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For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post. He ignores asset growth a

For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post. He ignores asset growth and the fact that all the wealth tax proposals have a very high floor for the tax. Saying the government will take 45% of your wealth above $100M is very different than saying the government will take 45% of your wealth.

aww_dang 6y ago
From the bottom of the page: >"Even a .5% wealth tax would start to keep founders away from a state or country that imposed it. That's more than a quarter of your stock."
- Miner49er 6y ago
  The point is that he arrived at this conclusion by building up a strawman. That 26% is over 60 years, ignores the fact that the stock will appreciate over time, ignores the fact that all wealth taxes have high floors, etc.
  - aww_dang 6y ago
    I read it as deterring start up founders from investing in a region. If they plan for success, then they should plan to exceed the floor.
    - deleted 6y ago
      [deleted]
    - manquer 6y ago
      100M being the most commonly discussed floor. That usually means about 400-500M value of the company Not ever founder thinks it’s either unicorn or broke . Most normal founders want build something good and make a good amount of money. And where else I am going to go? There are few places where it is possible to make 100M from scratch and without being corrupt .
      - aww_dang 6y ago
        All things being equal, people prefer to do business in jurisdictions with lower taxation. I don't see that as a strawman argument.
        manquer 6y ago
        True , if all things are equal , Bay Area is so far ahead of rest of the world this won’t be the decision point for most founders .
  - Simon_says 6y ago
    The amount of the wealth tax also appreciates over time.
stickyricky 6y ago
Why does asset growth matter if you're taking n% no matter what? Edit: After reading the responses, I think people are confusing themselves with dollar amounts. If I have 100 units of X. The government takes 1 unit in the first year, 0.99 units the next, and so on. Over time my total number of units decreases. The notional value of those units can fluctuate but the absolute number of units owed to the government remains the same. My original question, which I suppose has been answered, centered on this concept that the notional value claimed by the government is the only thing of value being lost. A unit of wealth is lost and wealth compounds over time. Disclaimer, I'm not advocating for or against a wealth tax. Just trying to understand an argument and now apparently teaching it.
- bitdivision 6y ago
  Because if your asset is growing at 5% and the wealth tax is taking 1%, your asset is still growing overall
  - bhupy 6y ago
    But asset isn't guaranteed to grow at 5%, it only grows that much on average. What you say makes sense if the wealth tax is applied on ETF/index fund holdings, but for most founders, the wealth is concentrated in holdings in their own company. On average, across all founders, the asset growth might be 5%, but for each individual there is significant variance. For nearly half of founders, wealth tax would take 1% on either a flat or a depreciating asset..
    - bitdivision 6y ago
      I agree there will be huge variance. I'm only suggesting that if you model growth of assets as well as a wealth tax then your numbers will look different.
    - nrmitchi 6y ago
      If your company, or your ownership value in said company, is valued at over the wealth tax floor ($50M?), and is "flat or depreciating" every year over the (according to PG) 60 years you control the asset, then you have much bigger worries than a 0.5% wealth tax.
foogazi 6y ago
Asset growth does not matter here since the wealth tax is setup as a percentage - the government will still take 45% over time
- simonh 6y ago
  Only if your wealth is so far above say $50m that a few tens of millions is completely inconsequential. If it's closer to $50m, then it will be a whole lot less than 45% and possibly nothing.
- awinder 6y ago
  Yeah but if your wealth has compounded 400% over 40 years, and they took 40% compounded, then that paints a different picture. He’s playing games around the idea that 100% is the cap because that’s how most people would think about money.
  - smallgovt 6y ago
    My guess is that you're the one misunderstanding the math here. At a 1% wealth tax, you will end up being 45% less wealthy in 40 years than you would be without the wealth tax. There is a 100% cap on what the government can take from you. And, with a 1% wealth tax, they are taking 45% of it (spread over 40 years). Put another way, the 1% wealth tax is similar to a 45% capital gains tax (where the cap is also 100%). Capital gains is just more front-loaded (paid upon liquidation) whereas wealth tax is paid over time.
    - dlp211 6y ago
      And every dollar that I pay in income taxes makes me less wealthy in 40 years since I am at the point that every marginal dollar I make is invested. We all need to pay taxes and need to do so in proportion with our ability to do so, whether that is income, sales, property, excise, import, impact, sin, payroll, wealth, estate, or otherwise. We are running $1,000,000,000,000+ deficits every year in this country because people think they are taxed too much despite having the lowest tax rates in modern history, what utter hogwash.
    - 6y ago
shin_lao 6y ago
Asset growth is taxed by capital gains tax.
- h4kor 6y ago
  But not with 100% tax. Your wealth still increases.
- rswail 6y ago
  Yes, but we're talking about a wealth tax. Which specifically does require that a wealthy person actually liquidate some of that wealth every year. Not sure why people are discussing this as if it's not exactly that. PG is right in what he's saying, but wrong on the impact. Assuming his figures are correct, then I would expect to own 45% of something much bigger than what I owned 100% of 60 years before.
irq-1 6y ago
The time-value of money is basic. 1% wealth tax, 3% inflation and 5% annual growth leads to more money in the future, not less. (Those percents are conservative.) Is it possible that PG doesn't understand this? Or is it shallow politics; lying and using his platform spread FUD. For shame. https://en.wikipedia.org/wiki/Time_value_of_money https://en.wikipedia.org/wiki/Time_value_of_money
- mathraki 6y ago
  So 5% - 3% = 2% real annual growth. So 1% wealth tax is equivalent to 50% tax on the return of the asset, every year. Say what you want, but this makes holding the asset or investing a lot less attractive. It will affect people's decisions and willingness to invest. Maybe we're OK with less investment but we shouldn't assume there is no impact. In addition what if this is a volatile asset (read: startup) whose value goes up and down? Will the gov't give you a refund if it loses 20% of its value 10 years in? What if the asset is illiquid (again:startup)? Who will lend to an otherwise not-wealthy startup founder 1% of their company's paper value every year to pay the tax? Because if the startup fails most founders will have to declare bankruptcy (having paid years of paper wealth taxes with no positive outcome in the end).
  - dlp211 6y ago
    > Say what you want, but this makes holding the asset or investing a lot less attractive. Not really. Where else is that money going to go? It's not enough to just say there is a disincentive, you have to show that the disincentive is so great that it makes other opportunities more attractive. But those other opportunities don't exist, because it is a wealth tax, it doesn't matter what instrument you use, the tax will still hit you. Also, those numbers are pretty much non-sense in today's economy, with inflation consistently below 2% and nominal capital asset growth being closer to 10%, a 1% wealth tax represents a tax rate of ~12.5%. I'm not losing sleep over a startup founder who owns so much of a company to be worth over $100MM on paper or otherwise. Startup founders have the ability to sell a part of their shares in liquidity events. If they choose to hold onto their shares above all else, it's on them to figure out how to pay the tax. It might even create a whole new financial instrument or class of investments.
mbesto 6y ago
> For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post. Where does pg rail about honest rational discourse? If you follow him on twitter for the last couple of years it's been nothing but pontification.
- sillysaurusx 6y ago
  Eh? Pg’s twitter account is one of the most interesting. I follow over a thousand, and pg is hardly a blip when it comes to pontification. (That word is surprisingly hard to spell out.)
RIMR 6y ago
He also seems to be assuming that business owners earn 100% of their wealth at the beginning of their careers and that the government will be chiseling away at their lump sum earnings for their entire working life... I think it's safe to call this propaganda.

