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.
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.
A wealth tax of 1% is equivalent to an income tax of 20% on capital gains.
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?
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.
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!
How is that paying for food? Insurance? Electricity? Gasoline? Health care? Gifts and charity? Or even taxes?
So complaining about having to contribute to the society that gave the conditions for your vast wealth is going to get you 0 sympathy
That can be quite a lot of people on HN, and also including FIRE people, so I can see why it's unpopular.
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.
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.
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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.
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...
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.
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.
> 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.
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.
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.
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
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.
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.
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.
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%”
$tax_paid = max($income_tax_liability + $capital_gain_tax_liability, $wealth_tax_liability)
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?
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.
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).
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...
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 principle is simple: if you are spending the money, your gains are realized, and you should pay taxes.
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.
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?
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.
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.
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.
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Here is a cool website showing Wealth, shown to scale.
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.
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.
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.
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 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.
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.
[1] https://press.uchicago.edu/ucp/books/book/chicago/S/bo256019...
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- 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?
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
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.
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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.
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.
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!
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.
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.
https://www.propublica.org/article/the-secret-irs-files-trov...
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.
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.
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.
- 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.
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.
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.
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.
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.
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.
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.
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.
> 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...
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.
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.
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.
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.
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.
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.
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.
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.
> 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.
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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.
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> 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.
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)
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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.
Both are important reasons for taxes.
"We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we cannot have both." (often attributed to Louis Brandeis, though he probably never said exactly the quote)
Taxation is one of the primary tools for avoiding destructive levels of wealth concentration.
Of course, the wealthy decry this as unfair wealth redistribution but all governments engage in constant wealth redistribution.
In the US we happen to have decided (since the Reagan era) that through increasingly regressive taxes the redistribution will almost always function upwards, ultimately resulting in the oligarchical dismantling of our government that we find ourselves in today.
> 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.
(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.
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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...
Economy's doing badly? Rent increases because costs and taxes for the landlord are higher.
UBI? Rent increases because people have more disposable income.
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The secret to the infinite money glitch is to maintain a much lower supply than the demand, and to concentrate jobs within a small area
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
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…
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.
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.
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.
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.
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.
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.
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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...
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.
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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.
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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.
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?
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.
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...
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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.
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.
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!"
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.
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.
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.
I think innovation is a tricky thing to measure, firstly. Certainly the US benefits massively from the world's largest capital markets, sucking in foreign money from all over the world. Is that innovation? is it stock price, or is it the work of all the academics, engineers, tech people etc?
Like, Europe (and the EU at the time) is where Deepmind came from, without which we'd be vanishingly unlikely to have seen Transformers/LLMs etc. Nokia basically made mobile phones a global category. ASML provides something that neither the US nor China can match.
And just to note, property taxes make up a much larger proportion of state revenue in the US than in the EU, if that's how you're measuring things.
And i didn't say anything about how great the EU was, I just noted that the US & the EU make up most of the richest countries in the world, where rich people like to live, so a wealth tax would probably work relatively effectively at that level.
Obviously that's not going to happen, but land and property taxes could get us a lot of the way there, with much less issues with capital flight and tax collection.
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.
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.
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...
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.
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.
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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.
> 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.
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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.
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?
But consider 5 people wanting to buy Richards 1 car.
I think that’s actually what they meant… although I agree w you.
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?
I guess the simplest approach is, if you're making money, it should be taxed fairly, regardless of how you're making it.
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
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.
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"!
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.
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!"
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We are already there in US. Real estate is already controlled by companies, and rental costs are through the roof.
>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.
These guys have whole offices working to figure out how their day to day expenses can be converted into stuff like "selling a business." ;-)
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.
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.
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.
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.
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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?
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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
In order to pay zero taxes you’d need to know you’re about to die. Until then your debt would be growing faster than your wealth.
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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.
(Lutnick donated $5M to House GOP super PAC ahead of Epstein deposition)
I'd put that in the broader category of doing something the president/politician likes in hopes of gaining favor.
With this administration there are even better ways to gain influence and money by doing things the president likes than donating to inauguration ceremonies. Become a known staunch Trump advocate, and you could become the Secretary of Defense, FBI Deputy Director, or head of DOGE. No experience necessary.
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.
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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.
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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.
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.
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...
No.
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...
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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.
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.
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.
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.
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).
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)
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.
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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?
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Get rid of the billionaire and the taxes still get paid.
Why do we credit those taxes to the billionaire rather than the employees?
> 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.
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.
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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.
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.
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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?
The government's monopoly on punitive violence isn't only intended for the peasantry...
If you're not using your funding to support your goals, thats corruption.
