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Perhaps notable: Switzerland has a wealth tax (of up to 0.3%), and there is zero evidence that this has any deterrent effect on wealthy people settling in Switz

Perhaps notable: Switzerland has a wealth tax (of up to 0.3%), and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland. Other features of the tax system more than offset the 0.3% wealth tax. Personally, I am a bit disappointed by the lack of depth of the discourse: Wealth taxes and their effect have been studied quite a bit in economics literature, and there are various peer-reviewed papers that attempt to measure the effects, but the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data. It's all 101ism and polemics. See also https://twitter.com/halvarflake/status/1295283922117566464?s=20 https://twitter.com/halvarflake/status/1295283922117566464?s... - I tried to ask @rabois for the source of a claim, and got crickets in return. I'd like to see a more nuanced and thorough discussion, to be honest. Perhaps that's a bit much to ask.

calyth2018 6y ago
"the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data. It's all 101ism and polemics." It's not strange at all. It's self-interest.
- Red_Leaves_Flyy 6y ago
  What's strange is that the same cohort that doesn't deeply discuss higher tax rates on tens of millions in wealth, love to get out tomes of research to support the social cause du jour.
- rtx 6y ago
  Wealth tax is majoritism and nothing else. And we all know how that ends.
  - dodnest 6y ago
    In order for your snarky statement to be correct, the wealthy would have to be a 'social minority'. Sure, they're a statistical minority, but they're not in danger of being oppressed because they own a greater share of social power in any given country than the majority of people. I can't believe you've gone around thinking that 'minority' just meant numbers and nothing else.
  - giantg2 6y ago
    Once a democracy realizes it has the keys to the treasury...
  - damnyou 6y ago
    Majoritarianism is bad because it can oppress powerless minorities. The wealthy are not a powerless minority.
    - deleted 6y ago
      [deleted]
    - philwelch 6y ago
      Majoritarianism usually justifies itself via populist arguments that some particular minority is too powerful and needs to be cut down. This is the basis of nearly every conspiracy theory about the Jews, for instance.
      - dodnest 6y ago
        Except that you can provide evidence for why the wealthy minority is too powerful whereas jews are just attacked for... being jewish. You know, the nazis for example were a minority, that doesn't mean attacking them was bad... populism isn't inherently bad...
        philwelch 6y ago
        You can provide “evidence” that the Jews are “too powerful”, too.
        heylook 6y ago
        Bad faith actors can fabricate "evidence". Therefore all evidence is useless?
        damnyou 6y ago
        What you're saying is that critical thinking is required to determine morality. That is indeed true. To oppose a wealth tax on majoritarian grounds you need to demonstrate that the wealthy are oppressed in some way. Simply saying "but majoritarianism" is not sufficient, and appealing to Jewish oppression is plain whataboutism. I'm not advocating for guillotines or whatever. Simply that a small percentage of individual wealth over a certain amount (say $10MM) be redistributed to the rest of society. The end result of this is that individuals are still going to be able to hold $10MM even if the wealth tax redistributed 100% of the rest of their wealth. They will still be incredibly rich and not have any meaningful financial constraints on their lives. Calling this oppression is absurd.
- ashtonkem 6y ago
  It’s often not even self interest; fairly often it’s obvious that some participants in these discussions are searching for arguments to validate pre-held beliefs and policy positions. Although sometimes self interest is also a factor.
  - donw 6y ago
    I hate to break it to you, but literally all of humanity does that, most of the time: https://en.m.wikipedia.org/wiki/Confirmation_bias https://en.m.wikipedia.org/wiki/Confirmation_bias This includes me. And you. And everybody else here. Changing your mind is actually really hard.
    - ashtonkem 6y ago
      > I hate to break it to you, but literally all of humanity does that, most of the time I'm not sure why you'd assume that you're breaking anything to me.
      - donw 6y ago
        Stating that "some participants are searching for arguments to validate pre-held beliefs and policy positions" is roughly akin to saying "some participants eat food and breathe air". Confirmation bias is part of the human condition, and should be expected by default.
  - jimbokun 6y ago
    > fairly often it’s obvious that participants in these discussions are searching for arguments to validate pre-held beliefs and policy positions. This is true of discussion of almost any topic by almost anyone ever.
    - BurningFrog 6y ago
      Yeah, this is just how the human brain works. The big thing to understand is that we lie about these things to ourselves, so we can easier lie about them to others. Unconscious parts of your brain lies to the conscious part!! I learned this here: https://www.amazon.com/Elephant-Brain-Hidden-Motives-Everyday/dp/0190495995 https://www.amazon.com/Elephant-Brain-Hidden-Motives-Everyda...
bluelu 6y ago
That's not true. In some cantons, the very rich get extra deals, called Lump-sum tax, independently of their revenues. E.g. the Ikea founder only paid around 165000$ in total taxes in 2014 on a fortune of 46.5 billion US $ and all his revenues which he had. Source: https://www.20min.ch/story/so-wenig-steuern-zahlte-der-ikea-gruender-884803687052 https://www.20min.ch/story/so-wenig-steuern-zahlte-der-ikea-...)
- Schweigi 6y ago
  The lump sum tax is only possible for non-citizens, who do not have direct W2 income from Switzerland. Local governments (if the state allows it) can use it as a shortcut to estimate the tax amount. Nevertheless wealthy Swiss citizen don’t leave Switzerland either. Probably also because there is no capital gains tax which offsets the wealth tax easily.
  - kgwgk 6y ago
    > there is no capital gains tax As long as capital gains are less than half of your income.
    - config_yml 6y ago
      That's not accurate. Only if you qualify as a professional investor, you'll have to pay capital gains tax.
      - kgwgk 6y ago
        And that’s one of the conditions that you have to fulfill to be sure the tax administration won’t classify you as professional investor. https://www.taxadvisors.ch/media/6666/TaxBulletin_02_12_english_.pdf https://www.taxadvisors.ch/media/6666/TaxBulletin_02_12_engl...
- Retric 6y ago
  That’s often reported but factually incorrect he did not own 100% of Ikea. https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation. That charity was valued at 36 Billion in 2006 and controls most IKEA stores and assets. The family owned https://en.wikipedia.org/wiki/Interogo_Foundation https://en.wikipedia.org/wiki/Interogo_Foundation which was valued at 15B in 2011 which controls IP and collects 3% of revenue from each store.
I_am_tiberius 6y ago
Switzerland can afford taxing based on wealth because other taxes are very low (e.g. only ~20 % of tax on your salary).
- comicjk 6y ago
  That's a good thing. Taxing wealth more, and income less, helps equalize wealth disparities over time.
  - logicchains 6y ago
    > That's a good thing. Taxing wealth more, and income less, helps equalize wealth disparities over time. It also slows economic growth over time, because most of the tax money is redistributed by the government, not invested, while the wealthy generally invest their wealth.
    - ucha 6y ago
      By that line of thinking why not tax the poor to give to the rich, that would accelerate economic growth, wouldn't it?
      - steffan 6y ago
        This is a strawman argument, but the logic actually does hold: If the original premise is true, "taxing the poor to give to the rich" would accelerate economic growth. The problem is of diminishing returns - it would have a disproportionate negative effect on the poor and a minimal impact on accelerating growth, so it would be considered one of the most inefficient ways to achieve the latter.
    - ath92 6y ago
      But if the government redistributes the wealth to its citizens, wouldn't that boost consumer demand and thereby boost economic growth on the demand side?
      - 6y ago
andrewtbham 6y ago
You're cherry picking. France imposed a wealth tax and they repealed it. "At least 10,000 wealthy people left the country to avoid paying the tax; most moved to neighboring Belgium" https://www.bloomberg.com/opinion/articles/2019-11-14/france-s-wealth-tax-should-be-a-warning-for-warren-and-sanders https://www.bloomberg.com/opinion/articles/2019-11-14/france...
- troughway 6y ago
  Not to derail the topic but “taxing the rich” was one of the bullet points that was supposed to answer where the money for a UBI system would come from. This is exactly how globalization will impact UBI as well, because at the end of the day the manufacturing firms, big corporations and everyone else who is vested in making money will uproot and go elsewhere, where they won’t be taxed so harshly. And just to add, that France even tried to pull that stunt without asking “what happens when they all leave?” is just silly negligence. Of course these people are not dependent on any particular country - they’ve diversified their assets long ago. Strikes me as incredibly narrow minded thinking at a country level. Unbelievable.
  - eanzenberg 6y ago
    I believe UBI zealots moved passed trying to explain how to fund it and now don’t really care.
  - AnthonyMouse 6y ago
