's entirely possible to have one while preventing the other. The idea that the only way you can incentivize individuals to start companies is to allow them to accumulate so much wealth that they become tiny kings is patently absurd. The world has thousands of companies and founders who happily sustain their businesses without ever reaching this ungodly and idiotic level of uber wealth.
abletonlive 15 hours ago [-]
> I don't think anyone is simply envious.
I think most are.
> The idea that the only way you can incentivize individuals to start companies is to allow them to accumulate so much wealth that they become tiny kings is patently absurd. The world has thousands of companies and founders who happily sustain their businesses without ever reaching this ungodly and idiotic level of uber wealth.
And how many of those companies and founders have given back to society at the scale that these uber wealthy people have? Entire new economies have been built up.
> ungodly and idiotic level of uber wealth.
This is still just envy. You should try to prove that you're being oppressed by the systems these billionaires have created because we don't have to go very far back to observe when these systems and economies did not exist. I'll remind you that for example, in NYC before Uber, taxi medallions were being sold for over a million dollars and people were going into debt just for the opportunity to drive a cab. If you go far back enough creating a virtual store front to sell your ideas and goods was a gate that was actually very high. Thanks to the systems that are in place now you have the opportunity to spin this up for very little risk and prove out your idea. Structural problems such as what? The idea that wealth is power? That's the same structural problem that has always existed, except that there are more players than ever before. You can launch an entire grass roots political campaign on social media for free. Does that sound like a system that oppresses or is that a system that has given you opportunity to enact change?
Even the barrier to invest in companies and participate directly in the profits and value creation has been erased or lowered. Hundreds of millions of people are directly benefitting from this everyday. It is now a few simple clicks of a button and you're in. Who lowered that barrier? It was the billionaires. And yes, because they did that they will get an asymmetrical reward because their impact and value creation for society is asymmetrical to yours.
You're not doing this, but when you try to have this conversation amongst the general population what is the response? Once you start poking holes at the concept it always reverts to "you're a bootlicker", "why are you defending billionaires, they don't care about you". These responses highlight envy, not reality or the desire to be objective.
Deep down a lot people either don't realize how much free will and agency they now have in this society or they are just living with contempt because everywhere they look they see people that are using that free will to accomplish more than them. It's lack and envy all the way through.
lurker919 14 hours ago [-]
Thank you for spelling out some good points. They always seemed obvious to me but I could never clearly explain them.
voidhorse 6 hours ago [-]
> given back to society
I wouldn't necessarily categorize giving people opportunity to do underpaid, tenuous, non-career, zero-mobility gig work as "giving back to society" nor would I classify the unregulated harms of social media, phone additions, etc. as social good either. That's not to say some of these things aren't also good in many ways, but I also still don't understand why you think this somehow leads to a moral or social justification for unbounded levels of amassed wealth to a single individual.
> Structural problems such as what? The idea that wealth is power? That's the same structural problem that has always existed, except that there are more players than ever before.
So your response to issues such as most people being unable to have a single living wage, rising homelessness, unaffordable housing, is "shrug wealth is power". This is not some kind of inviolable law of nature. We as human beings defining the terms of the game, can set up some legislation.
Learn history. America specifically has combated very similar issues in the past and curbing unimpeded accumulation and breaking up monopolies led to more innovation more diversity in the market and a better distribution of wealth. America has taxed the wealthiest classes more in the past and it wasn't a disaster. Look up the new deal.
> You're not doing this, but when you try to have this conversation amongst the general population what is the response?
Who are you conversing with, me, or the general population? What do you mean when you try to ascribe a belief to the general population? Have you done polling on this? Or are you basing this on media? What are you actually talking about? Why are you so confident in arguing against some perceived hypothetical belief you think "the general population" holds? How do you know there aren't more people who actually agree with your perspective?
> Who lowered that barrier? It was the billionaires
No. Scores of laborers employed by the billionaires lowered the barrier. Yes, many of the billionaires begin with a great idea, but there's no reason having an idea justifies having unbounded wealth. All enterprises depend on legions of people to actually materialize production. There is nothing written in nature that states that the person risking upfront capital should always be compensated more than the people who make production a reality, nor is there any corollary that states that the accumulation permitted should be completely unbounded.
You have convinced yourself that anyone not agreeing with your own belief is ruled by nothing but an emotional or psychological state rather than rational, but different, perspective. This is a perfect way to be a stubborn ass and ensure that no one will ever change your mind. It is anti-intellectualism at its finest. I hope one day you realize how foolish you are being about this.
Since you seem to be into super-reductive arguments, here's mine: we are all clearly hyper-dependent on one another on this planet. There is no reason people who make lots of money shouldn't have to give a reasonable portion of it back to the government and country that they draw labor, customers, and much more from daily. There is no reason that accumulation should be permitted without bound. It is pointless and leads to problems. We can and should argue for reasonable limits or at the very least taxation on massive wealth.
As for me, no envy here. I live comfortably and I am happy with what means I have, something most billionaires don't ever seem to experience. However, I also have eyes and functioning neurons so when I clearly see other human beings unable to afford basic necessities without feeling tremendous stress and pressure and then I see certain high-profile billionaires blowing money on dumb shit, underpaying and abusing workers (piss bottles) and more, I can understand why people want better guardrails in place, and no, wanting to limit the degree to which random people who got lucky in the market can exploit you is not envy.
someguydave 15 hours ago [-]
this post drips with envy
zzrrt 15 hours ago [-]
If they were saying that kings shouldn't have the unchecked right to execute people, this response would be akin to "Oh, you just wish you could kill anyone. Your argument is invalid."
abletonlive 14 hours ago [-]
Not really. The person saying that billionaires shouldn't exist is just failing to describe why that number is so mystical or interesting to them. If billionaires don't exist are we saying that people worth 500 million won't have power? you can keep doing this but the end result is the same. Power is asymmetrical and the system is self balancing. Those that have more wealth have more power. It's that simple. If you want to make wealth irrelevant then at least come up with a real system where wealth does not exist, because power is an intrinsic property of wealth.
The idea that you can distribute wealth is actually the tell for envy. You want to distribute power because you want power. And you won't be satisfied until that power reaches you, therefore you need to eliminate not just the billionaires, but after it trickles to centimillionaires and decamillionaires after that. If your premise is based on billionaires not existing because they have outsized power you're not going to be satisfied until that power eventually reaches where you are stationed in society.
It has nothing to do with billionaires and it has everything to do with people with more wealth than you having more power. That's envy. How far do you have to distribute before power is meaningless?
The truth is that there are more billionaires than ever before and that number is growing. It would seem that having power is becoming more democratized over time too. If we go back 500 years the number of people that had this level of power were limited to actual Kings. You are closer to a billionaire in your capabilities and agency in this society than a peasant was under an actual King. 500 years ago if you made a tiktok video about your King's private affairs and his properties while trying to tell everybody that the king doesn't deserve their power and the king should be taxed, you'd be executed in the town square. Yet somehow people that have the mindset that "billionaires should not exist" fail to convey how we've suddenly reached some tipping point where there's no going back.
zzrrt 12 hours ago [-]
Like saying, "There have never been more opportunities for commoners to become kings!" Okay, most of the people who say kings shouldn't exist will still feel that way, even if they could become king.
> You are closer to a billionaire in your capabilities and agency in this society than a peasant was under an actual King.
How much of that is because I live in a democratic republic, and not because billionaires exist? I guess you might say they're the same thing, but I believe there are free-enough societies with less wealth/power inequality than the US. I think I care more about the gap between top and bottom than about my own personal level of power, but of course it's hard to be objective.
It is harder to draw the line with money than with literal kingship, but I don't accept that we should change nothing and let unbounded power disparities exist.
Edit: More to the point of the original article, maybe I can accept their existence if we plugged all the holes they use to pay a very low percentage, as discussed in other comments. They may remain billionaires, but the tax law would treat them more like the rest of us than like kings.
voidhorse 6 hours ago [-]
I think there is a massive difference between wanting power and wanting freedom and security from undue exploitation and/or economic hardship.
Most people I know don't "want power". They just want to be able to afford basic necessities (food, housing, clothing) without feeling like they are on the brink of survival every day.
Billionaires are starting to take the heat because people are starting to recognize that the wealth created for these billionaires is 100% dependent on their labor, time, and sweat, yet many of them see fractions of fractions of what the billionaires make. If it's somehow unfair for the billionaires to have to pay the government a wealth tax it is equally unfair for said billionaires to withhold so much of the capital generated by their workforces for themselves.
underlipton 14 hours ago [-]
Not even that. Someone who got laid off by one of Paul Graham's friends likely has decent investments and is receiving relatively small salaries from labor (that is, 0, unless you're counting unemployment insurance, and then, is that saved-up labor pay, delayed and amortized, or "investment" income from your taxes?). And if that person is class-conscious, or at least self-interested, they should be 100% on-board with a wealth tax.
clear-octopus 19 hours ago [-]
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AnthonyMouse 15 hours ago [-]
> But Graham's math is only applicable to those flush with investments and with relatively small salaries from labor, so a wealth tax is only unpopular to that particular group.
Not quite, because you're using the opposite extreme where someone has no assets. Meanwhile the median net worth in the US ~$200k, which would be $2000/year in tax for every 1% in wealth tax. That's certainly enough for ordinary people to notice.
On top of that, the conversion is even worse than that implies for ordinary people, because the primary reason the median is ~$200k isn't that the median person has $200k their whole lives, it's that they have ~$0 when they're 18 and ~$400k when they retire and the median person is about halfway to retirement age. If you transfer tax burden from income tax to wealth tax then that means they'll be paying more in wealth tax in the second half of their life, which means they need to be saving rather than spending the money not paid in income tax, including during the first half of their life. But that causes their net worth to go up on paper by more/sooner, because they're essentially holding extra money they'll only have to pay in tax later, which in turn causes them to pay more in tax for a tax on holding assets.
Moreover, then you can't say that Alice always benefits because she has no assets and Bob always pays more because he has $400,000 because what's actually happening is that Alice pays less when she's 20 and more when she's 60. That's going to be unpopular because the 20 year olds are generally expecting to be 60 someday but the 60 year olds never expect to be 20 again.
Ensorceled 15 hours ago [-]
I've never seen a wealth tax proposal where "wealth" was defined as ~400K in assets. They tend to start in the millions with generous carve outs for IRAs and primary residences.
AnthonyMouse 14 hours ago [-]
See reply to the sister comment posted earlier than yours and saying the same thing.
SoftTalker 15 hours ago [-]
Nobody is talking about a wealth tax on someone with a net worth of ~$200k or ~$400k.
AnthonyMouse 15 hours ago [-]
> Nobody is talking about a wealth tax on someone with a net worth of ~$200k or ~$400k.
If that were the case the criticism of Paul Graham's reasoning would be wrong to begin with because the only people paying it would be the people who do get most of their income from investments.
Moreover, your proposal doesn't actually work. If corporations don't pay a wealth tax then rich people just put their assets into corporations that they control but don't formally own (there are many ways to do this). But if they do then ordinary people with ordinary retirement savings can't be spared, since it doesn't change your finances to have the companies your retirement savings are invested in give you lower returns by the amount they pay in wealth tax than to have you pay a wealth tax out of the returns.
bigfishrunning 14 hours ago [-]
When income tax was first implemented, less then 1% of people had to pay it. Taxes are a slippery slope, and that number will slide down.
AnthonyMouse 14 hours ago [-]
They don't even have to change the number. Per capita GDP growth and inflation cause the same number to impact more ordinary people over time by doing nothing.
moralestapia 15 hours ago [-]
We don't know, actually. If the threshold for "wealth" is set to be >100k, then we are.
SoftTalker 13 hours ago [-]
And almost nobody will support that. It would be political suicide for any lawmaker to implement that.
Havoc 19 hours ago [-]
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 tax
notahacker 16 hours ago [-]
The big flaw in his argument is that a mere 1% which is actually 20% of annual return is still less than the average income tax rate on workers, levied on people who have a lot more money and in some cases don't do anything resembling work. It's trivially true that 1% wealth taxes represent something in the region of a fifth of the average annual return on wealth, it's rather less convincing when it's suggested that this is harsh compared with income tax when people who pay more than half their much lower income in overall taxes whilst working 60 hour weeks and actually worrying about paying bills.
There are arguments about wealth taxes inducing capital flight and investment disincentives, the difficulty of paying tax bills from illiquid intangible wealth or even quantifying it, and whether it's really a good thing to pressure people building a company to sell much of it off, but telling income tax payers that an effective tax rate of 20% is high isn't one of them...
disgruntledphd2 16 hours ago [-]
> There are arguments about wealth taxes inducing capital flight and investment disincentives
If the US and the EU introduced a wealth tax then it would be relatively difficult for the capital flight fears to materialise. But yeah, the trouble with wealth taxes is that wealth (i.e. capital) is mobile.
Which is why land and property taxes are probably the most effective way of taxing wealth.
riffraff 15 hours ago [-]
Switzerland has cantonal wealth taxes, as does Norway and afair Spain. Italy, Belgium, Netherlands have a somewhat equivalent one on money held in securities or savings accounts. It's not that big of a deal if the rate is low enough.
abletonlive 15 hours ago [-]
Most of us would not prefer to follow the EU into irrelevancy. If they were the model for how we should be running things how come they are not the ones running the show on innovation?
jdasdf 15 hours ago [-]
> The big flaw in his argument is that a mere 1% which is actually 20% of annual return is still less than the average income tax rate on workers
This is untrue btw
50% of people in the US pay effectively no net taxes
SoftTalker 14 hours ago [-]
No net income taxes.
They still pay payroll taxes, state taxes, sales taxes, and various other state or local taxes and fees.
Or put another way, they already make so little money it isn't worth taking any from them.
blitzar 15 hours ago [-]
> 50% of people in the US pay effectively no net taxes
Billionaires included, defence contracts and corporate subsidies count just as much as food stamps.
solidsnack9000 15 hours ago [-]
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 money through the government has not been a particularly successful strategy for improving the overall standard of living.
accrual 11 hours ago [-]
> 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.
solidsnack9000 10 hours ago [-]
When a PE fund buys an apartment building, isn't that really competing with landlords, not renters? The PE fund is not living in the apartment -- they have to try to rent it out, after all.
defrost 10 hours ago [-]
> they have to try to rent it out, after all.
Not really.
It's also a plan to hold onto real estate as market prices rise, flip for profit later, and not deal with all the issues that renters bring (management and maintenance costs, bringing up and keeping to code, potential damages and law suits, etc).
Keeping a floor or two active for Air BnB type short churn rentals while shuttering the bulk of a building can make $$$-sense to a PE.
solidsnack9000 10 hours ago [-]
Because a PE can have longer time horizons than a landlord or a real estate company?
defrost 4 hours ago [-]
"Landlords" (aka individual non corporate property owners of more than one residential dwelling) and real estate companies (those with portfolio's of land assets rather than those that just take a commission on sale) can do pretty much the same thing if the numbers pan that way and/or they have no stomach for dealing with Tennants for marginal extra profit.
Ownership of rentable property that is empty is a thing across the board, at least here in Australia where (stupidly(?)) investment rules and returns have made multiple property ownership a sound investment that grows regardless of occupancy.
Don't even need a long ( > 10 year ) time horizon, flipping on a two or five year scale still makes money regardless of renters being present or not.
HDThoreaun 11 hours ago [-]
Housing is only a good investment when supply is constrained. These PE firms buy housing because they see that NIMBYs are in control. As they predict rents soon begin to rise. Youve got the cause backwards
ethbr1 10 hours ago [-]
What's to stop PE from supporting NIMBYism in markets they're part of?
solidsnack9000 10 hours ago [-]
Nothing -- but the crazy thing is that people vote for it, not that landlords support it.
i_cannot_hack 14 hours ago [-]
> Allocating money through the government has not been a particularly successful strategy for improving the overall standard of living.
What are you even basing this assumption on? Just quickly comparing the highest ranking countries by Human Development Index with the highest government budgets per capita and the highest income tax rates would, if anything, support the opposite conclusion.
This is potentially a long conversation; but why would you start with rankings like this, which only go back a relatively short time?
Broadly speaking, human welfare got a lot better in the last three hundred years, due to productivity improvements that were tied to things like property rights, joint stock companies, availability of credit, &c.
We haven't really found a good alternative to it. It may seem to you that countries like Austria, &c, are doing the right thing by taking very large amounts of GDP out of the hands of private enterprise and using it "for good" instead of "for growth"; but that is just eating the seed corn. It looks good in the short term.
i_cannot_hack 2 hours ago [-]
The HDI ranking has been published for 36 years now. And for many of those countries I would feel confident claiming the trend goes back to at least WW2, altough you would of course have to use other, contemporary metrics to support that to get a rigorous analysis.
If the initial step in your theory about human wellfare is to selectively ignore the last 35 or 75 years of history in the highest wellfare countries on earth, I think you should at least consider the possibility that your theory might be somewhat out of date.
Epa095 14 hours ago [-]
Money is votes into the economy and what it shall produce. The more money you have, the larger vote you have. Taxes are the way the government takes controll over a fraction of the votes. Then the government can use this power to make good or bad decisions. One thing which is clear is that the billionaires is not using their power over the economy to fix any of the deep fundamental problems we are facing
solidsnack9000 10 hours ago [-]
Consumption is a kind of voting in the economy, I suppose; but the economy is heavily geared towards making things that regular people want. How many Corollas are there for every Bugatti?
If what you're saying is true, would it be unfair of me to say that the government is not using their power over the economy to fix any of the deep fundamental problems we are facing?
Is it good policy to take people's money because they aren't doing what we think they should be doing with it?
dheera 17 hours ago [-]
> you do need something more extreme
That's how you end up with an over-regulated country where people doing great things for the country's economy start choosing a different country to build their dreams in.
It's also how you drive the currently-wealthy to other countries to spend and invest their fortunes in.
The possibility of being ultra-wealthy is a huge reason to build awesome shit in the US that creates millions of jobs and brings the US economy ahead.
svachalek 16 hours ago [-]
How is rent-seeking and monopolizing "doing great things for the country's economy"?
newtonianrules 10 hours ago [-]
Yeah because the one thing the US has is a risk of being overregulated.
thrance 15 hours ago [-]
This nefarious logic has been used for 50 years to justify ever worse austerity and tax breaks for the wealthy. And look at the situation today: pedophile oligarchs rule the world while we fight for scraps. The West has no future, unless we start aggressively redistributing wealth.
GS523523 11 hours ago [-]
Hasn't a rich oligarchy been the status quo for most of humanity? It seems to me most of humanity has had quite a future to look forward to, historically speaking.
thrance 10 hours ago [-]
I'd be reluctant to call the lords from the feudal system "oligarchs". Really, the people currently called such could only exist in a globalized economy.
But anyway, oligarchs weren't this powerful in the mid-century. FDR's New Deal was successful in bringing down the Robber Barons and ushering in America's golden age. Coincidentally, things started to go to shit with the introduction of Reaganomics and the promise that letting a few private individuals concentrate more and more wealth would be beneficial to the economy.
__turbobrew__ 19 hours ago [-]
> In fact the conversion rate between them is about 20. A wealth tax of 1% is equivalent to an income tax of 20%.
Sure, but you actually have to work for continued income. Wealth accumulates with no input once established.
Wealth has the ability to increase (capital gains) without having to pay tax until it changes hands, whereas when income increases it is immediately taxed at a higher rate. Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
jppope 18 hours ago [-]
> Wealth accumulates with no input once established.
This is incorrect, historically you'll pay a ~2%-3% loss via inflation if you keep your money in cash. If you invest (making it capital) in bonds or securities then you will see accumulation, but thats actually a risk premium.
> Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
This is true, its typically called "Buy, Borrow, Die" but the reality is that it is only available to a very small percent of wealthy individuals and exists because of the way inheritance is handled ("stepped-up basis"). Even reasonably (not fabulously) wealthy people will still pay retail rates on the loans making the tactic basically ineffective. Last I heard you needed something like 100M+ liquid for lenders to even consider it (presumably, because they will make more off of some other deal with you)
Epa095 14 hours ago [-]
The S&P500 has increased 9.8% annually the last 100 years, roughly 6% annually adjusted for inflation. Yes, past performance is no guarantee for future, but historically a completely passive index placement of wealth into S&P500 would double the real (adjusted for inflation) wealth every 12 years. With absolutely no work.
__turbobrew__ 12 hours ago [-]
Also, if you are wealthy enough you can just wait out any economic downturn. Hell, Im not even that wealthy and it would have to get really bad before I would be forced to sell in a down market.
xphos 8 hours ago [-]
Yeah but the 5% Paul used is also kind of conservative since the 1970s stock market returns is like 10% ignoringinflation. Its a big difference if your well grows 7% verse 5% a 1% wealth tax with that in mind is only 15% but i think factoring in inflation is unfair concerning labor pays tax after inflation. That brings the rate down to 10% and thats without taking any significant risk.
I think a real solution is a forced step up in bases every year so people cannot put taxes off forever. It can be modest too 5% of your investment value delta. You could make the carried lost yoy track the net so you cannot be forced to pay when things are down.
Also the idea that capital gains tax should be less than income tax rate is strange. Like the people that own large amount of capital are in the lowest risk situations why should they also.have the most generous tax positions it makes no sense. No real person things the business owner who gets large returns is actually worse off or in high risk because if they were they'd be culled by economic evolution
skybrian 18 hours ago [-]
Step-up basis is important for anyone who inherits property from their parents. That can be substantial in places like California where real estate has gone up a lot.
And for inherited rental property, there is another huge loophole: you can can depreciate the full market value of an asset that you got for free. That’s a substantial tax benefit for many years.
PokedBear 16 hours ago [-]
The step up basis makes sense in a world where you still have to pay substantial inheritance taxes. But with minimal to no inheritance taxes, the step up is a giveaway.
sokoloff 13 hours ago [-]
It’s also a practical policy. It’s far easier to know the stepped-up basis on the date of X’s death than it is to know the basis that X had in something once X is dead.
topaz0 12 hours ago [-]
Which argues in favor of the inheritance tax mentioned.
There could be other solutions too -- say, require a virtual wash trade at time of inheritance, so the capital gains from the parent's lifetime are taxed at time of death and the child gets the stepped up basis. Somewhat different than an inheritance tax, but at least not a giveaway.
sokoloff 10 hours ago [-]
The full value of the shares (original basis plus step-up [or step-down] in basis) is already part of the estate and so is already subject to the inheritance tax rules.
It's just that the exclusion amounts are fairly high, so in practice the tax owed is often $0.
topaz0 9 hours ago [-]
Right, the point of the person you replied to was about the scenario where inheritance taxes are small or non-existent - they literally said step up in basis makes sense when inheritance is taxed meaningfully.
15 hours ago [-]
jandrewrogers 16 hours ago [-]
There is little evidence that wealthy people actually borrow for income in any significant way. For example, this paper[0] finds that borrowing only accounts for 1-2% of economic income among the top 1%.
This makes sense. Borrowing for income in most scenarios is strictly worse financially than recognizing conventional income if you actually do the math. Wealthy people are optimizing for financial outcomes, not avoiding taxes per se.
>...Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
This is just Internet mythology. The IRS would go after such arrangements very quickly - the IRS has the Applicable Federal Rate for loans. Though this really isn't an issue with banks as they are not charities and tend to want to make money.
__turbobrew__ 12 hours ago [-]
It is called “Buy, Borrow, Die” and it is a very real thing.
opo 9 hours ago [-]
The buy, borrow, die idea came from McCaffery in the 90s which was before various IRS sections like 1259 and 7701(o) were codified.
Go get a calculator - if you took out a loan and had the interest set a the minimum of the AFR, what would it compound to in 30 years? It would obviously be much higher than just selling stock and paying capital gains on it.
The ultra rich do take out loans, and these loans do get repaid, and that money has to come from somewhere. Go google something like billionaire stock sales to see examples - if they all could just say, "Thanks for the zero percent interest loan! I'll pay you back in 30 years in my estate!" - I think they would have.
nullocator 6 hours ago [-]
You're going to have a hard time convincing me the wealthy aren't gaming the tax system after all the reporting and leaks over the last ~40 years.
I suspect you are simplifying what's happening quite a bit, not sure if it's intentional or otherwise. But wouldn't the more likely scenario be that you borrow 100m with a 10 year draw at x% interest and then at the end of the 10 years you do a stock sale (some taxes paid), pay the interest (interest is generally non-taxable) and then take out a new loan for 500m based on your much larger portfolio, and finally claim significant losses against some other asset (regain your actual stock sale taxes losses "oh no my art lost value!")? Repeat ad nauseam until you're dead.
blitzar 18 hours ago [-]
Ironically, a wealth tax of 1% is equivalent to 20% of the risk free earnings on that wealth.
noelsusman 16 hours ago [-]
This is simultaneously incredibly condescending and hopelessly naive. Politicians understand perfectly well that a 1% wealth tax is not a small tax on wealthy individuals. That's the whole point. They are engaging in basic political rhetoric when they say things like "a mere 1% tax".
goyozi 19 hours ago [-]
I don’t follow the debate and situation in the US that closely but isn’t (part of) the point of wealth tax to offset the fact that rich people are routinely avoiding paying income tax and taxes in general? Thus even if we assume the simplistic conversion here, it’s not that they’re moved from 40->60 bracket but more like <10 -> <30 ?
blackjack_ 19 hours ago [-]
Yes. And that wealthy individuals are avoiding taxes via things like buy -> borrow -> die, in which high stock valuations that increase but are not sold are not ever taxed, and roll over the taxation potential upon death to their current value. Thus by borrowing against them until death, the inheritor will inherit with a tax basis at the current value upon receipt and thus all taxes are avoided. In which case the tax would go from 0% to 20% (functionally a small amount may be sold to pay interest, so really assume 1% or 2% taxes default). The horror!
HDThoreaun 11 hours ago [-]
Buy borrow die as you describe still ends up with a 40% estate tax. Most uber wealthy want to avoid the estate tax so they utilize trusts, which cant die. Really the people who benefit the most from buy borrow die are those with 10-50 million. Not enough to pay serious estate tax because of the exemption. Above that everyone uses trusts which work differently. Not that the trusts dont have their own loopholes.
verteu 9 hours ago [-]
Indeed, the ultra-wealthy pay far less than 40% effective estate tax. Seems closer to 15% due to creative accounting, which is further reduced to 6.8% by charitable contributions:
> Specifically, for single decedents, estate taxes paid equal 6.8% of the value of Forbes wealth at death. The value of their gross estate is 39% of the Forbes estimate of their wealth. This large gap, already noted in earlier work (Raub et al., 2010), is likely to reflect the various techniques available to high-net-worth individuals to undervalue assets in the context of the estate tax. Taxable estate is then 45% of gross estate (due to deductions primarily gifts to charities) and on that base the tax rate is 39% (Balkir et al., 2025, Table 4 Panel B).
The wealth tax argument actually is because our current 2 party political system is set up to where politicians effectively "pay" their corporate constituency with their discretionary spending, which has increased the national debt substantially.
The only way this system can continue is if we increase the receipts (aka tax revenue).
The political class has very wisely targeted "the wealthy," who are capable of tactically avoiding taxes, but as always it will eventually include the middle class who will ultimately be paying the tax. From their standpoint they will popularize this tactic because it will work
This is being sold as class warfare, but its really the evolution of our political system into an unsustainable system of patronage with public funds.
We have plenty of other problems like "buy, borrow, die" (discussed elsewhere in this thread), but ultimately the wealth tax stems from needing more public funds, which stems from politicians spending all of our money.
fourseventy 16 hours ago [-]
The idea that rich people don't pay taxes is a myth. The top 5% richest people in America account for 60% of all of the federal income tax. The bottom 50% on the other hand only account for a total of 3%.
When Elon sold a bunch of Tesla stock in 2021 he paid $11 Billion in capital gains tax on it... That's more than entire cities worth of people combined would ever pay for the rest of their lives.
jdauriemma 16 hours ago [-]
Can you share a source? Of course the top 5% of _earners_ would pay more, but that's not necessarily the same crew as the top 5% in net worth. And 5% is a large share of the population. I'd be more interested in the top 1% of 1% in terms of wealth.
verteu 9 hours ago [-]
Indeed GP is falsely equating "wealthiest" with "highest taxable income".
> The top 5% richest people in America account for 60% of all of the federal income tax
I see this repeated all the time and it's worthless without context. What percent of all income do the top 5% earn? What's their share of national wealth?
archagon 8 hours ago [-]
It’s a stupid thought-terminating quip entirely centered around a superficial “one number bigger than other” gotcha.
We live in a society where the wealthiest have orders of magnitude more wealth than everyone else. The taxes they pay are not proportional to that wealth, period.
drivebyhooting 16 hours ago [-]
5% richest includes hand to mouth workers earning $100k.
ecshafer 14 hours ago [-]
95th percentile is around $150k individual and $330k joint income.
solidsnack9000 15 hours ago [-]
Wealthy people pay a lot of taxes in the USA. If they aren't routinely avoiding paying income tax and taxes in general, how could that be the point?