People can vote that a new tax should be levied on billionaires, but can't vote how those billionaires will react to the tax. Moving out of state is one option (see Larry Page, Sergey Brin, etc). Hiring armies of lawyers to challenge any wealth assessment is another. Litigating to the Supreme Court yet another. I'm not a billionaire and never will be, but if I can think of these few ideas, they can think of 100 times more.
Considering the alternative for them over the past millennia has been, inevitably that they get caught, hanged, quartered, beaten and other various violent methods: yes, they should smile, they're buying their lives with all that money :)
Threatening violence to get what you want always ends with you being out-violenced by a bigger thug.
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.
[0] https://en.wikipedia.org/wiki/Resource#Tangible_versus_intan...
Ironically the communists have managed to out-greed the capitalists through this one fantastical concepts. Capitalists accept that they need to pay people to get their inputs and try to make the most of it one way or another. Communists are kept up at night at by the thought that somebody else may have made a penny off of their labor, and think that they need to murder them for it.
Yes. Focus on outcomes.
Pick a target amount of inequity. Act to hit that goal. Adjust as needed.
For example, I advocate restoring our gini coefficient from the current 0.48 (?) back to 1970s era 0.35. People smarter than me will figure out how to best measure inequity, ideal targets, and implementation details.
Arguing about all the misc tax rates, purposefully ignoring the macro, is an obfuscation strategy to prevent taking any action at all. Straight out of the CIA's field guide on sabotage.
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.
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?
Property taxes are not wealth taxes, but fees for services rendered by the local government. Both home owners and renters (may) benefit from those fees.
Either way, if I rent out my house and pull in $5k/mo but spend $2k/mo on principal, $2k/mo on interest, and $1.5k/mo on miscellaneous costs, that $500 "loss" translates into me paying $500 for $2k in principal value, all while gaining the benefits of solid inflation-indexed real estate growth AND assistance up the amortization schedule. So even cash-flow negative rentals are usually pretty long-run lucrative.
Just because landlords don't clear their monthly expenses does not mean that the tenant's rent is not going to cover (a portion of) property taxes.
It like me buying a laptop and saying I pay for the electricity in the factory in China.
While it’s true the money helps pay for it, it’s not a pss through expense.
I assume that rising property values make the endeavor worthwhile?
tone: I am not being snarky here. Genuine question.
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.
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.
The commonly scapegoated cities in the United States are not experiencing third world conditions. Appalachia is experiencing third world conditions. Hollowed out rust belt cities in the Midwest are experiencing third world conditions. These areas are not run by lefty politicians. The United States has a systemic problem, not a local one.
And yes, the systemic problem is that there are a tiny number of ultra wealthy people with wildly outsized influence on the government of the United States, doing everything they can to reduce the amount they need to pay in taxes while simultaneously ensuring they extract the maximum amount of profit from the US government's wildly excessive expenditures.
You can tell this is true because property values have plummeted and nobody wants to live there any more, right? Or, since that’s not true at all, possibly the people who craft the media you consume are not being fully honest.
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.
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?
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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 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.
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.
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.
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.
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.
This is just patently false. The highest marginal income tax rate is 37%.
If you've read articles claiming that billionaires pay some absurdly low tax rate, those articles are counting their capital gains as income. Which is just a flat out lie, since those gains don't actually get taxed until the gains are realized, and the value of that capital can go down.
Re: 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.
You croak, your heirs become the beneficiaries of the trust. Rinse, repeat.
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.
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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!)
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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?
"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-...
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.
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.
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.
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?
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.
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.
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.
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.
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.
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.
Obviously every person tries to avoid taxes - you don’t have to be rich do do that - but the idea that there are magic banks that loan money and don’t mind waiting decades to get their money back is some kind of weird propaganda.
>...I suspect you are simplifying what's happening quite a bit
People keep saying “buy, borrow, die” as if it is really that simple - like it is that one simple trick that banks and the IRS hate.
>...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) ...
Your scenario is not “buy, borrow, die” as a core concept of that meme is you take advantage of the stepped-up basis upon death and the estate pays the interest. With your scenario the person imght have an interest payment of 50 million + the original 100 million, so now they have to sell enough stock to pay the 150 million and the 23-36% taxes on the gain (depending on the state they are located in - obviously different for countries other than the USA). That isn’t estate planning, that is hoping your stocks really go up and that the loan doesn’t come due in a downturn like 2008.
>"oh no my art lost value!"
That trick where for example, where someone would donate some painting to a museum and pay someone to say the donation is with N million, might have worked at some point in time, but that kind of thing is pretty much guaranteed to get an audit these days from what I have read and I would be very careful trying to do that.
A variant of the "buy, borrow, die" which some claim is done is basically that a bank essentially becomes a minority shareholder of the estate for giving the money. Though I recall one CPA who dealt in this area replying that none of the family offices he knew would likely be interested in this approach - people like Goldman Sachs are not your friends.