    > Not to derail the topic but “taxing the rich” was one of the bullet points that was supposed to answer where the money for a UBI system would come from. Obviously this could as easily refer to any form of taxation that comes disproportionately from the rich. Which, because of what a UBI itself does to the effective rate curve, is actually pretty much all of them. You could use VAT and VAT+UBI is still a progressive tax system, because everyone at the lower income levels is still receiving disproportionately more than they're paying. It actually solves the biggest drawback of a flat tax and allows you to use one while still having the money come disproportionately from people making more of it. > This is exactly how globalization will impact UBI as well, because at the end of the day the manufacturing firms, big corporations and everyone else who is vested in making money will uproot and go elsewhere, where they won’t be taxed so harshly. If you're funding it with VAT or some other consumption tax then it isn't the companies manufacturing there who pay it, it's the ones who sell there. Which they can't avoid by moving their operations somewhere else, because the customers are where they are.
edouard-harris 6y ago
> I tried to ask @rabois for the source of a claim, and got crickets in return. It looks like Keith did in fact reply to that tweet with a source, yesterday: https://twitter.com/rabois/status/1295357875187904512 https://twitter.com/rabois/status/1295357875187904512
- godelski 6y ago
  Came here to say this. If I have the time stamps right it looks like rabois even replied before this HN post even existed, which makes the comment a little dubious. I'm sure it was a mistake, but rabois only took 5hrs to reply. Please give someone an appropriate amount of time to reply and check before posting on other social media calling them out.
gridlockd 6y ago
> Other features of the tax system more than offset the 0.3% wealth tax. In other words, you can have a wealth tax without detrimental effects, as long as you keep taxes low otherwise? What's the point then?
mlyle 6y ago
> Other features of the tax system more than offset the 0.3% wealth tax. vs. the article "Even a .5% wealth tax would start to keep founders away from a state or country that imposed it." > I'd like to see a more nuanced and thorough discussion, to be honest. Perhaps that's a bit much to ask. Well, here you missed all the nuance, so...
dalbasal 6y ago
I'm not sure european examples are a great comparison. First, most european wealth taxes (including recently defunct ones) have much lower floors than US proposals. $1m instead of $100m. That changes a lot. France did experience "capital flight," famously Gerard Depardieu. Second, "capital flight" has always been present in Europe. There's a long history of it, and practical realities make it relevant. I do agree about depth though. One point that PG does address which is often skipped over is that a wealth tax is a "deplete billionaires" policy... or a "curb billionaire growth" policy. The premise is that the very wealthy are too wealthy and that this is bad. A wealth tax is not like a VAT, corporate or personal income tax. The tax revenue is secondary, and relatively small. It's more like a tariff, tax as an economic policy tool. I agree that considering a 2% wealth tax as a 70% depletion of wealth over 60 years is... not nuanced. The most important nuance being that you control most of this wealth for most of this time and will be paying your taxes out of interest. If you apply the model to actual examples (say Bezos or Buffet), you'll find that their wealth will still have increased... just at a reduced rate. But, to be nuanced we also need to address the core question: "are billionaires bad for the rest of us?" That is the premise of a wealth tax, at least the currently popular one.
- sam_lowry_ 6y ago
  Gerard Depardieu and Bernard Arnault returned their assets to France, and their flight was not without scandals. Their reputation shattered.
  - dalbasal 6y ago
    Granted. I was just using the bruhaha to demonstrate a point. A millionaire tax and a billionaire tax are totally different in practice, both operationally and socially.
    - sam_lowry_ 6y ago
      Depardieu is a millionaire and Arnault is a billionaire.
  - refurb 6y ago
scythe 6y ago
>Switzerland has a wealth tax (of up to 0.3%), and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland The model in PG's post appears to predict around a 12% "lifetime" (60-year) rate from an 0.3% wealth tax and thus suggests (at least to me) that this would be at most a minor concern for most wealthy people. So this does not seem like contrary evidence.
dominotw 6y ago
Here in India Switzerland is mainly famous for their bank accounts where all the corrupt politicians store their ill gained wealth. Everyone here knows the phrase "swiss bank". wondering if 0.3% a good tradeoff for secrecy?
- cranekam 6y ago
  1) Banking secrecy in Switzerland isn't what it was: https://en.wikipedia.org/wiki/Banking_in_Switzerland#Banking_secrecy https://en.wikipedia.org/wiki/Banking_in_Switzerland#Banking... 2) The Swiss wealth tax is only charged on Swiss tax residents, so corrupt politicians who stash their money there won't be paying it unless they are Swiss resident (which is pretty unlikely).
  - dominotw 6y ago
    Ah that explains why "swiss bank" stopped being a synonym for corrupt politician over the last decade or so. It used be, when i was growing up.
kgwgk 6y ago
On the other hand, the wealth tax is not the same across the country and definitely there is evidence of wealthy people choosing their residence accordingly.
- kazinator 6y ago
  Could it be that there is some separation between the concepts of "residence" and "wealth cache"? As in, you can reside where it is nice to reside, and park your wealth where it is nice to park your wealth? The truly rich don't reside in any specific place; they summer here, winter there ...
  - kgwgk 6y ago
    If you reside (183 days per year is the rule of thumb) somewhere they’ll usually want to tax you. That may be an issue even within a country. Swiss cantons and US states often go to court regarding where some particular person should pay taxes.
- francisofascii 6y ago
  Which is a good reason to only tax natural resource wealth, rather than all assets. You can't move a private beach or a n oil reserve from one country to another. It also is a fairer way to tax, since natural resources are not wealth created.
nightski 6y ago
Wealth taxes are one solution. But in my opinion the only way to get extremely wealthy is to own a company that goes public. Personally I'm starting to think that when a company goes public there should be limits on what percentage of that company an individual can hold. Bezos being able to control 11.1% of Amazon given it's size seems a little ridiculous. The entire point of the stock market or "going public" was to allow public ownership and benefit of these massive behemouths (whether they should even grow that large in the first place is another discussion). But when one person owns such a large percentage it really tips the scales. I don't know how you'd solve this. Forced pay out to the owners when a stock goes public? There are probably negatives I am not thinking of. But it just seems like public markets let companies grow to levels so large that having an individual have such a large share doesn't make sense anymore.
- giantg2 6y ago
  There are plenty of companies that are private that have large ownership shares. The point of going public is to raise capital buy relinquishing some ownership. Owners don't want to give their shares unless they have to. If there were mandates to sell out of a company that you started and at a stage before you realized the gains on the capital you raised, it would incentivize companies to stay private and find their funding through private channels.
  - nightski 6y ago
    I agree with what you are saying. But by relinquishing ownership they are gaining the ability to receive far more capital than they would without the public market from what I understand. If this is reinvested in the business it allows said company to grow to levels that would not be possible as a privately owned company. Even the largest privately owned company, Cargill, is making interesting restructuring moves that point to it possibly going public. I'm actually fine with companies staying private because I fundamentally believe this seriously restricts their growth. I do not think a company like Amazon, Facebook, Microsoft, or Google (20% of the S&P 500) would be able to reach the size they did without access to going public. Of course I fully admit I could be wrong and would love to hear interesting arguments why.
gotostatement 6y ago
I love the term 101ism. going to incorporate that into my daily life now
narrator 6y ago
One problem with a wealth tax is rich people who are not in publicly traded corporations are not extremely liquid. Often times this means having to sell off assets which is hard to do if their assets are largely in private corporations.
- randomdata 6y ago
  I always wonder how the farmer would deal with a wealth tax. Farmland, for example, is worth an incredible amount of money (where I live, at least), but cashflow is marginal, and net incomes are often negative. That would mean that the farmers would often have to sell off their land to cover a wealth tax on the land. Severing farmland is rarely permitted, so it would have to be entire parcels. It seems like soon you'll find yourself without any land on which to farm. Which means that we'll start to carve out exemptions, like we already do with existing wealth taxes, and then the race to find loopholes begins.
  - francisofascii 6y ago
    If done properly, the tax would never be more than the annual net return of the farming activities. In theory, if the net gain is low, then the value of the land should also be low. If the land is worth an incredible amount, but not as a farm, well, that is a different problem worth solving. It will always be a never ending races to cover up new loopholes and create proper incentives.
    - randomdata 6y ago
      > the tax would never be more than the annual net return of the farming activities. Doesn't that end up being nothing more than an income tax? Presumably the intent of a wealth tax is to capture from the benefits people have from holding things that do not normally return an income, such as housing. In fact, housing property is already taxed in many jurisdictions for that reason, so maybe not the best example of where a new wealth tax would benefit, but you get the idea.