It may be more realistic to view this in terms of elite power struggle. There are some constituencies that have found their way into positions of some power -- in government and public service -- that are in conflict with other elites, who have found some power in private enterprise. These groups battle for control of things. One strategy in the battle is managing the other group's access to money.
It's not clear from any kind of first principles, that we are better off with government allocation of a large portion of the society's capital. That hasn't historically been a big winner. Private ordering seems to net out a higher quality of life overall, even with income inequality.
ryeats 18 hours ago [-]
No it's just harder to accurately tax each and every form of wealth so we proxy it by taxing income.
jppope 16 hours ago [-]
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abcd_f 14 hours ago [-]
> You can tell from the way they talk about the subject that they don't understand the momentousness of what they're proposing.
All proposals focus on ultra-wealthy individuals. This "momentousness" wouldn't really touch the absolute vast majority of the taxpayers.
But, yeah, I bet the targeted people are getting nervous.
shmolyneaux 18 hours ago [-]
There is a bit more to the story than a 1% wealth being "equivalent" to a 20% income tax. The primary difference is that unrealized gains are taxed by a wealth tax. We need a mechanism for assets to be sold by the richest in society. If those with assets keep accruing more assets the median person will suffer. When we're talking about real assets (housing, retail shops, warehouses, land) we don't need to be concerned about capital flight. The assets are still there on the ground. Reducing the cost of those assets is exactly what we need to help a local economy.
That being said, the richest are effectively _not_ paying the highest marginal tax rate considering all the tax structuring they do. Claiming that they would be paying the highest income tax in the world is misleading, for one. Secondly, the richest in the world _should be_ paying the highest income tax.
zozbot234 16 hours ago [-]
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 generally understood.
loglog 12 hours ago [-]
This claim is plain malicious. Of course falling asset prices would be excellent for the median person, since they would be less extremely priced out of everywhere. This is one of the central benefits of a wealth tax.
wyre 16 hours ago [-]
> 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?
zozbot234 15 hours ago [-]
It's like a hot potato where people want to sell assets over buying them. Obviously at any given moment there are as many buyers as sellers, but this is exactly why trying to force people to sell at rock bottom prices brings widespread asset destruction.
wyre 13 hours ago [-]
Ya, but if there are way more sellers than buyers that means that prices are inflated. If prices were lower there would be more buyers, but sellers want to keep their asset prices inflated so they don't lower prices. Assets that are priced properly don't have the problem of having too many sellers. I think calling it asset destruction is slightly disingenuous. Just because the price is lower doesn't mean the asset is destroyed. Even if we are talking about a stock selling for 50% less, it is still a share in company ownership.
Who is forcing anyone to sell at rock bottom?
solidsnack9000 15 hours ago [-]
If those with assets keep accruing more assets the median person will suffer.
How will they suffer? The people with assets, to realize a benefit from them, have to spend money. If they don't spend the money, then what's the problem?
stymaar 15 hours ago [-]
It's funny, because even though he got the math right, PG got the reasoning completely wrong.
> Each 1% of wealth tax is equivalent to 20% of income tax.
Yes, this is the right part. Taxing wealth at 1% is equivalent to taxing income at 20-25% (depending on which return you count as baseline)
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate
On the opposite, they understand it right, and PG is completely wrong here: it's not about adding income tax rate to someone that already pay income taxes, it's about making wealthy people, who don't currently pay this tax rate, pay the same rate as people living from their income.
> So in the median case, a state adding an additional 20% in income tax would have a total marginal tax rate of 37% + 4.75% + 20%, or 61.75%.
Bezos, Musk, Zuck and the likes (or even PG himself, likely) don't pay 40% tax on their wealth growth, they currently pays 0%.
In fact, to make them pay as much tax as their employees, there should be a 2% wealth tax, not 1%. Hence, a “mere 1%” is in fact a very generous proposal by leftists politicians and economists, as it would still mean the wealthy only get half the rate of working people.
xyzzy_plugh 14 hours ago [-]
I really like the way you framed it. I've never really been against a wealth tax but making it equivalent to income feels fair to me. I don't think the math works out with rates where they are today, though.
I guess the simplest approach is, if you're making money, it should be taxed fairly, regardless of how you're making it.
BrenBarn 14 hours ago [-]
The trick is clarifying that "making money" means "increasing your wealth". Currently there are many ways of increasing wealth that don't "count" as making money.
shomp 11 hours ago [-]
Oh he understands the reasoning. He is one of the people who would be subject to the tax :) The wealthy writing essays on how to not infringe upon their wealth is nothing new, although it did go out of favor in the Carnegie-Rockefeller era when they competed to see who could do more public-good with their immense fortunes before their shoving off the mortal coil. Looks like the ultrawealthy currying sentiment to preserve ultrawealthy wealth at any expense is back in vogue.
throwawaypath 6 hours ago [-]
>Bezos, Musk, Zuck and the likes (or even PG himself, likely) don't pay 40% tax on their wealth growth, they currently pays 0%.
No one should pay taxes on "wealth growth" because it's not realized. They paid income taxes on the shares once they received them, and will pay capital gains taxes once they sell them.
>In fact, to make them pay as much tax as their employees, there should be a 2% wealth tax, not 1%. Hence, a “mere 1%” is in fact a very generous proposal by leftists politicians and economists, as it would still mean the wealthy only get half the rate of working people.
They paid the same tax as their employees once they received the stocks. They will pay the same capital gains taxes as their employees once they sell.
omoikane 14 hours ago [-]
> pay 40℅ tax
Offtopic but I thought your percent looked weird. Turns out, that's the "care of" symbol (℅, U+2105) and not percent (%, U+0025).
stymaar 14 hours ago [-]
Fixed, thanks.
I had noticed something was off when proofreading but I didn't know this symbol and I couldn't explain what I did wrong so I assumed it must have been a graphics glitch.
> In fact, to make them pay as much tax as their employees, there should be a 2% wealth tax, not 1%.
Indeed.
Andrew Mellon writing in 1924 "Taxation: The People’s Business.": "The fairness of taxing more lightly incomes from wages, salaries and professional services than the incomes from business or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it, and old age diminishes it. In the other, the source of income continues; the income may be disposed of during a man’s life, and it descends to his heirs."
> it's not about adding income tax rate to someone that already pay income taxes, it's about making wealthy people, who don't currently pay this tax rate, pay the same rate as people living from their income.
That's exactly it. I've been really shocked at the willful ignorance (or deceit) coming from the billionaire class on this. I mean, OBVIOUSLY the practical operation of the tax regime is unfair at the top end. If you put a billion dollars in assets somewhere, almost any asset (including e.g. stock in a company you can't sell because you need to own it), growth of that asset is (1) trivially liquid via loans[1] or deals and (2) COMPLETELY UNTAXABLE IN PRACTICE because there's never (ever!) going to be a point where it's traded or converted in such a way that it becomes a "capital gain".
[1] e.g. Bezos goes to Citi or whoever and writes up a contract for a $100M loan to be collateralized with ever-appreciating AMZN shares, likely at a deeply discounted rate (low risk, plus the "keep Jeff in the rolodex" benefit to the bank) then pays it back on schedule with another loan taken out on his now-even-larger stake in AMZN. Who pays the tax here? It's not "income"!
confidantlake 11 hours ago [-]
I am shocked that you are shocked. Billionaires have always said or done anything they can to maximize their wealth.
pipes 14 hours ago [-]
What mostly bothers me is that this is likely to start out as "tax the wealth of the rich" and it will become tax all wealth. Including my pension pot! In the UK the only people safe from that kind of nonsense will be public sector employees. Because guess what, their pension pots don't exist, they are just tax payer / debt funded liabilities.
Heck, it's even started in the UK with labour killing off salary sacrifice pensions, everyone one I know was reliant on those to be able to retire, but who gives a shit, we are private sector and we have no union!
I'm on a rant here, forgive me.
runamok 12 hours ago [-]
The issue at hand is the incredibly wealthy can pay close to nothing in income tax because they often borrow on their collateral vs. sell their holdings. Hence that 1% that PG equates to 20% tax is quite fair. Look at what Buffet says the percentage he pays is: https://finance.yahoo.com/news/warren-buffett-view-taxes-vs-.... Furthermore afaict the state proposals usually have a floor on how much of your wealth is taxed. I'm personally against the one time wealth tax by California for several reason but it only impacts those with a net worth of >= 1 billion.
lifeisstillgood 14 hours ago [-]
Some thoughts I have been having recently
1. Wealthy more or less means able to live off the investments (passive income). Usually it means live off the interest of the interest (generally assessed as 8 million bucks nest egg)
2. It’s an obvious logical step but it is literally impossible for everyone to be independently wealthy. As in everyone cannot have a passive income.
3. So this debate just chnages when we ask “how do we make everyone wealthy” we can’t given the definition we have.
4. So we have to change the definition
5. How can we make everyone in society share fairly in the wealth that society has?
6. What if we made it much harder for wealth to Snowball into more wealth pulling it away from middle class
7. What if instead of a foolish wealth tax where we assess wealth, we stick to the “freely entered into transaction situation”
8. So Capital Gains taxes at same rates as income
Also tax the “borrow till you die” idea - over a certain yearly amount, borrowing against your assets (ie Deutsche Bank lending you 100M against 1M shares of Blurb corporation should be treated as income just as if you sold the shares.)
I know that get hard but in the end we need money to circulate.
That’s how everyone shares
trollbridge 14 hours ago [-]
I still haven't heard a solid explanation of how taxing loans as "income" is going to work.
Being able to borrow against assets is a pretty essential part of the present-day economy. Almost everybody does it, from the very poorest taking out a car-title loan (however ill-advised) to middle-class people with home equity loans to medium sized businesses and farms who often have loans against their entire assets in order to buy more equipment or keep their operations going.
bhelkey 13 hours ago [-]
> I still haven't heard a solid explanation of how taxing loans as "income" is going to work.
The idea is that taking a secured loan out using an asset as collateral would be a taxable event for that asset.
That is to say, if you buy a house for $400,000 and it appreciates to be worth $850,000 then take a home equity loan out against the house, you would owe capital gains on the $450,000 appreciation.
With the current $250,000 capital gains exclusion for primary residence, this would result in ~$30,000 of capital gains tax.
Terr_ 11 hours ago [-]
> The idea is that taking a secured loan out using an asset as collateral would be a taxable event for that asset.
Doesn't that puts valuations in the hands of people who could conspire to manipulate them, creating false data points?
For example, suppose you bought something for $25 a long time ago, and it has, very unofficially, appreciated to ~$100.
I could lend you $100, and the contract will say that I'm only asking for it to be partially secured with collateral, which will be, oh that "$25" asset which obviously hasn't appreciated in value at all. Poof, no gains tax.
I think the real issue here has to do with dodges in the Estate Tax, which is the endgame that these delaying games are meant to reach.
lifeisstillgood 9 hours ago [-]
That’s an interesting take.
I certainly agree with the estate / inheritance tax (the main issue is “resetting” the value to market at point of inheritance)
But as for the valuation problem I think that can only stretch so far. If you put up a million shares of $TechFirm as collateral for a loan to buy a yacht, it’s hard to claim they aren’t worth what the NYSE listed them as. If instead you put up 250,000 shares as partial collateral the bank has to put the missing collateral on its balance sheet (else some one is committing fraud)
The thing is it’s common. We on HN know all about “borrow till you die”, that Trump got Mar-a-lago valued at a billion dollars. The problem is not banks doing favours for valued clients, it’s so common and normalised that we don’t notice.
Terr_ 6 hours ago [-]
My not-too-strategic thinking is that maybe we don't have to solve the tricky problem of loans, if we merely close the enormous final tax dodge that they're all aiming for.
There's a related calculation you can do -- what percent of your net worth is your employability? Take your salary, divide by 0.05 (or multiply by 20) -- if you had that much additional wealth earning 5%, you could replace your job's income.
For most people their ability to earn is by far their largest asset. You can kind of get a feel for how difficult it is to bootstrap into generational wealth if you think about the math -- it takes time to replace that earnings portion of your own balance sheet, and even more to well replace it; a lot has to go right in the interim.
superfrank 16 hours ago [-]
I'm not an expert in this, but I thought one of the biggest arguments for why a wealth tax is needed the whole "buy, borrow, die" thing where the ultra rich can use their assets as collateral to take out a never ending series of ultra low interest loans until they die and then have most of the tax burden of selling assets to pay off those loans wiped out because the tax code is much more favorable to selling assets to pay off the debt of someone's estate.
If (big if) I'm remembering that correctly, I don't get why we just go after the problem directly and do something like treat putting down collateral for these type of loans as a taxable event. I'm sure it's not as straight forward as it sounds, but I can't imagine it'd be more convoluted that needing to track the wealth of every high net worth individual.
Maybe I'm in the minority on this, but I actually don't care if Jeff Bezos' net worth went up by $5 billion because Amazon had a good day in the market. If the shares are just sitting in an account doing nothing other than proving ownership it's all kind of just numbers in a computer, IMO. A painting is probably a better example than stock, but if I have a painting on my wall that was worth $1 million dollars yesterday and today it's worth $10 million that change in valuation is essentially meaningless as long as the only thing the painting is doing is hanging on my wall.
What I do care about is when he's able to access the cash value of that $5 billion of Amazon stock without paying the taxes that would come along with selling the stock. If he wants to leave $5 billion in Amazon stock just sitting in his account doing nothing until the day he dies, that's totally fine, but the second he puts it up for collateral we should tax that. I think this has the added benefit of simplifying things by avoiding a lot of questions around fair valuation of assets. If I have a $10 million dollar one of a kind painting on my wall that I'm never planning on selling, it's kind of hard to put a valuation on that and it can be easily manipulated by finding the right appraiser. If I put a painting up as collateral for a $10 million loan it becomes a lot harder for the owner to argue that it's actually worthless or the IRS to argue that it's actually worth $1 billion.
gruez 15 hours ago [-]
>why a wealth tax is needed the whole "buy, borrow, die" thing [...]
Moreover if the bug is that income isn't tax at death, why not just fix that bug? Otherwise it's like arguing: "wow there are people in poverty? Better have a communist revolution to fix that!"
outside1234 15 hours ago [-]
This is exactly the reason -- or a tax against borrowing against assets once your net worth is high enough -- or not reseting capital gains at death. The entire system is currently basically rigged such that these ultra rich people pay no taxes.
14 hours ago [-]
juancn 18 hours ago [-]
There's a secondary side effect of wealth taxes: they redirect investments (I'm Argentinian and we have wealth taxes).
Investments shift to things whose tax value updates slowly, for example property which typically adjusted more slowly than other financial assets. This tends to rise property prices and concentrate ownership.
It causes other distortions in allocation depending on the tax details, but wealthy people tend to adjust more aggressively to changing conditions.
Epa095 14 hours ago [-]
In Norway the valuation of publicly listed stock companies is different than the valuation of non-traded companies (for publicly traded stocks it's the market value, while for the other companies it's their assets minus debt, so usually roughly 10x smaller). The effect of this is increased investment in small and medium sized companies compared to keeping the money passively in index founds.
warkdarrior 16 hours ago [-]
> This tends to rise property prices and concentrate ownership.
We are already there in US. Real estate is already controlled by companies, and rental costs are through the roof.
PokedBear 19 hours ago [-]
The bigger difference between an income tax and a wealth tax isn't the numbers. A wealth tax, for better or worse requires some realization of paper gains that very wealthy folks normally go to great lengths to avoid because their wealth is largely based on a broadly shared polite fiction. So imposing some realization of that wealth requires accountability that doesn't always pan out.
seanhly 12 hours ago [-]
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing. [2]
But it's not "mathematically the same thing". Taking the 100 dollars allegory Paul raises, for that allegory to be based in reality, someone would need to have 20x their annual salary in wealth. The median salary in the US is 59K per annum. For the 100 dollars allegory to work out to a 20% income tax equivalence, people would need to have just over a million dollars sitting in their bank account. The average American net worth is more like 48K (being generous), which is under a year's salary, with a tonne of people also just living permanently in debt (negative wealth). Interestingly, would a wealth tax mean negative tax (free money) for those many in America living in debt?
munch117 2 hours ago [-]
The fatal flaw in PG's argument is that is doesn't mention spending at all.
If you're spending your entire income on things like food and rent, then a 1% wealth tax corresponds to 0% income tax.
If you're spending your entire income on investment, then there's a calculation like PG's to be made to compute an equivalent income tax rate. But then we're talking about someone who doesn't need the money. This isn't even about rich vs. poor - you can have a high income and spend it all as you make it, like if you throw a huge party every week, or make a yearly trip into space. But if not, then it's just an ever growing number on your bank statement, and the only reason you care about it being 20% higher is because you're comparing it to other people's bank statements.
whatshisface 19 hours ago [-]
A much more interesting formula would be how to convert between income and income tax - you'd think it worked according to the superficial bracket system, but in fact, it works along the lines of going to 0 at the top.
P.S. a wealth tax is a property tax. They have existed in the US since before the income tax (which was originally considered unconstitutional by its opponents).
jeffreyrogers 18 hours ago [-]
I think the limit it can reach without carried forward losses is 20% because that's the top long-term capital gains tax rate. The other thing I can think of is if you sell a QSBS business, then your capital gains are taxed at 0, and you wouldn't pay income tax at all on that money either. So it's in theory possible that someone could make millions tax free from selling a business, but that's a rare case and one the tax code explicitly allows for.
koliber 16 hours ago [-]
You don’t need to teach anyone about this. The wealth tax should apply to extremely wealthy people, not everyone.
If you accumulated a fortune, there was some skill at play. There was also considerable luck and some exploitation. The wealth tax is a way of paying back for the luck and exploitation.
You will still be extremely wealthy.
Paul wants to play the fairness card. Life is not fair and those who accumulated massive fortunes won the lottery. Don’t let the massively rich conflate issues. Don’t get fooled.
jrmg 13 hours ago [-]
From the article:
Currently the country with the highest marginal income tax rate is Denmark, at 60.5%. The top US federal tax rate is 37%, and the median state income tax rate is Oklahoma's, which is 4.75%. So in the median case, a state adding an additional 20% in income tax would have a total marginal tax rate of 37% + 4.75% + 20%, or 61.75%. [3]
In the median case, US state politicians talking about adding a "mere 1%" wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.
It should be noted that the marginal tax rate for high earners in the USA was higher than 60% from the 1930s through the 1970s.
What's wrong with a 20% tax? We who make a living from labor instead of capital pay more than that.
Paul tries to frame it as an increase of 20% in the tax rate, but in reality the increase is from 0% to 20%, and it's hard to see why that's unfair.
The reason I say it's currently 0% is of course that for the wealthy most of these 5% gains are unrealized (e.g. inflation in the value of their assets) and untaxed.
stymaar 15 hours ago [-]
> most of these 5% gains are unrealized (e.g. inflation in the value of their assets) and untaxed.
The worst part is that even when they need to realize their profits, they have schemes that allow them to avoid taxes (guess how much taxes Musk paid for his $20B realized profits from his Tesla shares he sold to buy Twitter).
nullc 13 hours ago [-]
But strangely politicians generally aren't pushing for targeted corrections to reduce those loopholes-- e.g. impugning realizing gains when you take a loan on assets beyond certain thresholds just as currently happens when you create a constructive sale with options trades. When assets are encumbered by loans or as collateral one could force the tax realization of gains at some rate which then adjusts the cost basis. The distortionary effect of this policy would be greatly diminished by the fact that everyone could just choose to not use their assets in this way.
Instead, the are running straight for the full on land grab while distracting people with the details of technical loopholes of comparatively small consequence.
stymaar 4 hours ago [-]
> But strangely politicians generally aren't pushing for targeted corrections to reduce those loopholes
You are just not paying attention enough. They do talk about loopholes, and push to close them during the legislative process.
They just don't talk about the loopholes details a lot because you don't get elected by talking about technical details in the tax code: “Force the tax realization of gains at some rate which then adjusts the cost basis when assets are encumbered by loans or as collateral” isn't a slogan that makes you win an election.
kansface 12 hours ago [-]
Income (returns) are not guaranteed. Go for progressive capital gains if that’s what you want. A wealth tax is a crazy bad idea.
loteck 18 hours ago [-]
Isn't PG's conflation of Denmark's high income tax with a proposed wealth tax a clear flaw in his math and argument re: "the highest taxes in the world"? Why wouldn't you instead compare to other countries that also have both income and wealth taxes?
newsoftheday 18 hours ago [-]
As a layman, bringing up a purely income based argument with Denmark, seemed to be an odd juxtaposition.
w10-1 18 hours ago [-]
True enough, but it doesn't address the motivation or the issues presented by California's proposed wealth tax.
It's a big democracy red flag when a majority wants to take a lot from a tiny minority; the moral hazard of the unfairness is that it's unclear where this ends. (Saying "one-time" and "1%" are trying to limit that risk)
It's a democracy red flag when an unpopular minority is vilified as the cause of society's problems. It short-circuits real policy making and distracts from real issues.
The bargain of private wealth is that it's better at innovation that should spread widely -- if it's subject to competition and does not export costs.
One problem is that one of the best investments is to change the law to reduce competition, increase market power, and export costs -- i.e., to weaken politics.
Another is that wealth used to mostly invest locally (information and transaction costs), so locals would see some benefit. No longer.
Finally, as an accelerant, enterprises are made of legions of managers and experts, who now compete more than ever; they would lose that competition by supporting less extractive policies or gentler politics.
Net result is that wealth seems not productive but extractive, and there is no negative feedback to reduce that.
Once the grand gambit of goodwill is lost, it cannot be recovered for at least a generation, but there's no real feedback to prevent that. The political viability of something like a wealth tax is just an early indicator.
mbgerring 17 hours ago [-]
Wealthy people are taking food out of my mouth by driving up asset prices, and deploying capital in ways that will never benefit me, either in employment or in quality of life. The premise of reducing taxes on wealthy people was that everyone would broadly benefit. This has not happened. The contract is broken. I want my money back.
larme 17 hours ago [-]
> It's a big democracy red flag when a majority wants to take a lot from a tiny minority
It’s not “taking”. The rich give out some money so the society has a higher probability to stay peaceful. or a violent revolution may happen.
This is really a win win situation
sometimelurker 17 hours ago [-]
> It's a big democracy red flag when a majority wants to take a lot from a tiny minority
not to forget that the inverse is also bad; generally people shouldn't take from each other
atmavatar 17 hours ago [-]
> It's a big democracy red flag when a majority wants to take a lot from a tiny minority; the moral hazard of the unfairness is that it's unclear where this ends. (Saying "one-time" and "1%" are trying to limit that risk)
In the absence of any other considerations, I'd agree with you. However, the last half-century has seen that same tiny minority taking nearly all productivity gains from the rest, to the point that wealth inequality is greater now than during the first gilded age, so I have somewhat less sympathy for the tiny minority when the rest want to claw some of that back.
> It's a democracy red flag when an unpopular minority is vilified as the cause of society's problems. It short-circuits real policy making and distracts from real issues.
It's less of a red flag when that unpopular minority is the cause of society's problems. The ultra-wealthy have commandeered government to enrich themselves at the expense of the rest of us.
We have massive consolidation of markets and media due to lobbying for deregulation and against enforcing anti-trust laws. We have further wealth concentration, the likes of which exceeds even the first gilded age at the hands of massive tax cuts and loopholes predominantly benefiting only the wealthiest, while also cutting tax enforcement personnel, making it easier to get away with tax evasion. Of course, in the face of the massive budget deficits resulting from those tax cuts, we make cuts to important social programs affecting many (and with largely positive ROI) while protecting subsidies to some of the most profitable businesses on the planet and leaping at any chance to start wars abroad whenever we need to distract from embarrassments at home. We have lax enforcement of labor laws which would allow workers to organize and demand higher wages, while at the same time passing unconstitutional laws at the state level which try to prevent organized labor in the first place. We have not only allowed the federal minimum wage to lag significantly behind inflation, but we have lobbying groups coming out of the woodwork to stop any proposed increase. When we have large economic crises caused by the malfeasance of the wealthiest of the wealthy, our corrupt Congress passes large bail-outs for the culprits while telling the majority of us to suck it up and tighten our belts. Of course, our consolidated media landscape increasingly obfuscates the real problems, presenting alternate boogeymen like immigrants so the downward spiral continues.
Allowing so much wealth to concentrate in the hands of a tiny minority is itself a giant democracy red flag. The US is on the cusp of losing its democracy as a direct result, damaging global security and markets in its death throes. The mere existence of billionaires and their corrupting influence on government is the issue.
jmcmaster 19 hours ago [-]
So make income tax a deduction on a wealth tax, and avoid penalizing people who do indeed pay top marginal rate income tax on a large salary/bonus.
Given that the ultrarich pay very little to no income tax then Paul’s argument is “don’t increase my income tax from unnoticeable to 20%”
Jblx2 12 hours ago [-]
You probably mean that incomes taxes should be subtracted from wealth taxes? (I don't know that "deduction" is right technical term). That sounds like a good idea, and should probably also include subtracting out capital gains taxes as well. So if you had a $500,000 calculated income tax liability, and a $600,000 calculated wealth tax liability, you would only end up paying $600,000 in taxes (instead of $1,100,000).
...that does seem like it would seem to alleviate PG's concerns about adding "a mere 20%" to the income tax rate.
Garlef 4 hours ago [-]
Yeah... Most people just don't have the income to meaningfully invest.
And this seems to be an intentional category error.
The idea is to redistribute from the ultra wealthy to everyone else. Why would you then pretend that these methods should be convertable?
Just keep the conversation simple:
- Everyone with more than 10m in assets pays wealth tax on the value above 10m.
mlsu 16 hours ago [-]
I would love, LOVE to pay 20% in taxes! Goes without saying, I work for a living and have far less wealth and power compared to PG.
I think there is kind of a breakdown in social order here. If society allows you to become the chief, it ought to also impose upon you a burden, an obligation, to wield your power over the tribe fairly, generously. To care for the weak, to make sure that everyone benefits, to ensure that things stay stable and safe under your leadership... The standard is higher, not lower. The sacrifice is greater, not lesser.
It is absolutely bizarre and you can see exactly thew way PG, and other like him, are thinking. They all want to have this immense power (and it truly is immense, more immense than ever in modern history!) but they want none of the obligation, none of the responsibility.
Even asking for 20 percent is too much, apparently.
It's really sick.
oytis 19 hours ago [-]
Not everybody uses money to make more money, Paul. Most people work, get paid, and spend the money on their needs. In other words, you are in a position to care about the question, it's OK if you are taxed a bit more.
grassfedgeek 19 hours ago [-]
I think 1% wealth tax should be a replacement for income tax. That way only the wealthy will pay taxes.
niwtsol 18 hours ago [-]
I think that is the glaring hole here - via an insane number of instruments from the various investments, they can reduce their tax liability (fed and state) to be very close to 0%. I believe a main idea of the wealth tax is to get around the insanely complicated tax code w/ all its loopholes.
tastyfreeze 15 hours ago [-]
A national sales tax also gets around the insanely complicated tax code without government confiscation of wealth. Regardless of how it is earned money eventually gets spent. Rich people spend far more than lower incomes so they pay more taxes. If they pass their wealth on it will still eventually get spent by somebody. That fixes the stepped basis problem of inheritance. If they use equity to get loans they are still spending money so it fixes that problem too. It is also easier and less costly to collect and enforce. No special forms for specific types of income to make sure you are getting taxed enough and no army of IRS agents to check that everybody is following the tax code.
The most common opposition to replacing income tax with a sales tax is saying it is regressive because "poor" people will need to spend a larger portion of their income on taxes than a wealthy person. Ok, so don't food or primary residence. A poor person isn't buying a $300,000 car or a second home. The best part is that if somebody is having a hard time getting by, every dollar they earn can be saved instead of giving Uncle Sam a short term loan until tax day.
grassfedgeek 15 hours ago [-]
[flagged]
k2enemy 19 hours ago [-]
How do you propose we measure a person's wealth, when wealth is easily hidden? When it needs to be done now, it is usually a years long audit.
Matheus28 18 hours ago [-]
A lot of countries require you to declare your total wealth on your tax forms. Then once someone gets audited, that gets checked. Obviously it’s possible to hide it, but that in itself is a crime, and not everyone is willing to risk going to jail over paying taxes.
throw0101c 18 hours ago [-]
> A lot of countries require you to declare your total wealth on your tax forms.
If you own shares of $MCD, you can get wealth taking share prices and shares owned.
But if own a McDonald's franchise, how do you measure the 'wealth' of it? Annual profit? Last x years profit, averaged?
triceratops 14 hours ago [-]
Comparable sales. Discounted cash flow model. There are many ways.
Salgat 19 hours ago [-]
The first step we need to take is to invest in the IRS. Every dollar invested in the IRS returns between $5-9. Couple that with fines that offset the cost of auditing, and "hidden wealth" becomes a liability too expensive for people to bother with.
clear-octopus 19 hours ago [-]
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mbgerring 17 hours ago [-]
If you are wealthy enough, you can live off of untaxed loans from your “unrealized” gains, and never pay taxes on that money at any rate. Meanwhile, I am paying an effective tax rate of around 35%.
