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Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "managem

Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. A wealth tax is, to an approximation, the equivalent of the "management fee" that an ETF charges, but with the revenues going to the government. If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable.

logicchains 6y ago
>If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy Wealthy people don't just leave their money under a mattress, they invest it in something. Even if they just left it in a bank, the bank is still going to lend that money out and invest it. Taxing wealth just encourages riskier investments, as higher risk is needed to achieve comparable post-tax return.
- ampron 6y ago
  “Riskier”, but how much riskier? Having to beat inflation by 1% is not that much riskier compared to the gained equality in taxation. Bad argument. You can’t leave off the amount and implicitly use the worst case scenario to argue against all cases.
  - logicchains 6y ago
    Considering the risk-free interest rate in the US is currently around 0.7%, finding a low-risk extra percentage point return is non-trivial. Most of these people have wealth managers or invest in funds; you think if they could earn an extra percentage point return without much risk, they wouldn't already be doing that?
- marcus_holmes 6y ago
  Startups are high-risk, high-return investments, so following your logic, investment in startups would increase after a wealth tax, right?
  - dcolkitt 6y ago
    That effect would make startups more attractive. But it would be completely cancelled by a countervailing effect: the wealth tax strongly incentives liquid investments. Which of course heavily penalizes investing in startups as they're small, speculative privately-held, hard-to-value companies. Currently investment is only taxed on a "realized basis". No tax bill is due until the investor realizes a cash profit, either by receiving a dividend or harvesting capital gains on sale of the asset. In contrast a wealth tax is assessed every year, regardless of whether the investor has actually earned any actual income. Under current tax law, an investor is not penalized for continuing to hold a high-value asset. In contrast under a wealth tax regime, an investor would be forced to sell some portion of his portfolio every year just to pay his tax bill. That heavily favors large, liquid, public companies over startups. Selling a million dollars of Amazon shares is as easy as pressing a button. Selling a million dollars of a Series-A startup, especially at a fair price, is really hard. This would especially impact early-stage employees, who usually hold a very high fraction of their net worth in their stock options. At least VC investors usually have other holdings that they could liquidate to pay their annual wealth tax. Imagine you own 20% of a company with a $50 million valuation. On paper, you're a deca-millionaire. But in reality you could easily have an overdrawn checking account. How do you get your hands on $100k in cash to pay your tax bill? There's no real market to sell your shares, and very likely you can't even do so without board approval. You could borrow the money, but if the company fails, you're now left with huge debt and worthless equity. In all likelihood a wealth tax would pretty much destroy the Silicon Valley startup ecosystem. Or at least remake it into something totally unrecognizable.
    - SpicyLemonZest 6y ago
      Most wealth tax proposals include provisions for owners of assets which can't easily be sold or valued to defer payments for a decade or two.
      - im3w1l 6y ago
        dcolkitt already mentioned an issue with that: if the company goes bust you're still on the hook.
- jcfrei 6y ago
  Evidence points to the contrary: Taxes reduce profitability and therefore limit risk taking behaviour by companies. Same is most likely true for individuals because it reduces their income.
  - logicchains 6y ago
    >Same is most likely true for individuals because it reduces their income. A wealth tax does not reduce income, it reduces wealth! Income taxes and capital gains taxes reduce income.
  - munificent 6y ago
    > Taxes reduce profitability and therefore limit risk taking behaviour by companies. But taxes provide services that give people a greater safety net. Healthcare is the canonical example but there are many other ways that taxes can help ensure that one mistake does not ruin the rest of your life. Personally, I would love to live in a country where businesses took fewer risks and individuals could take more.
- TheTruth321 6y ago
  Yes, they invest it in dormant apartment blocks in Bangkok ... Maybe we don't need a wealth tax, but a way of unlocking capital from banks to excellent resource allocators (to be defined).
- mapleshamrock 6y ago
  Exactly. Capital gains tax is equivalent to a wealth tax on appreciating assets only, which is the only kind of assets you should be targeting with a wealth tax. So just implement a sensible capital gains tax, and you're done.
  - zentiggr 6y ago
    Considering it's the ones who hold the largest pools of assets affected who can buy the changes to the tax code to build loopholes to get themselves exempted, that seems about impossible.
- YPCrumble 6y ago