eanzenberg 6y ago
I never understood..what’s the fascination in turning one county into another? We have Switzerland, France, Belgium, Germany. Why force America to become one of these? Those countries already exist. Turning one country into another doesn’t make sense and isn’t what makes America unique. Imagine I moved to Germany and kept stating “Germany should be more like America because X Y and Z.” Can you imagine how offensive that would be?
- zulu-inuoe 6y ago
  I believe it's because the people most affected in these situations are also the people who are unable to simply move to a country that benefits them more.
  - eanzenberg 6y ago
    Maybe because the country that benefits them more doesn’t really want them, either?
- rockinghigh 6y ago
  It's not about turning the US into a European country, it's about decreasing wealth inequality. The US is doing a lot worse than the countries you mention--Gini of 41 for the US, vs 27-32 for Switzerland, France, Belgium, Germany. The poverty rate and poverty gaps are also a lot higher in the US. https://data.oecd.org/inequality/poverty-gap.htm https://data.oecd.org/inequality/poverty-gap.htm
  - eanzenberg 6y ago
    Perceived wealth inequality. The US has less wealth inequality because most of it is already wealthy. The shrinking middle class is shrinking because most of them are moving to the upper middle class.
    - heylook 6y ago
      Do you have any data to back up this claim? Parent comment provided links. It seems fair to me that a rebuttal should as well.
AnthonyMouse 6y ago
The first thing to notice about a wealth tax is how little it fundamentally differs from an income tax on investment income. If you have a billion dollars and you get a 2% return and pay 15% capital gains tax, you paid 0.3% of your wealth in tax. So then what's the difference? For one, it pushes people towards riskier investments. At a 1% annual return, a 0.3% wealth tax is equivalent to a 30% income tax. At a 5% annual return, it's equivalent to a 6% income tax. This has various consequences, but a big one of note is that it makes it much less desirable to own government debt, which has a low rate of return, which means the government could end up having to pay significantly higher interest on the debt. It could also incentivize excessive risk taking. Another concern is that it requires investments to be liquidated in order to pay the tax. Generally we defer taxes on investment income until the investment is sold in order to avoid this, because it can be quite problematic, e.g. you own 51% of your company but over time you're forced to become a minority shareholder just in order to pay the tax, or you owned 100% of it and are required to take on external investment over time just to stay in business. This also costs the government money because the government pays lower interest on borrowing than average investment returns, so paying 0.7% to borrow money in the interim while the investor is earning 5% returns on the money you'd have collected as tax means that when the tax is ultimately paid, the government ends up with more additional revenue than they paid in interest in the meantime. It also increases foreign ownership of domestic resources, because domestic owners are forced to liquidate in order to pay the tax and domestic buyers are in the same boat so the liquidated securities go primarily to foreign buyers. Another problem is that a lot of forms of wealth are hard to value. If you had a wealth tax and someone owned a piece of art, or some intellectual property, or shares in a privately held company, what are they worth? It's inherently subjective and estimates can very wildly. But then you're creating an opportunity for accountants to do their thing and avoid the tax. Waiting until the property is sold and then taxing the gain solves this neatly because then you have the sale price to go on.
- acheron9383 6y ago
  It seems like, if you wanted to help stop the wealthy from ducking paying taxes, one should just stop providing a special long term capitol gains tax and tax capitol gains the same as income. It simplifies the tax code, stops punishing workers who receive a wage over those who earn investment income, and doesn't require a bunch of new accounting to implement. My cynicism hat tells me the reason it isn't the policy goal is that it could actually pass in the US, the wealth tax likely never will.
drcongo 6y ago
Agreed. I doubt a very wealthy man's short blog post against taxing very wealthy people would make it to the front page of HN if it wasn't for the identity of the very wealthy man.
- wombatmobile 6y ago
  Is the blog post "against taxing very wealthy people"? Literally, it is a demonstration by mathematics of the effect of a tax on capital. Polemically, it is an argument by induction that a higher level of such a tax will discourage junior entrepreneurs from attempting to create start-ups in a jurisdiction. What's clever about the polemic strategy is how it appeals to the hopes and fears of young entrepreneurs who have not yet accumulated great wealth, to recruit them to support the interests of older entrepreneurs who may have done so in the absence of the tax. "Suppose you start a successful startup in your twenties" gets you hooked. You readily identify and strap yourself in for the ride. "if you live for 60 years after acquiring some asset" appeals to your fears by tapping in to your understanding that once you are older, you will not have boundless energy, and unbridled understanding of the zeitgeist. You'll need protection then. The young entrepreneur, with little wealth accumulated, consults the table, reads linearly down from the top to the lower right, building understanding, until bang 95%! At this point, he or she viscerally feels the pain of losing 95% of his or her capital, which, at this point, still being meagre, is unbuttressed by the psychological accoutrements that great wealth affords its owners. The conclusion is genius. "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." Ouch! The budding entrepreneur must now pack up and move to have any chance at a decent life. The tax must be resisted!
  - davidwitt415 6y ago
    Indeed, the majority of posts here live up to the aphorism of Americans seeing themselves as 'temporarily embarrassed millionaires.'
cik2e 6y ago
I'd also like to point out that we already have a wealth tax for everyone who would otherwise put their income taxes into savings. The lower the savings rate, the higher the effective wealth tax rate on the middle class. Assuming an absurdly high 25% savings rate on your pre-tax income and a 25% tax rate on that income, boom, there's your 50% wealth tax. So the 45% wealth loss over 60 years in PG's toy example that ignores asset growth sounds totally fair to me in this light. And with this "absurd" wealth tax on the middle class, why do we still have educated people from all over the world pounding at the door to get into the US? I would posit that it's for the same reasons that a wealth tax wouldn't suppress startups in this country.
- garmaine 6y ago
  Savings != savings account.
  - cik2e 6y ago
    Is this some kind of straw man? If not, please enlighten me because I have no idea how this relates to anything that I said.
option 6y ago
“ and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland.” - I can’t name any startup out of Switzerland, but can name at least one for pretty much any european country.
nickalaso 6y ago
No offense, but I personally hate it when someone online mentions the existence of scientific research supporting their position, and then doesn't post a link to said research. I'm personally interested in reading the papers you mentioned, could I get the link(s)?
MagnumOpus 6y ago
> Switzerland has a wealth tax (of up to 0.3%) Though the parts of Switzerland where the billionaire class settles have lower wealth taxes - they don't have their main residence in Geneva or Basel, but in canton Zug, ore even Obwalden/Nidwalden where the maximum wealth tax rate is 0.13% (and capital gains taxes are laughably low too).
fredfoobar 6y ago
There should be some ROI for the individual paying the wealth tax. How good is their infrastructure? how well do they handle social problems like homelessness?
gniv 6y ago
> Switzerland has a wealth tax (of up to 0.3%) Do you have a source? Maybe they changed recently, but from what I've read [0] it can be much higher. For example in Geneva that source shows up to 0.94%. [0] https://www.expatica.com/ch/finance/taxes/switzerland-tax-rates-101589/ https://www.expatica.com/ch/finance/taxes/switzerland-tax-ra...
darth_avocado 6y ago
You are right that the discourse is not nuanced, but it highlights a very basic problem with taxing an asset again and again, especially on unrealized gains. We gladly support this idea, because it affects "the billionaires" but not when it comes to everyone else and for good reason. Repeated taxation on an asset can erode your wealth really quickly. Here in California, your house gets taxed on the purchase price, but not the current valuation. Therefore you have people sitting on more than one multi million dollar houses that they bought for low 6 figures 3 decades ago. (Ironically this is one of the main contributor to sky high real estate prices and housing crisis) But we don't tax people on those unrealized gains, that too again and again, because if we do, most people would lose all their wealth in a matter of couple of years.
- heylook 6y ago
  > it highlights a very basic problem with taxing an asset again and again, especially on unrealized gains. Why is it so hard to understand the concept of a floor? If we only tax wealth above $10m or $100m, it will literally never result in "all of your wealth" disappearing. > We gladly support this idea, because it affects "the billionaires" but not when it comes to everyone else and for good reason. > Ironically this is one of the main contributor to sky high real estate prices and housing crisis Right. We support it, but we don't do anything about it, even though it causes one of the most obvious policy problems in the state. > if we do, most people would lose all their wealth in a matter of couple of years. Like literally every other state? I'm sorry, no. This comment is internally logically inconsistent, ignores obvious examples to the contrary, and asserts itself as its own proof.
