4 ms·

Why would a wealth tax be a bad thing?

by throwaway123x2 7y ago

zip1234 7y ago
Where does the money go?
- throwaway123x2 7y ago
  Healthcare, education, infrastructure... all of which badly need funding.
  - cdiddy2 7y ago
    infrastructure I agree, but we should just move funds to do that. healthcare and education are both already spending way too much on. healthcare is pretty obvious, but education as well we spend more than most other countries https://www.theguardian.com/us-news/2018/sep/07/us-education-spending-finland-south-korea https://www.theguardian.com/us-news/2018/sep/07/us-education...
    - docbrown 7y ago
      > healthcare and education are both already spending way too much on. Huh? Currently on mobile so I don’t have the CBO file to link but I will when I get to my PC. Anyway, Healthcare spending is not actually “too much” and instead is too low. When we expanded Medicaid and implemented the ACA, estimated costs were below actual cost by hundreds of billions to one trillion dollars due to the unknown number of people accessing healthcare. Healthcare is the one area in which there is not enough money being spent on lower income brackets and Medicaid/Medicare users.
  - john_moscow 7y ago
    So colleges and hospitals will finally have more administrators than students/patients? ([0], but you can google more). I think, the problem is not the lack of funding, but terrible inefficiency and lack of transparency. [0] https://www.aei.org/carpe-diem/chart-of-the-day-administrative-bloat-in-us-public-schools/ https://www.aei.org/carpe-diem/chart-of-the-day-administrati...
    - drewbug01 7y ago
      > So colleges and hospitals will finally have more administrators than students/patients? ([0], but you can google more). I think, the problem is not the lack of funding, but terrible inefficiency and lack of transparency. This is one of the proposed ways to pay for things like universal health care. Additionally, your citation (https://www.aei.org/carpe-diem/chart-of-the-day-administrative-bloat-in-us-public-schools/ https://www.aei.org/carpe-diem/chart-of-the-day-administrati...) is about public schools, not colleges and hospitals as you suggest.
    - bryanlarsen 7y ago
      Medicare for all will drastically reduce the amount of administration for health care.
      - john_moscow 7y ago
        That's a very good question. IIRC, the current mess with inflated medical bills started when Medicare placed caps on some fees that were below the actual cost. So the hospitals had to recover the difference from those who are not covered. This killed transparency, promoting even more cost inflation through bullshit admin positions. So now it's a tough spot. On once hand, if you apply the Medicare caps universally, many hospitals will go belly up. If you remove the caps and let them bill whatever they want, you will end up with a rapidly growing hole in the budget. I would say, instead we need a solid system of rules on what you can and cannot bill, some auditing body and a way for the patients to dispute inflated bills at an affordable cost. Whether it goes out-of-pocket or from a tax-filled fund is IMHO not as important as the cost audit/dispute mechanisms.
        bryanlarsen 7y ago
        > Whether it goes out-of-pocket or from a tax-filled fund is IMHO not as important as the cost audit/dispute mechanisms. IOW, more administration. Didn't this thread start with a complaint about administrative cost? There are many examples of successful universal medical systems with different trade-offs that have been refined over the last 50 years. Canada, Britain, Germany, Switzerland, etc. Choose the set of trade-offs you prefer and copy it; reinventing the wheel is likely not going to end well.
  - m0zg 7y ago
    Two of these three things provably don't need even more money poured into them - money just needs to be spent more efficiently. In fact, they'd probably benefit from cutting some of the spending: many bloodsucking intermediaries will fall off and move to something else. Infrastructure could use a funding bump, I agree.
  - the-dude 7y ago
    Why not to the military?
  - mynameishere 7y ago
    Healthcare, at least in the US, needs about 80 percent less "funding". The whole problem is that costs are out of control. Not that taxpayers are being insufficiently raped.
  - zip1234 7y ago
    When people say infrastructure they usually mean roads. Roads are perhaps overextended already and making more or bigger roads ends up subsidizing urban sprawl. Anyways, outside of interstates, roads could just be handled entirely at the state or local level and paid for via use taxes. If we are trying to combat global warming, not building more or bigger roads is an easy place to start.
    - yellowapple 7y ago
      > When people say infrastructure they usually mean roads. [citation needed] Granted, I can only speak for myself, but when I hear the word "infrastructure" I'm picturing a smörgåsbord of different things: - Roads - Bridges - Tunnels - Rail lines - Canals - Levees - Electrical delivery (power lines, distribution boxes, etc.) - Telecommunications delivery (data lines, radio towers, etc.) - Fuel delivery (pipelines, refineries, storage, etc.) - Water delivery (pipelines, aqueducts, reservoirs, wells, desalination plants, etc.) - etc. This is consistent with Wikipedia's definition of "hard infrastructure" (as opposed to "soft infrastructure", which focuses on institutional structures/organizations).
  - WoodenChair 7y ago
    > Healthcare, education, infrastructure... all of which badly need funding. Education is poorly funded? We spend more per student than any country except Norway as of 2015: https://nces.ed.gov/programs/coe/indicator_cmd.asp https://nces.ed.gov/programs/coe/indicator_cmd.asp The education system is not poorly funded. The money is poorly and inequitably allocated, and the system is poorly run.
    - docbrown 7y ago
      > The education system is not poorly funded. Every SpecialEd teacher and student would politely disagree with you. Not every aspect of education is funded differently, even when factoring i’m better budget management.
      - zip1234 7y ago
        That might just be an example of poorly allocated and more money should go towards special ed.
      - jki275 7y ago
        That's an example of exactly what the comment you're replying to said.
  - foogazi 7y ago
    How does that help people that can’t afford to pay for everyday things?
    - w1nst0nsm1th 7y ago
      By providing them a job with a decent living wage.
    - davidcbc 7y ago