  Assuming your thesis that taxing wealth encourages riskier investments for a minute. Why is that a problem? Isn't putting money into riskier assets a good thing for long term advancements in asset classes with high potential reward? It doesn't seem like low risk investments like sticking money in the bank to be lent as mortgages or investing in government bonds are as good for humanity over the long term.
jp555 6y ago
60% of Amazon stock is owned by mutual funds & other institutional investors (like pension funds). 77% of Google is owned by mutual funds & other institutional investors. 62% of Apple is owned my mutual funds & other institutional investors. 79% of Facebook is owned by mutual funds & other institutional investors.
bhupy 6y ago
But a wealth tax also targets owners of assets that don’t appreciate. It taxes both the winners and the losers, and for the latter it’s nothing but a forced divestiture of their ownership stake. A capital gains tax, on the other hand, strictly targets those whose assets have appreciated in value. Wealth is always eventually taxed when it’s liquidated. And if it is never liquidated, then it arguably doesn’t really matter.
- epistasis 6y ago
  Wealth hoarding matters immensely for things like land, which is why the most common wealth tax is a tax on real estate holdings. It can also matter for other resources which are finite, but land is one of the most crucial one in our current times, and why we are seeing such ridiculously large gains in housing costs in the past few decades after a century of housing costs remaining fairly constant.
  - bhupy 6y ago
    Agreed. As you said, the solution to that is either a Georgist Land Value Tax or a Land Appreciation Tax, not a blanket wealth tax.
    - epistasis 6y ago
      I'm also fully in favor of wealth taxes, especially since the US has weakened estate taxes and other checks that would help mitigate increasing inequality. I started mentioning land, as it's the most clear problem of idle wealth. But hugely unequal distribution of wealth also results in slower economic growth and overall less economic activity than if there is more equal access to capital and resources. Capital strikes can be just as effective as labor strikes, and though they don't get much attention they can cause great harm.
      - bhupy 6y ago
        > But hugely unequal distribution of wealth also results in slower economic growth and overall less economic activity than if there is more equal access to capital and resources But wealth != capital. Wealth only becomes capital when it is realized/liquidated, at which point it is taxed. Before that happens, one person's wealth doesn't preclude someone else from investing or being productive because unlike land, wealth is not zero-sum.
rel2thr 6y ago
I don’t think Paul forgot, it’s why he phrased it in terms of stock not dollars. If you start a company and hold on to ownership for 60+ years, you could be forced to sell X% to cover the wealth tax over the years
- Miner49er 6y ago
  Yes, but at the end you'll still have more real value in that stock then you had at the start, assuming your stock at least performs equal with the market.
  - austhrow743 6y ago
    Which is good and fine if all you want is real value. What you wont own any more is your company.
- theplague42 6y ago
  I don't think he forgot; he's being intentionally misleading. What about dividends? Starting another company? Working as a CEO or board member? The article has a terrible foundation because he's intentionally misleading the reader.
  - SpicyLemonZest 6y ago
    The board is unlikely to agree to give a CEO or board member enough stock to maintain control of the company. I don't even think this is an unintentional goal - most wealth tax proponents I've seen are explicitly trying to prevent situations like with Cargill or Walmart, where the founder and his descendants can control the company forever.
  - hanniabu 6y ago
    I think the word you're looking for is vague. He's being intentionally vague, not misleading.
loourr 6y ago
Change in price of the underlying asset doesn't matter/ change how much the government will take as a % over time. If I have a 100 shares they'll take 1 share year one, slightly less year 2, etc regardless of the price of a share.
supercanuck 6y ago
Government Spending is included in GDP and government services have value to a society. It is not simple just a management fee because instead of being used to purchase a luxury goods it may be used to improve healthcare, infrastructure or regulating industry. If it wasn’t for government investing into DARPA none of these startups would even exist.
- logicchains 6y ago
  In the US the vast majority of government spending is on defence and welfare: https://www.cbo.gov/publication/56324 https://www.cbo.gov/publication/56324 .
  - supercanuck 6y ago
    DARPA was defense.
hajile 6y ago
> If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable. We already do that via inflation. Leave your money uninvested and we tax it 2% or more per year, every year.
- maest 6y ago
  One big difference here is that inflation affects everyone equally (not exactly right, but let's ignore that for now). A wealth tax would act as an extra tax on ultra wealthy individuals.
  - rswail 6y ago
    That is absolutely correct. It would be an extra tax on ultra wealthy individuals. That is its purpose. I'm not sure why people think otherwise. Whether you think that purpose is a good reason to have a wealth tax is a separate argument.
weatherman2 6y ago
