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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 amount

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.
    - bhupy 6y ago
      Yes, you do. So why add yet another worry (a 0.5% wealth tax). Keep in mind that "flat or depreciating" companies are way more common than you think. Not every company enjoys the annualized returns of the S&P500. Almost any non-tech or non-tech-adjacent company has remained either flat or depreciated, in the last 10 years. That's the entire reason why lay people invest in the index, because it's relatively safe from depreciation. Most of the super-wealthy don't achieve that wealth on the back of the S&P500, they achieve that on the back of owning a single zero-to-one stock. It's one thing for the company to grow from 0 to {insert equilibrium valuation}, and another thing entirely for the company to continue to grow at a rate that outpaces inflation.
      - nrmitchi 6y ago
        The argument you'll get back though is that that 0.5% wealth tax will no longer impact you _at all_ if your asset value drops below $50M. A 0.5% wealth tax is not going to make you poor. It could, _at absolute worst_, make you worth "only $50M". If you still manage to go from $50M -> $20M, a wealth tax had absolutely nothing to do with that. As well, although it's not explicitly mentioned, I would expect any floor-value (such as $50M) to be set to keep pace with inflation.
        bhupy 6y ago
        Okay, $50M was just the number for the sake of the argument, but the core argument still applies for those individuals worth $100M in the same circumstance, or $500M, etc etc etc. Your argument doesn't refute my central argument, it refutes an unimportant implementation detail.
      - KarlKode 6y ago
        > Most of the super-wealthy don't achieve that wealth on the back of the S&P500 Are you saying that most of the super-wealthy do not (at least to a certain point) diversify their investements? Or is your point that most super-wealthy individuals acquired their wealth themselves by investing (or founding) a single corporation themselves?
- sumtechguy 6y ago
  Most assets do not 'grow in value'. Take a building any building. Sell it today. Sit on the cash for 50 years. How much building can you buy in 50 years? Not nearly as much. The only reason we are even talking about wealth tax is because of the crazy unable to be funded programs some people are proposing. These programs sound nice on paper until you do the math on them. Then they realize they can not pay for it at all. Remember wealth != cash value.
  - jakelazaroff 6y ago
    Cash, specifically, doesn’t grow in value — but most ultra-millionaires aren’t sitting on tens or hundreds of millions of dollars in cash. If you’d held onto the building for 50 years, it’d probably be a very different story.
    - sumtechguy 6y ago
      My parents have owned their home for about 50 years now. If they sold it today and turned around and bought another house they pretty much could get about the same sized house. The about 20k they paid for it 50 years ago in some places would not even get you a down payment. Wealth is not the same as cash value. It is easy to miss the distinction. We may be agreeing? We also already have a 'wealth tax' on many items already. We call it property tax.
  - thundergolfer 6y ago
    Not the only reason at all. So many people are concerned with inequality beyond its connection the USA’s inability to fund public goods.
    - logicchains 6y ago
      >Not the only reason at all. So many people are concerned with inequality beyond its connection the USA’s inability to fund public goods. "Being concerned with inequality" doesn't give people the right to go and arbitrarily expropriate other people's assets.
- bobcostas55 6y ago
  By the same reasoning income tax doesn't exist because people sometimes get raises. Come on.
  - bitdivision 6y ago
    I don't think that's a fair comparison. The article does not model asset growth in any way, and if you do model asset growth you would get significantly different numbers.
  - throwaway2048 6y ago
    Yet somehow people keep working and the entire world of "labour investment" dosen't collapse
arnvald 6y ago
Let's say you have 1% wealth tax and $1,000. Without asset growth, after 1 year you have $990. If you include let's say 5% asset growth, after 1 year you have $1,000 * 1.05 * 0.99 = $1,039. Then after another year, without growth you have $980.1 With %5 growth you have $1,040 * 1.05 * 0.99 = $1,080. So the article claims that with 1% wealth tax you'll lose 45% of your assets over time. With any growth above 1% every year, you will actually at least break even.
- weaksauce 6y ago
  except the wealth tax is not at anything other that the most ridiculously wealthy people in society. the wealth tax is proposed for precisely the reason that it slows down the growth of the ultra elite ruling class type society in favor of a more equitable one that is, you know, a society. bezoar shouldn’t have billions of dollars and influence society like he does... it’s obscene.
  - logicchains 6y ago
    >bezoar shouldn’t have billions of dollars and influence society like he does... it’s obscene. Why not? People voluntarily gave him and his company this money, voluntarily invested in Amazon. What gives you the right to try and take it from him? "Envy makes right" is not the basis for a very good moral system.
    - deleted 6y ago
      [deleted]
    - B4CKlash 6y ago
      This is a strange response. A). The parent doesn't claim morality as the foundation. B). Thriving in a capitalist system is also not a foundation for morality. C). There are no underlying structures that dictate/require the sum total of individual actions have to correspond to societal good (not that i'm aware of). This would be akin to claiming that drug dealers have moral superiority. What we have here is a version of the tragedy of the commons (https://en.wikipedia.org/wiki/Tragedy_of_the_commons#:~:text=The%20tragedy%20of%20the%20commons,resource%20through%20their%20collective%20action. https://en.wikipedia.org/wiki/Tragedy_of_the_commons#:~:text...). Something that benefits the individual on the short term while negatively impacting large swaths of connected infrastructure. In a society where money == votes I can't seen how that's a valid and functioning path forward.