      Just off the top of my head... By not bankrupting them as soon as they get sick. By giving them an opportunity to go to college and improve their economic standing without taking on six figures of debt. By giving them access to affordable reliable public transportation so they don't have to deal with the huge expense of owning a car.
rubyn00bie 7y ago
It would not be. It'd mean the rich are finally paying what they owe for all the externalities they currently get for "free," the rich in America get a free ride by not paying what they owe for what they get access to... As my econ professors used to say, in America for a long while now, we're in fact a socialist country already... it just happens to be "socialism for the rich."
JumpCrisscross 7y ago
> Why would a wealth tax be a bad thing? Valuing assets is complicated; for some assets, it's impossible. Furthermore, selling assets is complicated; for some assets, it's impossible. That is the logic behind taxing transactions. The only time we know what something is worth is at the instant it transacts. About the only time we know how liquid something is, is at the instant it transacts. For a facile example, consider the founder of a private company. They now have to sell 2% of their position each year, every year. That's a lot of work! And it gets worse if one considers a bootstrapped business, where there aren't lots of shareholders to sell to and there isn't a 409A valuation.
- Traster 7y ago
  Well, we can create a wealth tax that doesn't have that problem. I'd wager there aren't many billionaires who actually are primarily invested in illiquid assets. I'd say the larger objection is the principle that we shouldn't be multiply taxing people. A wealth tax basically means re-taxing the same wealth every year.
  - mquander 7y ago
    I'd wager there aren't many billionaires who actually are primarily invested in illiquid assets. If that's true now, it sure won't be true for long after you pass the tax!
  - JumpCrisscross 7y ago
    > we can create a wealth tax that doesn't have that problem It's fundamental to the problem of valuation, so probably not. > there aren't many billionaires who actually are primarily invested in illiquid assets Most assets are illiquid, e.g. real estate. To be clear, as a capital-markets guy, I love the idea of forcing more of the economy into the financial system. But as an American, it's totally unnecessary. Increase the take on transactions and remove the loopholes. Taxing wealth just creates artificial transactions to be taxed.
    - Traster 7y ago
maneesh 7y ago
Here's a thought experiment: You're a HN reader. You have had ideas to build a startup that can help the world solve a problem. So you create it. You decide to fundraise, and that capital will help you succeed. You pay yourself a salary of $100,000/year, and put everything else into the company. You raise $4 MM in a seed round, valuing your company at $20MM. 10-months later, your company is doubling growth YoY again, has a solid SAAS model, and low churn. You decide to raise again. This time, you raise some more money for your company, and you're now valued at 70MM. About a year later, you're growing just as fast -- but you see a new competitor is entering the ranks. It's time to scale even faster. So you go and raise again. In a fantastic series-B round, spread across TechCrunch and HN, you raise again, at a $200 MM valuation. As the sole founder, you now own 50% of the company -- making you worth $100MM. Your salary has remained constant at $100,000/year though. And then the wealth tax hits. The new wealth tax says you're responsible to pay an annual tax of 2% on all assets over $50MM. Starting this year. Which means that you, as a private founder with no liquid assets, are now responsible for $50MM * 2% = $1MM in taxes this year. Even though your liquid income is $100,000, and you have barely that much in your bank account -- you need to come up with $1,000,000 in liquid cash this year. And since your valuation probably won't go down, it'll be at least that much, every year, for the rest of your life, until you shutter the company. So you go and try to liquidate your shares. But unfortunately, it's not a public company --- and it's not that easy finding private secondary-market buyers willing to buy the half of the founder's entire stake. So what do you do now? As far as I can tell, this is how the wealth tax would work for startup founders.
- jdkee 7y ago
  1. Why wouldn’t a private secondary market appear in response to the need for wealth tax share liquidation? It seems little different from a venture capital operation. 2. If you are worth $100MM you should be able to borrow 1% annually of your net worth until you can liquidate your shares.
- steve19 7y ago
  What you do is what all the billionaires do: take out loans backed by you assets rather than sell equity. In this scenario the banks start profiting from startups, probably more in interest than the govt will get taxes.
john_moscow 7y ago
Because it will create a major incentive to take your money out of the economy and move it to a different jurisdiction that doesn't want a piece of it.
foogazi 7y ago
Do we even need a wealth tax? Whatever you have you have already paid taxes on - why does the government need to take more?
- w1nst0nsm1th 7y ago
  To fund education and to avoid people to be crippled by college debts at 24. To fund healthcare and to avoid diabetics to go bankrupt and die because they saved on insulin shot ; or all the people who have to take a second mortgage for basic cancer treatment, if they can, and finally go also bankrupt. To fund crippling public infrastructure and investment. To fund cultural events and promote art and diversity beside that culturaly dead hollywood movies pipeline ; scientific research ; libraries ; promote intelligent television programming not only motivated by a quick buck by pushing deep in your throat stupid ads for Coca-Cola and their fake, Mac Donald and other companies responsible for promoting detrimental products for health or envirronement ; to fund compagn to raise awareness on foundamental issues like global warming and stop the spread of misinformation by corporate chills or religious nutjobs. The list go on and on... All these public expense are the source of wealth redistribution.
  - foogazi 7y ago
    > To fund education and to avoid people to be crippled by college debts at 24 Why are people crippled by college debts at 24?
Grue3 7y ago
Let me rephrase: why is punishing people for success a bad thing? Because it rewards mediocrity.