Modeling the growth does not change the results in any way that makes the tax seem more favorable. Taxing away 1% of an asset that grows 0% every year leaves 45% of the assets that would be present without the tax after 60 years. Taxing away 1% of an asset that grows 7% every year leaves 45% of the assets that would be present without the tax after 60 years. However, to be more realistic, modeling growth makes the taxation even worse, because at times when your equity is at a high valuation, you need to sell some equity and then some extra on top of that in case your equity value crashes before the end of the year/ end of the tax period. You are forced to act defensively.
IkmoIkmo 6y ago
> Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. It's surprisingly not different. If you have an asset that is dormant, is $100, and you tax it with 1% for 20 years, you get to $81.79 by calculating 1000.99^20. Now suppose instead, your asset grows by 10% a year, and you have no tax. That asset grows to 1001.10^20 = $672 Now suppose that prior to the investment each year you tax it with 1% and invest the rest, for 20 years, again at 10%. So you get 1000.99^201.10^20 = $550 That $550 of $672 is exactly the same portion as $81.79 is of $100. In other words, growth or no growth, it has exactly the same effect, either way a 1% tax over 20 years takes 18.2%. > Penalizing static value seems almost reasonable. In the philosophy of taxation there's a different approach. Money you own is money you earned. Typically earnings are taxed. You produce X value, and a small portion of X is allocated to a general pot of money to fund general things in society, e.g. infrastructure, rule of law etc. But after that, it's your money. If you then invest it and earn more, again, a portion of those earnings are taxed. But if you don't do anything with the money, for the government to take it, is seen as a form of theft. The principle why the one form of appropriation is okay and the other isn't, is because when you earn, you benefit. And the government benefits, too. When you just store, you don't benefit, and taking it is a purely negative experience. Many people are willing to share part of their new earnings. Few are willing to give up something that has always belonged to them. Inflation is a natural penalty on static value anyway. So are opportunity costs. Plus, actually static value is quite rare, money in a savings account is being put to work by the bank. The amount of really static money (like money under your mattress, or a permanently vacant home) is quite a small portion of the financial system and again being penalised by inflation and opportunity costs already.
- coryfklein 6y ago
  > In the philosophy of taxation there's a different approach. THE philosophy of taxation? There is no central deciding authority here on a singular philosophy.
- jlangemeier 6y ago
  You're gussying up a "silicon valley" libertarian viewpoint in "philosophy of taxation." > When you just store, you don't benefit, and taking it is a purely negative experience. Many people are willing to share part of their new earnings. Few are willing to give up something that has always belonged to them. That's a real stretch when just a sentence earlier you talked about earned benefits and taxation of those benefits. Storage is just the accumulation of earned benefits beyond your spending habits. Value isn't created in a vacuum nor is it used in one. And current taxation doesn't preclude future taxation, it's why us common folk are told to do any of our retirement funding that we can as pre-tax, since who's to say something that is taxed today (and is expressly stated as not being taxable in the future) won't be taxed again later on appreciated or total value. So, by this alone, the government saying taxes now, and deferred taxes later if that valuation meets certain thresholds isn't something that the government can't or even shouldn't do. And, in many cases, the tax wouldn't apply to startups or their founders unless they're already sitting on multiple tens of millions of static personal valuation; which is where this whole argument really breaks down, and shows its disingenuous colors. When someone like PG talks about these wealth tax valuations in general terms of percentages, many of us are still thinking on OUR terms, which means we're thinking on "normie" scales of 10s or 100s of thousands, or maybe a couple million, where a 1% drop in valuation YoY would make a significant dent in what we can and can't do; when a wealth tax is floated (at least in the US) it's looking at $10M+ in static assets at the individual level, and applies to a wealth class that only a small percentage of people can actually comprehend. And, when a wealth tax is floated in the US, it also has discussions around non-realized asset valuation (such as small businesses, start-ups, etc) and what classes of assets contribute to the total value of an individual wealth tax. Applying a wealth tax in a general way like how PG has done it is a bit disingenuous, not wrong; but is prone to personal wealth view biases. It becomes even more obvious when we take your example and put it towards something that would actually be taxed... $100M; which you end up with $81M for static assets or $550M instead of $672M in PERSONAL assets. Most only think of numbers in these terms if the "win the lottery" so who in the general public thinks the difference of $122M over a lifetime of nearly 3/4 of a billion dollars in wealth (not earnings, but accumulated valuation) isn't a bit of a "whatever," they'll pay more in taxes on that Mega Millions winner and won't bat an eye. (this also works for the usual lower bound as well, $10M, but $100M is guaranteed to be included in any of the recently floated wealth taxes).
