5 ms·

This is a great illustration that the wealth tax is not about rational policy. It's based on nothing but emotion and ideology. We're not debating here the need

This is a great illustration that the wealth tax is not about rational policy. It's based on nothing but emotion and ideology. We're not debating here the need for taxes, or labor protections. You don't get to justify bad policies by pointing that there are places where government regulation is called for. Wealth tax is bad policy. Justify it on its own merits.

lemmsjid 6y ago
Here's my own-merits justification: Holding on to wealth is an inherently risky prospect. Let's say you are very wealthy but live in an unstable country. You're like a dragon sleeping on its pile of gold. Your wealth is a target. You need to hire considerable amounts of security, stockpile weapons, etc. in order to preserve that wealth. In a stable country, your wealth is not under that risk and you do not need to pay for that risk mitigation. You accrue the benefits of the wealth without taking on the risk. In other words, the act of amassing wealth and keeping it is a direct function of the stability and prosperity of the country in which you live. Because larger amounts of wealth incur larger amounts of risk, it makes sense that a portion of that wealth should be distributed to the country at large: for example, to pay for the less wealthy people who join the military to protect your wealth. Now: what separates that from the existing notion of income tax, capital gains tax, etc? The idea that your wealth, as it is sitting there (not its growth, not what you are earning), is incurring a cost to society, and that society is taking on risk in order to keep your wealth safe. Risk you are not directly paying for. Furthermore, in a stable and modern country holding onto wealth is so safe and protected that you can safely invest your wealth in markets and accrue compound interest. That is the polar opposite of what you would do in an unstable country, where you would keep your wealth hidden away underground, in mattresses, etc. So you are gaining a tremendous wealth-growth benefit by being in a stable country. (This doesn't seem to be addressed in pg's post, which I found confusing, because at 1% taxation you'd be below average market gains and would still gain). I'm not sold on the above argument being a truly compelling and overriding one for wealth tax, it's just some foundational thinking. I do think it explains, in part, why a wealthy person might choose to live in a country with a wealth tax over a country without one, assuming wealth tax became fashionable across most stable countries.
- cies 6y ago
  Stability is one thing. But super rich like growth opportunity even more. Now what about you can grow your wealth a lot faster if some laws change, would it justify a lobby campaign? Stability is one, but favourable laws for super rich have been passed and are upheld for so long. The fact that fines are not wealth and/or income dependent is a testimony to the dysfunction of democracy. The absolute fines implemented in most countries enable certain "high net worth individuals" to ignore fine all together.
  - klipt 6y ago
    Well depending what the fine is for, absolute values might make more sense. Eg for people overusing water during a drought, if you can fine them enough to build a water recycling plant that recovers the water they wasted, that essentially undoes the harm they caused. Why fine poor people less if they aren't doing less harm?
    - cies 6y ago
      That's not a fine. We the people dont want over use of water by anyone, we implement fine. If its absolute the rich are immune to it. If you want more money from the water used, put a tax on the water. This way water use pays for a new treatment plant.
cjslep 6y ago
Your absolutist statements ("based on nothing but emotion and ideology") do nothing but betray your own ignorance. As an American living in Switzerland, a "good policy" (whatever that means) here has resulted in: 1) no capital gains tax, nor any capital losses and certainly no carryover loss shenanigans but 2) using a wealth tax in lieu of capital gains tax to collect any sort of tax on those who have presumably been using their capital to beget more capital. Switzerland does not have any flight of capital, still actively is sought after for parking wealth (which is actually an economy-distorting problem as foreign investors seek to buy stable assets in the Swiss market), and definitely still has an ultra-rich class residing here or moving here. So, if you thought wealth tax alone was bad policy, how does wealth tax plus removing everything-capital-gains (especially the carryover losses which the current US President likes to excessively utilize) sound as effective policy?
- hrez 6y ago
  Are you talking about "up to $3k/year" carryover? How is that any significant?
  - doktorhladnjak 6y ago
    $3k is just the amount you can deduct from income each year. You can carry over the rest of the loss to future years until you die (not inherited by your heirs).
- cdfky 6y ago
  Capital is there because foreigners who park their money are not subject to a wealth tax
billiam 6y ago
I don't see why. There's a huge body of work that shows that taxing wealth versus capital income is likely to increase productvity while reducing income inequality, which is a hug source of our current economic problems and polarization: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3454385 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3454385. Two MIT economists just won a Nobel prize for showing the benefits not just in a developed economy but globally.