The principle is simple: if you are spending the money, your gains are realized, and you should pay taxes.
jwlake 16 hours ago [-]
Loans against unrealized gains should just be taxed directly as income. Not indirectly creating more loopholes. Same way stock buybacks should be taxed at the same rate as short term capital gains.
anon291 15 hours ago [-]
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 were taxed then my initial loan would have to be 40% larger which means all my profit would go into paying that back, which means this project never gets done.
You are already going to get the money once the homes are sold and the capital gains are realized. Why is everyone so greedy? You essentially want to tax twice
mbgerring 40 minutes ago [-]
If I buy a home, I’m likely going to use saved post-tax income. What makes the money you’re using special?
jwlake 12 hours ago [-]
The point is you should realize your gains before you reinvest the money. Circular borrowing causes asset bubbles. You could collateralize against OTHER assets, but unrealized gains you should be paying taxes on if you are borrowing against them. It's really just closing a loophole. If the loophole is BIG enough, the you could lower the rate for everyone!
anon291 12 hours ago [-]
Taxation would only worsen the bubble as people are left unable to pay.
Again the tax rate sets a minimum return. These high returns encourage too much risk.
Collateralizing other assets is the standard way in which capital grows. I don't see how equities and any different than homes.
There is no 'circular' borrowing other than the normal creation of money through lending
jwlake 12 hours ago [-]
2008 was literally people getting mortgages on unrealized gains, and then getting more loans. Even if the market wouldn't support the sale, they borrow against it and then get another load and causing an asset bubble. Its not ancient history.
anon291 10 hours ago [-]
My issue is singling out stocks for this. Try telling people they're laying taxes on their heloc and that this is now income so their 300k heloc cash out now puts them in the highest tax bracket! Good luck
Of course people taking out equity cash for investments are actually putting the money for productive use.
How about there's no capital gains tax on equity if it's rolled into another investment of any kind. Eliminate the like kind nonsense. Tax only consumption income.
hashmap 8 hours ago [-]
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mayneack 16 hours ago [-]
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing. [2]
This is the wrong way of thinking about it. It's not adding 20% to an already taxed entity, it's adding taxes where there weren't before. Adding 20% on top of the income tax would indeed be controversial. In his framing the rate of return is effectively untaxed income, so it would be more accurate to say that this is like adding income tax to a currently untaxed income stream.
nurspouse 15 hours ago [-]
As an aside, in Islam, people have to pay a 2.5% wealth tax annually for charity.[1]
This does make retiring a tad bit complicated. Say you've saved $3M and are ready to retire. That means each year you're spending $75K just to satisfy this tax.
[1] Depending on how your wealth is structured. Cash is 2.5%, but if you own, say, a business, you pay the tax on the value of the goods, not on the value of the building, hardware, etc. You don't pay Zakat on the house you live on. Agriculture is actually taxed at 10%, etc.
oa335 14 hours ago [-]
Yeah, in general the principle is that zakat isn't due on fixed assets, but on any inventory or cash you hold. So its a lot less onerous than a blanket wealth tax.
15 hours ago [-]
jlhawn 12 hours ago [-]
I was waiting for him to make some point but then it ended up being that a wealth tax is like increasing regular income taxes by 20% which makes it seem like PG is trying to confuse people about what a wealth tax is designed to target. It's not targeting your wages or salary, or even your interest or dividends. It's primarily targeting unrealized gains on financial securities.
Maybe he should spend his time trying to work with these politicians to design something that is more fair? Like making it actually act as a tax on unrealized gains over $1B (so that it takes cost basis into consideration) OR make it so that if you need to sell some assets to pay the tax, you can writeoff the wealth tax you paid from your regular/capital-gains income so that you aren't taxed twice? There's a lot of actually useful stuff he could write about in this policy area instead of blogging about the financial equivalence between stocks and flows.
Digit-Al 50 minutes ago [-]
Taking advice from Paul Graham on why you should not impose a wealth tax is like taking advice from the neighbours cat on why you should allow him to crap on your lawn.
His argument is incredibly disingenuous; the sort of people who will be affected by a wealth tax are the sort of people who find ways of avoiding paying income tax, or indeed any tax at all if possible.
It makes me very angry when these billionaires who build up enormous wealth, partaially by avoiding paying the taxes that fund the infrastructure that help them build their wealth, get upset at people who suggest that maybe they should pay something back to society.
Paul Graham should, maybe, stick to blogging about tech, because when he gets into politics he really shows his true colours... and it ain't pretty.
klaff 18 hours ago [-]
Anymore I think the question shouldn't be about some kind of economic fairness (the time value of money thing being discussed) but the idea that wealth accumulation is a disease that afflicts society. I don't think anyone should have the level of control or influence on others that having a billion dollars currently allows. If a millionaire gives $100 to a political candidate it probably doesn't require too much thought. It's impressive to note that a 10-billionaire can give $1M just as easily, and so we have a class of folks who can throw around influence, who can order a team of lawyers to do things, can employ their legion of sycophantic followers to harass people, or can threaten the employment of many people not-of-their-class because they can make decisions that threaten someone's employer's bottom line. And note that above I compared a millionaire to the 10-billionaire, but there are plenty of folks, especially around the planet, who economically live several orders of magnitude below the millionaire.
As a bit of an aside, "spending more time with family" is an often-used euphemism around someone being fired, but if you have more money than you know what to do with and you aren't using it to spend more time with those you love, then what on earth is it for?
nearbuy 18 hours ago [-]
I know this is tangential to your main point, but in the US, you can only give a max of $3,500 to a candidate per election cycle, for each the primaries and general election.
To give more financial support, you have to do independent, uncoordinated campaigning for the candidate. So you can spend a million dollars on ads saying to vote for a candidate, but you can't give that money to the candidate's campaign and the candidate can't coordinate with you. This is what Super PACs do.
I only write this because a lot of people are unclear on the rules. I'm not making an argument about billionaires.
> In fact, not a single coordination investigation has ever resulted in a PAC being fined.
klaff 18 hours ago [-]
As one example see million dollar donations to inaugurations.
arh5451 18 hours ago [-]
How do you think society works without wealth accumulation? There would be no incentive to innovate to push forward. You wouldn’t have your iPhone, computer, or car. Want to see the result of societies that forbid wealth creation? Go to Cuba.
klaff 17 hours ago [-]
It's an interesting question. If we lived in a universe in which we weren't in fear of losing access to basic necessities of food, shelter, and healthcare, but had to work to have anything beyond those, what would happen? I don't truly know and I don't believe we have done the experiment anywhere. But I do know that the system we have not only produces innovative products but also corruption, oligopolies, and steamrolls over labor and the environment if not regulated.
I'm not naive enough to think communism is a magical answer (but Cuba is not some A/B experiment - the U.S. in particular has done a lot to make sure Cuba didn't succeed) - it ends up concentrating the wealth too. I would favor some form of democratic socialism, with leaders who can be kicked out if they abuse their power and limits on the influence of rich individuals and corporations.
On the latter, I think we forget that corporations are a legal construct intended to benefit society by allowing risk pooling - they are not people and should not be considered as such for things like free speech rights. Corporations should not be allowed to make political contributions in any way.
There are all kinds of irrevocable trusts that exist to remove assets from your taxable estate so that they can be passed to heirs without paying estate tax. Raising the estate tax (which is already 40%) would just make planning to use these techniques more attractive.
BugsJustFindMe 16 hours ago [-]
The existence of perpetual trusts is solvable in a world that has decided to fix the insanity caused by intergenerational wealth transfer instead of propping it up. "This thing we could also eliminate stops us from eliminating this other thing" is a silly platform. Just eliminate them both.
jeffreyrogers 14 hours ago [-]
Perpetual trusts are different from irrevocable trusts, which have legitimate use cases. I don't really see how irrevocable trusts would be gotten rid of. In most states all trusts are irrevocable by default and there is a huge body of law dealing with trusts. Getting rid of them is essentially impossible without huge changes in the political/legal system.
BugsJustFindMe 14 hours ago [-]
> Getting rid of them is essentially impossible without huge changes in the political/legal system.
So is getting rid of intergenerational wealth transfer. So since we're already dreaming about a new system that seems irrelevant.
> legitimate use cases
Intergenerational wealth transfer also has "legitimate use cases" if one gets to define "legitimate". I'm curious what legitimate cases you have in mind.
tony69 14 hours ago [-]
By “raising death taxes”, I meant comprehensively, eliminating loopholes, as the sources I linked discuss more at length.
Re: irrevocable trust, a cursory search revealed no legitimate use case imo, all use cases I see are proxies to skirt taxes or hide income/wealth. What would you consider a legitimate use case for one?
Your point re: case law is well taken, but per [2] up until a few decades ago there was a cat-and-mouse game between laws and tricks regarding inheritance wealth transfer. This stopped and it’s easier than ever to transfer > 10M tax free at or death, which has massive implications for wealth inequality.
That said I agree it’s extremely unlikely and have no hope that any of this will change.
19 hours ago [-]
fra 16 hours ago [-]
If you follow his logic and believe that the ultra-wealthy pay too little tax (as e.g. Warren Buffett does), then a balanced approach is to set the tax rate to: "37% of income or 1.85% of wealth, whichever is higher".
This would close the gap between Buffett's tax rate and that of his secretary, but would not be the "highest taxes in the world" that PG decries.
mw1 18 hours ago [-]
Wow, I like to actually see the numbers laid out like this. Most of the ultra-wealthy pay almost nothing on their income taxes from investments because they have found ways to avoid capital gains, and even if they were paying long term capital gains rates of 15%, pg’s assertion that the wealth tax adds another 20% doesn’t seem unreasonable at all. If anything, it makes me think 1% is not nearly enough of a wealth tax!
adrianwaj 11 hours ago [-]
Perhaps all taxes should be abolished and then a new one introduced: a transaction tax.
The question then remains, does the sender add a bit more before sending to move any given amount, or do they pay a given amount with the recipient getting less?
The system certainly scales well for net-worth and one's economic activity.
The question then remains - who/what is considered an "outside" party for a tax to operate in financial flows? It could work well in an agentic economy if agents are considered as a single entity with flows not taxed between them.
Hnrobert42 11 hours ago [-]
Transaction taxes are considered regressive. That is, they disproportionately affect the poor.
The idea is that everyone must spend a certain amount of money to live. For the poor, that amount is a greater proportion of their total income and wealth.
Basically, a wealthy person can choose to pay the same taxes as a poor person by only spending as much as a poor person.
Maybe that's fair. Maybe it's not. But it is a criticism of sales/transaction taxes.
adrianwaj 10 hours ago [-]
That's true, the only thing I can think of is an "amplification curve" being set on whatever is paid, and that can be paid by everyone after any given period based on all the flows a person was involved in during that time.
So if a frugal rich person can be paying a similar amount to a poor person in overall tax looking at living expenses alone, one can also look at all the extra income the rich person gets from assets.
So this inequality/imbalance can be lessened through an amplification factor: by looking at the overall position of a person's flows.
The governments can decide how much to "squash down" down the inequality in society.
Would this address the issue raised?
The other thing interesting about a transaction tax is that individuals don't necessarily even need to be identified - only flows. That would suit the privacy-side of crypto. But I'm not sure how the final setup would look. And that could appeal to the super-rich who want to remain anonymous.
Maybe what I'm getting at is a blockchain tax: a proportion of transaction fees gets automatically routed to government coffers. Alternatively, add a staking tax as well.
This will all make more sense when more real-world assets go on-chain.
10 hours ago [-]
15 hours ago [-]
blmarket 16 hours ago [-]
So, if we go with 2% wealth tax(instead of 1%) we can cut income tax offset -20%? Go do it right now.
Cider9986 16 hours ago [-]
It's not excessive to charge a 1% wealth tax when the people paying it don't pay any income tax thanks to their financial engineering.
Here is a cool website showing Wealth, shown to scale.
This might be one point of view, but if you imagine an economy where everyone is poor/living paycheck-to-paycheck, then this looks super wrong:
Everyone has $100, earns $100/month, and spends $100/month.
at 1% wealth tax, they pay $1/year.
at 20% income tax, they pay $240/year.
Those are obviously not interchangeable taxes from a government revenue perspective!
modeless 18 hours ago [-]
The wealth tax that we should have is a federal property tax, in the form of a land-value tax. A property tax is more enforceable and produces much better incentives than an income tax or capital gains tax or death tax or wealth taxes in other forms.
I think it's underestimated how important ease of enforcement is for taxes and laws in general. Laws that are hard to enforce require more powerful law enforcement agencies, more invasion of privacy, more punishment, more restriction of freedom. Enforcing a death tax, for example, necessarily requires limiting and tracking of all transfers of money or assets between people including personal gifts. A property tax merely requires keeping track of land ownership, which is a function governments already do, and in the worst case you can simply physically go to the land and see who is using it or seize it.
masterj 14 hours ago [-]
pg seems to think we would be scandalized by this math, when all I feel is “so?”.
The language politicians use to sell to a general public does not have any correlation to their understanding of the mechanics. The people proposing this policy entirely understand the ramifications. That is the point of the policy.
The average person is already subject to something like a wealth tax through property taxes, in addition to also needing to pay taxes on their income. Join the club pal.
sokoloff 15 hours ago [-]
> You can tell from the way they talk about the subject that they don't understand the momentousness of what they're proposing.
I think that what you can tell is that they think the voting public won't understand the momentousness of what they're proposing (or that their "color" will cheer that very momentousness).
Whether they themselves do or don't understand how impactful the proposal would be is much harder to guess.
zedpm 19 hours ago [-]
Are there serious proposals to just add a wealth tax on top of the existing income tax that would apply to the sort of people who actually pay much in income tax vs capital gains? It's an honest question; I haven't seen proposals of that sort, so I'm skeptical that the arguments are meaningful here. For an individual like Jeff Bezos, he's paying virtually no tax under the normal income tax rates referenced in the article, but rather capital gains tax, which tops out at 20%, not 37%.
alistairSH 16 hours ago [-]
None that I've seen, though I'm sure somebody somewhere has introduced something.
All that I've seen are wealth taxes on top of some arbitrary (but very large) wealth level. The latest proposal from Congress applied a 2% tax to wealth above $50 million with an additional 1% (3% total) on wealth over $1 billion. Plus a 40% exit tax to stop them all from fleeing to the Bahamas or Monaco.
n2d4 19 hours ago [-]
The conversion would be more accurate if it compared wealth and capital gains taxes, no?
A defining feature of wealth taxes is that they only tax those that make most of their income through capital gains. This is why they're popular among much of the population.
Now the question is, if we lowered capgains tax rate by 20% but instituted a 1% wealth tax, would that be better or worse? My guess would be worse because wealth taxes are nearly unenforcable, but I wonder if there are good arguments for the other position.
tyleo 19 hours ago [-]
What makes them unenforceable?
Cider9986 16 hours ago [-]
It's not excessive to charge a 1% wealth tax when the people paying it don't pay any income tax thanks to their financial engineering.
SwellJoe 15 hours ago [-]
Whenever I've seen anyone suggesting a wealth tax, it is specifically to address the very wealthy who pay an effective 0% tax rate, because they use the "buy, borrow, die" strategy. These are not wage earners, working a regular job, these are folks who own enough assets that they can borrow their way through life, living lavishly, never contributing meaningfully to the common good, the roads they are chauffeured over, the infrastructure and laws they benefit mightily from, the police who protect their assets, etc.
Since a lot of billionaires pay practically nothing in taxes, relative to their wealth, a wealth tax that equates to a 20% income tax would be entirely reasonable, and they'd still pay a much smaller percentage than the taxes I pay from my wages. It closes a loophole, it doesn't punish the very rich. And, nobody is suggesting the average 401k or Robinhood portfolio should be subject to a wealth tax.
k2enemy 19 hours ago [-]
Lots of confusion and misunderstanding in these comments. Not surprising, given the highly charged nature of the subject. I highly recommend Ray Madoff's book The Second Estate [1] to learn more about the topic.
I believe some of Ray Madoff's points are that the tax code and most tax intuitions kinda differ.
There's the idea that "wealth" gains tend to not be taxed for a variety of reasons. The common parlance of "Buy, Borrow, Die" category things. The "step-up in basis" category things - i.e. no capital gains tax realized on lots of inherited wealth. (The inheritance tax might trigger in some cases, but oddly the capital gains tax often might not be triggered on transferred assets because they were never sold and the new possessor will be taxed at the stepped up received value if they ever sell. So there's a chunk of appreciation that never received capital gains taxation.) Trust related things.
There's the idea that 501(c)(4)s allow wealth to be transferred untaxed while retaining control over the assets (particularly because those organizations can engage in political activity, but I'd guess generally some of the organizations exert lots of influence/prestige.)
So perhaps OP is suggesting that maybe there's some fungibility in income tax % and wealth tax %, but when you look at the tax code the equivalency looks pretty weak currently.
triceratops 14 hours ago [-]
There's a way to levy a wealth tax that requires no asset liquidation whatsoever. Allow paying taxes with assets. The assets go into a sovereign wealth fund. At scale the fund effectively holds a percentage of the entire economy. Its returns should only be used to reduce income tax.
kansface 12 hours ago [-]
The sovereign wealth fund would be a stakeholder in equities and estates. It would have to exercise voting privileges and be a party to lawsuits. Do you want Trump getting control of the board of eg SpaceX or Meta?
triceratops 10 hours ago [-]
> It would have to exercise voting privileges
There's never a requirement to vote your shares. I've never cast a single shareholder vote in my life. The fund could be legally required to not exercise any votes.
> be a party to lawsuits
Since when are shareholders a party to lawsuits? It's called limited liability for a reason.
> Do you want Trump getting control of the board
I'd normally say "legally structure it so that doesn't happen" and "follow best practices".But laws only mean anything if someone enforces them. If the government doesn't function correctly no government function can work correctly.
bellowsgulch 12 hours ago [-]
you know that one guy, Ross Scott, who thought he wasn't going to get anywhere with stop killing games, but he thought, why not, let me ask people on YouTube whether or not people want to get together to stop video game publishers from killing service-based games
i think about that mentality all the time
one person just said, I don't think I'm going to be able to change the world, but well, why don't I try anyway because I don't see anyone else doing it, and instead thinking that a politician is responsible for my future instead of me and you
such a great mentality, I really do think about it all the time
julianozen 18 hours ago [-]
I think a lot of ink has been spilled on the problems with the proposed California Wealth tax, the main points being:
1- Is this in fact a 1-time tax or is that a dishonest narrative to make the proposal easier to swallow?
2- How do you prevent capital flight to other states?
3- How do those with paper money or more voting shares than
equity shares cover their tax bill?
That being said, I think more creative energy needs to be spent on the problem itself.
What do we do about individuals with $100M+ of unrealized capital gains that through various methods will never have to realize those gains to live an extraordinary lavish lifestyle, and their children will inherit the money with a step-up in basis? For those who make all their money from W2s, they pay very high tax burdens, while those who strictly have capital gains generally pay at most around ~20% for LTCG.
To those criticizing the California Wealth Tax, how do we solve this? How do we make billionaires pay more and lawyers/doctors/software engineers pay less?
hewasahaterboy 18 hours ago [-]
This blog post is incredibly tasteless. Really Paul should take it down and get the butler to wipe the egg off his face
fblp 14 hours ago [-]
This grossly simplifies things.
In the US the max federal tax rate is 20% on capital gains, that is the gains realized when you typically sell an asset. The max tax rate on ordinary income is 37%. Some states don't tax at capital gains at all. Others make also tax capital gains.
There are a myriad of loopholes to defer and minimise capital gains ranging from QSBS (first 10mil in small businesses) to trusts to foundations to offset losses. Billionaires are incentivised to hold their assets and let them accrue rather than deploying that capital.
Yes, you could argue that billionaires have earned his billions. But could you really argue that the tax system should be configured to reward them for sitting on those billions and those gains should be taxed at a rate lower than someone working every day to earn 200k in wage income?
The economy has a fundamental division between those who earn income off the gains on assets, and those who earn an income on wages. Wealth taxes help level the playing field by those who already have a tax system in their favor.
Trickel down economics does not work when you earn more holding on to what you have.
Which is a tax on only one kind of wealth. Back when that was the kind that mattered most, that made sense. Today? Not so much.
adverbly 10 hours ago [-]
Still, seems like table stakes.
Start with georgist/pigouvian taxes, and then expand to other kinds of income/wealth afterwards.
But Georgist taxes can go really far I'd imagine.
AnimalMuppet 9 hours ago [-]
No, why? If we're going to do a wealth tax, then do a wealth tax. Why single out only one kind of wealth, and the kind that is not even the most important these days?
(What's more important? IP. The value of Google, say, isn't in the land it owns. It's in the code, the database of web pages, and the google.com domain name.)
> kind that is not even the most important these days
uhhh source on that? I'm pretty sure land is literally the largest asset class in the economy. Real estate is by many estimates over 2X as large as the entire combined global market cap of all publicly traded companies. https://europhoenix.com/blog/part-ii-on-asset-classes-size-o...
AnimalMuppet 8 hours ago [-]
No, I'm not going to watch a video to see what your point is. Either tell me, or don't.
Re your last paragraph: I admit I'm surprised by that. Still... Georgism calls for a tax only on the value of the land, not on the improvements. Of all that money in real estate, how much is in the improvements, and how much is in the raw land?
> This figure includes only high quality retail property, offices, industrial, hotels, residential, other commercial uses, and agricultural land
From this I gather that a large chunk of it is the improvements.
And, if real estate is the biggest category, why focus just on the land part of that, and ignore all the improvements on it?
This article is about a wealth tax. The arguments for Georgism are about something else - about social policy. It may even work as social policy, though I have at least some doubts. But as a wealth tax, it's not very effective. (If I were a rich person, I could buy a $100 million apartment in New York, and have the rest of my assets in stocks and gold and art, and my tax liability would be for my pro-rated fraction of the land that the high rise that held my apartment occupied. As a wealth tax, that's got far too many loopholes to be useful.)
postflopclarity 16 hours ago [-]
it's more than that, because it's the one kind of wealth that has an (almost) completely inelastic supply
AnimalMuppet 9 hours ago [-]
Same is true of gold. So why single out land?
SandroG 18 hours ago [-]
I think the post is correct in a one-period sense, though I’m not sure the equivalence survives once you model long-term compounding, additional capital gains taxation and liquidity constraints.
17 hours ago [-]
ecshafer 14 hours ago [-]
Wealth and Income taxes are both wrong. What we need is to tax Land and Rents. By taxing land via a Land Value Tax system, and rent seeking monopolistic behavior, this will allow productive labor and productive capital to be exercised for economic growth.
adverbly 11 hours ago [-]
Bingo!
Yes! A tax system that incentivizes productivity! You for president! I would vote for this so f*** hard!
zug_zug 14 hours ago [-]
Could you explain more or link a place that explains how this prevents the runaway wealth we are seeing?
ecshafer 14 hours ago [-]
The book Progress and Poverty argues this. Basically as we see wealth increase,
increases in population and productivity raise the value of land (economic rent). Landowners capture this value, while wages for labor stagnate. A Land Value Tax and other taxes on rents removes that extraction, so people are able to reap its benefits. Meanwhile it also stop taxing productive things, like capital and labor, incentivizing people to work harder and invest. Runaway wealth is often parked in land other rents, but as land is taxed it, in incentivized investment: more housing, more innovation, etc to be more utilized more efficienty.
10 hours ago [-]
anonymousiam 18 hours ago [-]
Paul doesn't mention that these aren't exclusive. The California "Billionaires Tax" (which will likely soon become a "Millionaires Tax" after all the Billionaires exit the state), is levied on top of the regular state income tax.
odiroot 13 hours ago [-]
In any case, pretty much everywhere in the developed world, we desperately need lower burden on people's labour (through salary income tax and related contributions). If wealth tax is a way to get there, so be it.
econ 13 hours ago [-]
So 5% wealth tax would be the same as 100% income tax, 6% would de 120% AND 100% wealth tax would be the same as 2000% income tax.
I think some relevant factors are missing. What is the polite way of putting it... Ah right! You are a clown!
kansface 12 hours ago [-]
A 6% wealth tax indeed taxes more than the expected rate of return on the base assets. That is indeed equivalent to a higher rate than 100% in terms of an income tax. This math is in favor of PG’s argument.
econ 6 hours ago [-]
Certainly, but it's about as useful as comparing the range of a radio with that of a car.
We might also compare tax revenue. For the US 1% wealth tax (for the 0.1%) would generate 250ish billion while 1% income tax would also generate 250 b. Then say 50% worth of increased tax evasion. 2% wealth tax is equal to 1% income tax.
Hongwei 18 hours ago [-]
I appreciate PG's writing as always.
I'm skeptical that the super-rich are only generating 5% on their money. My anecdotal experience is that it's usually north of 15%. They have access to investments that main-street does not.
If we plug in 15% instead of 5% in PG's reasoning, the effective income tax increase is quite a bit lower.
levocardia 17 hours ago [-]
There is a footnote discussing this point; he uses 5% as the risk-free rate.
drivebyhooting 15 hours ago [-]
Is 5% risk free even available to the little guys?
No.
ojbyrne 18 hours ago [-]
Why choose the median state tax? The proposed wealth tax is in California, where the top tax rate is 13%. Also relevant would be Medicare (1.45% or 2.35% depending on your employment income) and presumably for billionaires, the Net Investment Income Tax, another 3.8%.
I understand why he simplifies things, but it doesn’t really jive with saying politicians don’t understand how taxes work.
I think politicians have a better understanding of taxes than Paul does, and they have a better understanding of how politics work - basically as in all things political, if you convince the majority that you’re dumping on minorities (billionaires, immigrants, trans people) you’ll do well.
nullc 11 hours ago [-]
> where the top tax rate is 13%
13.3%
> and presumably for billionaires, the Net Investment Income Tax,
NIIT kicks in at 200k, you presumably know this but I thought your comment could be misread as implying it only mattered for billionaires. :P
> I think politicians have a better understanding of taxes than Paul does, and they have a better understanding of how politics work - basically as in all things political, if you convince the majority that you’re dumping on minorities (billionaires, immigrants, trans people) you’ll do well
The author presumably understands this, but it's often more effective to pretend that your opposition is confused then to admit that you believe they are corrupt, unethical, dishonest, and actively trying to perpetrate evil. If nothing else, it gives them a more face saving avenue to course correct. And sometimes they really just didn't know better...
Glyptodon 16 hours ago [-]
The argument is plausible - that you can treat wealth taxes as equivalent to income taxes if you treat wealth taxes as a tax on the ostensible income generation of the wealth.
Of course there's more complexity than this, but that aspect is a plausible reductive lens.
But the conclusion is silly. We all know the extremely wealthy who'd be subject to a wealth tax basically don't pay taxes and that a 20% tax is totally right around what the typical overall tax burden is for the middle class or median households. The 1% example equating to 20% is basically saying the wealth tax would be in line with a flat tax, not even with a progressive rate tax. The wealthy have turned the tax system into one that's functionally regressive for the most wealthy and then PG complains that a proposal that makes it more like a flat tax is "not understood" by lawmakers?
It sounds ridiculous to me.
Or maybe I'm missing something.
Matheus28 19 hours ago [-]
You obviously can’t convert between the two directly and suggesting that is disingenuous.
Income tax doesn’t affect unrealized capital gains (where the rich “hide” most of their income).
A wealth tax (even without a minimum threshold) doesn’t apply to the poorest who can’t accumulate enough to even have any savings.
This conversion only works for income that is entirely saved and reinvested, which the majority of people can’t afford to do.
alistairSH 19 hours ago [-]
Paul the billionaire ignoring that billionaires often don't pay any income tax at all. Come on man, we're not stupid just because we don't own superyachts.
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Classic PG dishonesty. It's not mathematically the same, because it affects different people. "What is the income tax equivalent" isnt a relevant question unless your either stupid or desingenuous.
dasil003 14 hours ago [-]
Man, as a young programmer coming up I really looked up to Paul Graham, but now as a seasoned vet in the industry, it's remarkable (and disappointing) to see him publish an article based on such a false equivalency. I mean this level of missing the forest-for-the-trees is the type of thing that routinely prevents senior engineers from getting promoted to staff because they're pedantically fixated on the wrong details. And that's on top of failing to read the room as to why people are even calling for a wealth tax in the first place.
The more obvious reason to not tax wealth is because it's hard to measure, and if you try to do it you will incentivize hiding it. Meanwhile, there are obvious obvious loopholes that the ultra-wealthy enjoy which could be reasonably closed. Namely, close the buy-borrow-die loophole, don't allow step-up basis for inherited wealth, and tax capital gains at least as much as income. Now people with a lot of money can afford to fund a lot of premium think tanks to come up with fancy economic reasoning why those ideas are Really Bad™, but at this point it's clear that's bullshit propaganda and the unintended consequences are exceedingly unlikely to be worse than the current unchecked consolidation of wealth and power enabled by the current loopholes.
gist 17 hours ago [-]
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing. [2]
I am fully against any wealth tax but 'Don't get this'?