- rrrrrrrrrrrryan 6y ago
  Economists actually love recurring land value taxes because they're non-distortionary, but almost all land value tax proposals exclude primary residences under a certain value, for the reasons you've described.
pbk1 6y ago
FYI - Keith's response is in your link; he responded before you wrote this comment
deleted 6y ago
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traceroute66 6y ago
@thomasdullien Re: "Other features of the tax system more than offset the 0.3% wealth tax.". Yes, but the problem is the other countries contemplating implementing a wealth tax want to have their cake and eat it. They want to implement a wealth tax whilst not making any tweaks elsewhere. All take and no give does not make for an attractive environment, especially in this globalised world where resettlement of people and businesses elsewhere is not as difficult or time consuming as it might have once been.
ChrisLomont 6y ago
>there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland Got a peer-reviewed citation that there is zero evidence? Or is that your opinion? Here's some evidence on Swiss rich mobility [1]: ".. tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24% of the effect arise from taxpayer mobility .." [4] Taxpayer mobility.... means rich people moving for tax reasons, correct? Many countries had a wealth tax; almost all of them dropped it because it did cause capital flight and didn't generate much revenue compared to the costs. Switzerland was late to that party, and will likely drop theirs for the same reasons. Here's but one paper on the actual effects of the Switzerland wealth tax: [1] "We estimate that a 0.1 percentage-point rise in wealth taxation lowers reported wealth by 3.5% in aggregate. Expressed relative to taxable capital income flows, this implies a net-of-tax elasticity of roughly 1.2, which is large compared to the elasticities typically estimated in the income literature. The elasticity of tax revenues with respect to tax rates is only -0.2" So you see it's already pushing wealth out of the tax base. As to where wealthy people settle, look for the papers on wealthy moving between Swiss cantons to get the best tax advantage (the tax rates are by canton). So there is absolutely evidence of rich moving to take better tax advantage. >Wealth taxes and their effect have been studied quite a bit in economics literature, and there are various peer-reviewed papers that attempt to measure the effects, but the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data Yes, there is ample economic evidence. It's odd that those pushing for one in the US ignore the past case evidence. For example, [2] shows that a wealth tax does lower entrepreneurship, in [3] Stiglitz shows that a wealth tax does have a negative effect on investment and increased risk-aversion..... Google scholar has lots of papers on what happened to countries that implemented such taxes, and why those taxes got dropped. [1] https://www.nber.org/papers/w22376 https://www.nber.org/papers/w22376 [2] https://journals.sagepub.com/doi/abs/10.1177/097135570801700203 https://journals.sagepub.com/doi/abs/10.1177/097135570801700... [3] https://www.sciencedirect.com/science/article/pii/B9780127808505500290 https://www.sciencedirect.com/science/article/pii/B978012780... [4] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3471248 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3471248
mikorym 6y ago
Another question I would like to see discussed w.r.t. Switzerland is whether they are, in crude terms, dependent on other countries not being stable. An example would be the South African originated company Compagnie Financière Richemont SA. Apart from economy of scale reasons, the reason why they moved to Switzerland is absolutely the stability of that country. South African citizens, many pensioners, now pay tax in Switzerland on dividends. (Yes, you have a DT treaty that allows you to go from 35% dividends tax to 15%, but still paid in Switzerland. And yes, probably they spend tax money much better than the SA government.) LVMH by contrast doesn't have to move around, but in theory could have moved to Switzerland if it were the only stable country around. So, to be Devil's advocate, is Switzerland a well performing country when considered critically or do they get a lot of money that in practical terms is or was historically generated in other geographic areas? Conversely, if you don't have any stable countries at all, and you're left only with an option like South Africa, then there are countless examples of companies that simply could not survive. By the way, South Africa's taxes are getting quite high and there is absolutely no correlation between tax rates and service delivery. My personal opinion is somewhat more focused on practical terms. My first question about a country is not about taxes, but about the poverty line and buying power; and then about environmental issues. South African's don't have much hope for governments making any kind of sensible decisions.
ex3ndr 6y ago
Sorry but Switzerland is explicitly is not that good for wealthy and a lot of people are started leaving even 8 years ago. For example, one of my partners literally hired ex-minister of finance to do taxes and even then they wasn't able to avoid various taxation penalties.
controversy 6y ago
Keep in mind that the Swiss model would be analogous to the US charging wealth taxes at a State level. One can move between cantons to reduce the tax.
abvdasker 6y ago
It's honestly embarrassing that PG would even post this. The post strikes me as particularly lazy and dismissive because it doesn't engage with any of the arguments for a wealth tax or the motivations behind one. As other comments have pointed out, the example is not even close to a good "model" of a real-world wealth tax. It's a straw man. I would expect an overconfident high school student who just finished The Fountainhead to make this kind argument but not a successful and supposedly smart venture capitalist. I've seen this pattern from PG and other people in tech over and over. They assume their expertise in one domain translates into other fields in which they have no special knowledge. Underlying a post like this is the arrogant assumption that nobody smart has ever thought of calculating .99^60, and that PG knows what's best. Paul Graham is hopelessly out of touch.
brlewis 6y ago
> See also https://twitter.com/halvarflake/status/1295283922117566464?s.. https://twitter.com/halvarflake/status/1295283922117566464?s.... - I tried to ask @rabois for the source of a claim, and got crickets in return My twitter client shows a reply from him yesterday, mentioning you, that points to an NPR link, which in turn cites this article: https://www.france24.com/en/20150808-france-wealthy-flee-high-taxes-les-echos-figures?utm_source=npr_newsletter&utm_medium=email&utm_content=20190226&utm_campaign=money&utm_term=nprnews https://www.france24.com/en/20150808-france-wealthy-flee-hig...
karaterobot 6y ago
> Switzerland has a wealth tax (of up to 0.3% Switzerland has no wealth tax. Individual cantons and municipalities in Switzerland have wealth taxes, and set the rates and exemptions. The rates actually go much higher than 0.3%, up to 0.7% - 0.8% in some places. > there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland. There is evidence that wealth moves between cantons to minimize the amount paid in wealth taxes (cf. https://voxeu.org/article/wealth-taxation-swiss-experience https://voxeu.org/article/wealth-taxation-swiss-experience). Not strictly contradicting what you said, but I take the implication of your statement to be "the wealth tax actually doesn't change people's behavior", but it seems to in some cases.
juergbi 6y ago
The top wealth tax rate is definitely higher than 0.3% in Switzerland. In Zurich it's up to 0.7%. There is no capital gains tax for private long-term investments in Switzerland (with the exception of real estate). However, dividends are normally taxed the same as income from employment.
SkyMarshal 6y ago
>See also https://twitter.com/halvarflake/status/1295283922117566464?s.. https://twitter.com/halvarflake/status/1295283922117566464?s.... - I tried to ask @rabois for the source of a claim, and got crickets in return. Maybe you missed it but he replied to you with this NPR article on Europe's wealth taxes, from which he sourced his comment: https://www.npr.org/sections/money/2019/02/26/698057356/if-a-wealth-tax-is-such-a-good-idea-why-did-europe-kill-theirs https://www.npr.org/sections/money/2019/02/26/698057356/if-a...
m0zg 6y ago
They don't have capital gains tax, though, IIRC. For someone interested in "nuance", it's curious that you neglected to mention that.
SamReidHughes 6y ago
Also, some Swiss cantons have made special tax deals to get billionaires to reside there. Or at least that happened at least once.
lazyjones 6y ago
Switzerland offers lump-sum taxation for wealthy people: https://home.kpmg/ch/en/blogs/home/posts/2020/04/lump-sum-taxation-switzerland-brexit.html https://home.kpmg/ch/en/blogs/home/posts/2020/04/lump-sum-ta... So it's not 0.3%, but a mostly constant yearly amount that may be much lower.
graeme 6y ago
> See also https://twitter.com/halvarflake/status/1295283922117566464?s.. https://twitter.com/halvarflake/status/1295283922117566464?s.... - I tried to ask @rabois for the source of a claim, and got crickets in return. It’s pretty easy to google. This article quotes the source as a report. (Though the link is broke ): https://www.france24.com/en/20150808-france-wealthy-flee-high-taxes-les-echos-figures https://www.france24.com/en/20150808-france-wealthy-flee-hig... Someone not replying to you isn’t an argument when an answer is trivially found. That too me ten seconds to find. (Finding the report would take longer but should be doable)