mac01021 6y ago
It doesn't matter how much your shares appreciate. You can't retain control of your company if you have to give up a significant fraction of your votes every year.
- coryfklein 6y ago
  Unless you draw a salary or receive dividends from your stock.
  - mac01021 6y ago
    Suppose I do. That's good money for me, but it doesn't amount to a controlling share in the company.
m463 6y ago
What if you had a large static asset, like land a parent left you? or the family farm?
- hanniabu 6y ago
  There's already property tax.
  - stjohnswarts 6y ago
    But the wealth tax is on top of property tax. You would most likely have to sell it off in lots (if you could) to pay the wealth taxes on it if you aren't say farming or renting it and "making money" on it rather than it just sitting there storing value.
- deleted 6y ago
  [deleted]
- jedberg 6y ago
  Ironically, we already have a wealth tax on land. It's just called property tax, but it's effectively a wealth tax on land.
twblalock 6y ago
> If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable. So now we should be penalizing unproductive assets? When did we all decide that was ok? Based on that logic, wouldn't I be justified in draining someone's savings account in order to invest it more productively in stocks? Maybe it's ok to steal land from people if I will grow more crops on it than they will? You can justify taking pretty much anything if you say you will use it for something more productive. What about property rights? Why should people who have played by the rules and built wealth in our society, which they were encouraged to do, then have to live in fear that their wealth might be taken from them?
- lazulicurio 6y ago
  > So now we should be penalizing unproductive assets? When did we all decide that was ok? We already do that---it's called inflation. And the justification used by economists is that the economy will collapse without inflation to incentivize spending money.
  - twblalock 6y ago
    Inflation was not intentionally invented as a tax. It is a characteristic of a monetary economy. Economists prefer it to deflation because it deflation is worse, but that doesn't mean that we invented inflation on purpose as some kind of social engineering tool.
    - lazulicurio 6y ago
      > that doesn't mean that we invented inflation on purpose as some kind of social engineering tool. We didn't invent inflation, but we absolutely do set a target inflation rate as a social engineering tool. And the reason that deflation is considered "worse" is because it lets people keep equity in unproductive assets instead of liquidating it and moving the money into more productive assets.
      - 6y ago
DINKDINK 6y ago
>Penalizing static value seems almost reasonable. Ah yes, the economic argument of "punish savers and people refraining from consumption will lead us to our Centrally Planned Utopia" >If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Do you and I live in the same reality? When a global pandemic has shown almost every single person on earth that cash balances should have been higher -- enough to sustain unexpected periods of inactivity -- it seems a little tone deaf to say saving money is unproductive. There's already a tax on holding central-bank money -- it's called engineer inflation and it's what's exacerbated the economic repercussions. Your Central ~~Bankers~~ Planners convince you taxing fiat money holdings (price inflation) and artificially reducing the cost of bringing future production to the present (downward interest-rate manipulation) will lead us to utopia when it's actually cause over consumption, over production, and a planned economy on the precipice of collapse. I'll keep the "unproductive" savings, thanks.
- sharkmerry 6y ago
  >>I'll keep the "unproductive" savings, thanks. You're sitting on greater than 50 million dollars? That what a wealth tax would most likely target
  - anamax 6y ago
    > You're sitting on greater than 50 million dollars? Outside of Disney comic books, money doesn't sit around. The money "in" my savings account is just bits in a database. The value it represents has been loaned by the bank to someone who is doing something with it. When I sell stock to pay a tax, the money to pay that tax has to come from someone who bought it. That value represented by that money is value that won't be used for other things. Are you certain that what govt will do with that value is better than what those someones are doing with it? That's the question because taxing me means that they won't have that money and govt will. (Taxation doesn't create value - it moves it.) All of the talk about roads and stuff is somewhat dishonest. Transfer payments dominate govt spending, not production of goods and services. > That what a wealth tax would most likely target Ah yes, the "the tax will only affect bad things" rule. Is there any good reason to believe that the folks who are pretty much responsible for the current tax system will somehow figure out how to do this correctly? Your belief about "money just sitting around" is not encouraging. When things go south, we'll hear about the value of breaking eggs, but for some reason the omelets don't show up.