aww_dang 6y ago

From the bottom of the page: >"Even a .5% wealth tax would start to keep founders away from a state or country that imposed it. That's more than a quarter of your stock."

Miner49er 6y ago
The point is that he arrived at this conclusion by building up a strawman. That 26% is over 60 years, ignores the fact that the stock will appreciate over time, ignores the fact that all wealth taxes have high floors, etc.
- aww_dang 6y ago
  I read it as deterring start up founders from investing in a region. If they plan for success, then they should plan to exceed the floor.
  - deleted 6y ago
    [deleted]
  - manquer 6y ago
    100M being the most commonly discussed floor. That usually means about 400-500M value of the company Not ever founder thinks it’s either unicorn or broke . Most normal founders want build something good and make a good amount of money. And where else I am going to go? There are few places where it is possible to make 100M from scratch and without being corrupt .
    - aww_dang 6y ago
      All things being equal, people prefer to do business in jurisdictions with lower taxation. I don't see that as a strawman argument.
      - manquer 6y ago
        True , if all things are equal , Bay Area is so far ahead of rest of the world this won’t be the decision point for most founders .
- Simon_says 6y ago
  The amount of the wealth tax also appreciates over time.

stickyricky 6y ago

Why does asset growth matter if you're taking n% no matter what? Edit: After reading the responses, I think people are confusing themselves with dollar amounts. If I have 100 units of X. The government takes 1 unit in the first year, 0.99 units the next, and so on. Over time my total number of units decreases. The notional value of those units can fluctuate but the absolute number of units owed to the government remains the same. My original question, which I suppose has been answered, centered on this concept that the notional value claimed by the government is the only thing of value being lost. A unit of wealth is lost and wealth compounds over time. Disclaimer, I'm not advocating for or against a wealth tax. Just trying to understand an argument and now apparently teaching it.

bitdivision 6y ago
Because if your asset is growing at 5% and the wealth tax is taking 1%, your asset is still growing overall
- bhupy 6y ago
  But asset isn't guaranteed to grow at 5%, it only grows that much on average. What you say makes sense if the wealth tax is applied on ETF/index fund holdings, but for most founders, the wealth is concentrated in holdings in their own company. On average, across all founders, the asset growth might be 5%, but for each individual there is significant variance. For nearly half of founders, wealth tax would take 1% on either a flat or a depreciating asset..
  - bitdivision 6y ago
    I agree there will be huge variance. I'm only suggesting that if you model growth of assets as well as a wealth tax then your numbers will look different.
  - nrmitchi 6y ago
    If your company, or your ownership value in said company, is valued at over the wealth tax floor ($50M?), and is "flat or depreciating" every year over the (according to PG) 60 years you control the asset, then you have much bigger worries than a 0.5% wealth tax.