calyth2018 6y ago

"the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data. It's all 101ism and polemics." It's not strange at all. It's self-interest.

Red_Leaves_Flyy 6y ago
What's strange is that the same cohort that doesn't deeply discuss higher tax rates on tens of millions in wealth, love to get out tomes of research to support the social cause du jour.
rtx 6y ago
Wealth tax is majoritism and nothing else. And we all know how that ends.
- dodnest 6y ago
  In order for your snarky statement to be correct, the wealthy would have to be a 'social minority'. Sure, they're a statistical minority, but they're not in danger of being oppressed because they own a greater share of social power in any given country than the majority of people. I can't believe you've gone around thinking that 'minority' just meant numbers and nothing else.
- giantg2 6y ago
  Once a democracy realizes it has the keys to the treasury...
- damnyou 6y ago
  Majoritarianism is bad because it can oppress powerless minorities. The wealthy are not a powerless minority.
  - deleted 6y ago
    [deleted]
  - philwelch 6y ago
    Majoritarianism usually justifies itself via populist arguments that some particular minority is too powerful and needs to be cut down. This is the basis of nearly every conspiracy theory about the Jews, for instance.
    - dodnest 6y ago
      Except that you can provide evidence for why the wealthy minority is too powerful whereas jews are just attacked for... being jewish. You know, the nazis for example were a minority, that doesn't mean attacking them was bad... populism isn't inherently bad...
      - philwelch 6y ago
        You can provide “evidence” that the Jews are “too powerful”, too.
        heylook 6y ago
        Bad faith actors can fabricate "evidence". Therefore all evidence is useless?
        damnyou 6y ago
        What you're saying is that critical thinking is required to determine morality. That is indeed true. To oppose a wealth tax on majoritarian grounds you need to demonstrate that the wealthy are oppressed in some way. Simply saying "but majoritarianism" is not sufficient, and appealing to Jewish oppression is plain whataboutism. I'm not advocating for guillotines or whatever. Simply that a small percentage of individual wealth over a certain amount (say $10MM) be redistributed to the rest of society. The end result of this is that individuals are still going to be able to hold $10MM even if the wealth tax redistributed 100% of the rest of their wealth. They will still be incredibly rich and not have any meaningful financial constraints on their lives. Calling this oppression is absurd.
ashtonkem 6y ago
It’s often not even self interest; fairly often it’s obvious that some participants in these discussions are searching for arguments to validate pre-held beliefs and policy positions. Although sometimes self interest is also a factor.
- donw 6y ago
  I hate to break it to you, but literally all of humanity does that, most of the time: https://en.m.wikipedia.org/wiki/Confirmation_bias https://en.m.wikipedia.org/wiki/Confirmation_bias This includes me. And you. And everybody else here. Changing your mind is actually really hard.
  - ashtonkem 6y ago
    > I hate to break it to you, but literally all of humanity does that, most of the time I'm not sure why you'd assume that you're breaking anything to me.
    - donw 6y ago
      Stating that "some participants are searching for arguments to validate pre-held beliefs and policy positions" is roughly akin to saying "some participants eat food and breathe air". Confirmation bias is part of the human condition, and should be expected by default.
- jimbokun 6y ago
  > fairly often it’s obvious that participants in these discussions are searching for arguments to validate pre-held beliefs and policy positions. This is true of discussion of almost any topic by almost anyone ever.
  - BurningFrog 6y ago
    Yeah, this is just how the human brain works. The big thing to understand is that we lie about these things to ourselves, so we can easier lie about them to others. Unconscious parts of your brain lies to the conscious part!! I learned this here: https://www.amazon.com/Elephant-Brain-Hidden-Motives-Everyday/dp/0190495995 https://www.amazon.com/Elephant-Brain-Hidden-Motives-Everyda...

bluelu 6y ago

That's not true. In some cantons, the very rich get extra deals, called Lump-sum tax, independently of their revenues. E.g. the Ikea founder only paid around 165000$ in total taxes in 2014 on a fortune of 46.5 billion US $ and all his revenues which he had. Source: https://www.20min.ch/story/so-wenig-steuern-zahlte-der-ikea-gruender-884803687052 https://www.20min.ch/story/so-wenig-steuern-zahlte-der-ikea-...)

Schweigi 6y ago
The lump sum tax is only possible for non-citizens, who do not have direct W2 income from Switzerland. Local governments (if the state allows it) can use it as a shortcut to estimate the tax amount. Nevertheless wealthy Swiss citizen don’t leave Switzerland either. Probably also because there is no capital gains tax which offsets the wealth tax easily.
- kgwgk 6y ago
  > there is no capital gains tax As long as capital gains are less than half of your income.
  - config_yml 6y ago
    That's not accurate. Only if you qualify as a professional investor, you'll have to pay capital gains tax.
    - kgwgk 6y ago
      And that’s one of the conditions that you have to fulfill to be sure the tax administration won’t classify you as professional investor. https://www.taxadvisors.ch/media/6666/TaxBulletin_02_12_english_.pdf https://www.taxadvisors.ch/media/6666/TaxBulletin_02_12_engl...
Retric 6y ago
That’s often reported but factually incorrect he did not own 100% of Ikea. https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation https://en.wikipedia.org/wiki/Stichting_INGKA_Foundation. That charity was valued at 36 Billion in 2006 and controls most IKEA stores and assets. The family owned https://en.wikipedia.org/wiki/Interogo_Foundation https://en.wikipedia.org/wiki/Interogo_Foundation which was valued at 15B in 2011 which controls IP and collects 3% of revenue from each store.

I_am_tiberius 6y ago

Switzerland can afford taxing based on wealth because other taxes are very low (e.g. only ~20 % of tax on your salary).

comicjk 6y ago
That's a good thing. Taxing wealth more, and income less, helps equalize wealth disparities over time.
- logicchains 6y ago
  > That's a good thing. Taxing wealth more, and income less, helps equalize wealth disparities over time. It also slows economic growth over time, because most of the tax money is redistributed by the government, not invested, while the wealthy generally invest their wealth.
  - ucha 6y ago
    By that line of thinking why not tax the poor to give to the rich, that would accelerate economic growth, wouldn't it?
    - steffan 6y ago
      This is a strawman argument, but the logic actually does hold: If the original premise is true, "taxing the poor to give to the rich" would accelerate economic growth. The problem is of diminishing returns - it would have a disproportionate negative effect on the poor and a minimal impact on accelerating growth, so it would be considered one of the most inefficient ways to achieve the latter.
  - ath92 6y ago
    But if the government redistributes the wealth to its citizens, wouldn't that boost consumer demand and thereby boost economic growth on the demand side?
    - 6y ago

andrewtbham 6y ago

You're cherry picking. France imposed a wealth tax and they repealed it. "At least 10,000 wealthy people left the country to avoid paying the tax; most moved to neighboring Belgium" https://www.bloomberg.com/opinion/articles/2019-11-14/france-s-wealth-tax-should-be-a-warning-for-warren-and-sanders https://www.bloomberg.com/opinion/articles/2019-11-14/france...

troughway 6y ago
Not to derail the topic but “taxing the rich” was one of the bullet points that was supposed to answer where the money for a UBI system would come from. This is exactly how globalization will impact UBI as well, because at the end of the day the manufacturing firms, big corporations and everyone else who is vested in making money will uproot and go elsewhere, where they won’t be taxed so harshly. And just to add, that France even tried to pull that stunt without asking “what happens when they all leave?” is just silly negligence. Of course these people are not dependent on any particular country - they’ve diversified their assets long ago. Strikes me as incredibly narrow minded thinking at a country level. Unbelievable.
- eanzenberg 6y ago
  I believe UBI zealots moved passed trying to explain how to fund it and now don’t really care.
- AnthonyMouse 6y ago
  > Not to derail the topic but “taxing the rich” was one of the bullet points that was supposed to answer where the money for a UBI system would come from. Obviously this could as easily refer to any form of taxation that comes disproportionately from the rich. Which, because of what a UBI itself does to the effective rate curve, is actually pretty much all of them. You could use VAT and VAT+UBI is still a progressive tax system, because everyone at the lower income levels is still receiving disproportionately more than they're paying. It actually solves the biggest drawback of a flat tax and allows you to use one while still having the money come disproportionately from people making more of it. > This is exactly how globalization will impact UBI as well, because at the end of the day the manufacturing firms, big corporations and everyone else who is vested in making money will uproot and go elsewhere, where they won’t be taxed so harshly. If you're funding it with VAT or some other consumption tax then it isn't the companies manufacturing there who pay it, it's the ones who sell there. Which they can't avoid by moving their operations somewhere else, because the customers are where they are.