Who says they don't get it. It doesn't serve their purpose so of course (like anyone selling) they are not going to disclose it.
Apreche 19 hours ago [-]
His math is correct, but the conclusion is wrong.
Income is money that comes from actually laboring and contributing to society. Wealth tax is tax from sitting on your ass doing nothing.
Also, taxes don’t have to be a flat percentage. Like income tax, a good wealth tax would be progressive. Only wealth beyond a certain amount would be taxed, and the percentages would scale.
This is why we should have income taxes that are as low as possible, but still progressively scaled. We should similarly have a progressive scaling wealth tax, but it should be much harsher than the income tax because we want people to work.
renticulous 16 hours ago [-]
> Wealth tax is tax from sitting on your ass doing nothing.
Related point is monetary system and monetary plumbing should be boring like electricity or water supply but because of distortions making money out of money has become the hottest thing.
dirteater_ 19 hours ago [-]
Because billionaires accumulate wealth through assets and unrealized gains, many of them skip taking a traditional income and pay. If the numbers in the links below are to be believed, according to paulgraham's calculations, this might bump them into a ~fair range (when comparing to average/median earners).
There are numbers in this post, but only in the technical sense.
My read of this is "the discussion of taxing wealth makes me anxious. i will do a tap dance, please become mired in watching / discussing my tap dance so that we can put off the inevitable and ultimately necessary a little longer"
To the "conversion rate": maybe, but who cares? The answer here is: apply the tax, see if we still have billionaires afterwards. If we do, then keep doing it.
chipotle_coyote 13 hours ago [-]
This seems to be willfully eliding that proposed wealth taxes tend to either be taxes on wealth above a certain amount, or (such as California’s) a one-time tax on people with wealth over a certain amount. If I were a mere millionaire -- technically, I am, with a net worth of just over $1.1M, but this would be true if that were $5M or $10M or even $50M -- then under any proposal I’ve seen, my wealth tax would be $0. (Note that if someone were to have $50M, then under Graham’s risk-free rate of return of 5%, they would literally have to do nothing to pay themselves an “income” of $2.5M annually.)
If I were an actual billionaire -- say, my net worth was $2B -- then my one-time tax under California’s proposal would be $100M, leaving me with a net worth of $1.9B. Under that 5% risk-free rate of return, I would recover that amount of money within one year even if my income were $0, which seems exceedingly unlikely.
One can argue about the specifics of various proposals -- the Tax Foundation, for example, thinks California’s proposal has “aggressive design choices and possible drafting errors” that could lead to somewhat bonkers results, although I haven’t seen any critiques of their analysis yet -- but a wealth tax cannot be converted to income tax in a reasonable manner any more than a VAT could be converted to property tax. They’re both taxes, but they’re simply not the same kind of tax. And while I don’t mean to cap on Paul here, there’s a distinct “woe, pity the poor billionaires who will surely be driven to bankruptcy” subtext I find to be risible nonsense.
zozbot234 13 hours ago [-]
The traditional name for a surprise "one time wealth tax" is a capital levy. It's got a pretty terrible reputation all around because it's the closest thing to an official declaration that your country (or state as the case may be) is now a complete fiscal and financial basket case that can't manage to fund itself by sensible means.
kansface 12 hours ago [-]
No one believes or acts like this will be a one time event (on any side of the issue). The history of all new forms of taxation is that eventually it will come for you.
kommunicate 16 hours ago [-]
This argument strikes me as massively disingenuous. The central problem of the US tax system is caused by a combination of:
- high net wealth individuals essentially being indifferent to income tax.
- income tax and short term capital gains are taxed at much higher rates to long term capital gains.
- lower net wealth folks (ie. the general public) receiving most of their income as income.
- high and ultra high net wealth individuals now making most of their money through dynastic trusts and inheritance.
This combination ends up making it so that, as Warren Buffet would put it, he ends up paying a lower effective tax rate than his secretary.
I effectively don't really care if it's a wealth tax or some other more targeted technical fix, but it's not sustainable to have the very wealthiest individuals taxed at a lower effective tax rate than everyone else and also able to pass on their wealth directly to heirs without significant estate taxes.
nullc 10 hours ago [-]
LTCG + Corp tax rate >= income tax rate. It's an error to disregard the taxes your investments pay before they pass that wealth back to you.
breppp 13 hours ago [-]
You are always so progressive up to the point you meet a progressive tax
BugsJustFindMe 16 hours ago [-]
The thing that all these asshole billionaires don't want anyone to think about is that not taxing wealth means that a person who primarily accumulates non-income capital only ever pays taxes on what they spend while the rest of us pay taxes on approximately everything we get regardless of whether we spend it.
throw310822 15 hours ago [-]
Isn't this argument simply confusing income tax with capital gains tax? Because that's the tax you pay on your investment returns, and it's actually capped (in the US) at around 20%.
No, he's disingenuously talking specifically about income tax, on interests.
Capital gains are on realized gains. Based on the difference between purchase price and selling price.
The thing is, wealthy people don't have interests bearing investments, because they don't need the cash right now. They either have unrealized gains (shares, real estate, etc), or interest bearing products wrapped in marked to market vehicules with reinvestment (ETFs, life insurance, mutual fund, etc).
Unrealized gains are not taxed as long as you don't sell them. If you need cash, you can borrow against them, so problem solved.
As for interest bearing investments, most companies nowadays use buybacks instead of dividends to avoid withholding taxes.
TZubiri 15 hours ago [-]
As others have mentioned this is wrong. Here's 3 accounts on how it is so:
1- Fundamentally, they are magnitudes of different units, one is tax/income, the other is tax/wealth/time. Not only is the denominator different, one being calculated over income, the other over wealth, but there is an additional inverse time factor.
In income tax, whether the period is yearly or monthly or hourly, is an administrative matter that doesn't materially change the rate, 1%/month is the same as 12%/month, however in wealth tax, 1% wealth tax per year is not the same as 1% wealth tax per month. In many respects one might consider wealth tax to be a second order derivative of income with respect to time. Which is again very similar to a progressive income tax. Anyone that studied polynomials knows that there is no such equivalence between ax and bx^2, they are irreducible mathematical forms.
2)Trivially, in the scenario Paul proposed, Wealth tax is comparable to income tax only with respect to capital gains. That is, if he did find an equivalence between income tax and wealth tax for capital gains (which he didn't), income tax would still apply non capital gain taxes. But I will concede that there may be an argument that, if such an equivalence were found, it could be considered that there exists an Income Tax which will always yield more tax than another specific wealth tax.
3) The equivalence between wealth and income tax cannot be linear. The example given applied to 1% wealth tax and was compared to 20%, and a risk free interest of 5%. If the wealth tax were of 2%, 5% or 10%, would that be equivalent to 40%, 100%, and 200% income tax respectively? The last one is especially ridiculous.
newtonianrules 10 hours ago [-]
We get it Paul. You’re rich and don’t want to give any of it away. We don’t expect you to. We know you and your ilk have bought all the politicians off and all this wealth tax nonsense is just theater. No need feigning their ignorance.
outside1234 16 hours ago [-]
You need to understand the "Buy/Build, Borrow, Die" cycle that the ultra rich use to avoid basically any taxes.
That's a distraction. Were that the issue politicians and the media were actually concerned about they could implement policy which made it ineffective at avoiding taxes-- e.g. requiring appreciated assets used as collateral to throw off an implied return which you're taxed on and which gets added to the asset's cost basis. We already have analogous tax rules e.g. using options trades to nullify the risk on an asset causes it to be treated as sold for tax purposes.
The reality is that the total financial effect of that sort of technique is not that considerable, but the political noise that can be made out of turning it into a perpetual problem (e.g. by only proposing to fix it with drastic non-solutions like wealth taxes) is gold to the people that profit from making us hate each other.
epolanski 16 hours ago [-]
But income from most comes from labor, whereas wealth is passive.
I don't want to do math, but they aren't the same.
And people aren't investing 100% of their income in risk free 5% assets.
annoyingnoob 16 hours ago [-]
This treats all income like Labor income and completely ignores Investment income and long-term capital gains and losses.
How I pay tax on my labor income doesn't have a lot to do with how Paul pays taxes on his investments. Paul makes his money from investment income.
robotresearcher 19 hours ago [-]
This is a transparently misleading framing.
The very wealthy are paying very low effective rates on their investment gains. Various billionaires have publicly described the truth of this. This is not 20% on top of 35%. They are paying a marginal rate of 35% of deliberately minimized taxable income and zero on deliberately maximized unrealized gains. Then 20% when realized, but as we all know by now there are ways to make sure it’s never realized.
I don’t know what the best approach is here, but I know this framing is nonsense.
ipython 17 hours ago [-]
Thank you. This is exactly the problem- pg is twisting the conversation by saying "look how painful taxes are for you, pleb!" When in reality, the taxation levels on the ultra-wealthy (whom this is targeted toward) are so much smaller not only on a %'age level, but on an impact level as well.
eis 17 hours ago [-]
Here's a crucial mechanism that Paul Graham did not mention:
With a wealth tax using his calculation, the higher your returns, the lower the comparable income tax would be. If your returns are 10% you'll pay $1 on $10 capital gains which is 10% and you end up with $109. Conversely someone achieving a mere 1% cap gains would be essentially taxed for 100% of his return.
With income taxes it's usually the opposite: the more you earn, the higher the tax bracket you will be put into.
Somebody like Paul Graham surely has higher than 10% capital gains, otherwise he'd not be exactly a great investor.
Personally I'm against wealth taxes, I think capital gains taxes are a much more appropriate and fairer tool. I also think taxes in general are way too high, if you are part of the middle class and add up everything you pay in taxes, fees, insurance, duties and whatnot you can end up losing 70-90% of whatever you earn. It's extremely hard to actually accumulate wealth for the vast majority of people.
SoftTalker 14 hours ago [-]
Well he does qualify this in his post, "The conversion rate of 20 comes from assuming that the risk-free rate of return is 5%."
ipython 17 hours ago [-]
Yet... an entire industry (financial advisors) will happily charge you a 1% "wealth tax" to manage your money. And you don't see lengthy articles from luminary venture capitalists about that.
Feel free to just tell the masses to eat cake since bread is so expensive while you dine on your mega-yacht. Just like the market can stay irrational longer than you can stay solvent, you may or may not be able to outlive the eventual violent outburst from the rest of the 99%. Scott Galloway is right on that the anti-data center backlash is just a proxy for anger at wealth inequality.
fraserharris 16 hours ago [-]
The entry level rate for >$10M AUM is ~0.5%
ipython 16 hours ago [-]
That's a 10% tax! <gasp>
keernan 17 hours ago [-]
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.
They can have the vault in the cave. Or they can put money into artwork that grows in value and only generates income upon sale. Or a million other ways they can choose to control taxable income.
robertoandred 14 hours ago [-]
Except they already paid taxes on that one billion in cash. The receipt of that cash is taxable income.
keernan 11 hours ago [-]
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.
jsrozner 16 hours ago [-]
Stop thinking about taxes as a way to fund the government.
Money in the long run can buy anything, including political influence. There are no regulations that can effectively preclude this. (And empirically, America over the past 40 years has seen moneyed entities successfully re-align politics and economic policy with their interests -- this was entirely predictable). An unequal society therefore cannot be a democracy. If you believe in democracy, then you necessarily must believe in wealth redistribution. (In fact, I argue that any person who believes that the American Revolution was justified, for any non-trivial reason, will likely find that those the same non-trivial reason could be invoked to reallocate wealth away from today's wealthy.)
Counterarguments to this view (i.e. a different top-level value than democracy / meaningful sovereignty over the society in which one lives) might invoke utilitarianism: an unequal society potentially produces "better" outcomes if capitalism is allowed to run unrestrained.
But a problem this argument encounters is who gets to decide what "better" is? All systems are economic in the long term, including political ones. A good framework for understanding is that a society in the long term is not "one person one vote" but rather "one dollar one vote." Today's preferences are dollar-weighted. Those with money decide what is better. The economy serves the average dollar's interests. And the average dollar's interest are the wealth-weighted preferences of society's members.
We started with an income tax to fund the government. But today our most pressing issue is not funding the government, but not having an oligarchy. Wealth is the thing that most needs to be taxed in order to allow for any semblance of democracy. Analogies drawn to income, though interesting, are meaningless.
wat10000 18 hours ago [-]
> None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
I sure would, if I was talking about someone who makes more money in a week than most of us will make in our entire lives.
I think pg has forgotten that most people aren't rich.
artoghrul 19 hours ago [-]
Here is a better algorithm to edify the masses: if someone is such a massive billionaire as to have the boldness to teach the public basic 5th-grade math, their wealth tax rate should be set at 10%. From that point on, the rate goes in proportion to their level of condescension.
robtherobber 16 hours ago [-]
That's so unambitious, I'd argue.
> In 1940, the federal tax rate on income over $200,000 started at 66 percent. By 1944, the top tax rate on all income over $200,000 — about $3.4 million in today’s dollars — had jumped to 94 percent.
>It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
His core point seems to be that taking $20 from him is mathematically equivalent to taking $20 from a homeless girl's hat.
I guess mathematically it is the same number if you dont normalize for that, which he wont.
deathanatos 19 hours ago [-]
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Uh … sure I would? Why not? The top bracket was 70% in the 80s. So that 61% is still a fair bit short of what it was then. (And the 80s isn't the highest point, either.)
IDK if it would be a good idea or not, but I'd entertain the debate, certainly. To state that this is unarguable, though, well…
tyleo 19 hours ago [-]
I used to be against wealth taxes but as inequality gets out of hand I've more and more felt like they are the right move.
Hell, I'll be the first in line to pay the damn tax so long as billionaires are right in line with me too.
silexia 12 hours ago [-]
How about instead of trying to take earnings from those who work or assets from those who earned them, we reduce government size and spending?
Jblx2 12 hours ago [-]
Maybe tax rates should be based on government spending? So that as government spending goes up, taxes go up, giving people incentive to try and reduce government spending.
drcongo 16 hours ago [-]
Is this Graham accidentally revealing his contempt for working people?
bayarearefugee 16 hours ago [-]
He's a billionaire.
Based on available data deep contempt for working people should be assumed until proven otherwise, even for billionaires who are 'self-made' by way of a lot of right-time-right-place luck.
gist 17 hours ago [-]
> That's why I think few politicians currently understand how to convert between wealth and income taxes. You can tell from the way they talk about the subject that they don't understand the momentousness of what they're proposing. But I'm optimistic that we can teach them. The answer's not hard to understand, once you realize the question exists.
What a pompous and uninformed "I am smarter than others" way to think. And very 'parental' (ie 'we can teach them').
Note that Politicians (in order to remain in their job) need to think in terms of the people they represent and getting re-elected by those people. You may not like it it may not be good for you but understand that in the position they are in why they do it.
etchalon 19 hours ago [-]
I think Paul thinks people care about the distinction, or think that a 20% marginal increase to the nation's wealthiest is something the public would find "unfair".
Rich people need to stop hanging out with other rich people.
renticulous 16 hours ago [-]
The real problem is our politicians aren't representing our people. All these other issues of wasteful spending and money printing and inflation and whatnot are downstream of that main crux of problem. People don't hate wealthy perse but when laypeople aren't provided proper means of living, they will try anything as a solution, even throwing a wrench in the system. That's how we got Trump.
zelon88 12 hours ago [-]
Oligarch argument. Tax anything over $999m in assets, stocks, wealth at 100%. No more billionaires.
scotty79 11 hours ago [-]
I have a weird take on income tax.
In my opinion it's not a tax on the employee but on the employer and one of very few solid methods of actually taxing the rich (for as long as the rich need labor to get richer).
Your income tax money never reaches your pocket so it's never a part of your actual income and if employer didn't pay your income tax, they are (not you) on the hook for that.
And if income tax rate was lowered to zero, the employer wouldn't automatically start paying you that much more. There would be a renegotiation and most of that money would stay with the employer, because you already agreed and demonstrate that you can work for as little as you do. Of course in specific cases that the position of the employee in the market is very strong, some companies might choose to use the money they don't have to pay as your income tax to compete for employers by offering higher salaries. But that's definitely not given. Company getting richer rarely automatically translates to higher salaries.
So employee, if the economy is strong, should advocate for as high income taxes as possible, because that one of the very few ways that the money in the economy flows from the rich to the poor (with a detour through governments, which are poor nowadays anyway, perpetually indebted to the rich).
voidhorse 15 hours ago [-]
yawn hack writer issues wealth-hoarding and inequality apologia.
Economics is simple. Resources are finite, and money plus markets preserve that finitude as an invariant (that's why it works as a store of value). If you sit on more money and accumulate more money a natural consequence is that someone else has less access to the finite resources available (either in actuality or in potentia), period, because you can accumulate enough to begin to dictate how much they can access (by having decision power around wages). There is no reason to assume private individual wealth-hoarders have public interest in mind, and indeed they have often proven that they don't. They want to maximize value at specific points in the system, which is the literal definition of instability and eventual collapse in chaos theory. You need to bring the system back to stability through structural intervention and regulation. Tax the rich. Cap individual accumulation. It's that simple. The world does need or benefit from kings, whether minted through politic or finance.
robertoandred 14 hours ago [-]
Investments aren’t money. They’re just things you own, and their value can go up and down. They don’t affect the money supply.
voidhorse 6 hours ago [-]
Many investments are considered a liquid asset precisely because they are basically money.
You're missing the point on a stupid technicality.
If I have more liquid and therefore more purchasing and capital power than you, I have access to more resources than you, and I am immediately in a position in which I can potentially exploit you (get you to labor to generate more resources in exchange for some of the capital I have, then retain most of all of the newly generated capital and production from your labor for myself while paying you a fraction of what's generated because you are in a position of immediate need (need access to necessities) and I wasn't).
gist 17 hours ago [-]
> In the median case, US state politicians talking about adding a "mere 1%" wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.
The missed point is that a 1% wealth tax 'only for a select group' can easily become later a 1% (or higher) wealth tax 'for a less select group'.
duped 19 hours ago [-]
> So in the median case, a state adding an additional 20% in income tax would have a total marginal tax rate of 37% + 4.75% + 20%, or 61.75%
Good! It should still be higher!
There's nothing more tone deaf than an uber wealthy man arguing he shouldn't pay more in taxes to the system that allows him to be uber wealthy and to be deliberately misleading at the same time.
fguerraz 19 hours ago [-]
This is misleading and not the point of the wealth tax.
If you’re lucky enough that you don’t need to work for your income, you should be taxed. A lot. How much? Enough to make sure you don’t become so rich that your children don’t need to work.
Being rich is not fair, it’s very rarely deserved, and it needs to be taxed unfairly.
IshKebab 19 hours ago [-]
Yeah this ignores at least three things:
1. Most people do not derive even a fraction of their income from interest on wealth.
2. Earning income from interest on wealth requires zero effort. That isn't true for salaries.
3. Income and wealth are totally different things. You can find a way to equate them in one contrived example but there are so many other factors involved in the real world.
Billionaires gonna billionaire.
themafia 13 hours ago [-]
Cool, now I just need: "How to convert between silicon valley bloviating and normal human dialog."
> None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Income tax is progressive. So, not really.
BrenBarn 14 hours ago [-]
Utter nonsense. You can't convert between a wealth tax and an income tax in any manner as simple as this, unless the wealth tax and the income tax were implemented in a simplistic way unlike any actual proposal. Most obviously, there is no such thing as "the" income tax rate, because different people pay different rates; those rates depend most obviously on the amount of income but also on various kinds of accounting gimmicks that allow wealthy people to pay less. Similarly, no one is proposing a flat wealth tax that would tax 1% of everyone's wealth.
The "example" discussing paying income tax on your $5 of return on your capital is similar nonsense. You don't pay anything on that gain unless it's income, which it isn't unless it's realized. So (assuming the various parameters of a wealth tax meant this mythical $100 person would indeed pay a wealth tax), the comparison is between zero income tax and some nonzero amount of wealth tax.
> None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Plenty of politicians (e.g., Bernie Sanders, AOC) have pointed out that the top income tax rate during the 1950s was over 90%, and have suggested raising rates back or near to that level, which would be well more than a 20% increase in the income tax rate.
paol_taja 19 hours ago [-]
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jasonmp85 17 hours ago [-]
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bogota 16 hours ago [-]
Any tax on wealth i will forever and always disagree with. People don’t see its just a setup for the eventual tax your children will be paying as it becomes normalized and inflation makes 10 million the new 1 million.
clear-octopus 19 hours ago [-]
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lowbloodsugar 19 hours ago [-]
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wing-_-nuts 19 hours ago [-]
I recently read 'the second estate' and reading about the number of loopholes the ultra wealthy exploit to pay almost no taxes and establish dynastic wealth does boil the blood.
Off the top of my head:
* 'Income' generated from loans using shares pledged as collateral should be treated the same as if you sold those shares.
* Someone receiving an inheritance over x million dollars (carve out 95% of family farms and small businesses if you want), should pay taxes on it as if it were any other windfall
* Donor advised funds should have a 5% distribution / yr requirement, same as private foundations
* capital gains should probably be treated as regular income. I have no idea why 50k in gains on INTC is somehow privileged over the salary paid to a roofer working in the hot sun.
vessenes 19 hours ago [-]
This just isn't true, unless you're the president.
Who is the single largest taxpayer in US history? I'll wait while you google it.
giarc 19 hours ago [-]
Prof G Markets podcast just had an episode on this with Ray Madoff. They talk about the claim that "the top 1% of Americans pay 40% of the income tax". But Ray points out that is misleading because the 1% is basically lawyers, physicians, accountants etc that make like $500,000/yr. These people still pay income tax and that's the group paying 40% of income tax. What that claim misses is the 0.1% that pay 0 income tax because they have no income. The claim makes people believe that the billionaires are the ones paying that huge sum but we fail to realize that the 1% is our neighbours, not just the billionaires flying private jets across the world.
vessenes 18 hours ago [-]
$0 just feels like a concept -- I can imagine a really high quality structuring exercise that gets tax low by making sure leverage on capital is what's used for spending, but I'd be really surprised to see a 0.1%-er (or 0.001%-er) post $0 income tax. For one, it's disadvantageous for certain kinds of bank interactions. But also, capital calls come in, investments that are made often require a step-up in basis, leverage is taken out on assets that require a margin call or a sale, there are alternative tax regimes, the corporations that are owned by these parties have their own tax burdens..
To say the wealthy can afford to radically optimize taxes and that our system taxes capital much more lightly than labor seems accurate to me, but I just haven't seen offers for "pay zero tax for all your life" from high grade professionals.
If US citizens want that, they generally give up their citizenship, pay their exit tax, and live in a low tax jurisdiction. I do know people like this, and they are very unlike the 0.1% types you're referring to here, and they've given up the benefits of being a US citizen in exchange for their preferred lifestyle. (And paid a mark to market exit tax on all assets on their way out of the country)
ceejayoz 18 hours ago [-]
> I'd be really surprised to see a 0.1%-er (or 0.001%-er) post $0 income tax.
> Consider Bezos’ 2007, one of the years he paid zero in federal income taxes. Amazon’s stock more than doubled. Bezos’ fortune leapt $3.8 billion, according to Forbes, whose wealth estimates are widely cited. How did a person enjoying that sort of wealth explosion end up paying no income tax?
Or the President (now permanently immune from audit, incidentally):
> He had paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made.
arh5451 18 hours ago [-]
Yeah and he lost money for a decade or more. Blame the system that you can loss harvest. Or call it fair that we don’t penalise business for having bad years.
vessenes 18 hours ago [-]
This. The paragraph might have backed up and said "Bezos, after sustaining over 95% capital losses in the prior decade,.."
ceejayoz 18 hours ago [-]
> Yeah and he lost money for a decade or more.
On paper, I'm sure. Let's not pretend that's reality.
flyingcircus3 18 hours ago [-]
According to Google, this claim is sourced to a person rather famous for baseless claims, from the founding of companies he owns, to the capabilities of his products, to cash prizes for registering to vote, to when he will send humans to mars.
Continuing to accept this person as a credible source of information isnt a reasonable thing to do.
HWR_14 18 hours ago [-]
There's not an easy source for that information, especially not inflation adjusted. Who do you think the answer is?
ceejayoz 19 hours ago [-]
Musk paid $11B in a year his wealth went up $86B on his way to likely being the first trillionaire. Are we supposed to cry about it?
The median net worth in the US is ~$200k. A lot of middle-class folks have likely paid more taxes in their lifetime than their entire net worth.
19 hours ago [-]
vessenes 19 hours ago [-]
Nope. Just not post things like "billionaires pay no taxes."
ceejayoz 18 hours ago [-]
They don't pay zero tax, for sure.
But they certainly get clever about techniques to keep it as low as possible, for shockingly low effective tax rates.
I have some quibbles about the ProPublica definitions -- for instance market liquidity matters when calculating public company stock wealth -- and even if you're going to borrow against it, there are additional costs and pledges that must be made that significantly reduce the available capital.
The propublica number was like 4.5% or so if I recall, and does not count the taxes paid by the companies these people owned, nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds, nor does it reduce for effective wealth, nor does it reduce for unutilized wealth, e.g. if the stock price goes up and you don't sell or borrow against it, have you received benefit that makes sense to tax?
But if you net all those out and told me the effective rate was 12-15% on utilized capital, I wouldn't be surprised. I would be really surprised if it was $0 though.
ceejayoz 18 hours ago [-]
> does not count the taxes paid by the companies these people owned
Why should they? Should I get to count the taxes paid by my local water treatment plant workers because I shit in the toilet?
> nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds
They get taxed on that!
vessenes 18 hours ago [-]
> They get taxed on that!
The funds don't get taxed on unrealized gains. Nor do the pensioners. They do get taxed on spendable income they get out of the fund's investments, just like the other owners of the company.
> [Should we look at the benefits to society of corporations paying taxes?]
I think so.
john_strinlai 18 hours ago [-]
if you havent noticed yet, you are talking with someone who owns a private equity fund and, apparently, has "lost more than $1bn twice".
in other words, you are talking to someone in the stupid-wealthy class. you are not going to convince them of anything -- especially not that billionaires should pay more.
its like trying to convince Jon Moore (Phillip Morris USA CEO) that cigarettes should be banned.
jmcmaster 18 hours ago [-]
The only reason he paid $11B that year was because he exercised Tesla options. Many other years his tax bill has ranged from zero to millions.
blanched 18 hours ago [-]
What did he pay in previous years? To borrow a phrase, I’ll wait while you google it.
Salgat 19 hours ago [-]
As a percentage of their income? Because that's the only number I care about. You don't get to hoard wealth off the backs of tens of thousands of workers and then act like paying a smaller percentage is some good deed being done. The more one benefits from society (and billionaires depend most on the financial security and infrastructure setup by society), the more one needs to pay back into the system they gained their wealth from.
philipallstar 19 hours ago [-]
This seems like such a poor understanding of reality. If you want to rank order people who contribute net taxes, you would put billionaires at the top, as they not only pay taxes themselves, but their businesses pay taxes, and their employees pay taxes, and their customers potentially pay taxes (VAT) as well.
The bottom of the list would be anyone who works for the state, as they are a massive net tax negative, followed by benefits recipients and pensioners, followed by low income workers, followed finally by the middle classes.
Are you sure you want that to be your guiding principle?
blanched 19 hours ago [-]
In what reality does a business owner get to claim their customers’ taxes as their own contribution?
17 hours ago [-]
nullc 10 hours ago [-]
Parent poster was being a bit grandiose, but there is at least something in the idea that if your company produces a product that I make myself economical prosperous with... some credit for the taxes I pay is owed to you.
ceejayoz 19 hours ago [-]
Do you think employees and "customers" of the government don't pay tax?
wat10000 19 hours ago [-]
Get rid of the employees and the taxes no longer get paid.
Get rid of the billionaire and the taxes still get paid.
Why do we credit those taxes to the billionaire rather than the employees?
blitzar 19 hours ago [-]
[flagged]
Supermancho 19 hours ago [-]
The post goes out of it's way to mischaracterize the strategy (and purpose) of wealth taxes being proposed.
> Each 1% of wealth tax is equivalent to 20% of income tax.
Mathematically sound.
> Politicians understand that an additional 20% income tax would be a lot. And indeed a US state that added 20% to its top income tax rate would have extraordinarily high taxes.
That's the point.
> In the median case, US state politicians talking about adding a "mere 1%" wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.
Not "all of the residents". Specifically the ultra wealthy that have a billion dollars. 20% at that point, is 20% of lots. You still have lots left over.
Mathematical fairness isn't the point, which is one reason there isn't a flat tax rate.
superfrank 17 hours ago [-]
> > Each 1% of wealth tax is equivalent to 20% of income tax.
> Mathematically sound.
Don't most wealth taxes that have been proposed have a certain level of wealth that you pay no taxes on? If so, doesn't that make this at least partially incorrect?