logicchains 6y ago

>If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy Wealthy people don't just leave their money under a mattress, they invest it in something. Even if they just left it in a bank, the bank is still going to lend that money out and invest it. Taxing wealth just encourages riskier investments, as higher risk is needed to achieve comparable post-tax return.

ampron 6y ago
“Riskier”, but how much riskier? Having to beat inflation by 1% is not that much riskier compared to the gained equality in taxation. Bad argument. You can’t leave off the amount and implicitly use the worst case scenario to argue against all cases.
- logicchains 6y ago
  Considering the risk-free interest rate in the US is currently around 0.7%, finding a low-risk extra percentage point return is non-trivial. Most of these people have wealth managers or invest in funds; you think if they could earn an extra percentage point return without much risk, they wouldn't already be doing that?
marcus_holmes 6y ago
Startups are high-risk, high-return investments, so following your logic, investment in startups would increase after a wealth tax, right?
- dcolkitt 6y ago
  That effect would make startups more attractive. But it would be completely cancelled by a countervailing effect: the wealth tax strongly incentives liquid investments. Which of course heavily penalizes investing in startups as they're small, speculative privately-held, hard-to-value companies. Currently investment is only taxed on a "realized basis". No tax bill is due until the investor realizes a cash profit, either by receiving a dividend or harvesting capital gains on sale of the asset. In contrast a wealth tax is assessed every year, regardless of whether the investor has actually earned any actual income. Under current tax law, an investor is not penalized for continuing to hold a high-value asset. In contrast under a wealth tax regime, an investor would be forced to sell some portion of his portfolio every year just to pay his tax bill. That heavily favors large, liquid, public companies over startups. Selling a million dollars of Amazon shares is as easy as pressing a button. Selling a million dollars of a Series-A startup, especially at a fair price, is really hard. This would especially impact early-stage employees, who usually hold a very high fraction of their net worth in their stock options. At least VC investors usually have other holdings that they could liquidate to pay their annual wealth tax. Imagine you own 20% of a company with a $50 million valuation. On paper, you're a deca-millionaire. But in reality you could easily have an overdrawn checking account. How do you get your hands on $100k in cash to pay your tax bill? There's no real market to sell your shares, and very likely you can't even do so without board approval. You could borrow the money, but if the company fails, you're now left with huge debt and worthless equity. In all likelihood a wealth tax would pretty much destroy the Silicon Valley startup ecosystem. Or at least remake it into something totally unrecognizable.
  - SpicyLemonZest 6y ago
    Most wealth tax proposals include provisions for owners of assets which can't easily be sold or valued to defer payments for a decade or two.
    - im3w1l 6y ago
      dcolkitt already mentioned an issue with that: if the company goes bust you're still on the hook.
jcfrei 6y ago
Evidence points to the contrary: Taxes reduce profitability and therefore limit risk taking behaviour by companies. Same is most likely true for individuals because it reduces their income.
- logicchains 6y ago
  >Same is most likely true for individuals because it reduces their income. A wealth tax does not reduce income, it reduces wealth! Income taxes and capital gains taxes reduce income.
- munificent 6y ago
  > Taxes reduce profitability and therefore limit risk taking behaviour by companies. But taxes provide services that give people a greater safety net. Healthcare is the canonical example but there are many other ways that taxes can help ensure that one mistake does not ruin the rest of your life. Personally, I would love to live in a country where businesses took fewer risks and individuals could take more.
TheTruth321 6y ago
Yes, they invest it in dormant apartment blocks in Bangkok ... Maybe we don't need a wealth tax, but a way of unlocking capital from banks to excellent resource allocators (to be defined).
mapleshamrock 6y ago
Exactly. Capital gains tax is equivalent to a wealth tax on appreciating assets only, which is the only kind of assets you should be targeting with a wealth tax. So just implement a sensible capital gains tax, and you're done.
- zentiggr 6y ago
  Considering it's the ones who hold the largest pools of assets affected who can buy the changes to the tax code to build loopholes to get themselves exempted, that seems about impossible.
YPCrumble 6y ago
Assuming your thesis that taxing wealth encourages riskier investments for a minute. Why is that a problem? Isn't putting money into riskier assets a good thing for long term advancements in asset classes with high potential reward? It doesn't seem like low risk investments like sticking money in the bank to be lent as mortgages or investing in government bonds are as good for humanity over the long term.

