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>I don't think in absolutes. But you speak in absolutes. >If you impose a wealth tax at the national level, rich people will leave America (edit: renounce cit

>I don't think in absolutes. But you speak in absolutes. >If you impose a wealth tax at the national level, rich people will leave America (edit: renounce citizenship) and ambitious people will never come here to begin with. America will no longer be the land of opportunity. >But yes, it is a powerful disincentive due to the compounding nature of wealth taxes. This compounding nature of wealth taxes is nonsense. It's a negative feedback loop not a positive one. Compound interest is powerful because it compounds on itself--it's a positive feedback loop. Comparing compound interest to a wealth tax is just flat out wrong.

andrewtbham 6y ago
The whole point of the pg essay is that wealth tax losses compound. > The reason wealth taxes have such dramatic effects is that they're applied over and over to the same money. Income tax happens every year, but only to that year's income. Whereas if you live for 60 years after acquiring some asset, a wealth tax will tax that same asset 60 times. A wealth tax compounds. Compounding is not exclusive to positive feedback cycles. It applies to negative feedback cycles as well. Have you heard the phrase "my problems are compounding?"
- learc83 6y ago
  Compound has several definitions. The one that we are talking about here is in relation to compound interest: to pay (interest) on the accrued interest as well as the principal. I'm going to take the fact that you keep talking about the power of compound interest to mean that this is the definition you're talking about. >Compounding is not exclusive to positive feedback cycles. Compound interest isn't powerful because it happens every year, it's powerful because you accrue interest on the principal and the additional interest. It's only powerful explicitly because it is a positive feedback cycle. A negative feedback cycle is self limiting. The rate of change gets slower each year. >It applies to negative feedback cycles as well. Have you heard the phrase "my problems are compounding?" I'm positive that you don't understand what negative feedback means based on this comment.
  - andrewtbham 6y ago
    > Compound interest isn't powerful because it happens every year Yes it is. If you just got a one time payment compounding interest would not have exponential growth. I agree that payment on the principal and additional interest is another component of the exponential growth.
    - learc83 6y ago
      >Yes it is. If you just got a one time payment compounding interest would not have exponential growth. Obviously. There is an implied only in that sentence. It clearly doesn't make sense without it.
  - andrewtbham 6y ago
    To be clear, I understand that the rate of gets lower every year in negative feedback cycle. I am not saying a wealth tax takes your money at an exponentially increasing rate. I am saying that it lessens your ability to grow your wealth at an exponential rate. It mitigates the miracle of compounding growth. Think about if you create a startup and you have to sell shares to pay your wealth tax. What if Larry Page did that in 2001. He wouldn't be out the $100 of the stock price in 2001. Today he is out thousands of dollars of what it would have been if it could have grown.
    - learc83 6y ago
      >I am saying that it lessens your ability to grow your wealth at an exponential rate. It mitigates the miracle of compounding growth. It doesn't mitigate the miracle of compounding growth any more than a capital gains tax. A capital gains tax of 50% combined with inflation would completely mitigate the compounding growth of any many investments. For some easy numbers: take an interest bearing account that pays 10% interest. A 1% wealth tax and an 11% capital gains tax are functionally equivalent. And Elizabeth Warren's wealth taxes don't even kick in until $50 million. So the vast majority of people should prefer that to increasing the capital gains tax or setting to income tax rates. >Think about if you create a startup and you have to sell shares to pay your wealth tax. What if Larry Page did that in 2001. He wouldn't be out the $100 of the stock price in 2001. Today he is out thousands of dollars of what it would have been if it could have grown. That's just an absurd way to frame things. My grandparents paid $500 in income tax 70 years ago. If they had been able to invest that they would have thousands. If he sold shares, someone else would own them, so someone else would have those thousands of dollars, it's not like the value would just disappear into the ether.

andrewtbham 6y ago

The whole point of the pg essay is that wealth tax losses compound. > The reason wealth taxes have such dramatic effects is that they're applied over and over to the same money. Income tax happens every year, but only to that year's income. Whereas if you live for 60 years after acquiring some asset, a wealth tax will tax that same asset 60 times. A wealth tax compounds. Compounding is not exclusive to positive feedback cycles. It applies to negative feedback cycles as well. Have you heard the phrase "my problems are compounding?"

learc83 6y ago
Compound has several definitions. The one that we are talking about here is in relation to compound interest: to pay (interest) on the accrued interest as well as the principal. I'm going to take the fact that you keep talking about the power of compound interest to mean that this is the definition you're talking about. >Compounding is not exclusive to positive feedback cycles. Compound interest isn't powerful because it happens every year, it's powerful because you accrue interest on the principal and the additional interest. It's only powerful explicitly because it is a positive feedback cycle. A negative feedback cycle is self limiting. The rate of change gets slower each year. >It applies to negative feedback cycles as well. Have you heard the phrase "my problems are compounding?" I'm positive that you don't understand what negative feedback means based on this comment.
- andrewtbham 6y ago
  > Compound interest isn't powerful because it happens every year Yes it is. If you just got a one time payment compounding interest would not have exponential growth. I agree that payment on the principal and additional interest is another component of the exponential growth.
  - learc83 6y ago
    >Yes it is. If you just got a one time payment compounding interest would not have exponential growth. Obviously. There is an implied only in that sentence. It clearly doesn't make sense without it.
- andrewtbham 6y ago
  To be clear, I understand that the rate of gets lower every year in negative feedback cycle. I am not saying a wealth tax takes your money at an exponentially increasing rate. I am saying that it lessens your ability to grow your wealth at an exponential rate. It mitigates the miracle of compounding growth. Think about if you create a startup and you have to sell shares to pay your wealth tax. What if Larry Page did that in 2001. He wouldn't be out the $100 of the stock price in 2001. Today he is out thousands of dollars of what it would have been if it could have grown.
  - learc83 6y ago
    >I am saying that it lessens your ability to grow your wealth at an exponential rate. It mitigates the miracle of compounding growth. It doesn't mitigate the miracle of compounding growth any more than a capital gains tax. A capital gains tax of 50% combined with inflation would completely mitigate the compounding growth of any many investments. For some easy numbers: take an interest bearing account that pays 10% interest. A 1% wealth tax and an 11% capital gains tax are functionally equivalent. And Elizabeth Warren's wealth taxes don't even kick in until $50 million. So the vast majority of people should prefer that to increasing the capital gains tax or setting to income tax rates. >Think about if you create a startup and you have to sell shares to pay your wealth tax. What if Larry Page did that in 2001. He wouldn't be out the $100 of the stock price in 2001. Today he is out thousands of dollars of what it would have been if it could have grown. That's just an absurd way to frame things. My grandparents paid $500 in income tax 70 years ago. If they had been able to invest that they would have thousands. If he sold shares, someone else would own them, so someone else would have those thousands of dollars, it's not like the value would just disappear into the ether.