Maybe I'm missing something, but if I have $100 and have to pay a 1% wealth tax on it then sure that's roughly 20%. If I have $100, but I only have to pay a 1% wealth tax on everything over $90 that's more like a 2% income tax.
arh5451 18 hours ago [-]
I live in Switzerland. All residents are assessed a wealth tax. It would not be just the top x%. Wealth taxes are a bad idea tried in Europe and then later repealed.
haizhung 17 hours ago [-]
Famously, Switzerland is a socialist failed state where no one wants to live, of course.
vessenes 19 hours ago [-]
Please make higher quality posts -- what in specific do you think pg has missed or does not understand?
blitzar 18 hours ago [-]
If he can phone it in why cant I? His entire framing.
Income (or revenue), what is left over freom the paycheque (profits) and net worth (market cap) - applying a simple ratio to companies of revenue to market cap doesnt work, why would applying a simple ratio of income to net worth for people who live hand to mouth and billionaires work any better.
vessenes 18 hours ago [-]
I think you may have missed the background: US tax rhetoric -- he's doing what I think is pretty fair math with a fair take -- the math is supposed to break down what percent income tax you need to get the same dollars in tax revenue as a 1% wealth tax (on the wealthy). I think you could quibble with his risk free rate of return number, but most conservative planners would recommend a 4 - 5 % budget for risk free rate of return.
It's not about companies - it's about showing an equivalency between a Piketty-style tax of wealth setup and what we're used to thinking about in the US, an income-style tax setup on individuals.
Galanwe 15 hours ago [-]
Hahaha this is so bogus.
Americans really struggle to understand how tax work outside of their country.
First, the whole premise of income to wealth tax equivalence is non sensical, because interests are rarely literally in the form of coupons/payments, but rather left as compounding value. This is the whole point of share buybacks, reinvested ETFs, etc; and Paul Graham knows that of course. If you are rich, you don't need the cash of your investments, so you don't want to trigger taxable events, so you are effectively at 0% tax rate and just let it compound.
> Currently the country with the highest marginal income tax rate is Denmark, at 60.5%
This is the most BS statement ever, and would only be believable to Americans with no understanding of how foreign country do taxes. Which is at best very naive of him, or highly disingenuous. This is because "tax" in the US is essentially employee paid, whereas most other countries split the bill between employer and employee at a higher proportion. The result is the same, but the employee part only is labeled "tax", the employer part being often called "contribution".
When comparing across countries, you have to look at the tax wedge (super gross to net), not the tax rate (gross to net).
And if you do that, well the US has a lower tax wedge than even the most generous European countries (Ireland).
In France for instance, the tax wedge is close to 70% for the higher bracket. Yes, that means if your employer pays $100, you get $30. And that's in a country with 20% VAT compared to US ~8%.
Not to mention, except super rich little little business-hub countries (Hong Kong, Singapore, Ireland, Malta, Cayman Islands, etc), pretty much all _developed_ countries have some form of wealth tax, it's just common sense.
ajjenkins 19 hours ago [-]
This is wrong. You can’t convert between the two because it’s possible to have a lot of wealth with very little (even zero) income. Billionaires can completely avoid income taxes by paying themselves a very low salary and instead borrowing money against their assets (usually stock), which is not taxed as income.
Source: The Second Estate by Ray Madoff (2025)
ineptech 15 hours ago [-]
Always a pleasure to hear capital explain to labor why taxing capital is bad, but this seems like a giant red herring. I don't want a wealth tax so I can cut my income tax, I want a wealth tax to address inequality. Our existing policies have produced a very bad bad outcome - wealth inequality exceeding that of pre-Industrial England led by a small, essentially randomly-selected group of people so wealthy that they effectively run everything who have entirely captured a corrupt government and are very close to making the situation permanent - and a wealth tax is the only policy idea I know of with any chance of changing that.
That is not illuminating at all. Like, the author just imagines the premise and finds three ways to repeat it. There is no exploration into why people think inequality is unfair; the underlying assumption is that it is perfectly natural and trying to address it is hypocritical and harmful.
The other major assumption is that billionaires are rich because of something they did or are good at doing, better than anyone else could in their position. There is no challenge to this assumption in the text.
This belies a deep disconnect with reality, and an unwillingness to confront the idea that maybe excessive inequality is caused by too much concentrated power changing the rules to further concentrate power. Taxation is just one mechanism to combat this tendency; another way is the guillotine.
keybored 19 hours ago [-]
> If you want to understand why someone would even propose taking from the rich and complain about inequality,
Because they want to take back what was taken from them.
meta_gunslinger 19 hours ago [-]
Why is that the case?
keybored 28 minutes ago [-]
Trivially follows from the premise.
18 hours ago [-]
idle_zealot 18 hours ago [-]
I think your blog post is confused. People on the left are pro-taxation because they (a) think billionaires do not have superpowers, and are benefiting from some combination of systemic injustices and plain old fraud gussied up for the modern era, and (b) think superheroes actually shouldn't be allowed to have 1,000,000 times the influence over the structure of the world and its economy compared to a mundane human, even if they existed.
There isn't a level of competence or ability that shifts the answer to the morality of power. There's not an earning threshold you can cross that entitles you to own a fiefdom or a level of genius that grants you moral right to dictate how others use your inventions. We create democracy and grant everyone an equal vote in matters that impact their lives. The economy gets layered on top to allocate resources efficiently. If the economy is deciding that some people live like kings and some like serfs, then we've failed to construct an economy that lives up to liberal values.
boomskats 18 hours ago [-]
Wow, what a piece of text. Just, wow. Our poor billionaires and their tasty, tasty boots.
wat10000 19 hours ago [-]
I can't speak for others, but this doesn't match my thinking at all.
I want to heavily tax the ultra rich because money is power, and vast inequality in power is undemocratic and just plain dangerous.
I don't really care if somebody buys ten massive yachts. It's annoying and seems wasteful but it's not worth too much of my attention.
But it's another matter if somebody buys politicians, laws, social change. The issue with someone like Elon Musk isn't that he owns a private jet, or even that he owns a rocket company, it's that he bought his way to taking an axe to major parts of our government by pouring unimaginable amounts of money into buying a presidential election.
It's not about grabbing stuff, it's about preventing people from accumulating too much power. The ultra-wealthy should be heavily taxed for the same reason the President shouldn't be given unlimited power to do whatever they want.
meta_gunslinger 19 hours ago [-]
Easily solved, remove the power centers and then the billionaires will have no power to buy or influence with their money.
ceejayoz 18 hours ago [-]
Define "easily" for us, please.
meta_gunslinger 18 hours ago [-]
Don't hand over power to politicians, bureaucrats and NGOs. It's not rocket science to need further explanation.
blanched 18 hours ago [-]
Politicians, by definition, have power. How do you easily remove or withhold it?
meta_gunslinger 18 hours ago [-]
It's the degree of power they hold, not a binary. A politican in Switzerland has much less power than a politician in China.
When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power. But when it is e.g printing money the calculus is massively different.
ceejayoz 18 hours ago [-]
> When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power.
I take it you've never encountered a homeowner's association.
ceejayoz 18 hours ago [-]
I thought you said it was easy?
mrguyorama 16 hours ago [-]
There's no such thing as "Power centers".
Money is that power.
You cannot have billionaires and them not be immensely, structurally powerful.
That's the entire point of capitalism, that resources, including labor, be directed by those with capital.
Believing you can have a single human being in control of a non-negligible percentage of all resources of a country, and they wont somehow be actually powerful or influential is moronic.
Taking the power away from billionaires literally IS taking their money.
meta_gunslinger 15 hours ago [-]
“Money is that power.”
That’s the stupidest thing I’ve ever read. Power is power. Members of the Communist Party in the USSR were as wealthy as their subjects, their power differential was enormous.
wat10000 15 hours ago [-]
Not all power is money, but money is power.
wat10000 18 hours ago [-]
I know, that's why I want to tax them, to remove their power.
Of course, you probably mean to remove their power centers without removing their money. But that doesn't make any sense. Money is power. You can't remove the power from a billionaire and leave them a billionaire.
idle_zealot 18 hours ago [-]
"Don't want to be ruled by billionaires, peasants? Have you tried dismantling your government so they can't buy it? That will surely save you."
meta_gunslinger 15 hours ago [-]
Isn’t that what Anarchists and Marxists peddle to the peasants?
idle_zealot 15 hours ago [-]
A Marxist peddles restructuring of the government to better represent the people. Notable attempts at that replaced existing governments with autocracies that promptly killed the Marxists and Anarchists among them, which is not what you were talking about, I don't think. What kind of revolutionary wants only to tear down their government and not replace it? Anarcho-primitivists, I guess?
GuinansEyebrows 19 hours ago [-]
this is some of the most insipid dreck i've read in a long time. the only thing illuminated here is the author's complete lack of understanding regarding ability and worth and total inability to think beyond a system imposed upon him by others. i think the kids would say he's "billionaire glazing".
scottious 18 hours ago [-]
The vibe I get is that he's saying "you poors are just jealous of the billionaires who are smarter and richer than you, so you want to take it away from them"
The comparison to _literal super heroes_ from comic books definitely made me roll my eyes
My problem with billionaires is that their gains are in part from exploitation. I just don't believe that one person can actually produce billions of dollars of value all by themselves. They extract that value from other people and our whole system is structured to promote this.
There are probably millions people who could have been Mark Zuckerberg or Bill Gates or Elon Musk or whoever. A million people with the right skills who maybe were born a few years too late or didn't have the right connections or just didn't have rich enough parents. It's a little too "winner take all" for my taste. And then those few winners end up having disproportionate affect on politics and issues that affect us all. It's just not a great system.
cayley_graph 19 hours ago [-]
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.
There are certainly sometimes unusual abilities in a positive sense, but the common case likely falls closer to having an unusual degree of sociopathy. It is unclear to me how else one could view the state of perfectly solvable human suffering in the world and continue to prioritize accumulating wealth over all else, moreover and overwhelmingly at the cost of being party to the suffering itself. Indeed, I suspect having such callous disregard for your fellow person is prerequisite to encountering these unfathomable sums.
When people with an intact capacity for empathy come into huge amounts of money I think it's far more common to give a large proportion of it away (say, Jane Street workers have a culture of doing this). And thus you only stay 'comfortably' wealthy, rather than accumulating so much that it distorts society around your singular existence.
ceejayoz 19 hours ago [-]
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.
If you count luck, maybe.
> But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be just as eager to tax them to reduce unfair inequality?
Yes, I would.
> But if those few very rich folks had real physical super-powers, we would be a lot more afraid of their simple physical retaliation. They might be very effective at physically resisting our attempts to take their stuff.
Yes, and this is why a lot of superhero movies involve fighting the greedy superpowered villain.
blanched 19 hours ago [-]
Right, as presented, these people are closer to Lex Luthor than Superman.
And I would still want to tax Superman.
futter9 19 hours ago [-]
[flagged]
ceejayoz 19 hours ago [-]
> What motivates this?
An element of fairness.
> Why can't you just leave people be?
Because they're making employees piss in bottles to survive the workday? They're buying up the representatives who are supposed to represent me? They're driving services we rely on into austerity? They get bailouts when they fuck up?
This seems to only be true for people whose income entirely comes from their wealth, rather than their labor. The math doesn't math for someone on the other extreme end of the spectrum who has zero savings or investments and obtains all his income from labor: To him, a N% wealth tax = 0% income tax for all N. Those with -some- savings are somewhere in the middle.
It is a very sneaky way to argue that a wealth tax should be as across-the-board unpopular as a large income tax increase. But Graham's math is only applicable to those flush with investments and with relatively small salaries from labor, so a wealth tax is only unpopular to that particular group.
People love to talk about the marginal tax rates but not the average tax rates. And I think that’s right because the conversation should be focused on the wealthiest people.
That's an irrelevant diversion though, because the measure that matters when discussing the fairness of taxes is how much people are left with at the end after paying whatever taxes they pay, including sales tax, income tax, and any other kind of tax. And for those particular people you're talking about the answer is very little, next to none, and for the people for whom a wealth tax would even apply the answer is unimaginable amounts.
I'd say the fact that California remains the epicenter of tech despite its high taxes suggests concentration of talent matters far more than tax rates.
The government's monopoly on punitive violence isn't only intended for the peasantry...
> And for those particular people you're talking about the answer is very little, next to none...
So... where are the real resources coming from then? Because if these people aren't using them to support their living standards they must be doing something else. If we give one person enough money out of the tax pot to pay rent, that means the resources were redeployed from somewhere else that was about 1-rentworth of something.
Because I agree that the taxes aren't going to come out of the wealthy's living standards, but the implications of that in practice are not good.
Yes, and that "somewhere else" is others' excess profit.
That excess profit comes from (a) inventing or investing capital with a return or (b) paying less for goods / labor than they can be sold for.
Capitalist profit has always been equal parts ingenuity and fucking other people over, and as most often implemented makes no discrimination between the two.
The bargain by which this has traditionally been squared is "the person who made the profit gets to keep some of it" + "they pay the rest in taxes to support the society they're successful in and depend on."
Unfortunately over the years this has continually been eroded by capital's invasion into democracy, with the express purpose of neutering the latter part of that bargain.
Those who would be hit with a wealth tax are incensed by it precisely because it would be less avoidable than the myriad of loopholes that have been engineered into income taxes.
How else could it work? The poor don't have enough money to tax them. That's why they're poor. Schemes where the rich don't get taxed are systems that tend towards the 0% tax for everyone end of the spectrum.
(Social security and Medicare)
SS tax has a limit because benefits are also limited. It is a forced retirement plan where if you live long enough, you might get back what you paid in.
It could also be classified as an insurance premium, but a government mandating it is the key characteristic of a tax.
But the fact that the government reduces the annuity amount by increasing retirement age and benefit purchasing power means it is not insurance either. It is wealth redistribution from the working to the non working.
If you have a car, you need to pay car insurance. Is that also a tax?
The concept of insurance is independent of mandatory or not. That should be obvious, I wonder why it isn't to you. Maybe your ideology prohibits clear thinking and makes you vote Trump?
In the context of differentiating between wealth redistribution and insurance, insurance does not redistribute wealth, insurance redistributes risk since underwriting in a competitive marketplace ensures you only a premium commensurate to your risks.
For example, the government mandates only liability insurance up to $x, for which the premium for the same coverage can be vastly different depending on each person's driving history. While this can be considered a tax because the government mandates it, one can see how this is not wealth redistribution since the "tax" being paid is at least partly dependent on one's risk profile.
Contrast this with a government mandated defined benefit pension contribution equal to a percentage of one's earned income, with a known fact that one's contributions will reflect their benefit less and less as the years go on. That is far more "wealth redistribution" than "insurance".
Another example is in the US, health insurance premiums are more tax than an actuarially calculated premium based on health risk. This is because health insurers are not allowed to price health insurance based on health risks. It is explicitly a redistribution of wealth from the young and healthy to the old and sick, due to the maximum age rating factor and inability to underwrite based on pre-existing health conditions.
If you're talking about property taxes, then renters pay that as well through their rent (which passes through the landlord before getting to the city/county).
* https://realestatemagazine.ca/do-residential-tenants-pay-pro...
And is some (many?) cases higher rates than owners:
* https://www.renx.ca/renters-often-pay-higher-municipal-taxes...
I consider this fine, because proponents of a wealth tax consistently omit that it will ultimately be the middle class who pays the tax... the ultra-wealthy and wealthy can afford sophisticated strategies to render a wealth tax ineffective against them, and if that doesn't work they can just move somewhere else. Income tax was the same.
Some of the mechanisms are loopholes, that might be closed l. But many start to interact with international business regulations that exist for considered reasons, and are harder to change even if it is serving as a loophole.
You end up with only the small wealth (one lifetime as a skilled professional) group getting caught
Nobody needs these billionaires; we can create new billionaires and new products. They think they bring some sort of ultra speciality but in reality they are doing something millions want to do and their monopolistic success is preventing others from succeeding; knocking these giants down makes rooms for new businesses and products. This is the entire thrust of a capitalistic economy.
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 off when Russian oligarch parked their money in London in early 2000s? And likewise - was the average Londoner worse off when that money was frozen in Jan 2022 when Ukrainian war started? Not really…
Many other businesses that are not large enough to interest the newspaper are moving out as well.
What the politicians will do with these taxes does not matter to me. The only thing I dispute is this sense of doom because, of my god, Bill Gates and Andy Jassy and Howard Schultz and Ballmer will pick up their toys and leave.
Brilliant.
Just look at Oregon for example. It’s a lot like WA state but without the billionaires. And it is a really nice place to live. If WA state ends up like Oregon I won’t mind.
With this framing, the wealth tax isn’t a new tax; it is only prepaying the capital gains tax instead of allowing it to be deferred forever.
It already exists in the form of property taxes, which are quite unpopular.
For an unpopular tax, the property tax is remarkably ubiquitous. Are there really any popular taxes?
So I spend 30 minutes to set up an LLC and then transfer my assets to that LLC. Now, I don't hold the assets; I hold a stake in a privately-held company.
Ultimately, the solution you come up with needs to be at least somewhat airtight; otherwise, it just penalizes people who spend less money on tax advisors. The generation of income is a fairly well-defined point where assets change hands and you can apply some quasi-clear rules. Ongoing taxes on the potential to make money are a lot harder. So I buy some gold bars or valuable paintings and stash them in the attic. Gold / Picasso appreciates. How do you tax me on that? Do I submit an inventory of everything I own to the government every year? How does the government check - do they get to rifle through my stuff every December?
And hey, here's a cool one: if my parent owns a company and puts it in their will that it's mine when they die, is that promise an asset I owe taxes on every year? It's clearly worth something: it's potential money down the line.
Beneficial ownership is a well established concept in law, and this strategy simply would not work. If those assets are easily valued and liquid (stocks or whatever) then the taxes will just end up being passed through as the entity won’t be relevant for tax purposes. Sure you could try to hide assets or offshore them or whatever but you’d be running headlong into outright tax fraud at that point.
You would probably instead see less new public companies, more companies/divisions being sold to various groups under opaque structures and taken private, and a lot more weird borderline legal transactions done between private parties to pretend valuation of private companies or other assets are lower than reality.
> Gold / Picasso appreciates. How do you tax me on that? Do I submit an inventory of everything I own to the government every year? How does the government check - do they get to rifle through my stuff every December?
Yes, of course you would owe taxes on such things assuming they were over whatever exemption limits and such. The government can’t realistically check everyone. They just throw the more obvious offenders in prison when found and keep enough background “random audits” to keep folks scared enough into compliance.
And obviously the government has been making “hiding” such assets harder every year with the ratcheting up of KYC/AML laws. Over time you’d see these requirements for pretty much every major on/offramp for such assets like gold bullion dealers, coin shops, or auctions. A lot already are required to verify your identity and even report transactions. There is no more showing up to a car dealer and paying for a new car with a duffel bag full of cash, much less anonymously. Such a transaction is reported and you’d see this simply expand.
Property taxes exist at least in part because the asset is impossible to hide and more difficult than most to play games with valuation.
> And hey, here's a cool one: if my parent owns a company and puts it in their will that it's mine when they die, is that promise an asset I owe taxes on every year? It's clearly worth something: it's potential money down the line.
Presumably your parents would already be paying the wealth taxes owed on the asset in question. That someone might loan you money against a future inheritance seems immaterial but perhaps I’m missing something here?
Let’s do the bog-standard obvious and sane thing and pick a single point in time, once a year and use the value then. Maybe, i don’t know, close of market on the last trading day of the year. At which point it won’t fluctuate again until the new tax year. Then, we can call it “mark to market” because we’re marking the value to the market at a point in time.
Finally, we stop with silly bad faith arguments because fluctuations in stock have been successful taxed for decades. This is how day-traders pay taxes, and it’s not even a little challenging to do.
You're wealthy, or the definition will change to include you. The spice must flow.
that doesn't make a whole lot of sense, for two reasons. For one, as even Paul points out in the piece, a wealth tax below what's practically a risk free return on capital (~5%) doesn't eat into the capital stock, it simply means wealth grows slower, but still increases.
Secondly, there's no monotonous historical direction towards higher wealth taxes, in fact the opposite. We're living in an age of low wealth taxation, with only half a dozen countries or so, if I'm not mistaken, imposing one at all.
But what does this mean? If you have a load of money in some companies, that's helping to fund their activities, and the companies' share price goes up a bit, you haven't gained any money. And you won't gain any until you sell some shares, which is already taxed.
Assets are used as collateral for loans that don’t require any repayment until death. Generally the borrower can borrow up to 75% of their collateralized asset, and that loan is not taxed. When they die the assets are passed to heirs and stepped up to their current value as the new cost basis. They’re sold to repay the loan and interest. No taxes paid on the loan “income”, no taxes paid on the capital gains, 3-5% interest paid for the outstanding balance of the loan and I’m sure some of that gets taxed. Because the collateralized asset stays invested the entire time, it usually grows faster than the interest that will eventually be paid.
If they don't have money then they can't buy elections and aren't insulated from the consequences of their actions.
[1] Note: I don't really think we should literally take all their money. Just enough to reduce some of the power imbalance.
But any real wealth tax is going to have exemptions, only apply to wealth above some threshold, and for the wealthy who structure their finances so as to have little or no taxable income, well they end up paying 20% like all the rest of us do.
It's not. That calculation would say that if you have $1000 of wealth and $5 of income your effective tax rate is 220%. It's bad math.
Your conventional income is taxed separately.
A wealth tax sort of stacks with capital gains, but capital gains is way too low anyway.
($1,000 * 1%) + ($5 * 20%) = $11 tax due on $5 income. They are separate taxes but he's expressing them both in terms of an effective income tax rate.
In this case, since you owe more taxes than income you've earned, you'll need to sell off some of your wealth to pay up.
If you have no income at all, but do have wealth, then you get a division by zero error so I do get that it's maybe absurd to frame it this way, but the premise of TFA was "how to convert between a wealth tax and an income tax" and the context is a presumed 5% return on capital.
If that $5 of ""income"" is actually capital gains, then it won't be taxed very highly, and adding another 20% is fine. The discussion of 37% + 4.5% + 20% is misdirection.
If that $5 is honest to goodness income, then on average you're also getting $5 of unrealized capital gains, which means you're not paying $2 on $5, you're paying $2 on $10. Or maybe you realize part of the gains and you're paying somewhere between $2 and $3 on $10. A much smaller impact, and that's only if someone in a medium tax bracket with 20x their income in wealth is even affected by the wealth tax at all.
Graham gets this totally wrong, adding the 20% to 37%+4.75%, which are rates applicable to labor income (and short term capital gains, but those are very rare among the most wealthy Americans). That is such a major error it is hard to take any of the argument seriously.
Edit: Updated account for short term gains.
Having your house get ‘too expensive to live in’, in fact, is a classic issue with property taxes, and was happening in California - which is exactly why prop 13 happened. And most of those locations the maximum tax is around 1-3%!
‘Wealth’ is not the same as income, because wealth is potential money, if you can sell - and if you sell, you lose access to it.
A 20% wealth tax would mean any asset which doesn’t earning free cash flow returns of at least 20% a year, or which isn’t appreciating at least 20% a year in a risk free way would be impossible to hold for anyone except the most rich people. And even they couldn’t do it for long.
I can’t think of anything which that realistically describes.
A 20% income tax reduces actual cash in hand to 80% of what you’d otherwise have, which isn’t great. But you still get the actual 80% cash in hand right now, and can use it.
You can’t have ‘80% control/ownership for the year’ of a house in a meaningful way, and especially for people actually using/relying on the asset to live, they can’t find 20% (or in most cases even 5%!) of the value in cash for the asset every year. They’d go bankrupt.
I think there's no reason why a wealth tax can't be progressive. Just making up numbers here, it could be zero for your first 30 million, and rise to some palpable amount for your first billion.
This would protect granny from being taxed out of her house, and in fact would affect relatively few salary earners.
I'm not overlooking the possibility that such a tax structure could create an effective wealth cap at some level.
The problem in California is that it's very hard to change laws. Likewise in my state, where many aspects of the tax system are constrained by the state constitution.
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.
Personally, I see a big benefit of a wealth tax being lowering wealth inequality; even if the money isn't actually used for anything useful. That would at least help prevent the ultra wealthy from being able to unilaterally ruin society.
Labour is what actually creates value in society, let's tax it less and ownership more.
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 supposed to pay that in cash?
How does this even really work? He could try to sell $200 million in stock, I suppose (if that's even legal according to the SEC, though that stuff could be loosened up), 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"?
What if instead, he just gives 20% of the shares to the government, and they get to sell them, would that count? They wouldn't even have to sell them... the government could become the shareholder, until it controlled every corporation out there. The grift and graft would be massive, nothing to go wrong there. CEOs and other top positions basically appointed by whoever gets to be on the Congressional committee. The Democrats no doubt are certain they'll be in control of it, but then they'll be hysterical when it turns out they miscalculated. Could be fun to watch while eating popcorn, at least until there is no more popcorn left because the corporation that distributed popcorn melted down.
Wealth taxes are the domain of angsty teenage marxists and other retarded children.
How much does a wealth tax collect in the US, does anyone know? Does anyone care? Is it that they've identified a need for the government have revenue and devised a fair way of having the entire nation pay for that need, or are they just hoping it will be confiscatory in the most punitive way possible?
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 million now, and the money he owes drops to $60 million.
Though I don't see why it would tank that much.
Also normal people and the mildly rich and retirement funds and many other big sources of ownership wouldn't be taxed, so I don't see prices actually crashing.
Repeatedly pushing the "destroy the world economy" multiple times per day is most likely not going to be a "one-time thing". But who knows... maybe you're right and economics doesn't work like it has been documented to work by the world's experts for the last 100 years or so.
Especially because every push shrinks the number of people affected by the button.
Valuation hasn’t been tied or related to earnings for top stocks in at least a decade.
It isn’t ’wealth redistribution’.
Removing half or more of market demand isn’t going to be pretty.
Using a wealth tax to nationalize corporations sounds like exactly what we should be doing.
You want Trump and company in charge of it all? Or are we finally back to "the next time Democrats win it will be forever!" wishful thinking? I mean, even if you want to nationalize everything, it's as if you dreamt up the worst possible way to go about doing that so that they've cratered first and started hemorrhaging all their talent in the leadup.
We need a wealth tax, ONLY public financing of elections (no PAC money, no "I'm a billionaire so I can spend as much as I want on myself"), and many other reforms. Nationalizing critical industries and sectors is also something we should be pursuing.
To me, that would seem extremely difficult for Congress to pass a law restricting individual speech in this particular way that would pass First Amendment muster, and I don’t think we should be at “let’s just set aside the Constitution when it clearly says something we don’t like” because I don’t think that ends well in today’s political climate (or any other, but it’s especially bad now).
And if you think anything's going to change in November, you're going to be really disappointed.
If grandma has $50M in her house and pension, she can afford to pay a tiny tiny tiny fraction of her wealth to make sure her grandkids still have a place to live that's not falling apart.
Thank god no one is talking about this, then. According to Graham, a 20% wealth tax is equivalent to a 400% income tax.
It is clearly the case if you try to apply the income tax rate as a wealth tax using concrete real world examples.
Even a 3% property tax makes it very difficult for many normal people to own those assets in many real world economic circumstances.
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.
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.
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.
The higher the rate, the harder it will be to do.
At some point, only speculators with deep pockets and the desperate with enough cash flow could do it.
Please read before making replies that don't make sense in context. When I refer to 20% I'm referring the PG's characterization of a 1% wealth tax as an effective 20% income tax, not a 20% wealth tax.
A wealth tax of 1% is equivalent to an income tax of 20% on capital gains.
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 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 by the donor until the new one has all the assets, or any of a hundred other things.
If you try to do a wealth tax then their assets end up in another country under whatever arrangement is necessary to give them de facto control but not formal ownership.
The best way to solve the "buy, borrow, die" thing is actually a consumption tax because then borrowing money in order to spend it doesn't avoid the tax.
There are lots of apartments available with no credit check. They're more often of lower quality, but if your situation is such that you want to spend less on rent and have more left for something else (like paying off your debts), why is it a problem for people to be able to choose that?
It's the status quo that screws them, because the government often pays out $1000/month or more in housing assistance but it's required to go directly to the landlord, and then if you have money problems but could live with family or are willing to take in a crappy low-rent studio apartment for a while, you can't take that money and use it to fix your situation instead because if you tried to do that the government takes it away.
> 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?).
Isn't this the opposite? If you give them a UBI then they can buy whatever they want. If you give them paternalistic micromanaged benefits like SNAP then they can buy carbonated high fructose corn syrup in a can but not vitamins or farming supplies.
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 going to shift to something else. Consumption taxes give billionaires the option to drastically reduce their tax burden by consuming less. The lifestyle of someone with a $20 million net worth is not that much worse than someone with a $2 billion net worth.
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 of air travel.
> Consumption taxes give billionaires the option to drastically reduce their tax burden by consuming less.
Isn't that what we want? An incentive for the money to go to creating jobs or charitable donations rather than private jets and third mansions?
Getting from that to where they at least pay the same taxes as anyone else on the money they actually spend would be a marked improvement.
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 mechanism.
Consumption taxes are regressive: a sales tax is a flat tax that taxes a billion on their $10 latte the same as a poor person. Consumption also doesn't scale linearly with wealth: most billionaires don't consume 1000x as much as a millionaire.