jp555 6y ago

60% of Amazon stock is owned by mutual funds & other institutional investors (like pension funds). 77% of Google is owned by mutual funds & other institutional investors. 62% of Apple is owned my mutual funds & other institutional investors. 79% of Facebook is owned by mutual funds & other institutional investors.

bhupy 6y ago

But a wealth tax also targets owners of assets that don’t appreciate. It taxes both the winners and the losers, and for the latter it’s nothing but a forced divestiture of their ownership stake. A capital gains tax, on the other hand, strictly targets those whose assets have appreciated in value. Wealth is always eventually taxed when it’s liquidated. And if it is never liquidated, then it arguably doesn’t really matter.

epistasis 6y ago
Wealth hoarding matters immensely for things like land, which is why the most common wealth tax is a tax on real estate holdings. It can also matter for other resources which are finite, but land is one of the most crucial one in our current times, and why we are seeing such ridiculously large gains in housing costs in the past few decades after a century of housing costs remaining fairly constant.
- bhupy 6y ago
  Agreed. As you said, the solution to that is either a Georgist Land Value Tax or a Land Appreciation Tax, not a blanket wealth tax.
  - epistasis 6y ago
    I'm also fully in favor of wealth taxes, especially since the US has weakened estate taxes and other checks that would help mitigate increasing inequality. I started mentioning land, as it's the most clear problem of idle wealth. But hugely unequal distribution of wealth also results in slower economic growth and overall less economic activity than if there is more equal access to capital and resources. Capital strikes can be just as effective as labor strikes, and though they don't get much attention they can cause great harm.
    - bhupy 6y ago
      > But hugely unequal distribution of wealth also results in slower economic growth and overall less economic activity than if there is more equal access to capital and resources But wealth != capital. Wealth only becomes capital when it is realized/liquidated, at which point it is taxed. Before that happens, one person's wealth doesn't preclude someone else from investing or being productive because unlike land, wealth is not zero-sum.

rel2thr 6y ago

I don’t think Paul forgot, it’s why he phrased it in terms of stock not dollars. If you start a company and hold on to ownership for 60+ years, you could be forced to sell X% to cover the wealth tax over the years

Miner49er 6y ago
Yes, but at the end you'll still have more real value in that stock then you had at the start, assuming your stock at least performs equal with the market.
- austhrow743 6y ago
  Which is good and fine if all you want is real value. What you wont own any more is your company.
theplague42 6y ago
I don't think he forgot; he's being intentionally misleading. What about dividends? Starting another company? Working as a CEO or board member? The article has a terrible foundation because he's intentionally misleading the reader.
- SpicyLemonZest 6y ago
  The board is unlikely to agree to give a CEO or board member enough stock to maintain control of the company. I don't even think this is an unintentional goal - most wealth tax proponents I've seen are explicitly trying to prevent situations like with Cargill or Walmart, where the founder and his descendants can control the company forever.
- hanniabu 6y ago
  I think the word you're looking for is vague. He's being intentionally vague, not misleading.

loourr 6y ago

Change in price of the underlying asset doesn't matter/ change how much the government will take as a % over time. If I have a 100 shares they'll take 1 share year one, slightly less year 2, etc regardless of the price of a share.

supercanuck 6y ago

Government Spending is included in GDP and government services have value to a society. It is not simple just a management fee because instead of being used to purchase a luxury goods it may be used to improve healthcare, infrastructure or regulating industry. If it wasn’t for government investing into DARPA none of these startups would even exist.

logicchains 6y ago
In the US the vast majority of government spending is on defence and welfare: https://www.cbo.gov/publication/56324 https://www.cbo.gov/publication/56324 .
- supercanuck 6y ago
  DARPA was defense.

hajile 6y ago

> If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable. We already do that via inflation. Leave your money uninvested and we tax it 2% or more per year, every year.

maest 6y ago
One big difference here is that inflation affects everyone equally (not exactly right, but let's ignore that for now). A wealth tax would act as an extra tax on ultra wealthy individuals.
- rswail 6y ago
  That is absolutely correct. It would be an extra tax on ultra wealthy individuals. That is its purpose. I'm not sure why people think otherwise. Whether you think that purpose is a good reason to have a wealth tax is a separate argument.

weatherman2 6y ago

Modeling the growth does not change the results in any way that makes the tax seem more favorable. Taxing away 1% of an asset that grows 0% every year leaves 45% of the assets that would be present without the tax after 60 years. Taxing away 1% of an asset that grows 7% every year leaves 45% of the assets that would be present without the tax after 60 years. However, to be more realistic, modeling growth makes the taxation even worse, because at times when your equity is at a high valuation, you need to sell some equity and then some extra on top of that in case your equity value crashes before the end of the year/ end of the tax period. You are forced to act defensively.