Why would a wealth tax be a bad thing?

zip1234 7y ago

Where does the money go?

throwaway123x2 7y ago
Healthcare, education, infrastructure... all of which badly need funding.
- cdiddy2 7y ago
  infrastructure I agree, but we should just move funds to do that. healthcare and education are both already spending way too much on. healthcare is pretty obvious, but education as well we spend more than most other countries https://www.theguardian.com/us-news/2018/sep/07/us-education-spending-finland-south-korea https://www.theguardian.com/us-news/2018/sep/07/us-education...
  - docbrown 7y ago
    > healthcare and education are both already spending way too much on. Huh? Currently on mobile so I don’t have the CBO file to link but I will when I get to my PC. Anyway, Healthcare spending is not actually “too much” and instead is too low. When we expanded Medicaid and implemented the ACA, estimated costs were below actual cost by hundreds of billions to one trillion dollars due to the unknown number of people accessing healthcare. Healthcare is the one area in which there is not enough money being spent on lower income brackets and Medicaid/Medicare users.
- john_moscow 7y ago
  So colleges and hospitals will finally have more administrators than students/patients? ([0], but you can google more). I think, the problem is not the lack of funding, but terrible inefficiency and lack of transparency. [0] https://www.aei.org/carpe-diem/chart-of-the-day-administrative-bloat-in-us-public-schools/ https://www.aei.org/carpe-diem/chart-of-the-day-administrati...
  - drewbug01 7y ago
    > So colleges and hospitals will finally have more administrators than students/patients? ([0], but you can google more). I think, the problem is not the lack of funding, but terrible inefficiency and lack of transparency. This is one of the proposed ways to pay for things like universal health care. Additionally, your citation (https://www.aei.org/carpe-diem/chart-of-the-day-administrative-bloat-in-us-public-schools/ https://www.aei.org/carpe-diem/chart-of-the-day-administrati...) is about public schools, not colleges and hospitals as you suggest.
  - bryanlarsen 7y ago
    Medicare for all will drastically reduce the amount of administration for health care.
    - john_moscow 7y ago
      That's a very good question. IIRC, the current mess with inflated medical bills started when Medicare placed caps on some fees that were below the actual cost. So the hospitals had to recover the difference from those who are not covered. This killed transparency, promoting even more cost inflation through bullshit admin positions. So now it's a tough spot. On once hand, if you apply the Medicare caps universally, many hospitals will go belly up. If you remove the caps and let them bill whatever they want, you will end up with a rapidly growing hole in the budget. I would say, instead we need a solid system of rules on what you can and cannot bill, some auditing body and a way for the patients to dispute inflated bills at an affordable cost. Whether it goes out-of-pocket or from a tax-filled fund is IMHO not as important as the cost audit/dispute mechanisms.
      - bryanlarsen 7y ago
        > Whether it goes out-of-pocket or from a tax-filled fund is IMHO not as important as the cost audit/dispute mechanisms. IOW, more administration. Didn't this thread start with a complaint about administrative cost? There are many examples of successful universal medical systems with different trade-offs that have been refined over the last 50 years. Canada, Britain, Germany, Switzerland, etc. Choose the set of trade-offs you prefer and copy it; reinventing the wheel is likely not going to end well.
- m0zg 7y ago
  Two of these three things provably don't need even more money poured into them - money just needs to be spent more efficiently. In fact, they'd probably benefit from cutting some of the spending: many bloodsucking intermediaries will fall off and move to something else. Infrastructure could use a funding bump, I agree.