Who is forcing anyone to sell at rock bottom?
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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.
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Setting aside money to pay for a relative who can't provide for themselves, protecting assets if you are professional who faces high chance of being sued (e.g. surgeon), providing for children from a first marriage if you get married and predecease your second spouse.
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.)
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.
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.
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.
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Why not? They already did it.
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And no, I do not believe that Musk's flabby arms or Bezos' shiny head are a threat of bigger violence to me anyways.
In humanity, being the alpha chimp, you can actually just run away from the tribe with all your wealth instead of outright die and form a new identity and start a life elsewhere and change your last name and go somewhere not well known, and if you and your family does this for enough generations you are forgotten.
I think this might explain the rotten apples at the tip-top of our industrial/societal wealth classes. I think they are these people, played out over generations, having somehow survived the system that used to make it impossible to do this when at the chimp level (or even medieval maybe, maybe this new form of evasion only arose in the industrial age).
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.
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.
He owed more tax than his net worth, lost his house, everything, and wound up in a trailer.
He never saw the money he was taxed on.
> bad faith arguments
A person's net worth can have wild gyrations on a daily basis. It's not unusual for a stock to move 10% in a few hours. MSFT dropped something like a third of its value last year. What something is "worth" is an utterly arbitrary notion, and basing taxes on that is inevitably unfair an inequitable. (A lot of effort and handwaving is done by accountants trying to guess at what something is "worth".) Heck, what is your house "worth"? Do you agree with the tax assessor? I once told the assessor that if he believed my house was worth what he assessed it at, I'd sell it to him at a 10% discount and he can flip it for what he thought it was worth. He wouldn't take the deal.
With taxes on income, that is fairly well understood and can be accounted for to the dollar.
The next day, the stock could tank.
BTW, do you think that a mortgage on a house should be taxed as "income"? How about credit card debt? Is that also "income"?
> When they die the assets are passed to heirs and stepped up to their current value as the new cost basis...no taxes paid on the capital gains
And then your entire estate is taxed at 40%.
> and that loan is not taxed
Of course it is not taxed. A loan is not income, and is not an asset. It's a liability.
> Because the collateralized asset stays invested the entire time, it usually grows faster than the interest that will eventually be paid.
The higher the return, the higher the risk. It is normal practice to borrow money to invest it hoping for higher returns than the interest. It is not a scam.
Let’s say you put $20M as collateral for an SBLOC loan. The collateral amount and grows at ≥7%/year and you’re charged interest on your loan of 4%/year. You pull $1M/year that goes into the loan. This goes on for 40 years.
At death the cost basis is stepped up to the value at the time of death. All capital gains are erased.
Next, the loan is paid back before any distribution to heirs. This is done at 0% tax rate because it happens before any distribution to heirs.
Finally, the heirs get what remains and any inheritance tax applies to that.
So you got to live with no income tax related to capital gains. The capital gains are wiped out upon death.
Had you paid taxes along the way, you’d leave about $37M to your heirs (and none of that would be touched by inheritance tax).
If you did the SBLOC strategy, The portfolio grew to around $300M. The loan principal and interest are around $100M. Taxes are $64M. Your heirs get to keep $136M.
There’s less risk since there is never any sales over a longer period, so the returns approach the average.
There’s more tax paid by the SBLOC strategy, it just happens very acutely instead of over time. The heirs are also left with significantly more.
Right. And then 40% estate taxes are applied.
All you're saying is that you can borrow money and invest it and hopefully you make more off of the investment than the interest on the money.
A loan is not income. After all, when you borrow a half million to buy a house, you aren't charged income tax on that. You also are not charged income tax on stuff you charged on your credit card.
Borrowing on margin is no different.
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.
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.
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.
Van life, couch surfing, living in hotels: these are the options available to them. And it's obviously not so simple as "roughing it" for a few months, as they're essentially forced to sell or abandon most of their personal property.
What you're talking about it taking people in those dire straits and forcing them to pay MORE money just to keep a roof over their heads, while millions of wealthier Americans own multiple properties where they and their family are the only residents. It's ridiculous.
>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.
I am, once again, going to state that you don't seem to understand the topic at hand.
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?
Building jets and houses creates jobs though. A more likely outcome of a consumption tax is that wealthy people simply spend less.
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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.
> 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.
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.
Not going to be sympathetic to someone YOLO'ing their compensation/taxes.
Restricted stock is taxed at vesting, unless you choose to be taxed when they're granted to you. Ditto since 1969.
RSUs are taxed at vesting/settlement as ordinary income. This was pretty much the case since 1969 as well, but fully confirmed in 2009.
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.