IkmoIkmo 6y ago

> Someone forgot to model growth in the value of the asset, and/or putting the wealth to use. It's surprisingly not different. If you have an asset that is dormant, is $100, and you tax it with 1% for 20 years, you get to $81.79 by calculating 1000.99^20. Now suppose instead, your asset grows by 10% a year, and you have no tax. That asset grows to 1001.10^20 = $672 Now suppose that prior to the investment each year you tax it with 1% and invest the rest, for 20 years, again at 10%. So you get 1000.99^201.10^20 = $550 That $550 of $672 is exactly the same portion as $81.79 is of $100. In other words, growth or no growth, it has exactly the same effect, either way a 1% tax over 20 years takes 18.2%. > Penalizing static value seems almost reasonable. In the philosophy of taxation there's a different approach. Money you own is money you earned. Typically earnings are taxed. You produce X value, and a small portion of X is allocated to a general pot of money to fund general things in society, e.g. infrastructure, rule of law etc. But after that, it's your money. If you then invest it and earn more, again, a portion of those earnings are taxed. But if you don't do anything with the money, for the government to take it, is seen as a form of theft. The principle why the one form of appropriation is okay and the other isn't, is because when you earn, you benefit. And the government benefits, too. When you just store, you don't benefit, and taking it is a purely negative experience. Many people are willing to share part of their new earnings. Few are willing to give up something that has always belonged to them. Inflation is a natural penalty on static value anyway. So are opportunity costs. Plus, actually static value is quite rare, money in a savings account is being put to work by the bank. The amount of really static money (like money under your mattress, or a permanently vacant home) is quite a small portion of the financial system and again being penalised by inflation and opportunity costs already.

coryfklein 6y ago
> In the philosophy of taxation there's a different approach. THE philosophy of taxation? There is no central deciding authority here on a singular philosophy.
jlangemeier 6y ago
You're gussying up a "silicon valley" libertarian viewpoint in "philosophy of taxation." > When you just store, you don't benefit, and taking it is a purely negative experience. Many people are willing to share part of their new earnings. Few are willing to give up something that has always belonged to them. That's a real stretch when just a sentence earlier you talked about earned benefits and taxation of those benefits. Storage is just the accumulation of earned benefits beyond your spending habits. Value isn't created in a vacuum nor is it used in one. And current taxation doesn't preclude future taxation, it's why us common folk are told to do any of our retirement funding that we can as pre-tax, since who's to say something that is taxed today (and is expressly stated as not being taxable in the future) won't be taxed again later on appreciated or total value. So, by this alone, the government saying taxes now, and deferred taxes later if that valuation meets certain thresholds isn't something that the government can't or even shouldn't do. And, in many cases, the tax wouldn't apply to startups or their founders unless they're already sitting on multiple tens of millions of static personal valuation; which is where this whole argument really breaks down, and shows its disingenuous colors. When someone like PG talks about these wealth tax valuations in general terms of percentages, many of us are still thinking on OUR terms, which means we're thinking on "normie" scales of 10s or 100s of thousands, or maybe a couple million, where a 1% drop in valuation YoY would make a significant dent in what we can and can't do; when a wealth tax is floated (at least in the US) it's looking at $10M+ in static assets at the individual level, and applies to a wealth class that only a small percentage of people can actually comprehend. And, when a wealth tax is floated in the US, it also has discussions around non-realized asset valuation (such as small businesses, start-ups, etc) and what classes of assets contribute to the total value of an individual wealth tax. Applying a wealth tax in a general way like how PG has done it is a bit disingenuous, not wrong; but is prone to personal wealth view biases. It becomes even more obvious when we take your example and put it towards something that would actually be taxed... $100M; which you end up with $81M for static assets or $550M instead of $672M in PERSONAL assets. Most only think of numbers in these terms if the "win the lottery" so who in the general public thinks the difference of $122M over a lifetime of nearly 3/4 of a billion dollars in wealth (not earnings, but accumulated valuation) isn't a bit of a "whatever," they'll pay more in taxes on that Mega Millions winner and won't bat an eye. (this also works for the usual lower bound as well, $10M, but $100M is guaranteed to be included in any of the recently floated wealth taxes).