foogazi 6y ago

Asset growth does not matter here since the wealth tax is setup as a percentage - the government will still take 45% over time

simonh 6y ago
Only if your wealth is so far above say $50m that a few tens of millions is completely inconsequential. If it's closer to $50m, then it will be a whole lot less than 45% and possibly nothing.
awinder 6y ago
Yeah but if your wealth has compounded 400% over 40 years, and they took 40% compounded, then that paints a different picture. He’s playing games around the idea that 100% is the cap because that’s how most people would think about money.
- smallgovt 6y ago
  My guess is that you're the one misunderstanding the math here. At a 1% wealth tax, you will end up being 45% less wealthy in 40 years than you would be without the wealth tax. There is a 100% cap on what the government can take from you. And, with a 1% wealth tax, they are taking 45% of it (spread over 40 years). Put another way, the 1% wealth tax is similar to a 45% capital gains tax (where the cap is also 100%). Capital gains is just more front-loaded (paid upon liquidation) whereas wealth tax is paid over time.
  - dlp211 6y ago
    And every dollar that I pay in income taxes makes me less wealthy in 40 years since I am at the point that every marginal dollar I make is invested. We all need to pay taxes and need to do so in proportion with our ability to do so, whether that is income, sales, property, excise, import, impact, sin, payroll, wealth, estate, or otherwise. We are running $1,000,000,000,000+ deficits every year in this country because people think they are taxed too much despite having the lowest tax rates in modern history, what utter hogwash.
  - 6y ago

shin_lao 6y ago

Asset growth is taxed by capital gains tax.

h4kor 6y ago
But not with 100% tax. Your wealth still increases.
rswail 6y ago
Yes, but we're talking about a wealth tax. Which specifically does require that a wealthy person actually liquidate some of that wealth every year. Not sure why people are discussing this as if it's not exactly that. PG is right in what he's saying, but wrong on the impact. Assuming his figures are correct, then I would expect to own 45% of something much bigger than what I owned 100% of 60 years before.

irq-1 6y ago

The time-value of money is basic. 1% wealth tax, 3% inflation and 5% annual growth leads to more money in the future, not less. (Those percents are conservative.) Is it possible that PG doesn't understand this? Or is it shallow politics; lying and using his platform spread FUD. For shame. https://en.wikipedia.org/wiki/Time_value_of_money https://en.wikipedia.org/wiki/Time_value_of_money

mathraki 6y ago
So 5% - 3% = 2% real annual growth. So 1% wealth tax is equivalent to 50% tax on the return of the asset, every year. Say what you want, but this makes holding the asset or investing a lot less attractive. It will affect people's decisions and willingness to invest. Maybe we're OK with less investment but we shouldn't assume there is no impact. In addition what if this is a volatile asset (read: startup) whose value goes up and down? Will the gov't give you a refund if it loses 20% of its value 10 years in? What if the asset is illiquid (again:startup)? Who will lend to an otherwise not-wealthy startup founder 1% of their company's paper value every year to pay the tax? Because if the startup fails most founders will have to declare bankruptcy (having paid years of paper wealth taxes with no positive outcome in the end).
- dlp211 6y ago
  > Say what you want, but this makes holding the asset or investing a lot less attractive. Not really. Where else is that money going to go? It's not enough to just say there is a disincentive, you have to show that the disincentive is so great that it makes other opportunities more attractive. But those other opportunities don't exist, because it is a wealth tax, it doesn't matter what instrument you use, the tax will still hit you. Also, those numbers are pretty much non-sense in today's economy, with inflation consistently below 2% and nominal capital asset growth being closer to 10%, a 1% wealth tax represents a tax rate of ~12.5%. I'm not losing sleep over a startup founder who owns so much of a company to be worth over $100MM on paper or otherwise. Startup founders have the ability to sell a part of their shares in liquidity events. If they choose to hold onto their shares above all else, it's on them to figure out how to pay the tax. It might even create a whole new financial instrument or class of investments.

mbesto 6y ago

> For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post. Where does pg rail about honest rational discourse? If you follow him on twitter for the last couple of years it's been nothing but pontification.

sillysaurusx 6y ago
Eh? Pg’s twitter account is one of the most interesting. I follow over a thousand, and pg is hardly a blip when it comes to pontification. (That word is surprisingly hard to spell out.)

RIMR 6y ago

He also seems to be assuming that business owners earn 100% of their wealth at the beginning of their careers and that the government will be chiseling away at their lump sum earnings for their entire working life... I think it's safe to call this propaganda.