edouard-harris 6y ago

> I tried to ask @rabois for the source of a claim, and got crickets in return. It looks like Keith did in fact reply to that tweet with a source, yesterday: https://twitter.com/rabois/status/1295357875187904512 https://twitter.com/rabois/status/1295357875187904512

godelski 6y ago
Came here to say this. If I have the time stamps right it looks like rabois even replied before this HN post even existed, which makes the comment a little dubious. I'm sure it was a mistake, but rabois only took 5hrs to reply. Please give someone an appropriate amount of time to reply and check before posting on other social media calling them out.

gridlockd 6y ago

> Other features of the tax system more than offset the 0.3% wealth tax. In other words, you can have a wealth tax without detrimental effects, as long as you keep taxes low otherwise? What's the point then?

mlyle 6y ago

> Other features of the tax system more than offset the 0.3% wealth tax. vs. the article "Even a .5% wealth tax would start to keep founders away from a state or country that imposed it." > I'd like to see a more nuanced and thorough discussion, to be honest. Perhaps that's a bit much to ask. Well, here you missed all the nuance, so...

dalbasal 6y ago

I'm not sure european examples are a great comparison. First, most european wealth taxes (including recently defunct ones) have much lower floors than US proposals. $1m instead of $100m. That changes a lot. France did experience "capital flight," famously Gerard Depardieu. Second, "capital flight" has always been present in Europe. There's a long history of it, and practical realities make it relevant. I do agree about depth though. One point that PG does address which is often skipped over is that a wealth tax is a "deplete billionaires" policy... or a "curb billionaire growth" policy. The premise is that the very wealthy are too wealthy and that this is bad. A wealth tax is not like a VAT, corporate or personal income tax. The tax revenue is secondary, and relatively small. It's more like a tariff, tax as an economic policy tool. I agree that considering a 2% wealth tax as a 70% depletion of wealth over 60 years is... not nuanced. The most important nuance being that you control most of this wealth for most of this time and will be paying your taxes out of interest. If you apply the model to actual examples (say Bezos or Buffet), you'll find that their wealth will still have increased... just at a reduced rate. But, to be nuanced we also need to address the core question: "are billionaires bad for the rest of us?" That is the premise of a wealth tax, at least the currently popular one.

sam_lowry_ 6y ago
Gerard Depardieu and Bernard Arnault returned their assets to France, and their flight was not without scandals. Their reputation shattered.
- dalbasal 6y ago
  Granted. I was just using the bruhaha to demonstrate a point. A millionaire tax and a billionaire tax are totally different in practice, both operationally and socially.
  - sam_lowry_ 6y ago
    Depardieu is a millionaire and Arnault is a billionaire.
- refurb 6y ago

scythe 6y ago

>Switzerland has a wealth tax (of up to 0.3%), and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland The model in PG's post appears to predict around a 12% "lifetime" (60-year) rate from an 0.3% wealth tax and thus suggests (at least to me) that this would be at most a minor concern for most wealthy people. So this does not seem like contrary evidence.

dominotw 6y ago

Here in India Switzerland is mainly famous for their bank accounts where all the corrupt politicians store their ill gained wealth. Everyone here knows the phrase "swiss bank". wondering if 0.3% a good tradeoff for secrecy?

cranekam 6y ago
1) Banking secrecy in Switzerland isn't what it was: https://en.wikipedia.org/wiki/Banking_in_Switzerland#Banking_secrecy https://en.wikipedia.org/wiki/Banking_in_Switzerland#Banking... 2) The Swiss wealth tax is only charged on Swiss tax residents, so corrupt politicians who stash their money there won't be paying it unless they are Swiss resident (which is pretty unlikely).
- dominotw 6y ago
  Ah that explains why "swiss bank" stopped being a synonym for corrupt politician over the last decade or so. It used be, when i was growing up.

kgwgk 6y ago

On the other hand, the wealth tax is not the same across the country and definitely there is evidence of wealthy people choosing their residence accordingly.

kazinator 6y ago
Could it be that there is some separation between the concepts of "residence" and "wealth cache"? As in, you can reside where it is nice to reside, and park your wealth where it is nice to park your wealth? The truly rich don't reside in any specific place; they summer here, winter there ...
- kgwgk 6y ago
  If you reside (183 days per year is the rule of thumb) somewhere they’ll usually want to tax you. That may be an issue even within a country. Swiss cantons and US states often go to court regarding where some particular person should pay taxes.
francisofascii 6y ago
Which is a good reason to only tax natural resource wealth, rather than all assets. You can't move a private beach or a n oil reserve from one country to another. It also is a fairer way to tax, since natural resources are not wealth created.

nightski 6y ago

Wealth taxes are one solution. But in my opinion the only way to get extremely wealthy is to own a company that goes public. Personally I'm starting to think that when a company goes public there should be limits on what percentage of that company an individual can hold. Bezos being able to control 11.1% of Amazon given it's size seems a little ridiculous. The entire point of the stock market or "going public" was to allow public ownership and benefit of these massive behemouths (whether they should even grow that large in the first place is another discussion). But when one person owns such a large percentage it really tips the scales. I don't know how you'd solve this. Forced pay out to the owners when a stock goes public? There are probably negatives I am not thinking of. But it just seems like public markets let companies grow to levels so large that having an individual have such a large share doesn't make sense anymore.

giantg2 6y ago
There are plenty of companies that are private that have large ownership shares. The point of going public is to raise capital buy relinquishing some ownership. Owners don't want to give their shares unless they have to. If there were mandates to sell out of a company that you started and at a stage before you realized the gains on the capital you raised, it would incentivize companies to stay private and find their funding through private channels.
- nightski 6y ago
  I agree with what you are saying. But by relinquishing ownership they are gaining the ability to receive far more capital than they would without the public market from what I understand. If this is reinvested in the business it allows said company to grow to levels that would not be possible as a privately owned company. Even the largest privately owned company, Cargill, is making interesting restructuring moves that point to it possibly going public. I'm actually fine with companies staying private because I fundamentally believe this seriously restricts their growth. I do not think a company like Amazon, Facebook, Microsoft, or Google (20% of the S&P 500) would be able to reach the size they did without access to going public. Of course I fully admit I could be wrong and would love to hear interesting arguments why.

gotostatement 6y ago

I love the term 101ism. going to incorporate that into my daily life now

narrator 6y ago

One problem with a wealth tax is rich people who are not in publicly traded corporations are not extremely liquid. Often times this means having to sell off assets which is hard to do if their assets are largely in private corporations.

randomdata 6y ago
I always wonder how the farmer would deal with a wealth tax. Farmland, for example, is worth an incredible amount of money (where I live, at least), but cashflow is marginal, and net incomes are often negative. That would mean that the farmers would often have to sell off their land to cover a wealth tax on the land. Severing farmland is rarely permitted, so it would have to be entire parcels. It seems like soon you'll find yourself without any land on which to farm. Which means that we'll start to carve out exemptions, like we already do with existing wealth taxes, and then the race to find loopholes begins.
- francisofascii 6y ago
  If done properly, the tax would never be more than the annual net return of the farming activities. In theory, if the net gain is low, then the value of the land should also be low. If the land is worth an incredible amount, but not as a farm, well, that is a different problem worth solving. It will always be a never ending races to cover up new loopholes and create proper incentives.
  - randomdata 6y ago
    > the tax would never be more than the annual net return of the farming activities. Doesn't that end up being nothing more than an income tax? Presumably the intent of a wealth tax is to capture from the benefits people have from holding things that do not normally return an income, such as housing. In fact, housing property is already taxed in many jurisdictions for that reason, so maybe not the best example of where a new wealth tax would benefit, but you get the idea.

eanzenberg 6y ago

I never understood..what’s the fascination in turning one county into another? We have Switzerland, France, Belgium, Germany. Why force America to become one of these? Those countries already exist. Turning one country into another doesn’t make sense and isn’t what makes America unique. Imagine I moved to Germany and kept stating “Germany should be more like America because X Y and Z.” Can you imagine how offensive that would be?

zulu-inuoe 6y ago
I believe it's because the people most affected in these situations are also the people who are unable to simply move to a country that benefits them more.
- eanzenberg 6y ago
  Maybe because the country that benefits them more doesn’t really want them, either?
rockinghigh 6y ago
It's not about turning the US into a European country, it's about decreasing wealth inequality. The US is doing a lot worse than the countries you mention--Gini of 41 for the US, vs 27-32 for Switzerland, France, Belgium, Germany. The poverty rate and poverty gaps are also a lot higher in the US. https://data.oecd.org/inequality/poverty-gap.htm https://data.oecd.org/inequality/poverty-gap.htm
- eanzenberg 6y ago
  Perceived wealth inequality. The US has less wealth inequality because most of it is already wealthy. The shrinking middle class is shrinking because most of them are moving to the upper middle class.
  - heylook 6y ago
    Do you have any data to back up this claim? Parent comment provided links. It seems fair to me that a rebuttal should as well.