- the-dude 7y ago
  Why not to the military?
- mynameishere 7y ago
  Healthcare, at least in the US, needs about 80 percent less "funding". The whole problem is that costs are out of control. Not that taxpayers are being insufficiently raped.
- zip1234 7y ago
  When people say infrastructure they usually mean roads. Roads are perhaps overextended already and making more or bigger roads ends up subsidizing urban sprawl. Anyways, outside of interstates, roads could just be handled entirely at the state or local level and paid for via use taxes. If we are trying to combat global warming, not building more or bigger roads is an easy place to start.
  - yellowapple 7y ago
    > When people say infrastructure they usually mean roads. [citation needed] Granted, I can only speak for myself, but when I hear the word "infrastructure" I'm picturing a smörgåsbord of different things: - Roads - Bridges - Tunnels - Rail lines - Canals - Levees - Electrical delivery (power lines, distribution boxes, etc.) - Telecommunications delivery (data lines, radio towers, etc.) - Fuel delivery (pipelines, refineries, storage, etc.) - Water delivery (pipelines, aqueducts, reservoirs, wells, desalination plants, etc.) - etc. This is consistent with Wikipedia's definition of "hard infrastructure" (as opposed to "soft infrastructure", which focuses on institutional structures/organizations).
- WoodenChair 7y ago
  > Healthcare, education, infrastructure... all of which badly need funding. Education is poorly funded? We spend more per student than any country except Norway as of 2015: https://nces.ed.gov/programs/coe/indicator_cmd.asp https://nces.ed.gov/programs/coe/indicator_cmd.asp The education system is not poorly funded. The money is poorly and inequitably allocated, and the system is poorly run.
  - docbrown 7y ago
    > The education system is not poorly funded. Every SpecialEd teacher and student would politely disagree with you. Not every aspect of education is funded differently, even when factoring i’m better budget management.
    - zip1234 7y ago
      That might just be an example of poorly allocated and more money should go towards special ed.
    - jki275 7y ago
      That's an example of exactly what the comment you're replying to said.
- foogazi 7y ago
  How does that help people that can’t afford to pay for everyday things?
  - w1nst0nsm1th 7y ago
    By providing them a job with a decent living wage.
  - davidcbc 7y ago
    Just off the top of my head... By not bankrupting them as soon as they get sick. By giving them an opportunity to go to college and improve their economic standing without taking on six figures of debt. By giving them access to affordable reliable public transportation so they don't have to deal with the huge expense of owning a car.

rubyn00bie 7y ago

It would not be. It'd mean the rich are finally paying what they owe for all the externalities they currently get for "free," the rich in America get a free ride by not paying what they owe for what they get access to... As my econ professors used to say, in America for a long while now, we're in fact a socialist country already... it just happens to be "socialism for the rich."

JumpCrisscross 7y ago

> Why would a wealth tax be a bad thing? Valuing assets is complicated; for some assets, it's impossible. Furthermore, selling assets is complicated; for some assets, it's impossible. That is the logic behind taxing transactions. The only time we know what something is worth is at the instant it transacts. About the only time we know how liquid something is, is at the instant it transacts. For a facile example, consider the founder of a private company. They now have to sell 2% of their position each year, every year. That's a lot of work! And it gets worse if one considers a bootstrapped business, where there aren't lots of shareholders to sell to and there isn't a 409A valuation.