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 the country in which "profit" is earned in an international supply chain, or value non-fungible assets not undergoing transactions, are easy to game. "You pay a given percentage when you buy something" is hard to game.
> Consumption taxes are regressive: a sales tax is a flat tax that taxes a billion on their $10 latte the same as a poor person.
The existing "progressive" income tax and benefits programs do worse than that: 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.
> Consumption also doesn't scale linearly with wealth: most billionaires don't consume 1000x as much as a millionaire.
Only if you're looking for it in the wrong place. A billionaire isn't going to buy a billion dollars in lattes, they're going to invest in some business ventures, which in turn are going to spend the money on equipment and vehicles and utilities and so on, i.e. consumption. You don't get a return on capital by sticking it in a mattress, you get a return by spending it to build or operate something.
You croak, your heirs become the beneficiaries of the trust. Rinse, repeat.
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 admin) only morons pay estate taxes : https://www.cnbc.com/2017/08/29/only-morons-pay-the-estate-t...
IIRC this is part of how they avoid taxes in general. Penalties don't hurt enough for the ones who do eventually face them.
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.
curious how they came to that number. There's probably plenty of voters willing to cast a vote for $0.5M+ and plenty ready to cast a vote for $100M+. How was the line drawn?
"The top 1%" is a popular target for these schemes because 99% of people might be convinced to support it, since it won't affect them (at least not directly).
[1] https://www.investopedia.com/financial-edge/1212/average-net...
I think your assumptions are off, though; less wealthy people might not be "forced" into investment at all, but given the "opportunity" to pay off debt or increase/diversify consumption. In the end, the important part is the wealth transfer downward, wherever it ends up. No trickle, but you can pump it.
Arguably, there’s a disconnect where the people who lead civic organizations don’t have a great deal in common with the median member. They might be wealthier and generally more plugged in to power structures. They might not support policies that are in the best interest of members they represent, especially people who have a hard time representing themselves.
Anyway, if your goal is to get a policy enacted, it’s not enough for your policy to be theoretically good for the median voter. You need a winning political coalition.
I don't think people with savings of $15mil and above (assuming that would be the cutoff) are in danger of going bankrupt in 20 yrs from a 1% wealth tax. Assuming your 3% return, they'd be earning $450,000 a year that wouldn't be touched by the wealth tax.
Obviously people who have retired and based their entire life plan on making that work have many fewer options than those who are still working. You are arguing that nobody can plan for any kind of secure retirement, including you.
Having progressive tax rate might be a better way to discuss, instead of blaming whole points.
Productivity comes from labor AND assets though. You need the farmer and the tractor. Why would we create a tax system that encourages people to divorce themselves from having a stake in the means of production?
This is exactly why economic models broadly show that taxing capital assets makes workers worse off in the long run. An abundance of capital means that workers will be more productive on the margin, so their wage will be higher. This extends to the capital-income taxation involved in income taxes: pure labor taxes or consumption taxes are inherently more efficient. There are countervailing effects (taxing capital income works as an effective way of indirectly taxing the unearned value of resource-like assets, or of idiosyncratic skills that happen to correlate with holding more capital-like assets) but they can only roughly justify the current income tax arrangement, not some extra tax on assets.
https://wtfhappenedin1971.com/
Oops!
You deride the weak justification for trickle down economics, then proceed to link wtfhappenedin1971.com, a site that tries to argue for the reintroduction of the gold standard through a gish-gallop of random charts?
I'm not perfectly aligned with gold bug politics. Their faith in the Kindleberger world is misplaced and their tax aversion can make them useful to my opponents, but at the same time they tend to take the Cantillon Pump and Balance of Payments mechanisms seriously while my traditional allies do not.
No, I don't mind borrowing their charts. Why? Do you have a better go-to link for The Wedge?
It's not. The (in)famous epi.org is flawed for all sorts of reasons, from excluding noproduction/supervisory workers (the highest compensated ones!), to excluding non-wage compensation (eg. benefits), to different deflators for compensation vs productivity. If you adjust for all of that, the chart is unremarkable.
https://www.piie.com/blogs/realtime-economic-issues-watch/gr...
That incidentally, is the exact problem with the site. It presents a barrage of charts, without regard to relevance or rigor, and tries to persuade through sheer volume alone. Yet, if you scrutinize any of them, it quickly falls apart. That's probably why the site doesn't even bother justifying the charts, or even state the thesis, for that matter.
Nearly all good jobs are now concentrated in dense city cores, in the ever-dwindling set of large cities. This drives up the _cost_ of having these jobs. For example, the median ratio of rent to income is rising: https://www.moodyscre.com/insights/cre-trends/housing-afford...
And this "cost of work" is not only monetary but also psychological and physical (it takes longer to commute). You also don't get nearly the same amount of job security as your parents.
From the epi.org chart - it indeed misses that a lot of stuff is now cheaper. Clothes, electronics, toys and even appliances - they are so cheap that we now treat them as disposable!
As for "gish gallop," right back atcha: those billionaire-funded think tanks firehose a lot of nonsense into the economic discourse (and curricula!)
300 years of thinking has established that copyright is the best way to sustain ongoing creation of knowledge and thought, yet the same crowd seem pretty fine gutting that 300 years of understanding because of their judgement that their desired use case for today outweighs the cost to society of lost future knowledge creation, so they seem plenty happy to ignore established thought when it benefits them.
However, if your goal is to increase stakeholdership, how would a policy that explicitly disincentivizes that behavior fix anything?
In any case, taxes do not go into a black hole, no matter how much the right likes to encourage this self-serving fiction. Taxes generally get spent down the economic ladder and move people up the economic ladder, increasing their marginal propensity to save. People must have money if you want them to save money.
Even more concretely: reversing the policies which dissolved the middle class might reasonably be expected to restore the middle class, or at least slow their demise.
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
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?
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....
To whom are the selling? The buyers would be only those that can make efficient enough returns to offset this tax due to their existing systemic advantages, like economies of scale or regulatory lobbying. This would accelerate consolidation.
> 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
At this point I think there is ample evidence that policy in this country does not move forward without the consent of these so-called privileged stakeholders. If you take that as a given, why would you support handing these people an economic machine gun to point at your future self?
You don't need "systemic advantages" to earn more than 1% average annual return on your wealth. And strangely enough, not paying tax on their wealth accumulation whilst everyone else pays it on their earnings and trades doesn't reduce prospective buyers' advantages...
> At this point I think there is ample evidence that policy in this country does not move forward without the consent of these so-called privileged stakeholders. If you take that as a given, why would you support handing these people an economic machine gun to point at your future self?
Using pretty phrases like "economic machine guns" doesn't somehow make an argument of the form that wealth taxes somehow make wealthy people more powerful actually make sense.
Or people who aren't wealthy enough to have to pay it.
But nothing in the article implies that these wealth taxes apply to most people. The argument is that a 1% wealth tax is equivalent to a 20% income tax because, under certain assumptions, the government gets the same amount of money.
If that is what is being targeted, then why not actually target that. Apply some percent taxation on the current value of all assets transferred because of death. And, if they want, only apply it to estates over some X threshold in size.
Performing the taxation at time of probate makes the valuation easy (unlike a 'wealth tax') because the valuation could be one of "value at time of death" or "value at time of transfer". And, if the ultra wealthy are using this angle to avoid taxes, then this taxes some of that transferred value.
Of course, just like with subscriptions, to the politicians a yearly wealth tax is far more valuable than a one time tax on the total value of the estate.
That already exists. The rate is 40% of the asset value.
[0] https://www.sciencedirect.com/science/article/abs/pii/S00472...
"1 % of wealth-holders (above $14 million in 2022)"
1-2% of $14,000,000 is $140,000 to $280,000 a year. The median personal income is $45,140. They are benefiting untaxed to the tune of 3-6 times the median American income.
1-2% of 100 million is 1-2 million dollars a year untaxed benefit (44x median income). That is substantial. That their wealth is growing so fast that that is fairly small to them and makes the median American income seem small doesn't sell me.
How is an untaxed benefit of 3-44X the median income insignificant? I would love to benefit annually by that 'insignificant' amount. By this argument why should we not then exclude all economic income below $140,000 to $2,000,000 from taxation? Since it's 'insignificant'. Oh, right, because it's only insignificant in the context of 'they are so obscenely rich it's insignificant to them'.
Are you saying that billionaires are actually realizing capital gains to afford yachts, private jets, and mansions?
Here’s billionaire Tim Cook last month:
https://m.investing.com/news/insider-trading-news/apple-ceo-...
This is more of a fair comparable to reason about when comparing taxing wealth and taxing wages.
In nerd-speak, taxing the Derivative of Wealth is comparable to taxing Income.
You could argue that a fair comparison of wages and wealth would first subtract the minimum cost of living, so that wage tax is effectively a tax on the growing wealth of wage-earners. This would arguably be a fairer tax comparison - in both cases it is the derivative of wealth that is being taxed.
If a large portion of the populace spends all their income on basic food, rent and petrol then they have no chance of wealth increase, and perhaps should fairly be charged 30% of their $0 growth in annual wealth.
You can work for years at a startup at a depressed wage, then have a windfall that makes up for it on average.
That windfall (in California) will be taxed at a marginal rate of 52%. The only people that ever pay nearly that much are middle class. Some sort of time averaging would help.
Anyway, the US tax code is complicated. Personally, I’d prefer a flat tax with universal basic income. This could replace income, capital gains and inheritance taxes in their entirety. (Along with a lot of social services bureaucracy).
If we moved to a wealth tax I'd be the first in line to pay it. So long as everyone else had to pay it too.
California contains a lot of houses!
This is one of those “check your privilege” moments and one where it is best to look at the median and not just the average when talking about household wealth in the US. Between 57% and 67% of U.S. adults are estimated to live paycheck to paycheck. They aren’t saving it, they’re going into debt because the only local grocery store is a Dollar General and it’s just a clever name nowadays.
If so, the problem likely isn’t the paycheck.
For those who have little hope of the wealth tax applied to them (me for example), but as as someone who has investments and need them for retirement, I need to decide if this will affect bond prices or equity prices in a positive or negative way as their attractiveness will change in relative terms, or if publicly accessible funds will get devalued in favor of private investment opportunities and all public assets get devalued. Oh, wait, I am not wealthy, so I do not have the option of private equity, and cannot participate in what would be an attractive investment opportunity when investments shift towards more opaque assets.
For those that have zero assets, I do not think that a shift by the wealthy to private equity is a good thing, unless you want to work for a private equity company. A government job would be your best bet. And a shift to private equity would have a downward pressure on tax collections, so whatever projections for how much a wealth tax would generate, I am suspect.
A lot of people complain about private equity. This scourge was, to a small or large degree depending on your viewpoint, an unintended side effect of SOX compliance, meant to protect investors, and in the end narrowed down the amount of public companies, and created more opportunities/demand for PE. I think it is debatable how much protection investors actually received.
We live in a system, and making a fundamental change to one part of that system has effects on all parts. Raising the amount of taxes under the current system ? That is one thing. Introducing a whole new tax concept, difficult to predict. Especially if this is done by states, which could cause capital movements with their own unexpected consequences.
That can be quite a lot of people on HN, and also including FIRE people, so I can see why it's unpopular.
Illegal and legal immigrants are being completely supported by Uber right now in NYC. If you lived here you would know that this is their primary source of income for many of them.
The gate that previously blocked your ability to disseminate your ideas to a wide audience and create a living off of it has been completely torn down by the billionaires that create platforms like Tiktok. There are scores of people that have made a living off of this, which was virtually impossible before. The barrier to entry to start from grass roots and build a following and then monetize it has been erased.
It's completely banal at this point to just point at billionaires and say they are the problem just because of envy. I wish there was a plugin for it so I can erase it from my consumption.
The premise that billionaires are less efficient than the government at deploying capital to serve society is incongruent with reality, but sure, they are a convenient scapegoat if your heart is poisoned by envy and lack. That's really all it is and it needs to be called out more often because it's a mind virus that is easy to infect others with. Your life is not served by being clouded by envy and lack, and spreading it is detrimental to all consciousness.
There is objectively more paths to success than ever before. Being preoccupied with what you don't have currently and pointing the finger to blame at some boogeyman billionaire is not going to change anything for your personal life. The buck is on the person with the finger to improve their life and take advantage of the opportunities that are presented to them. Spending your time being mad that people have created something society deems worthwhile and are being rewarded for it is spending your time being envious about something that has nothing to do with your own problems.
A lot has changed in the U.S. in the last 20-40 years.
Also I'm not really convinced that the existence of individuals with over a billion dollars in wealth is a net positive for society or really anyone except that individual.
I think it's a bit ridiculous that these individuals feel the compulsion to min-max their capital at the expense of pursuits that could better be fueled by it, specifically for the collective good. I think it is shameful behavior and not something we should be promoting in society.
Shameful and obvious envy. You're not fooling anybody because your comments betray you
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.
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.
Who said that? Not in the post that prompted your reply, nor in the parent post.
> Illegal and legal immigrants are being completely supported by Uber right now in NYC.
Can you prove that taxis wouldn't have been able to do that, if Uber didn't exist? That wealth taxes wouldn't have been able to support them?
> The gate that previously blocked your ability to disseminate your ideas to a wide audience and create a living off of it has been completely torn down by the billionaires that create platforms
Musk is also erecting new gates, to promote himself and his ideas. I have to admit, I'm surprised what he lets stay up there, but I still don't believe it's an actual free platform.
> I wish there was a plugin for it so I can erase it from my consumption.
Vibecode it; the billionaires tore down the gates that previously blocked your ability to have any software you want -- as long as the billionaires accede to your use of their AI and running your own software against their platforms, of course.
You complain about open platforms filled with people giving you their ideas for free, and you just don't like what they're saying, but you just cited exactly that openness as one of the valuable things that billionaires deserve to have billions for.
> The premise that billionaires are less efficient than the government at deploying capital to serve society is incongruent with reality
Nobody said that, explicitly. Maybe the people arguing against billionaires don't believe capital efficiency is paramount, so you'd have to persuade them of that first, otherwise you're just saying "But capitalism is the right way, of course!"
Yes, because we only have to go back a few decades to see that the cab industry in NYC were being gatekept by medallions that people were paying 800k+ for just to have the opportunity to drive cab. That was not a system made by billionaires. That was a system made by the government and unions, which is exactly the system that you're fighting for.
> Musk is also erecting new gates, to promote himself and his ideas. I have to admit, I'm surprised what he lets stay up there, but I still don't believe it's an actual free platform.
It's more free and less friction than what we had before. The fact that you can't accept it despite the evidence in front of you and your own observations about being surprised is highlighting that you are failing to be objective.
> Vibecode it; the billionaires tore down the gates that previously blocked your ability to have any software you want -- as long as the billionaires accede to your use of their AI and running your own software against their platforms, of course.
Sure, another capability that billionaires unironically gave me. I do have other more interesting things to work towards.
> ou complain about open platforms filled with people giving you their ideas for free, and you just don't like what they're saying, but you just cited exactly that openness as one of the valuable things that billionaires deserve to have billions for.
Yes, and notice that I didn't say that they should be banned from the platform and their speech oppressed. I turned it around to make it about my own consumption. I have the free will. You're not arguing against me, you're proving my point.
> Maybe the people arguing against billionaires don't believe capital efficiency is paramount, so you'd have to persuade them of that first
Maybe we shouldn't assume the people without capital know what is paramount and what isn't when it comes to capital. It's hilarious to think there's some poor chap out there saying these people are being too efficient with capital and accumulating it while also believing that capital efficiency is not paramount. Hello? The problem you're pointing out is directly related to capital efficiency, yet you think the solution is to be capital inefficient. That has clearly not worked out for you or for anybody else in this society. We have countless examples where capital inefficiency has hurt us badly in this society.
Though I agree with many of your points, what I think the OP was gesturing at was the idea that billionaires are more avaricious than the average person; hence we shouldn't be surprised that Paul Graham is wary about paying an effective tax rate that would put him on par with majority of tax payers in this country.
This isn't an new or particularly controversial observation: e.g. "Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one." Benjamin Franklin
"The love of money grows as the money itself grows." Juvenal
Having worked for several billionaires and seen them in their day-to-day, those quotes resonate with me.
I think most are.
> The idea that the only way you can incentivize individuals to start companies is to allow them to accumulate so much wealth that they become tiny kings is patently absurd. The world has thousands of companies and founders who happily sustain their businesses without ever reaching this ungodly and idiotic level of uber wealth.
And how many of those companies and founders have given back to society at the scale that these uber wealthy people have? Entire new economies have been built up.
> ungodly and idiotic level of uber wealth.
This is still just envy. You should try to prove that you're being oppressed by the systems these billionaires have created because we don't have to go very far back to observe when these systems and economies did not exist. I'll remind you that for example, in NYC before Uber, taxi medallions were being sold for over a million dollars and people were going into debt just for the opportunity to drive a cab. If you go far back enough creating a virtual store front to sell your ideas and goods was a gate that was actually very high. Thanks to the systems that are in place now you have the opportunity to spin this up for very little risk and prove out your idea. Structural problems such as what? The idea that wealth is power? That's the same structural problem that has always existed, except that there are more players than ever before. You can launch an entire grass roots political campaign on social media for free. Does that sound like a system that oppresses or is that a system that has given you opportunity to enact change?
Even the barrier to invest in companies and participate directly in the profits and value creation has been erased or lowered. Hundreds of millions of people are directly benefitting from this everyday. It is now a few simple clicks of a button and you're in. Who lowered that barrier? It was the billionaires. And yes, because they did that they will get an asymmetrical reward because their impact and value creation for society is asymmetrical to yours.
You're not doing this, but when you try to have this conversation amongst the general population what is the response? Once you start poking holes at the concept it always reverts to "you're a bootlicker", "why are you defending billionaires, they don't care about you". These responses highlight envy, not reality or the desire to be objective.
Deep down a lot people either don't realize how much free will and agency they now have in this society or they are just living with contempt because everywhere they look they see people that are using that free will to accomplish more than them. It's lack and envy all the way through.
I wouldn't necessarily categorize giving people opportunity to do underpaid, tenuous, non-career, zero-mobility gig work as "giving back to society" nor would I classify the unregulated harms of social media, phone additions, etc. as social good either. That's not to say some of these things aren't also good in many ways, but I also still don't understand why you think this somehow leads to a moral or social justification for unbounded levels of amassed wealth to a single individual.
> Structural problems such as what? The idea that wealth is power? That's the same structural problem that has always existed, except that there are more players than ever before.
So your response to issues such as most people being unable to have a single living wage, rising homelessness, unaffordable housing, is "shrug wealth is power". This is not some kind of inviolable law of nature. We as human beings defining the terms of the game, can set up some legislation.
Learn history. America specifically has combated very similar issues in the past and curbing unimpeded accumulation and breaking up monopolies led to more innovation more diversity in the market and a better distribution of wealth. America has taxed the wealthiest classes more in the past and it wasn't a disaster. Look up the new deal.
> You're not doing this, but when you try to have this conversation amongst the general population what is the response?
Who are you conversing with, me, or the general population? What do you mean when you try to ascribe a belief to the general population? Have you done polling on this? Or are you basing this on media? What are you actually talking about? Why are you so confident in arguing against some perceived hypothetical belief you think "the general population" holds? How do you know there aren't more people who actually agree with your perspective?
> Who lowered that barrier? It was the billionaires
No. Scores of laborers employed by the billionaires lowered the barrier. Yes, many of the billionaires begin with a great idea, but there's no reason having an idea justifies having unbounded wealth. All enterprises depend on legions of people to actually materialize production. There is nothing written in nature that states that the person risking upfront capital should always be compensated more than the people who make production a reality, nor is there any corollary that states that the accumulation permitted should be completely unbounded.
You have convinced yourself that anyone not agreeing with your own belief is ruled by nothing but an emotional or psychological state rather than rational, but different, perspective. This is a perfect way to be a stubborn ass and ensure that no one will ever change your mind. It is anti-intellectualism at its finest. I hope one day you realize how foolish you are being about this.
Since you seem to be into super-reductive arguments, here's mine: we are all clearly hyper-dependent on one another on this planet. There is no reason people who make lots of money shouldn't have to give a reasonable portion of it back to the government and country that they draw labor, customers, and much more from daily. There is no reason that accumulation should be permitted without bound. It is pointless and leads to problems. We can and should argue for reasonable limits or at the very least taxation on massive wealth.
As for me, no envy here. I live comfortably and I am happy with what means I have, something most billionaires don't ever seem to experience. However, I also have eyes and functioning neurons so when I clearly see other human beings unable to afford basic necessities without feeling tremendous stress and pressure and then I see certain high-profile billionaires blowing money on dumb shit, underpaying and abusing workers (piss bottles) and more, I can understand why people want better guardrails in place, and no, wanting to limit the degree to which random people who got lucky in the market can exploit you is not envy.
The idea that you can distribute wealth is actually the tell for envy. You want to distribute power because you want power. And you won't be satisfied until that power reaches you, therefore you need to eliminate not just the billionaires, but after it trickles to centimillionaires and decamillionaires after that. If your premise is based on billionaires not existing because they have outsized power you're not going to be satisfied until that power eventually reaches where you are stationed in society.
The truth is that there are more billionaires than ever before and that number is growing. It would seem that having power is becoming more democratized over time too. If we go back 500 years the number of people that had this level of power were limited to actual Kings. You are closer to a billionaire in your capabilities and agency in this society than a peasant was under an actual King. 500 years ago if you made a tiktok video about your King's private affairs and his properties while trying to tell everybody that the king doesn't deserve their power and the king should be taxed, you'd be executed in the town square. Yet somehow people that have the mindset that "billionaires should not exist" fail to convey how we've suddenly reached some tipping point where there's no going back.> You are closer to a billionaire in your capabilities and agency in this society than a peasant was under an actual King.
How much of that is because I live in a democratic republic, and not because billionaires exist? I guess you might say they're the same thing, but I believe there are free-enough societies with less wealth/power inequality than the US. I think I care more about the gap between top and bottom than about my own personal level of power, but of course it's hard to be objective.
It is harder to draw the line with money than with literal kingship, but I don't accept that we should change nothing and let unbounded power disparities exist.
Edit: More to the point of the original article, maybe I can accept their existence if we plugged all the holes they use to pay a very low percentage, as discussed in other comments. They may remain billionaires, but the tax law would treat them more like the rest of us than like kings.
Most people I know don't "want power". They just want to be able to afford basic necessities (food, housing, clothing) without feeling like they are on the brink of survival every day.
Billionaires are starting to take the heat because people are starting to recognize that the wealth created for these billionaires is 100% dependent on their labor, time, and sweat, yet many of them see fractions of fractions of what the billionaires make. If it's somehow unfair for the billionaires to have to pay the government a wealth tax it is equally unfair for said billionaires to withhold so much of the capital generated by their workforces for themselves.
Not quite, because you're using the opposite extreme where someone has no assets. Meanwhile the median net worth in the US ~$200k, which would be $2000/year in tax for every 1% in wealth tax. That's certainly enough for ordinary people to notice.
On top of that, the conversion is even worse than that implies for ordinary people, because the primary reason the median is ~$200k isn't that the median person has $200k their whole lives, it's that they have ~$0 when they're 18 and ~$400k when they retire and the median person is about halfway to retirement age. If you transfer tax burden from income tax to wealth tax then that means they'll be paying more in wealth tax in the second half of their life, which means they need to be saving rather than spending the money not paid in income tax, including during the first half of their life. But that causes their net worth to go up on paper by more/sooner, because they're essentially holding extra money they'll only have to pay in tax later, which in turn causes them to pay more in tax for a tax on holding assets.
Moreover, then you can't say that Alice always benefits because she has no assets and Bob always pays more because he has $400,000 because what's actually happening is that Alice pays less when she's 20 and more when she's 60. That's going to be unpopular because the 20 year olds are generally expecting to be 60 someday but the 60 year olds never expect to be 20 again.
If that were the case the criticism of Paul Graham's reasoning would be wrong to begin with because the only people paying it would be the people who do get most of their income from investments.
Moreover, your proposal doesn't actually work. If corporations don't pay a wealth tax then rich people just put their assets into corporations that they control but don't formally own (there are many ways to do this). But if they do then ordinary people with ordinary retirement savings can't be spared, since it doesn't change your finances to have the companies your retirement savings are invested in give you lower returns by the amount they pay in wealth tax than to have you pay a wealth tax out of the returns.
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 tax
There are arguments about wealth taxes inducing capital flight and investment disincentives, the difficulty of paying tax bills from illiquid intangible wealth or even quantifying it, and whether it's really a good thing to pressure people building a company to sell much of it off, but telling income tax payers that an effective tax rate of 20% is high isn't one of them...
If the US and the EU introduced a wealth tax then it would be relatively difficult for the capital flight fears to materialise. But yeah, the trouble with wealth taxes is that wealth (i.e. capital) is mobile.
Which is why land and property taxes are probably the most effective way of taxing wealth.
This is untrue btw
50% of people in the US pay effectively no net taxes
They still pay payroll taxes, state taxes, sales taxes, and various other state or local taxes and fees.
https://itep.org/fairness-matters-chart-book-on-who-pays-sta...
Billionaires included, defence contracts and corporate subsidies count just as much as food stamps.
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 money through the government has not been a particularly successful strategy for improving the overall standard of living.
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.
Not really.
It's also a plan to hold onto real estate as market prices rise, flip for profit later, and not deal with all the issues that renters bring (management and maintenance costs, bringing up and keeping to code, potential damages and law suits, etc).
Keeping a floor or two active for Air BnB type short churn rentals while shuttering the bulk of a building can make $$$-sense to a PE.
Ownership of rentable property that is empty is a thing across the board, at least here in Australia where (stupidly(?)) investment rules and returns have made multiple property ownership a sound investment that grows regardless of occupancy.
Don't even need a long ( > 10 year ) time horizon, flipping on a two or five year scale still makes money regardless of renters being present or not.
What are you even basing this assumption on? Just quickly comparing the highest ranking countries by Human Development Index with the highest government budgets per capita and the highest income tax rates would, if anything, support the opposite conclusion.
https://en.wikipedia.org/wiki/List_of_countries_by_Human_Dev...
https://en.wikipedia.org/wiki/List_of_countries_by_governmen...
https://tradingeconomics.com/country-list/personal-income-ta...
Broadly speaking, human welfare got a lot better in the last three hundred years, due to productivity improvements that were tied to things like property rights, joint stock companies, availability of credit, &c.
We haven't really found a good alternative to it. It may seem to you that countries like Austria, &c, are doing the right thing by taking very large amounts of GDP out of the hands of private enterprise and using it "for good" instead of "for growth"; but that is just eating the seed corn. It looks good in the short term.
If the initial step in your theory about human wellfare is to selectively ignore the last 35 or 75 years of history in the highest wellfare countries on earth, I think you should at least consider the possibility that your theory might be somewhat out of date.
If what you're saying is true, would it be unfair of me to say that the government is not using their power over the economy to fix any of the deep fundamental problems we are facing?
Is it good policy to take people's money because they aren't doing what we think they should be doing with it?
That's how you end up with an over-regulated country where people doing great things for the country's economy start choosing a different country to build their dreams in.
It's also how you drive the currently-wealthy to other countries to spend and invest their fortunes in.
The possibility of being ultra-wealthy is a huge reason to build awesome shit in the US that creates millions of jobs and brings the US economy ahead.
But anyway, oligarchs weren't this powerful in the mid-century. FDR's New Deal was successful in bringing down the Robber Barons and ushering in America's golden age. Coincidentally, things started to go to shit with the introduction of Reaganomics and the promise that letting a few private individuals concentrate more and more wealth would be beneficial to the economy.
Sure, but you actually have to work for continued income. Wealth accumulates with no input once established.
Wealth has the ability to increase (capital gains) without having to pay tax until it changes hands, whereas when income increases it is immediately taxed at a higher rate. Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
This is incorrect, historically you'll pay a ~2%-3% loss via inflation if you keep your money in cash. If you invest (making it capital) in bonds or securities then you will see accumulation, but thats actually a risk premium.
> Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
This is true, its typically called "Buy, Borrow, Die" but the reality is that it is only available to a very small percent of wealthy individuals and exists because of the way inheritance is handled ("stepped-up basis"). Even reasonably (not fabulously) wealthy people will still pay retail rates on the loans making the tactic basically ineffective. Last I heard you needed something like 100M+ liquid for lenders to even consider it (presumably, because they will make more off of some other deal with you)
I think a real solution is a forced step up in bases every year so people cannot put taxes off forever. It can be modest too 5% of your investment value delta. You could make the carried lost yoy track the net so you cannot be forced to pay when things are down.
Also the idea that capital gains tax should be less than income tax rate is strange. Like the people that own large amount of capital are in the lowest risk situations why should they also.have the most generous tax positions it makes no sense. No real person things the business owner who gets large returns is actually worse off or in high risk because if they were they'd be culled by economic evolution
And for inherited rental property, there is another huge loophole: you can can depreciate the full market value of an asset that you got for free. That’s a substantial tax benefit for many years.