mac01021 6y ago

It doesn't matter how much your shares appreciate. You can't retain control of your company if you have to give up a significant fraction of your votes every year.

coryfklein 6y ago
Unless you draw a salary or receive dividends from your stock.
- mac01021 6y ago
  Suppose I do. That's good money for me, but it doesn't amount to a controlling share in the company.

m463 6y ago

What if you had a large static asset, like land a parent left you? or the family farm?

hanniabu 6y ago
There's already property tax.
- stjohnswarts 6y ago
  But the wealth tax is on top of property tax. You would most likely have to sell it off in lots (if you could) to pay the wealth taxes on it if you aren't say farming or renting it and "making money" on it rather than it just sitting there storing value.
deleted 6y ago
[deleted]
jedberg 6y ago
Ironically, we already have a wealth tax on land. It's just called property tax, but it's effectively a wealth tax on land.

twblalock 6y ago

> If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Penalizing static value seems almost reasonable. So now we should be penalizing unproductive assets? When did we all decide that was ok? Based on that logic, wouldn't I be justified in draining someone's savings account in order to invest it more productively in stocks? Maybe it's ok to steal land from people if I will grow more crops on it than they will? You can justify taking pretty much anything if you say you will use it for something more productive. What about property rights? Why should people who have played by the rules and built wealth in our society, which they were encouraged to do, then have to live in fear that their wealth might be taken from them?

lazulicurio 6y ago
> So now we should be penalizing unproductive assets? When did we all decide that was ok? We already do that---it's called inflation. And the justification used by economists is that the economy will collapse without inflation to incentivize spending money.
- twblalock 6y ago
  Inflation was not intentionally invented as a tax. It is a characteristic of a monetary economy. Economists prefer it to deflation because it deflation is worse, but that doesn't mean that we invented inflation on purpose as some kind of social engineering tool.
  - lazulicurio 6y ago
    > that doesn't mean that we invented inflation on purpose as some kind of social engineering tool. We didn't invent inflation, but we absolutely do set a target inflation rate as a social engineering tool. And the reason that deflation is considered "worse" is because it lets people keep equity in unproductive assets instead of liquidating it and moving the money into more productive assets.
    - 6y ago

DINKDINK 6y ago

>Penalizing static value seems almost reasonable. Ah yes, the economic argument of "punish savers and people refraining from consumption will lead us to our Centrally Planned Utopia" >If you have a bucket of money that isn't doing anything, then what value does it actually bring to the economy? Do you and I live in the same reality? When a global pandemic has shown almost every single person on earth that cash balances should have been higher -- enough to sustain unexpected periods of inactivity -- it seems a little tone deaf to say saving money is unproductive. There's already a tax on holding central-bank money -- it's called engineer inflation and it's what's exacerbated the economic repercussions. Your Central ~~Bankers~~ Planners convince you taxing fiat money holdings (price inflation) and artificially reducing the cost of bringing future production to the present (downward interest-rate manipulation) will lead us to utopia when it's actually cause over consumption, over production, and a planned economy on the precipice of collapse. I'll keep the "unproductive" savings, thanks.

sharkmerry 6y ago
>>I'll keep the "unproductive" savings, thanks. You're sitting on greater than 50 million dollars? That what a wealth tax would most likely target
- anamax 6y ago
  > You're sitting on greater than 50 million dollars? Outside of Disney comic books, money doesn't sit around. The money "in" my savings account is just bits in a database. The value it represents has been loaned by the bank to someone who is doing something with it. When I sell stock to pay a tax, the money to pay that tax has to come from someone who bought it. That value represented by that money is value that won't be used for other things. Are you certain that what govt will do with that value is better than what those someones are doing with it? That's the question because taxing me means that they won't have that money and govt will. (Taxation doesn't create value - it moves it.) All of the talk about roads and stuff is somewhat dishonest. Transfer payments dominate govt spending, not production of goods and services. > That what a wealth tax would most likely target Ah yes, the "the tax will only affect bad things" rule. Is there any good reason to believe that the folks who are pretty much responsible for the current tax system will somehow figure out how to do this correctly? Your belief about "money just sitting around" is not encouraging. When things go south, we'll hear about the value of breaking eggs, but for some reason the omelets don't show up.