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.
  - bhupy 6y ago
    Yes, you do. So why add yet another worry (a 0.5% wealth tax). Keep in mind that "flat or depreciating" companies are way more common than you think. Not every company enjoys the annualized returns of the S&P500. Almost any non-tech or non-tech-adjacent company has remained either flat or depreciated, in the last 10 years. That's the entire reason why lay people invest in the index, because it's relatively safe from depreciation. Most of the super-wealthy don't achieve that wealth on the back of the S&P500, they achieve that on the back of owning a single zero-to-one stock. It's one thing for the company to grow from 0 to {insert equilibrium valuation}, and another thing entirely for the company to continue to grow at a rate that outpaces inflation.
    - nrmitchi 6y ago
      The argument you'll get back though is that that 0.5% wealth tax will no longer impact you _at all_ if your asset value drops below $50M. A 0.5% wealth tax is not going to make you poor. It could, _at absolute worst_, make you worth "only $50M". If you still manage to go from $50M -> $20M, a wealth tax had absolutely nothing to do with that. As well, although it's not explicitly mentioned, I would expect any floor-value (such as $50M) to be set to keep pace with inflation.
      - bhupy 6y ago
        Okay, $50M was just the number for the sake of the argument, but the core argument still applies for those individuals worth $100M in the same circumstance, or $500M, etc etc etc. Your argument doesn't refute my central argument, it refutes an unimportant implementation detail.
    - KarlKode 6y ago
      > Most of the super-wealthy don't achieve that wealth on the back of the S&P500 Are you saying that most of the super-wealthy do not (at least to a certain point) diversify their investements? Or is your point that most super-wealthy individuals acquired their wealth themselves by investing (or founding) a single corporation themselves?
sumtechguy 6y ago
Most assets do not 'grow in value'. Take a building any building. Sell it today. Sit on the cash for 50 years. How much building can you buy in 50 years? Not nearly as much. The only reason we are even talking about wealth tax is because of the crazy unable to be funded programs some people are proposing. These programs sound nice on paper until you do the math on them. Then they realize they can not pay for it at all. Remember wealth != cash value.
- jakelazaroff 6y ago
  Cash, specifically, doesn’t grow in value — but most ultra-millionaires aren’t sitting on tens or hundreds of millions of dollars in cash. If you’d held onto the building for 50 years, it’d probably be a very different story.
  - sumtechguy 6y ago
    My parents have owned their home for about 50 years now. If they sold it today and turned around and bought another house they pretty much could get about the same sized house. The about 20k they paid for it 50 years ago in some places would not even get you a down payment. Wealth is not the same as cash value. It is easy to miss the distinction. We may be agreeing? We also already have a 'wealth tax' on many items already. We call it property tax.
- thundergolfer 6y ago
  Not the only reason at all. So many people are concerned with inequality beyond its connection the USA’s inability to fund public goods.
  - logicchains 6y ago
    >Not the only reason at all. So many people are concerned with inequality beyond its connection the USA’s inability to fund public goods. "Being concerned with inequality" doesn't give people the right to go and arbitrarily expropriate other people's assets.
bobcostas55 6y ago
By the same reasoning income tax doesn't exist because people sometimes get raises. Come on.
- bitdivision 6y ago
  I don't think that's a fair comparison. The article does not model asset growth in any way, and if you do model asset growth you would get significantly different numbers.
- throwaway2048 6y ago
  Yet somehow people keep working and the entire world of "labour investment" dosen't collapse

arnvald 6y ago

Let's say you have 1% wealth tax and $1,000. Without asset growth, after 1 year you have $990. If you include let's say 5% asset growth, after 1 year you have $1,000 * 1.05 * 0.99 = $1,039. Then after another year, without growth you have $980.1 With %5 growth you have $1,040 * 1.05 * 0.99 = $1,080. So the article claims that with 1% wealth tax you'll lose 45% of your assets over time. With any growth above 1% every year, you will actually at least break even.

weaksauce 6y ago
except the wealth tax is not at anything other that the most ridiculously wealthy people in society. the wealth tax is proposed for precisely the reason that it slows down the growth of the ultra elite ruling class type society in favor of a more equitable one that is, you know, a society. bezoar shouldn’t have billions of dollars and influence society like he does... it’s obscene.
- logicchains 6y ago
  >bezoar shouldn’t have billions of dollars and influence society like he does... it’s obscene. Why not? People voluntarily gave him and his company this money, voluntarily invested in Amazon. What gives you the right to try and take it from him? "Envy makes right" is not the basis for a very good moral system.
  - deleted 6y ago
    [deleted]
  - B4CKlash 6y ago
    This is a strange response. A). The parent doesn't claim morality as the foundation. B). Thriving in a capitalist system is also not a foundation for morality. C). There are no underlying structures that dictate/require the sum total of individual actions have to correspond to societal good (not that i'm aware of). This would be akin to claiming that drug dealers have moral superiority. What we have here is a version of the tragedy of the commons (https://en.wikipedia.org/wiki/Tragedy_of_the_commons#:~:text=The%20tragedy%20of%20the%20commons,resource%20through%20their%20collective%20action. https://en.wikipedia.org/wiki/Tragedy_of_the_commons#:~:text...). Something that benefits the individual on the short term while negatively impacting large swaths of connected infrastructure. In a society where money == votes I can't seen how that's a valid and functioning path forward.