There could be other solutions too -- say, require a virtual wash trade at time of inheritance, so the capital gains from the parent's lifetime are taxed at time of death and the child gets the stepped up basis. Somewhat different than an inheritance tax, but at least not a giveaway.
It's just that the exclusion amounts are fairly high, so in practice the tax owed is often $0.
This makes sense. Borrowing for income in most scenarios is strictly worse financially than recognizing conventional income if you actually do the math. Wealthy people are optimizing for financial outcomes, not avoiding taxes per se.
[0] https://www.sciencedirect.com/science/article/abs/pii/S00472...
This is just Internet mythology. The IRS would go after such arrangements very quickly - the IRS has the Applicable Federal Rate for loans. Though this really isn't an issue with banks as they are not charities and tend to want to make money.
Go get a calculator - if you took out a loan and had the interest set a the minimum of the AFR, what would it compound to in 30 years? It would obviously be much higher than just selling stock and paying capital gains on it.
The ultra rich do take out loans, and these loans do get repaid, and that money has to come from somewhere. Go google something like billionaire stock sales to see examples - if they all could just say, "Thanks for the zero percent interest loan! I'll pay you back in 30 years in my estate!" - I think they would have.
I suspect you are simplifying what's happening quite a bit, not sure if it's intentional or otherwise. But wouldn't the more likely scenario be that you borrow 100m with a 10 year draw at x% interest and then at the end of the 10 years you do a stock sale (some taxes paid), pay the interest (interest is generally non-taxable) and then take out a new loan for 500m based on your much larger portfolio, and finally claim significant losses against some other asset (regain your actual stock sale taxes losses "oh no my art lost value!")? Repeat ad nauseam until you're dead.
> Specifically, for single decedents, estate taxes paid equal 6.8% of the value of Forbes wealth at death. The value of their gross estate is 39% of the Forbes estimate of their wealth. This large gap, already noted in earlier work (Raub et al., 2010), is likely to reflect the various techniques available to high-net-worth individuals to undervalue assets in the context of the estate tax. Taxable estate is then 45% of gross estate (due to deductions primarily gifts to charities) and on that base the tax rate is 39% (Balkir et al., 2025, Table 4 Panel B).
https://www.nber.org/system/files/working_papers/w34170/w341...
The only way this system can continue is if we increase the receipts (aka tax revenue).
The political class has very wisely targeted "the wealthy," who are capable of tactically avoiding taxes, but as always it will eventually include the middle class who will ultimately be paying the tax. From their standpoint they will popularize this tactic because it will work
This is being sold as class warfare, but its really the evolution of our political system into an unsustainable system of patronage with public funds.
We have plenty of other problems like "buy, borrow, die" (discussed elsewhere in this thread), but ultimately the wealth tax stems from needing more public funds, which stems from politicians spending all of our money.
When Elon sold a bunch of Tesla stock in 2021 he paid $11 Billion in capital gains tax on it... That's more than entire cities worth of people combined would ever pay for the rest of their lives.
They are likely referring to a stat like this: https://usafacts.org/articles/who-pays-the-most-income-tax/
I see this repeated all the time and it's worthless without context. What percent of all income do the top 5% earn? What's their share of national wealth?
We live in a society where the wealthiest have orders of magnitude more wealth than everyone else. The taxes they pay are not proportional to that wealth, period.
It may be more realistic to view this in terms of elite power struggle. There are some constituencies that have found their way into positions of some power -- in government and public service -- that are in conflict with other elites, who have found some power in private enterprise. These groups battle for control of things. One strategy in the battle is managing the other group's access to money.
It's not clear from any kind of first principles, that we are better off with government allocation of a large portion of the society's capital. That hasn't historically been a big winner. Private ordering seems to net out a higher quality of life overall, even with income inequality.
All proposals focus on ultra-wealthy individuals. This "momentousness" wouldn't really touch the absolute vast majority of the taxpayers.
But, yeah, I bet the targeted people are getting nervous.
That being said, the richest are effectively _not_ paying the highest marginal tax rate considering all the tax structuring they do. Claiming that they would be paying the highest income tax in the world is misleading, for one. Secondly, the richest in the world _should be_ paying the highest income tax.
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?
Who is forcing anyone to sell at rock bottom?
How will they suffer? The people with assets, to realize a benefit from them, have to spend money. If they don't spend the money, then what's the problem?
> Each 1% of wealth tax is equivalent to 20% of income tax.
Yes, this is the right part. Taxing wealth at 1% is equivalent to taxing income at 20-25% (depending on which return you count as baseline)
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate
On the opposite, they understand it right, and PG is completely wrong here: it's not about adding income tax rate to someone that already pay income taxes, it's about making wealthy people, who don't currently pay this tax rate, pay the same rate as people living from their income.
> So in the median case, a state adding an additional 20% in income tax would have a total marginal tax rate of 37% + 4.75% + 20%, or 61.75%.
Bezos, Musk, Zuck and the likes (or even PG himself, likely) don't pay 40% tax on their wealth growth, they currently pays 0%.
In fact, to make them pay as much tax as their employees, there should be a 2% wealth tax, not 1%. Hence, a “mere 1%” is in fact a very generous proposal by leftists politicians and economists, as it would still mean the wealthy only get half the rate of working people.
I guess the simplest approach is, if you're making money, it should be taxed fairly, regardless of how you're making it.
No one should pay taxes on "wealth growth" because it's not realized. They paid income taxes on the shares once they received them, and will pay capital gains taxes once they sell them.
>In fact, to make them pay as much tax as their employees, there should be a 2% wealth tax, not 1%. Hence, a “mere 1%” is in fact a very generous proposal by leftists politicians and economists, as it would still mean the wealthy only get half the rate of working people.
They paid the same tax as their employees once they received the stocks. They will pay the same capital gains taxes as their employees once they sell.
Offtopic but I thought your percent looked weird. Turns out, that's the "care of" symbol (℅, U+2105) and not percent (%, U+0025).
I had noticed something was off when proofreading but I didn't know this symbol and I couldn't explain what I did wrong so I assumed it must have been a graphics glitch.
TIL about the “care of” symbol: https://en.wikipedia.org/wiki/Care_of
Indeed.
Andrew Mellon writing in 1924 "Taxation: The People’s Business.": "The fairness of taxing more lightly incomes from wages, salaries and professional services than the incomes from business or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it, and old age diminishes it. In the other, the source of income continues; the income may be disposed of during a man’s life, and it descends to his heirs."
https://en.wikipedia.org/wiki/Andrew_Mellon
Via "Our Tax System Should Make You Furious" (interview with a Boston College Law School professor who specializes in tax law and estate planning):
https://www.nytimes.com/2026/04/17/opinion/ezra-klein-podcas...
That's exactly it. I've been really shocked at the willful ignorance (or deceit) coming from the billionaire class on this. I mean, OBVIOUSLY the practical operation of the tax regime is unfair at the top end. If you put a billion dollars in assets somewhere, almost any asset (including e.g. stock in a company you can't sell because you need to own it), growth of that asset is (1) trivially liquid via loans[1] or deals and (2) COMPLETELY UNTAXABLE IN PRACTICE because there's never (ever!) going to be a point where it's traded or converted in such a way that it becomes a "capital gain".
[1] e.g. Bezos goes to Citi or whoever and writes up a contract for a $100M loan to be collateralized with ever-appreciating AMZN shares, likely at a deeply discounted rate (low risk, plus the "keep Jeff in the rolodex" benefit to the bank) then pays it back on schedule with another loan taken out on his now-even-larger stake in AMZN. Who pays the tax here? It's not "income"!
Heck, it's even started in the UK with labour killing off salary sacrifice pensions, everyone one I know was reliant on those to be able to retire, but who gives a shit, we are private sector and we have no union!
I'm on a rant here, forgive me.
1. Wealthy more or less means able to live off the investments (passive income). Usually it means live off the interest of the interest (generally assessed as 8 million bucks nest egg)
2. It’s an obvious logical step but it is literally impossible for everyone to be independently wealthy. As in everyone cannot have a passive income.
3. So this debate just chnages when we ask “how do we make everyone wealthy” we can’t given the definition we have.
4. So we have to change the definition
5. How can we make everyone in society share fairly in the wealth that society has?
6. What if we made it much harder for wealth to Snowball into more wealth pulling it away from middle class
7. What if instead of a foolish wealth tax where we assess wealth, we stick to the “freely entered into transaction situation”
8. So Capital Gains taxes at same rates as income Also tax the “borrow till you die” idea - over a certain yearly amount, borrowing against your assets (ie Deutsche Bank lending you 100M against 1M shares of Blurb corporation should be treated as income just as if you sold the shares.)
I know that get hard but in the end we need money to circulate.
That’s how everyone shares
Being able to borrow against assets is a pretty essential part of the present-day economy. Almost everybody does it, from the very poorest taking out a car-title loan (however ill-advised) to middle-class people with home equity loans to medium sized businesses and farms who often have loans against their entire assets in order to buy more equipment or keep their operations going.
The idea is that taking a secured loan out using an asset as collateral would be a taxable event for that asset.
That is to say, if you buy a house for $400,000 and it appreciates to be worth $850,000 then take a home equity loan out against the house, you would owe capital gains on the $450,000 appreciation.
With the current $250,000 capital gains exclusion for primary residence, this would result in ~$30,000 of capital gains tax.
Doesn't that puts valuations in the hands of people who could conspire to manipulate them, creating false data points?
For example, suppose you bought something for $25 a long time ago, and it has, very unofficially, appreciated to ~$100.
I could lend you $100, and the contract will say that I'm only asking for it to be partially secured with collateral, which will be, oh that "$25" asset which obviously hasn't appreciated in value at all. Poof, no gains tax.
I think the real issue here has to do with dodges in the Estate Tax, which is the endgame that these delaying games are meant to reach.
I certainly agree with the estate / inheritance tax (the main issue is “resetting” the value to market at point of inheritance)
But as for the valuation problem I think that can only stretch so far. If you put up a million shares of $TechFirm as collateral for a loan to buy a yacht, it’s hard to claim they aren’t worth what the NYSE listed them as. If instead you put up 250,000 shares as partial collateral the bank has to put the missing collateral on its balance sheet (else some one is committing fraud)
The thing is it’s common. We on HN know all about “borrow till you die”, that Trump got Mar-a-lago valued at a billion dollars. The problem is not banks doing favours for valued clients, it’s so common and normalised that we don’t notice.
https://taxproject.org/buy-borrow-die/
For most people their ability to earn is by far their largest asset. You can kind of get a feel for how difficult it is to bootstrap into generational wealth if you think about the math -- it takes time to replace that earnings portion of your own balance sheet, and even more to well replace it; a lot has to go right in the interim.
If (big if) I'm remembering that correctly, I don't get why we just go after the problem directly and do something like treat putting down collateral for these type of loans as a taxable event. I'm sure it's not as straight forward as it sounds, but I can't imagine it'd be more convoluted that needing to track the wealth of every high net worth individual.
Maybe I'm in the minority on this, but I actually don't care if Jeff Bezos' net worth went up by $5 billion because Amazon had a good day in the market. If the shares are just sitting in an account doing nothing other than proving ownership it's all kind of just numbers in a computer, IMO. A painting is probably a better example than stock, but if I have a painting on my wall that was worth $1 million dollars yesterday and today it's worth $10 million that change in valuation is essentially meaningless as long as the only thing the painting is doing is hanging on my wall.
What I do care about is when he's able to access the cash value of that $5 billion of Amazon stock without paying the taxes that would come along with selling the stock. If he wants to leave $5 billion in Amazon stock just sitting in his account doing nothing until the day he dies, that's totally fine, but the second he puts it up for collateral we should tax that. I think this has the added benefit of simplifying things by avoiding a lot of questions around fair valuation of assets. If I have a $10 million dollar one of a kind painting on my wall that I'm never planning on selling, it's kind of hard to put a valuation on that and it can be easily manipulated by finding the right appraiser. If I put a painting up as collateral for a $10 million loan it becomes a lot harder for the owner to argue that it's actually worthless or the IRS to argue that it's actually worth $1 billion.
see: https://news.ycombinator.com/item?id=48239802
Moreover if the bug is that income isn't tax at death, why not just fix that bug? Otherwise it's like arguing: "wow there are people in poverty? Better have a communist revolution to fix that!"
Investments shift to things whose tax value updates slowly, for example property which typically adjusted more slowly than other financial assets. This tends to rise property prices and concentrate ownership.
It causes other distortions in allocation depending on the tax details, but wealthy people tend to adjust more aggressively to changing conditions.
We are already there in US. Real estate is already controlled by companies, and rental costs are through the roof.
But it's not "mathematically the same thing". Taking the 100 dollars allegory Paul raises, for that allegory to be based in reality, someone would need to have 20x their annual salary in wealth. The median salary in the US is 59K per annum. For the 100 dollars allegory to work out to a 20% income tax equivalence, people would need to have just over a million dollars sitting in their bank account. The average American net worth is more like 48K (being generous), which is under a year's salary, with a tonne of people also just living permanently in debt (negative wealth). Interestingly, would a wealth tax mean negative tax (free money) for those many in America living in debt?
If you're spending your entire income on things like food and rent, then a 1% wealth tax corresponds to 0% income tax.
If you're spending your entire income on investment, then there's a calculation like PG's to be made to compute an equivalent income tax rate. But then we're talking about someone who doesn't need the money. This isn't even about rich vs. poor - you can have a high income and spend it all as you make it, like if you throw a huge party every week, or make a yearly trip into space. But if not, then it's just an ever growing number on your bank statement, and the only reason you care about it being 20% higher is because you're comparing it to other people's bank statements.
P.S. a wealth tax is a property tax. They have existed in the US since before the income tax (which was originally considered unconstitutional by its opponents).
If you accumulated a fortune, there was some skill at play. There was also considerable luck and some exploitation. The wealth tax is a way of paying back for the luck and exploitation.
You will still be extremely wealthy.
Paul wants to play the fairness card. Life is not fair and those who accumulated massive fortunes won the lottery. Don’t let the massively rich conflate issues. Don’t get fooled.
Currently the country with the highest marginal income tax rate is Denmark, at 60.5%. The top US federal tax rate is 37%, and the median state income tax rate is Oklahoma's, which is 4.75%. So in the median case, a state adding an additional 20% in income tax would have a total marginal tax rate of 37% + 4.75% + 20%, or 61.75%. [3]
In the median case, US state politicians talking about adding a "mere 1%" wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.
It should be noted that the marginal tax rate for high earners in the USA was higher than 60% from the 1930s through the 1970s.
Chart here: https://www.hrblock.com/tax-center/newsroom/income/the-histo...
Paul tries to frame it as an increase of 20% in the tax rate, but in reality the increase is from 0% to 20%, and it's hard to see why that's unfair.
The reason I say it's currently 0% is of course that for the wealthy most of these 5% gains are unrealized (e.g. inflation in the value of their assets) and untaxed.
The worst part is that even when they need to realize their profits, they have schemes that allow them to avoid taxes (guess how much taxes Musk paid for his $20B realized profits from his Tesla shares he sold to buy Twitter).
Instead, the are running straight for the full on land grab while distracting people with the details of technical loopholes of comparatively small consequence.
You are just not paying attention enough. They do talk about loopholes, and push to close them during the legislative process.
They just don't talk about the loopholes details a lot because you don't get elected by talking about technical details in the tax code: “Force the tax realization of gains at some rate which then adjusts the cost basis when assets are encumbered by loans or as collateral” isn't a slogan that makes you win an election.
It's a big democracy red flag when a majority wants to take a lot from a tiny minority; the moral hazard of the unfairness is that it's unclear where this ends. (Saying "one-time" and "1%" are trying to limit that risk)
It's a democracy red flag when an unpopular minority is vilified as the cause of society's problems. It short-circuits real policy making and distracts from real issues.
The bargain of private wealth is that it's better at innovation that should spread widely -- if it's subject to competition and does not export costs.
One problem is that one of the best investments is to change the law to reduce competition, increase market power, and export costs -- i.e., to weaken politics.
Another is that wealth used to mostly invest locally (information and transaction costs), so locals would see some benefit. No longer.
Finally, as an accelerant, enterprises are made of legions of managers and experts, who now compete more than ever; they would lose that competition by supporting less extractive policies or gentler politics.
Net result is that wealth seems not productive but extractive, and there is no negative feedback to reduce that.
Once the grand gambit of goodwill is lost, it cannot be recovered for at least a generation, but there's no real feedback to prevent that. The political viability of something like a wealth tax is just an early indicator.
It’s not “taking”. The rich give out some money so the society has a higher probability to stay peaceful. or a violent revolution may happen.
This is really a win win situation
not to forget that the inverse is also bad; generally people shouldn't take from each other
In the absence of any other considerations, I'd agree with you. However, the last half-century has seen that same tiny minority taking nearly all productivity gains from the rest, to the point that wealth inequality is greater now than during the first gilded age, so I have somewhat less sympathy for the tiny minority when the rest want to claw some of that back.
> It's a democracy red flag when an unpopular minority is vilified as the cause of society's problems. It short-circuits real policy making and distracts from real issues.
It's less of a red flag when that unpopular minority is the cause of society's problems. The ultra-wealthy have commandeered government to enrich themselves at the expense of the rest of us.
We have massive consolidation of markets and media due to lobbying for deregulation and against enforcing anti-trust laws. We have further wealth concentration, the likes of which exceeds even the first gilded age at the hands of massive tax cuts and loopholes predominantly benefiting only the wealthiest, while also cutting tax enforcement personnel, making it easier to get away with tax evasion. Of course, in the face of the massive budget deficits resulting from those tax cuts, we make cuts to important social programs affecting many (and with largely positive ROI) while protecting subsidies to some of the most profitable businesses on the planet and leaping at any chance to start wars abroad whenever we need to distract from embarrassments at home. We have lax enforcement of labor laws which would allow workers to organize and demand higher wages, while at the same time passing unconstitutional laws at the state level which try to prevent organized labor in the first place. We have not only allowed the federal minimum wage to lag significantly behind inflation, but we have lobbying groups coming out of the woodwork to stop any proposed increase. When we have large economic crises caused by the malfeasance of the wealthiest of the wealthy, our corrupt Congress passes large bail-outs for the culprits while telling the majority of us to suck it up and tighten our belts. Of course, our consolidated media landscape increasingly obfuscates the real problems, presenting alternate boogeymen like immigrants so the downward spiral continues.
Allowing so much wealth to concentrate in the hands of a tiny minority is itself a giant democracy red flag. The US is on the cusp of losing its democracy as a direct result, damaging global security and markets in its death throes. The mere existence of billionaires and their corrupting influence on government is the issue.
Given that the ultrarich pay very little to no income tax then Paul’s argument is “don’t increase my income tax from unnoticeable to 20%”
And this seems to be an intentional category error.
The idea is to redistribute from the ultra wealthy to everyone else. Why would you then pretend that these methods should be convertable?
Just keep the conversation simple:
- Everyone with more than 10m in assets pays wealth tax on the value above 10m.
I think there is kind of a breakdown in social order here. If society allows you to become the chief, it ought to also impose upon you a burden, an obligation, to wield your power over the tribe fairly, generously. To care for the weak, to make sure that everyone benefits, to ensure that things stay stable and safe under your leadership... The standard is higher, not lower. The sacrifice is greater, not lesser.
It is absolutely bizarre and you can see exactly thew way PG, and other like him, are thinking. They all want to have this immense power (and it truly is immense, more immense than ever in modern history!) but they want none of the obligation, none of the responsibility.
Even asking for 20 percent is too much, apparently.
It's really sick.
The most common opposition to replacing income tax with a sales tax is saying it is regressive because "poor" people will need to spend a larger portion of their income on taxes than a wealthy person. Ok, so don't food or primary residence. A poor person isn't buying a $300,000 car or a second home. The best part is that if somebody is having a hard time getting by, every dollar they earn can be saved instead of giving Uncle Sam a short term loan until tax day.
If you own shares of $MCD, you can get wealth taking share prices and shares owned.
But if own a McDonald's franchise, how do you measure the 'wealth' of it? Annual profit? Last x years profit, averaged?
The principle is simple: if you are spending the money, your gains are realized, and you should pay taxes.
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 were taxed then my initial loan would have to be 40% larger which means all my profit would go into paying that back, which means this project never gets done.
You are already going to get the money once the homes are sold and the capital gains are realized. Why is everyone so greedy? You essentially want to tax twice
Again the tax rate sets a minimum return. These high returns encourage too much risk.
Collateralizing other assets is the standard way in which capital grows. I don't see how equities and any different than homes.
There is no 'circular' borrowing other than the normal creation of money through lending
Of course people taking out equity cash for investments are actually putting the money for productive use.
How about there's no capital gains tax on equity if it's rolled into another investment of any kind. Eliminate the like kind nonsense. Tax only consumption income.
This is the wrong way of thinking about it. It's not adding 20% to an already taxed entity, it's adding taxes where there weren't before. Adding 20% on top of the income tax would indeed be controversial. In his framing the rate of return is effectively untaxed income, so it would be more accurate to say that this is like adding income tax to a currently untaxed income stream.
This does make retiring a tad bit complicated. Say you've saved $3M and are ready to retire. That means each year you're spending $75K just to satisfy this tax.
[1] Depending on how your wealth is structured. Cash is 2.5%, but if you own, say, a business, you pay the tax on the value of the goods, not on the value of the building, hardware, etc. You don't pay Zakat on the house you live on. Agriculture is actually taxed at 10%, etc.
Maybe he should spend his time trying to work with these politicians to design something that is more fair? Like making it actually act as a tax on unrealized gains over $1B (so that it takes cost basis into consideration) OR make it so that if you need to sell some assets to pay the tax, you can writeoff the wealth tax you paid from your regular/capital-gains income so that you aren't taxed twice? There's a lot of actually useful stuff he could write about in this policy area instead of blogging about the financial equivalence between stocks and flows.
His argument is incredibly disingenuous; the sort of people who will be affected by a wealth tax are the sort of people who find ways of avoiding paying income tax, or indeed any tax at all if possible.
It makes me very angry when these billionaires who build up enormous wealth, partaially by avoiding paying the taxes that fund the infrastructure that help them build their wealth, get upset at people who suggest that maybe they should pay something back to society.
Paul Graham should, maybe, stick to blogging about tech, because when he gets into politics he really shows his true colours... and it ain't pretty.
As a bit of an aside, "spending more time with family" is an often-used euphemism around someone being fired, but if you have more money than you know what to do with and you aren't using it to spend more time with those you love, then what on earth is it for?
To give more financial support, you have to do independent, uncoordinated campaigning for the candidate. So you can spend a million dollars on ads saying to vote for a candidate, but you can't give that money to the candidate's campaign and the candidate can't coordinate with you. This is what Super PACs do.
I only write this because a lot of people are unclear on the rules. I'm not making an argument about billionaires.
> In fact, not a single coordination investigation has ever resulted in a PAC being fined.
I'm not naive enough to think communism is a magical answer (but Cuba is not some A/B experiment - the U.S. in particular has done a lot to make sure Cuba didn't succeed) - it ends up concentrating the wealth too. I would favor some form of democratic socialism, with leaders who can be kicked out if they abuse their power and limits on the influence of rich individuals and corporations.
On the latter, I think we forget that corporations are a legal construct intended to benefit society by allowing risk pooling - they are not people and should not be considered as such for things like free speech rights. Corporations should not be allowed to make political contributions in any way.
So is getting rid of intergenerational wealth transfer. So since we're already dreaming about a new system that seems irrelevant.
> legitimate use cases
Intergenerational wealth transfer also has "legitimate use cases" if one gets to define "legitimate". I'm curious what legitimate cases you have in mind.
Re: irrevocable trust, a cursory search revealed no legitimate use case imo, all use cases I see are proxies to skirt taxes or hide income/wealth. What would you consider a legitimate use case for one?
Your point re: case law is well taken, but per [2] up until a few decades ago there was a cat-and-mouse game between laws and tricks regarding inheritance wealth transfer. This stopped and it’s easier than ever to transfer > 10M tax free at or death, which has massive implications for wealth inequality.
That said I agree it’s extremely unlikely and have no hope that any of this will change.
This would close the gap between Buffett's tax rate and that of his secretary, but would not be the "highest taxes in the world" that PG decries.
The question then remains, does the sender add a bit more before sending to move any given amount, or do they pay a given amount with the recipient getting less?
The system certainly scales well for net-worth and one's economic activity.
The question then remains - who/what is considered an "outside" party for a tax to operate in financial flows? It could work well in an agentic economy if agents are considered as a single entity with flows not taxed between them.
The idea is that everyone must spend a certain amount of money to live. For the poor, that amount is a greater proportion of their total income and wealth.
Basically, a wealthy person can choose to pay the same taxes as a poor person by only spending as much as a poor person.
Maybe that's fair. Maybe it's not. But it is a criticism of sales/transaction taxes.
So if a frugal rich person can be paying a similar amount to a poor person in overall tax looking at living expenses alone, one can also look at all the extra income the rich person gets from assets.
So this inequality/imbalance can be lessened through an amplification factor: by looking at the overall position of a person's flows.
The governments can decide how much to "squash down" down the inequality in society.
Would this address the issue raised?
The other thing interesting about a transaction tax is that individuals don't necessarily even need to be identified - only flows. That would suit the privacy-side of crypto. But I'm not sure how the final setup would look. And that could appeal to the super-rich who want to remain anonymous.
Maybe what I'm getting at is a blockchain tax: a proportion of transaction fees gets automatically routed to government coffers. Alternatively, add a staking tax as well.
This will all make more sense when more real-world assets go on-chain.
Here is a cool website showing Wealth, shown to scale.
https://wealth.ronnycoste.com
This might be one point of view, but if you imagine an economy where everyone is poor/living paycheck-to-paycheck, then this looks super wrong:
Everyone has $100, earns $100/month, and spends $100/month.
at 1% wealth tax, they pay $1/year.
at 20% income tax, they pay $240/year.
Those are obviously not interchangeable taxes from a government revenue perspective!
I think it's underestimated how important ease of enforcement is for taxes and laws in general. Laws that are hard to enforce require more powerful law enforcement agencies, more invasion of privacy, more punishment, more restriction of freedom. Enforcing a death tax, for example, necessarily requires limiting and tracking of all transfers of money or assets between people including personal gifts. A property tax merely requires keeping track of land ownership, which is a function governments already do, and in the worst case you can simply physically go to the land and see who is using it or seize it.
The language politicians use to sell to a general public does not have any correlation to their understanding of the mechanics. The people proposing this policy entirely understand the ramifications. That is the point of the policy.
The average person is already subject to something like a wealth tax through property taxes, in addition to also needing to pay taxes on their income. Join the club pal.
I think that what you can tell is that they think the voting public won't understand the momentousness of what they're proposing (or that their "color" will cheer that very momentousness).
Whether they themselves do or don't understand how impactful the proposal would be is much harder to guess.
All that I've seen are wealth taxes on top of some arbitrary (but very large) wealth level. The latest proposal from Congress applied a 2% tax to wealth above $50 million with an additional 1% (3% total) on wealth over $1 billion. Plus a 40% exit tax to stop them all from fleeing to the Bahamas or Monaco.
A defining feature of wealth taxes is that they only tax those that make most of their income through capital gains. This is why they're popular among much of the population.
Now the question is, if we lowered capgains tax rate by 20% but instituted a 1% wealth tax, would that be better or worse? My guess would be worse because wealth taxes are nearly unenforcable, but I wonder if there are good arguments for the other position.
Since a lot of billionaires pay practically nothing in taxes, relative to their wealth, a wealth tax that equates to a 20% income tax would be entirely reasonable, and they'd still pay a much smaller percentage than the taxes I pay from my wages. It closes a loophole, it doesn't punish the very rich. And, nobody is suggesting the average 401k or Robinhood portfolio should be subject to a wealth tax.
[1] https://press.uchicago.edu/ucp/books/book/chicago/S/bo256019...
There's the idea that "wealth" gains tend to not be taxed for a variety of reasons. The common parlance of "Buy, Borrow, Die" category things. The "step-up in basis" category things - i.e. no capital gains tax realized on lots of inherited wealth. (The inheritance tax might trigger in some cases, but oddly the capital gains tax often might not be triggered on transferred assets because they were never sold and the new possessor will be taxed at the stepped up received value if they ever sell. So there's a chunk of appreciation that never received capital gains taxation.) Trust related things.
There's the idea that 501(c)(4)s allow wealth to be transferred untaxed while retaining control over the assets (particularly because those organizations can engage in political activity, but I'd guess generally some of the organizations exert lots of influence/prestige.)
So perhaps OP is suggesting that maybe there's some fungibility in income tax % and wealth tax %, but when you look at the tax code the equivalency looks pretty weak currently.
There's never a requirement to vote your shares. I've never cast a single shareholder vote in my life. The fund could be legally required to not exercise any votes.
> be a party to lawsuits
Since when are shareholders a party to lawsuits? It's called limited liability for a reason.