Traster 7y ago
Well, we can create a wealth tax that doesn't have that problem. I'd wager there aren't many billionaires who actually are primarily invested in illiquid assets. I'd say the larger objection is the principle that we shouldn't be multiply taxing people. A wealth tax basically means re-taxing the same wealth every year.
- mquander 7y ago
  I'd wager there aren't many billionaires who actually are primarily invested in illiquid assets. If that's true now, it sure won't be true for long after you pass the tax!
- JumpCrisscross 7y ago
  > we can create a wealth tax that doesn't have that problem It's fundamental to the problem of valuation, so probably not. > there aren't many billionaires who actually are primarily invested in illiquid assets Most assets are illiquid, e.g. real estate. To be clear, as a capital-markets guy, I love the idea of forcing more of the economy into the financial system. But as an American, it's totally unnecessary. Increase the take on transactions and remove the loopholes. Taxing wealth just creates artificial transactions to be taxed.
  - Traster 7y ago

maneesh 7y ago

Here's a thought experiment: You're a HN reader. You have had ideas to build a startup that can help the world solve a problem. So you create it. You decide to fundraise, and that capital will help you succeed. You pay yourself a salary of $100,000/year, and put everything else into the company. You raise $4 MM in a seed round, valuing your company at $20MM. 10-months later, your company is doubling growth YoY again, has a solid SAAS model, and low churn. You decide to raise again. This time, you raise some more money for your company, and you're now valued at 70MM. About a year later, you're growing just as fast -- but you see a new competitor is entering the ranks. It's time to scale even faster. So you go and raise again. In a fantastic series-B round, spread across TechCrunch and HN, you raise again, at a $200 MM valuation. As the sole founder, you now own 50% of the company -- making you worth $100MM. Your salary has remained constant at $100,000/year though. And then the wealth tax hits. The new wealth tax says you're responsible to pay an annual tax of 2% on all assets over $50MM. Starting this year. Which means that you, as a private founder with no liquid assets, are now responsible for $50MM * 2% = $1MM in taxes this year. Even though your liquid income is $100,000, and you have barely that much in your bank account -- you need to come up with $1,000,000 in liquid cash this year. And since your valuation probably won't go down, it'll be at least that much, every year, for the rest of your life, until you shutter the company. So you go and try to liquidate your shares. But unfortunately, it's not a public company --- and it's not that easy finding private secondary-market buyers willing to buy the half of the founder's entire stake. So what do you do now? As far as I can tell, this is how the wealth tax would work for startup founders.

jdkee 7y ago
1. Why wouldn’t a private secondary market appear in response to the need for wealth tax share liquidation? It seems little different from a venture capital operation. 2. If you are worth $100MM you should be able to borrow 1% annually of your net worth until you can liquidate your shares.
steve19 7y ago
What you do is what all the billionaires do: take out loans backed by you assets rather than sell equity. In this scenario the banks start profiting from startups, probably more in interest than the govt will get taxes.

john_moscow 7y ago

Because it will create a major incentive to take your money out of the economy and move it to a different jurisdiction that doesn't want a piece of it.

foogazi 7y ago

Do we even need a wealth tax? Whatever you have you have already paid taxes on - why does the government need to take more?

w1nst0nsm1th 7y ago
To fund education and to avoid people to be crippled by college debts at 24. To fund healthcare and to avoid diabetics to go bankrupt and die because they saved on insulin shot ; or all the people who have to take a second mortgage for basic cancer treatment, if they can, and finally go also bankrupt. To fund crippling public infrastructure and investment. To fund cultural events and promote art and diversity beside that culturaly dead hollywood movies pipeline ; scientific research ; libraries ; promote intelligent television programming not only motivated by a quick buck by pushing deep in your throat stupid ads for Coca-Cola and their fake, Mac Donald and other companies responsible for promoting detrimental products for health or envirronement ; to fund compagn to raise awareness on foundamental issues like global warming and stop the spread of misinformation by corporate chills or religious nutjobs. The list go on and on... All these public expense are the source of wealth redistribution.
- foogazi 7y ago
  > To fund education and to avoid people to be crippled by college debts at 24 Why are people crippled by college debts at 24?

Grue3 7y ago

Let me rephrase: why is punishing people for success a bad thing? Because it rewards mediocrity.