AnthonyMouse 6y ago

The first thing to notice about a wealth tax is how little it fundamentally differs from an income tax on investment income. If you have a billion dollars and you get a 2% return and pay 15% capital gains tax, you paid 0.3% of your wealth in tax. So then what's the difference? For one, it pushes people towards riskier investments. At a 1% annual return, a 0.3% wealth tax is equivalent to a 30% income tax. At a 5% annual return, it's equivalent to a 6% income tax. This has various consequences, but a big one of note is that it makes it much less desirable to own government debt, which has a low rate of return, which means the government could end up having to pay significantly higher interest on the debt. It could also incentivize excessive risk taking. Another concern is that it requires investments to be liquidated in order to pay the tax. Generally we defer taxes on investment income until the investment is sold in order to avoid this, because it can be quite problematic, e.g. you own 51% of your company but over time you're forced to become a minority shareholder just in order to pay the tax, or you owned 100% of it and are required to take on external investment over time just to stay in business. This also costs the government money because the government pays lower interest on borrowing than average investment returns, so paying 0.7% to borrow money in the interim while the investor is earning 5% returns on the money you'd have collected as tax means that when the tax is ultimately paid, the government ends up with more additional revenue than they paid in interest in the meantime. It also increases foreign ownership of domestic resources, because domestic owners are forced to liquidate in order to pay the tax and domestic buyers are in the same boat so the liquidated securities go primarily to foreign buyers. Another problem is that a lot of forms of wealth are hard to value. If you had a wealth tax and someone owned a piece of art, or some intellectual property, or shares in a privately held company, what are they worth? It's inherently subjective and estimates can very wildly. But then you're creating an opportunity for accountants to do their thing and avoid the tax. Waiting until the property is sold and then taxing the gain solves this neatly because then you have the sale price to go on.

acheron9383 6y ago
It seems like, if you wanted to help stop the wealthy from ducking paying taxes, one should just stop providing a special long term capitol gains tax and tax capitol gains the same as income. It simplifies the tax code, stops punishing workers who receive a wage over those who earn investment income, and doesn't require a bunch of new accounting to implement. My cynicism hat tells me the reason it isn't the policy goal is that it could actually pass in the US, the wealth tax likely never will.

drcongo 6y ago

Agreed. I doubt a very wealthy man's short blog post against taxing very wealthy people would make it to the front page of HN if it wasn't for the identity of the very wealthy man.

wombatmobile 6y ago
Is the blog post "against taxing very wealthy people"? Literally, it is a demonstration by mathematics of the effect of a tax on capital. Polemically, it is an argument by induction that a higher level of such a tax will discourage junior entrepreneurs from attempting to create start-ups in a jurisdiction. What's clever about the polemic strategy is how it appeals to the hopes and fears of young entrepreneurs who have not yet accumulated great wealth, to recruit them to support the interests of older entrepreneurs who may have done so in the absence of the tax. "Suppose you start a successful startup in your twenties" gets you hooked. You readily identify and strap yourself in for the ride. "if you live for 60 years after acquiring some asset" appeals to your fears by tapping in to your understanding that once you are older, you will not have boundless energy, and unbridled understanding of the zeitgeist. You'll need protection then. The young entrepreneur, with little wealth accumulated, consults the table, reads linearly down from the top to the lower right, building understanding, until bang 95%! At this point, he or she viscerally feels the pain of losing 95% of his or her capital, which, at this point, still being meagre, is unbuttressed by the psychological accoutrements that great wealth affords its owners. The conclusion is genius. "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." Ouch! The budding entrepreneur must now pack up and move to have any chance at a decent life. The tax must be resisted!
- davidwitt415 6y ago
  Indeed, the majority of posts here live up to the aphorism of Americans seeing themselves as 'temporarily embarrassed millionaires.'

cik2e 6y ago

I'd also like to point out that we already have a wealth tax for everyone who would otherwise put their income taxes into savings. The lower the savings rate, the higher the effective wealth tax rate on the middle class. Assuming an absurdly high 25% savings rate on your pre-tax income and a 25% tax rate on that income, boom, there's your 50% wealth tax. So the 45% wealth loss over 60 years in PG's toy example that ignores asset growth sounds totally fair to me in this light. And with this "absurd" wealth tax on the middle class, why do we still have educated people from all over the world pounding at the door to get into the US? I would posit that it's for the same reasons that a wealth tax wouldn't suppress startups in this country.

garmaine 6y ago
Savings != savings account.
- cik2e 6y ago
  Is this some kind of straw man? If not, please enlighten me because I have no idea how this relates to anything that I said.

option 6y ago

“ and there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland.” - I can’t name any startup out of Switzerland, but can name at least one for pretty much any european country.

nickalaso 6y ago

No offense, but I personally hate it when someone online mentions the existence of scientific research supporting their position, and then doesn't post a link to said research. I'm personally interested in reading the papers you mentioned, could I get the link(s)?

MagnumOpus 6y ago

> Switzerland has a wealth tax (of up to 0.3%) Though the parts of Switzerland where the billionaire class settles have lower wealth taxes - they don't have their main residence in Geneva or Basel, but in canton Zug, ore even Obwalden/Nidwalden where the maximum wealth tax rate is 0.13% (and capital gains taxes are laughably low too).

fredfoobar 6y ago

There should be some ROI for the individual paying the wealth tax. How good is their infrastructure? how well do they handle social problems like homelessness?

gniv 6y ago

> Switzerland has a wealth tax (of up to 0.3%) Do you have a source? Maybe they changed recently, but from what I've read [0] it can be much higher. For example in Geneva that source shows up to 0.94%. [0] https://www.expatica.com/ch/finance/taxes/switzerland-tax-rates-101589/ https://www.expatica.com/ch/finance/taxes/switzerland-tax-ra...

darth_avocado 6y ago

You are right that the discourse is not nuanced, but it highlights a very basic problem with taxing an asset again and again, especially on unrealized gains. We gladly support this idea, because it affects "the billionaires" but not when it comes to everyone else and for good reason. Repeated taxation on an asset can erode your wealth really quickly. Here in California, your house gets taxed on the purchase price, but not the current valuation. Therefore you have people sitting on more than one multi million dollar houses that they bought for low 6 figures 3 decades ago. (Ironically this is one of the main contributor to sky high real estate prices and housing crisis) But we don't tax people on those unrealized gains, that too again and again, because if we do, most people would lose all their wealth in a matter of couple of years.

heylook 6y ago
> it highlights a very basic problem with taxing an asset again and again, especially on unrealized gains. Why is it so hard to understand the concept of a floor? If we only tax wealth above $10m or $100m, it will literally never result in "all of your wealth" disappearing. > We gladly support this idea, because it affects "the billionaires" but not when it comes to everyone else and for good reason. > Ironically this is one of the main contributor to sky high real estate prices and housing crisis Right. We support it, but we don't do anything about it, even though it causes one of the most obvious policy problems in the state. > if we do, most people would lose all their wealth in a matter of couple of years. Like literally every other state? I'm sorry, no. This comment is internally logically inconsistent, ignores obvious examples to the contrary, and asserts itself as its own proof.
rrrrrrrrrrrryan 6y ago
Economists actually love recurring land value taxes because they're non-distortionary, but almost all land value tax proposals exclude primary residences under a certain value, for the reasons you've described.

pbk1 6y ago

FYI - Keith's response is in your link; he responded before you wrote this comment

deleted 6y ago

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traceroute66 6y ago

@thomasdullien Re: "Other features of the tax system more than offset the 0.3% wealth tax.". Yes, but the problem is the other countries contemplating implementing a wealth tax want to have their cake and eat it. They want to implement a wealth tax whilst not making any tweaks elsewhere. All take and no give does not make for an attractive environment, especially in this globalised world where resettlement of people and businesses elsewhere is not as difficult or time consuming as it might have once been.