> Do you want Trump getting control of the board
I'd normally say "legally structure it so that doesn't happen" and "follow best practices".But laws only mean anything if someone enforces them. If the government doesn't function correctly no government function can work correctly.
i think about that mentality all the time
one person just said, I don't think I'm going to be able to change the world, but well, why don't I try anyway because I don't see anyone else doing it, and instead thinking that a politician is responsible for my future instead of me and you
such a great mentality, I really do think about it all the time
1- Is this in fact a 1-time tax or is that a dishonest narrative to make the proposal easier to swallow?
2- How do you prevent capital flight to other states?
3- How do those with paper money or more voting shares than equity shares cover their tax bill?
That being said, I think more creative energy needs to be spent on the problem itself.
What do we do about individuals with $100M+ of unrealized capital gains that through various methods will never have to realize those gains to live an extraordinary lavish lifestyle, and their children will inherit the money with a step-up in basis? For those who make all their money from W2s, they pay very high tax burdens, while those who strictly have capital gains generally pay at most around ~20% for LTCG.
To those criticizing the California Wealth Tax, how do we solve this? How do we make billionaires pay more and lawyers/doctors/software engineers pay less?
In the US the max federal tax rate is 20% on capital gains, that is the gains realized when you typically sell an asset. The max tax rate on ordinary income is 37%. Some states don't tax at capital gains at all. Others make also tax capital gains.
There are a myriad of loopholes to defer and minimise capital gains ranging from QSBS (first 10mil in small businesses) to trusts to foundations to offset losses. Billionaires are incentivised to hold their assets and let them accrue rather than deploying that capital.
Yes, you could argue that billionaires have earned his billions. But could you really argue that the tax system should be configured to reward them for sitting on those billions and those gains should be taxed at a rate lower than someone working every day to earn 200k in wage income?
The economy has a fundamental division between those who earn income off the gains on assets, and those who earn an income on wages. Wealth taxes help level the playing field by those who already have a tax system in their favor.
Trickel down economics does not work when you earn more holding on to what you have.
Start with georgist/pigouvian taxes, and then expand to other kinds of income/wealth afterwards.
But Georgist taxes can go really far I'd imagine.
(What's more important? IP. The value of Google, say, isn't in the land it owns. It's in the code, the database of web pages, and the google.com domain name.)
Because of some very good reasons. See: https://www.youtube.com/watch?v=smi_iIoKybg
> kind that is not even the most important these days
uhhh source on that? I'm pretty sure land is literally the largest asset class in the economy. Real estate is by many estimates over 2X as large as the entire combined global market cap of all publicly traded companies. https://europhoenix.com/blog/part-ii-on-asset-classes-size-o...
Re your last paragraph: I admit I'm surprised by that. Still... Georgism calls for a tax only on the value of the land, not on the improvements. Of all that money in real estate, how much is in the improvements, and how much is in the raw land?
> This figure includes only high quality retail property, offices, industrial, hotels, residential, other commercial uses, and agricultural land
From this I gather that a large chunk of it is the improvements.
And, if real estate is the biggest category, why focus just on the land part of that, and ignore all the improvements on it?
This article is about a wealth tax. The arguments for Georgism are about something else - about social policy. It may even work as social policy, though I have at least some doubts. But as a wealth tax, it's not very effective. (If I were a rich person, I could buy a $100 million apartment in New York, and have the rest of my assets in stocks and gold and art, and my tax liability would be for my pro-rated fraction of the land that the high rise that held my apartment occupied. As a wealth tax, that's got far too many loopholes to be useful.)
Yes! A tax system that incentivizes productivity! You for president! I would vote for this so f*** hard!
I think some relevant factors are missing. What is the polite way of putting it... Ah right! You are a clown!
We might also compare tax revenue. For the US 1% wealth tax (for the 0.1%) would generate 250ish billion while 1% income tax would also generate 250 b. Then say 50% worth of increased tax evasion. 2% wealth tax is equal to 1% income tax.
I'm skeptical that the super-rich are only generating 5% on their money. My anecdotal experience is that it's usually north of 15%. They have access to investments that main-street does not.
If we plug in 15% instead of 5% in PG's reasoning, the effective income tax increase is quite a bit lower.
No.
I understand why he simplifies things, but it doesn’t really jive with saying politicians don’t understand how taxes work.
I think politicians have a better understanding of taxes than Paul does, and they have a better understanding of how politics work - basically as in all things political, if you convince the majority that you’re dumping on minorities (billionaires, immigrants, trans people) you’ll do well.
13.3%
> and presumably for billionaires, the Net Investment Income Tax,
NIIT kicks in at 200k, you presumably know this but I thought your comment could be misread as implying it only mattered for billionaires. :P
> I think politicians have a better understanding of taxes than Paul does, and they have a better understanding of how politics work - basically as in all things political, if you convince the majority that you’re dumping on minorities (billionaires, immigrants, trans people) you’ll do well
The author presumably understands this, but it's often more effective to pretend that your opposition is confused then to admit that you believe they are corrupt, unethical, dishonest, and actively trying to perpetrate evil. If nothing else, it gives them a more face saving avenue to course correct. And sometimes they really just didn't know better...
Of course there's more complexity than this, but that aspect is a plausible reductive lens.
But the conclusion is silly. We all know the extremely wealthy who'd be subject to a wealth tax basically don't pay taxes and that a 20% tax is totally right around what the typical overall tax burden is for the middle class or median households. The 1% example equating to 20% is basically saying the wealth tax would be in line with a flat tax, not even with a progressive rate tax. The wealthy have turned the tax system into one that's functionally regressive for the most wealthy and then PG complains that a proposal that makes it more like a flat tax is "not understood" by lawmakers?
It sounds ridiculous to me.
Or maybe I'm missing something.
Income tax doesn’t affect unrealized capital gains (where the rich “hide” most of their income).
A wealth tax (even without a minimum threshold) doesn’t apply to the poorest who can’t accumulate enough to even have any savings.
This conversion only works for income that is entirely saved and reinvested, which the majority of people can’t afford to do.
https://www.propublica.org/article/the-secret-irs-files-trov...
Classic PG dishonesty. It's not mathematically the same, because it affects different people. "What is the income tax equivalent" isnt a relevant question unless your either stupid or desingenuous.
The more obvious reason to not tax wealth is because it's hard to measure, and if you try to do it you will incentivize hiding it. Meanwhile, there are obvious obvious loopholes that the ultra-wealthy enjoy which could be reasonably closed. Namely, close the buy-borrow-die loophole, don't allow step-up basis for inherited wealth, and tax capital gains at least as much as income. Now people with a lot of money can afford to fund a lot of premium think tanks to come up with fancy economic reasoning why those ideas are Really Bad™, but at this point it's clear that's bullshit propaganda and the unintended consequences are exceedingly unlikely to be worse than the current unchecked consolidation of wealth and power enabled by the current loopholes.
I am fully against any wealth tax but 'Don't get this'?
Who says they don't get it. It doesn't serve their purpose so of course (like anyone selling) they are not going to disclose it.
Income is money that comes from actually laboring and contributing to society. Wealth tax is tax from sitting on your ass doing nothing.
Also, taxes don’t have to be a flat percentage. Like income tax, a good wealth tax would be progressive. Only wealth beyond a certain amount would be taxed, and the percentages would scale.
This is why we should have income taxes that are as low as possible, but still progressively scaled. We should similarly have a progressive scaling wealth tax, but it should be much harsher than the income tax because we want people to work.
Related point is monetary system and monetary plumbing should be boring like electricity or water supply but because of distortions making money out of money has become the hottest thing.
https://www.nber.org/papers/w34170 https://www.propublica.org/article/how-we-calculated-the-tru...
My read of this is "the discussion of taxing wealth makes me anxious. i will do a tap dance, please become mired in watching / discussing my tap dance so that we can put off the inevitable and ultimately necessary a little longer"
To the "conversion rate": maybe, but who cares? The answer here is: apply the tax, see if we still have billionaires afterwards. If we do, then keep doing it.
If I were an actual billionaire -- say, my net worth was $2B -- then my one-time tax under California’s proposal would be $100M, leaving me with a net worth of $1.9B. Under that 5% risk-free rate of return, I would recover that amount of money within one year even if my income were $0, which seems exceedingly unlikely.
One can argue about the specifics of various proposals -- the Tax Foundation, for example, thinks California’s proposal has “aggressive design choices and possible drafting errors” that could lead to somewhat bonkers results, although I haven’t seen any critiques of their analysis yet -- but a wealth tax cannot be converted to income tax in a reasonable manner any more than a VAT could be converted to property tax. They’re both taxes, but they’re simply not the same kind of tax. And while I don’t mean to cap on Paul here, there’s a distinct “woe, pity the poor billionaires who will surely be driven to bankruptcy” subtext I find to be risible nonsense.
- high net wealth individuals essentially being indifferent to income tax.
- income tax and short term capital gains are taxed at much higher rates to long term capital gains.
- lower net wealth folks (ie. the general public) receiving most of their income as income.
- high and ultra high net wealth individuals now making most of their money through dynastic trusts and inheritance.
This combination ends up making it so that, as Warren Buffet would put it, he ends up paying a lower effective tax rate than his secretary.
I effectively don't really care if it's a wealth tax or some other more targeted technical fix, but it's not sustainable to have the very wealthiest individuals taxed at a lower effective tax rate than everyone else and also able to pass on their wealth directly to heirs without significant estate taxes.
Capital gains are on realized gains. Based on the difference between purchase price and selling price.
The thing is, wealthy people don't have interests bearing investments, because they don't need the cash right now. They either have unrealized gains (shares, real estate, etc), or interest bearing products wrapped in marked to market vehicules with reinvestment (ETFs, life insurance, mutual fund, etc).
Unrealized gains are not taxed as long as you don't sell them. If you need cash, you can borrow against them, so problem solved.
As for interest bearing investments, most companies nowadays use buybacks instead of dividends to avoid withholding taxes.
1- Fundamentally, they are magnitudes of different units, one is tax/income, the other is tax/wealth/time. Not only is the denominator different, one being calculated over income, the other over wealth, but there is an additional inverse time factor.
In income tax, whether the period is yearly or monthly or hourly, is an administrative matter that doesn't materially change the rate, 1%/month is the same as 12%/month, however in wealth tax, 1% wealth tax per year is not the same as 1% wealth tax per month. In many respects one might consider wealth tax to be a second order derivative of income with respect to time. Which is again very similar to a progressive income tax. Anyone that studied polynomials knows that there is no such equivalence between ax and bx^2, they are irreducible mathematical forms.
2)Trivially, in the scenario Paul proposed, Wealth tax is comparable to income tax only with respect to capital gains. That is, if he did find an equivalence between income tax and wealth tax for capital gains (which he didn't), income tax would still apply non capital gain taxes. But I will concede that there may be an argument that, if such an equivalence were found, it could be considered that there exists an Income Tax which will always yield more tax than another specific wealth tax.
3) The equivalence between wealth and income tax cannot be linear. The example given applied to 1% wealth tax and was compared to 20%, and a risk free interest of 5%. If the wealth tax were of 2%, 5% or 10%, would that be equivalent to 40%, 100%, and 200% income tax respectively? The last one is especially ridiculous.
Explained here: https://gemini.google.com/share/e230bcecaaeb
The reality is that the total financial effect of that sort of technique is not that considerable, but the political noise that can be made out of turning it into a perpetual problem (e.g. by only proposing to fix it with drastic non-solutions like wealth taxes) is gold to the people that profit from making us hate each other.
I don't want to do math, but they aren't the same.
And people aren't investing 100% of their income in risk free 5% assets.
How I pay tax on my labor income doesn't have a lot to do with how Paul pays taxes on his investments. Paul makes his money from investment income.
The very wealthy are paying very low effective rates on their investment gains. Various billionaires have publicly described the truth of this. This is not 20% on top of 35%. They are paying a marginal rate of 35% of deliberately minimized taxable income and zero on deliberately maximized unrealized gains. Then 20% when realized, but as we all know by now there are ways to make sure it’s never realized.
I don’t know what the best approach is here, but I know this framing is nonsense.
With a wealth tax using his calculation, the higher your returns, the lower the comparable income tax would be. If your returns are 10% you'll pay $1 on $10 capital gains which is 10% and you end up with $109. Conversely someone achieving a mere 1% cap gains would be essentially taxed for 100% of his return.
With income taxes it's usually the opposite: the more you earn, the higher the tax bracket you will be put into.
Somebody like Paul Graham surely has higher than 10% capital gains, otherwise he'd not be exactly a great investor.
Personally I'm against wealth taxes, I think capital gains taxes are a much more appropriate and fairer tool. I also think taxes in general are way too high, if you are part of the middle class and add up everything you pay in taxes, fees, insurance, duties and whatnot you can end up losing 70-90% of whatever you earn. It's extremely hard to actually accumulate wealth for the vast majority of people.
Feel free to just tell the masses to eat cake since bread is so expensive while you dine on your mega-yacht. Just like the market can stay irrational longer than you can stay solvent, you may or may not be able to outlive the eventual violent outburst from the rest of the 99%. Scott Galloway is right on that the anti-data center backlash is just a proxy for anger at wealth inequality.
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.
They can have the vault in the cave. Or they can put money into artwork that grows in value and only generates income upon sale. Or a million other ways they can choose to control taxable income.
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.
Money in the long run can buy anything, including political influence. There are no regulations that can effectively preclude this. (And empirically, America over the past 40 years has seen moneyed entities successfully re-align politics and economic policy with their interests -- this was entirely predictable). An unequal society therefore cannot be a democracy. If you believe in democracy, then you necessarily must believe in wealth redistribution. (In fact, I argue that any person who believes that the American Revolution was justified, for any non-trivial reason, will likely find that those the same non-trivial reason could be invoked to reallocate wealth away from today's wealthy.)
Counterarguments to this view (i.e. a different top-level value than democracy / meaningful sovereignty over the society in which one lives) might invoke utilitarianism: an unequal society potentially produces "better" outcomes if capitalism is allowed to run unrestrained.
But a problem this argument encounters is who gets to decide what "better" is? All systems are economic in the long term, including political ones. A good framework for understanding is that a society in the long term is not "one person one vote" but rather "one dollar one vote." Today's preferences are dollar-weighted. Those with money decide what is better. The economy serves the average dollar's interests. And the average dollar's interest are the wealth-weighted preferences of society's members.
We started with an income tax to fund the government. But today our most pressing issue is not funding the government, but not having an oligarchy. Wealth is the thing that most needs to be taxed in order to allow for any semblance of democracy. Analogies drawn to income, though interesting, are meaningless.
I sure would, if I was talking about someone who makes more money in a week than most of us will make in our entire lives.
I think pg has forgotten that most people aren't rich.
> In 1940, the federal tax rate on income over $200,000 started at 66 percent. By 1944, the top tax rate on all income over $200,000 — about $3.4 million in today’s dollars — had jumped to 94 percent.
https://inequality.org/article/tax-the-rich-we-did-that-once...
His core point seems to be that taking $20 from him is mathematically equivalent to taking $20 from a homeless girl's hat.
I guess mathematically it is the same number if you dont normalize for that, which he wont.
Uh … sure I would? Why not? The top bracket was 70% in the 80s. So that 61% is still a fair bit short of what it was then. (And the 80s isn't the highest point, either.)
IDK if it would be a good idea or not, but I'd entertain the debate, certainly. To state that this is unarguable, though, well…
Hell, I'll be the first in line to pay the damn tax so long as billionaires are right in line with me too.
Based on available data deep contempt for working people should be assumed until proven otherwise, even for billionaires who are 'self-made' by way of a lot of right-time-right-place luck.
What a pompous and uninformed "I am smarter than others" way to think. And very 'parental' (ie 'we can teach them').
Note that Politicians (in order to remain in their job) need to think in terms of the people they represent and getting re-elected by those people. You may not like it it may not be good for you but understand that in the position they are in why they do it.
Rich people need to stop hanging out with other rich people.
In my opinion it's not a tax on the employee but on the employer and one of very few solid methods of actually taxing the rich (for as long as the rich need labor to get richer).
Your income tax money never reaches your pocket so it's never a part of your actual income and if employer didn't pay your income tax, they are (not you) on the hook for that.
And if income tax rate was lowered to zero, the employer wouldn't automatically start paying you that much more. There would be a renegotiation and most of that money would stay with the employer, because you already agreed and demonstrate that you can work for as little as you do. Of course in specific cases that the position of the employee in the market is very strong, some companies might choose to use the money they don't have to pay as your income tax to compete for employers by offering higher salaries. But that's definitely not given. Company getting richer rarely automatically translates to higher salaries.
So employee, if the economy is strong, should advocate for as high income taxes as possible, because that one of the very few ways that the money in the economy flows from the rich to the poor (with a detour through governments, which are poor nowadays anyway, perpetually indebted to the rich).
Economics is simple. Resources are finite, and money plus markets preserve that finitude as an invariant (that's why it works as a store of value). If you sit on more money and accumulate more money a natural consequence is that someone else has less access to the finite resources available (either in actuality or in potentia), period, because you can accumulate enough to begin to dictate how much they can access (by having decision power around wages). There is no reason to assume private individual wealth-hoarders have public interest in mind, and indeed they have often proven that they don't. They want to maximize value at specific points in the system, which is the literal definition of instability and eventual collapse in chaos theory. You need to bring the system back to stability through structural intervention and regulation. Tax the rich. Cap individual accumulation. It's that simple. The world does need or benefit from kings, whether minted through politic or finance.
You're missing the point on a stupid technicality.
If I have more liquid and therefore more purchasing and capital power than you, I have access to more resources than you, and I am immediately in a position in which I can potentially exploit you (get you to labor to generate more resources in exchange for some of the capital I have, then retain most of all of the newly generated capital and production from your labor for myself while paying you a fraction of what's generated because you are in a position of immediate need (need access to necessities) and I wasn't).
The missed point is that a 1% wealth tax 'only for a select group' can easily become later a 1% (or higher) wealth tax 'for a less select group'.
Good! It should still be higher!
There's nothing more tone deaf than an uber wealthy man arguing he shouldn't pay more in taxes to the system that allows him to be uber wealthy and to be deliberately misleading at the same time.
If you’re lucky enough that you don’t need to work for your income, you should be taxed. A lot. How much? Enough to make sure you don’t become so rich that your children don’t need to work.
Being rich is not fair, it’s very rarely deserved, and it needs to be taxed unfairly.
1. Most people do not derive even a fraction of their income from interest on wealth.
2. Earning income from interest on wealth requires zero effort. That isn't true for salaries.
3. Income and wealth are totally different things. You can find a way to equate them in one contrived example but there are so many other factors involved in the real world.
Billionaires gonna billionaire.
> None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Income tax is progressive. So, not really.
The "example" discussing paying income tax on your $5 of return on your capital is similar nonsense. You don't pay anything on that gain unless it's income, which it isn't unless it's realized. So (assuming the various parameters of a wealth tax meant this mythical $100 person would indeed pay a wealth tax), the comparison is between zero income tax and some nonzero amount of wealth tax.
> None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Plenty of politicians (e.g., Bernie Sanders, AOC) have pointed out that the top income tax rate during the 1950s was over 90%, and have suggested raising rates back or near to that level, which would be well more than a 20% increase in the income tax rate.
Off the top of my head:
* 'Income' generated from loans using shares pledged as collateral should be treated the same as if you sold those shares.
* Someone receiving an inheritance over x million dollars (carve out 95% of family farms and small businesses if you want), should pay taxes on it as if it were any other windfall
* Donor advised funds should have a 5% distribution / yr requirement, same as private foundations
* capital gains should probably be treated as regular income. I have no idea why 50k in gains on INTC is somehow privileged over the salary paid to a roofer working in the hot sun.
Who is the single largest taxpayer in US history? I'll wait while you google it.
To say the wealthy can afford to radically optimize taxes and that our system taxes capital much more lightly than labor seems accurate to me, but I just haven't seen offers for "pay zero tax for all your life" from high grade professionals.
If US citizens want that, they generally give up their citizenship, pay their exit tax, and live in a low tax jurisdiction. I do know people like this, and they are very unlike the 0.1% types you're referring to here, and they've given up the benefits of being a US citizen in exchange for their preferred lifestyle. (And paid a mark to market exit tax on all assets on their way out of the country)
Bezos did, in 2007.
https://www.propublica.org/article/the-secret-irs-files-trov...
> Consider Bezos’ 2007, one of the years he paid zero in federal income taxes. Amazon’s stock more than doubled. Bezos’ fortune leapt $3.8 billion, according to Forbes, whose wealth estimates are widely cited. How did a person enjoying that sort of wealth explosion end up paying no income tax?
Or the President (now permanently immune from audit, incidentally):
https://www.nytimes.com/interactive/2020/09/27/us/donald-tru...
> He had paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made.
On paper, I'm sure. Let's not pretend that's reality.
Continuing to accept this person as a credible source of information isnt a reasonable thing to do.
The median net worth in the US is ~$200k. A lot of middle-class folks have likely paid more taxes in their lifetime than their entire net worth.
But they certainly get clever about techniques to keep it as low as possible, for shockingly low effective tax rates.
https://www.propublica.org/article/the-secret-irs-files-trov... has a whole bunch of examples.
The propublica number was like 4.5% or so if I recall, and does not count the taxes paid by the companies these people owned, nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds, nor does it reduce for effective wealth, nor does it reduce for unutilized wealth, e.g. if the stock price goes up and you don't sell or borrow against it, have you received benefit that makes sense to tax?
But if you net all those out and told me the effective rate was 12-15% on utilized capital, I wouldn't be surprised. I would be really surprised if it was $0 though.
Why should they? Should I get to count the taxes paid by my local water treatment plant workers because I shit in the toilet?
> nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds
They get taxed on that!
The funds don't get taxed on unrealized gains. Nor do the pensioners. They do get taxed on spendable income they get out of the fund's investments, just like the other owners of the company.
> [Should we look at the benefits to society of corporations paying taxes?]
I think so.
in other words, you are talking to someone in the stupid-wealthy class. you are not going to convince them of anything -- especially not that billionaires should pay more.
its like trying to convince Jon Moore (Phillip Morris USA CEO) that cigarettes should be banned.
The bottom of the list would be anyone who works for the state, as they are a massive net tax negative, followed by benefits recipients and pensioners, followed by low income workers, followed finally by the middle classes.
Are you sure you want that to be your guiding principle?
Get rid of the billionaire and the taxes still get paid.
Why do we credit those taxes to the billionaire rather than the employees?
> Each 1% of wealth tax is equivalent to 20% of income tax.
Mathematically sound.
> Politicians understand that an additional 20% income tax would be a lot. And indeed a US state that added 20% to its top income tax rate would have extraordinarily high taxes.
That's the point.
> In the median case, US state politicians talking about adding a "mere 1%" wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.
Not "all of the residents". Specifically the ultra wealthy that have a billion dollars. 20% at that point, is 20% of lots. You still have lots left over.
Mathematical fairness isn't the point, which is one reason there isn't a flat tax rate.
> Mathematically sound.
Don't most wealth taxes that have been proposed have a certain level of wealth that you pay no taxes on? If so, doesn't that make this at least partially incorrect?
Maybe I'm missing something, but if I have $100 and have to pay a 1% wealth tax on it then sure that's roughly 20%. If I have $100, but I only have to pay a 1% wealth tax on everything over $90 that's more like a 2% income tax.
Income (or revenue), what is left over freom the paycheque (profits) and net worth (market cap) - applying a simple ratio to companies of revenue to market cap doesnt work, why would applying a simple ratio of income to net worth for people who live hand to mouth and billionaires work any better.
It's not about companies - it's about showing an equivalency between a Piketty-style tax of wealth setup and what we're used to thinking about in the US, an income-style tax setup on individuals.
Americans really struggle to understand how tax work outside of their country.
First, the whole premise of income to wealth tax equivalence is non sensical, because interests are rarely literally in the form of coupons/payments, but rather left as compounding value. This is the whole point of share buybacks, reinvested ETFs, etc; and Paul Graham knows that of course. If you are rich, you don't need the cash of your investments, so you don't want to trigger taxable events, so you are effectively at 0% tax rate and just let it compound.
> Currently the country with the highest marginal income tax rate is Denmark, at 60.5%
This is the most BS statement ever, and would only be believable to Americans with no understanding of how foreign country do taxes. Which is at best very naive of him, or highly disingenuous. This is because "tax" in the US is essentially employee paid, whereas most other countries split the bill between employer and employee at a higher proportion. The result is the same, but the employee part only is labeled "tax", the employer part being often called "contribution".
When comparing across countries, you have to look at the tax wedge (super gross to net), not the tax rate (gross to net).
And if you do that, well the US has a lower tax wedge than even the most generous European countries (Ireland).
In France for instance, the tax wedge is close to 70% for the higher bracket. Yes, that means if your employer pays $100, you get $30. And that's in a country with 20% VAT compared to US ~8%.
Not to mention, except super rich little little business-hub countries (Hong Kong, Singapore, Ireland, Malta, Cayman Islands, etc), pretty much all _developed_ countries have some form of wealth tax, it's just common sense.
Source: The Second Estate by Ray Madoff (2025)
The other major assumption is that billionaires are rich because of something they did or are good at doing, better than anyone else could in their position. There is no challenge to this assumption in the text.
This belies a deep disconnect with reality, and an unwillingness to confront the idea that maybe excessive inequality is caused by too much concentrated power changing the rules to further concentrate power. Taxation is just one mechanism to combat this tendency; another way is the guillotine.
Because they want to take back what was taken from them.
There isn't a level of competence or ability that shifts the answer to the morality of power. There's not an earning threshold you can cross that entitles you to own a fiefdom or a level of genius that grants you moral right to dictate how others use your inventions. We create democracy and grant everyone an equal vote in matters that impact their lives. The economy gets layered on top to allocate resources efficiently. If the economy is deciding that some people live like kings and some like serfs, then we've failed to construct an economy that lives up to liberal values.
I want to heavily tax the ultra rich because money is power, and vast inequality in power is undemocratic and just plain dangerous.
I don't really care if somebody buys ten massive yachts. It's annoying and seems wasteful but it's not worth too much of my attention.
But it's another matter if somebody buys politicians, laws, social change. The issue with someone like Elon Musk isn't that he owns a private jet, or even that he owns a rocket company, it's that he bought his way to taking an axe to major parts of our government by pouring unimaginable amounts of money into buying a presidential election.
It's not about grabbing stuff, it's about preventing people from accumulating too much power. The ultra-wealthy should be heavily taxed for the same reason the President shouldn't be given unlimited power to do whatever they want.
When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power. But when it is e.g printing money the calculus is massively different.
I take it you've never encountered a homeowner's association.
Money is that power.
You cannot have billionaires and them not be immensely, structurally powerful.
That's the entire point of capitalism, that resources, including labor, be directed by those with capital.
Believing you can have a single human being in control of a non-negligible percentage of all resources of a country, and they wont somehow be actually powerful or influential is moronic.
Taking the power away from billionaires literally IS taking their money.
That’s the stupidest thing I’ve ever read. Power is power. Members of the Communist Party in the USSR were as wealthy as their subjects, their power differential was enormous.
Of course, you probably mean to remove their power centers without removing their money. But that doesn't make any sense. Money is power. You can't remove the power from a billionaire and leave them a billionaire.
The comparison to _literal super heroes_ from comic books definitely made me roll my eyes
My problem with billionaires is that their gains are in part from exploitation. I just don't believe that one person can actually produce billions of dollars of value all by themselves. They extract that value from other people and our whole system is structured to promote this.
There are probably millions people who could have been Mark Zuckerberg or Bill Gates or Elon Musk or whoever. A million people with the right skills who maybe were born a few years too late or didn't have the right connections or just didn't have rich enough parents. It's a little too "winner take all" for my taste. And then those few winners end up having disproportionate affect on politics and issues that affect us all. It's just not a great system.
There are certainly sometimes unusual abilities in a positive sense, but the common case likely falls closer to having an unusual degree of sociopathy. It is unclear to me how else one could view the state of perfectly solvable human suffering in the world and continue to prioritize accumulating wealth over all else, moreover and overwhelmingly at the cost of being party to the suffering itself. Indeed, I suspect having such callous disregard for your fellow person is prerequisite to encountering these unfathomable sums.
When people with an intact capacity for empathy come into huge amounts of money I think it's far more common to give a large proportion of it away (say, Jane Street workers have a culture of doing this). And thus you only stay 'comfortably' wealthy, rather than accumulating so much that it distorts society around your singular existence.
If you count luck, maybe.
> But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be just as eager to tax them to reduce unfair inequality?
Yes, I would.
> But if those few very rich folks had real physical super-powers, we would be a lot more afraid of their simple physical retaliation. They might be very effective at physically resisting our attempts to take their stuff.
Yes, and this is why a lot of superhero movies involve fighting the greedy superpowered villain.
And I would still want to tax Superman.
An element of fairness.
> Why can't you just leave people be?
Because they're making employees piss in bottles to survive the workday? They're buying up the representatives who are supposed to represent me? They're driving services we rely on into austerity? They get bailouts when they fuck up?
Why not? They already did it.