lemmsjid 6y ago

Here's my own-merits justification: Holding on to wealth is an inherently risky prospect. Let's say you are very wealthy but live in an unstable country. You're like a dragon sleeping on its pile of gold. Your wealth is a target. You need to hire considerable amounts of security, stockpile weapons, etc. in order to preserve that wealth. In a stable country, your wealth is not under that risk and you do not need to pay for that risk mitigation. You accrue the benefits of the wealth without taking on the risk. In other words, the act of amassing wealth and keeping it is a direct function of the stability and prosperity of the country in which you live. Because larger amounts of wealth incur larger amounts of risk, it makes sense that a portion of that wealth should be distributed to the country at large: for example, to pay for the less wealthy people who join the military to protect your wealth. Now: what separates that from the existing notion of income tax, capital gains tax, etc? The idea that your wealth, as it is sitting there (not its growth, not what you are earning), is incurring a cost to society, and that society is taking on risk in order to keep your wealth safe. Risk you are not directly paying for. Furthermore, in a stable and modern country holding onto wealth is so safe and protected that you can safely invest your wealth in markets and accrue compound interest. That is the polar opposite of what you would do in an unstable country, where you would keep your wealth hidden away underground, in mattresses, etc. So you are gaining a tremendous wealth-growth benefit by being in a stable country. (This doesn't seem to be addressed in pg's post, which I found confusing, because at 1% taxation you'd be below average market gains and would still gain). I'm not sold on the above argument being a truly compelling and overriding one for wealth tax, it's just some foundational thinking. I do think it explains, in part, why a wealthy person might choose to live in a country with a wealth tax over a country without one, assuming wealth tax became fashionable across most stable countries.

cies 6y ago
Stability is one thing. But super rich like growth opportunity even more. Now what about you can grow your wealth a lot faster if some laws change, would it justify a lobby campaign? Stability is one, but favourable laws for super rich have been passed and are upheld for so long. The fact that fines are not wealth and/or income dependent is a testimony to the dysfunction of democracy. The absolute fines implemented in most countries enable certain "high net worth individuals" to ignore fine all together.
- klipt 6y ago
  Well depending what the fine is for, absolute values might make more sense. Eg for people overusing water during a drought, if you can fine them enough to build a water recycling plant that recovers the water they wasted, that essentially undoes the harm they caused. Why fine poor people less if they aren't doing less harm?
  - cies 6y ago
    That's not a fine. We the people dont want over use of water by anyone, we implement fine. If its absolute the rich are immune to it. If you want more money from the water used, put a tax on the water. This way water use pays for a new treatment plant.

cjslep 6y ago

Your absolutist statements ("based on nothing but emotion and ideology") do nothing but betray your own ignorance. As an American living in Switzerland, a "good policy" (whatever that means) here has resulted in: 1) no capital gains tax, nor any capital losses and certainly no carryover loss shenanigans but 2) using a wealth tax in lieu of capital gains tax to collect any sort of tax on those who have presumably been using their capital to beget more capital. Switzerland does not have any flight of capital, still actively is sought after for parking wealth (which is actually an economy-distorting problem as foreign investors seek to buy stable assets in the Swiss market), and definitely still has an ultra-rich class residing here or moving here. So, if you thought wealth tax alone was bad policy, how does wealth tax plus removing everything-capital-gains (especially the carryover losses which the current US President likes to excessively utilize) sound as effective policy?

hrez 6y ago
Are you talking about "up to $3k/year" carryover? How is that any significant?
- doktorhladnjak 6y ago
  $3k is just the amount you can deduct from income each year. You can carry over the rest of the loss to future years until you die (not inherited by your heirs).
cdfky 6y ago
Capital is there because foreigners who park their money are not subject to a wealth tax

billiam 6y ago

I don't see why. There's a huge body of work that shows that taxing wealth versus capital income is likely to increase productvity while reducing income inequality, which is a hug source of our current economic problems and polarization: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3454385 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3454385. Two MIT economists just won a Nobel prize for showing the benefits not just in a developed economy but globally.