ChrisLomont 6y ago

>there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland Got a peer-reviewed citation that there is zero evidence? Or is that your opinion? Here's some evidence on Swiss rich mobility [1]: ".. tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24% of the effect arise from taxpayer mobility .." [4] Taxpayer mobility.... means rich people moving for tax reasons, correct? Many countries had a wealth tax; almost all of them dropped it because it did cause capital flight and didn't generate much revenue compared to the costs. Switzerland was late to that party, and will likely drop theirs for the same reasons. Here's but one paper on the actual effects of the Switzerland wealth tax: [1] "We estimate that a 0.1 percentage-point rise in wealth taxation lowers reported wealth by 3.5% in aggregate. Expressed relative to taxable capital income flows, this implies a net-of-tax elasticity of roughly 1.2, which is large compared to the elasticities typically estimated in the income literature. The elasticity of tax revenues with respect to tax rates is only -0.2" So you see it's already pushing wealth out of the tax base. As to where wealthy people settle, look for the papers on wealthy moving between Swiss cantons to get the best tax advantage (the tax rates are by canton). So there is absolutely evidence of rich moving to take better tax advantage. >Wealth taxes and their effect have been studied quite a bit in economics literature, and there are various peer-reviewed papers that attempt to measure the effects, but the Silicon Valley crowd is strangely avoidant of examining evidence or explaining their opposition with real-world data Yes, there is ample economic evidence. It's odd that those pushing for one in the US ignore the past case evidence. For example, [2] shows that a wealth tax does lower entrepreneurship, in [3] Stiglitz shows that a wealth tax does have a negative effect on investment and increased risk-aversion..... Google scholar has lots of papers on what happened to countries that implemented such taxes, and why those taxes got dropped. [1] https://www.nber.org/papers/w22376 https://www.nber.org/papers/w22376 [2] https://journals.sagepub.com/doi/abs/10.1177/097135570801700203 https://journals.sagepub.com/doi/abs/10.1177/097135570801700... [3] https://www.sciencedirect.com/science/article/pii/B9780127808505500290 https://www.sciencedirect.com/science/article/pii/B978012780... [4] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3471248 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3471248

mikorym 6y ago

Another question I would like to see discussed w.r.t. Switzerland is whether they are, in crude terms, dependent on other countries not being stable. An example would be the South African originated company Compagnie Financière Richemont SA. Apart from economy of scale reasons, the reason why they moved to Switzerland is absolutely the stability of that country. South African citizens, many pensioners, now pay tax in Switzerland on dividends. (Yes, you have a DT treaty that allows you to go from 35% dividends tax to 15%, but still paid in Switzerland. And yes, probably they spend tax money much better than the SA government.) LVMH by contrast doesn't have to move around, but in theory could have moved to Switzerland if it were the only stable country around. So, to be Devil's advocate, is Switzerland a well performing country when considered critically or do they get a lot of money that in practical terms is or was historically generated in other geographic areas? Conversely, if you don't have any stable countries at all, and you're left only with an option like South Africa, then there are countless examples of companies that simply could not survive. By the way, South Africa's taxes are getting quite high and there is absolutely no correlation between tax rates and service delivery. My personal opinion is somewhat more focused on practical terms. My first question about a country is not about taxes, but about the poverty line and buying power; and then about environmental issues. South African's don't have much hope for governments making any kind of sensible decisions.

ex3ndr 6y ago

Sorry but Switzerland is explicitly is not that good for wealthy and a lot of people are started leaving even 8 years ago. For example, one of my partners literally hired ex-minister of finance to do taxes and even then they wasn't able to avoid various taxation penalties.

controversy 6y ago

Keep in mind that the Swiss model would be analogous to the US charging wealth taxes at a State level. One can move between cantons to reduce the tax.

abvdasker 6y ago

It's honestly embarrassing that PG would even post this. The post strikes me as particularly lazy and dismissive because it doesn't engage with any of the arguments for a wealth tax or the motivations behind one. As other comments have pointed out, the example is not even close to a good "model" of a real-world wealth tax. It's a straw man. I would expect an overconfident high school student who just finished The Fountainhead to make this kind argument but not a successful and supposedly smart venture capitalist. I've seen this pattern from PG and other people in tech over and over. They assume their expertise in one domain translates into other fields in which they have no special knowledge. Underlying a post like this is the arrogant assumption that nobody smart has ever thought of calculating .99^60, and that PG knows what's best. Paul Graham is hopelessly out of touch.

brlewis 6y ago

> See also https://twitter.com/halvarflake/status/1295283922117566464?s.. https://twitter.com/halvarflake/status/1295283922117566464?s.... - I tried to ask @rabois for the source of a claim, and got crickets in return My twitter client shows a reply from him yesterday, mentioning you, that points to an NPR link, which in turn cites this article: https://www.france24.com/en/20150808-france-wealthy-flee-high-taxes-les-echos-figures?utm_source=npr_newsletter&utm_medium=email&utm_content=20190226&utm_campaign=money&utm_term=nprnews https://www.france24.com/en/20150808-france-wealthy-flee-hig...

karaterobot 6y ago

> Switzerland has a wealth tax (of up to 0.3% Switzerland has no wealth tax. Individual cantons and municipalities in Switzerland have wealth taxes, and set the rates and exemptions. The rates actually go much higher than 0.3%, up to 0.7% - 0.8% in some places. > there is zero evidence that this has any deterrent effect on wealthy people settling in Switzerland or startups being created in Switzerland. There is evidence that wealth moves between cantons to minimize the amount paid in wealth taxes (cf. https://voxeu.org/article/wealth-taxation-swiss-experience https://voxeu.org/article/wealth-taxation-swiss-experience). Not strictly contradicting what you said, but I take the implication of your statement to be "the wealth tax actually doesn't change people's behavior", but it seems to in some cases.

juergbi 6y ago

The top wealth tax rate is definitely higher than 0.3% in Switzerland. In Zurich it's up to 0.7%. There is no capital gains tax for private long-term investments in Switzerland (with the exception of real estate). However, dividends are normally taxed the same as income from employment.

SkyMarshal 6y ago

>See also https://twitter.com/halvarflake/status/1295283922117566464?s.. https://twitter.com/halvarflake/status/1295283922117566464?s.... - I tried to ask @rabois for the source of a claim, and got crickets in return. Maybe you missed it but he replied to you with this NPR article on Europe's wealth taxes, from which he sourced his comment: https://www.npr.org/sections/money/2019/02/26/698057356/if-a-wealth-tax-is-such-a-good-idea-why-did-europe-kill-theirs https://www.npr.org/sections/money/2019/02/26/698057356/if-a...

m0zg 6y ago

They don't have capital gains tax, though, IIRC. For someone interested in "nuance", it's curious that you neglected to mention that.

SamReidHughes 6y ago

Also, some Swiss cantons have made special tax deals to get billionaires to reside there. Or at least that happened at least once.

lazyjones 6y ago

Switzerland offers lump-sum taxation for wealthy people: https://home.kpmg/ch/en/blogs/home/posts/2020/04/lump-sum-taxation-switzerland-brexit.html https://home.kpmg/ch/en/blogs/home/posts/2020/04/lump-sum-ta... So it's not 0.3%, but a mostly constant yearly amount that may be much lower.

graeme 6y ago

> See also https://twitter.com/halvarflake/status/1295283922117566464?s.. https://twitter.com/halvarflake/status/1295283922117566464?s.... - I tried to ask @rabois for the source of a claim, and got crickets in return. It’s pretty easy to google. This article quotes the source as a report. (Though the link is broke ): https://www.france24.com/en/20150808-france-wealthy-flee-high-taxes-les-echos-figures https://www.france24.com/en/20150808-france-wealthy-flee-hig... Someone not replying to you isn’t an argument when an answer is trivially found. That too me ten seconds to find. (Finding the report would take longer but should be doable)