5 ms·

There are some really smart ideas in here, and some really smart assessments of existing policies. The thing I was most taken aback by was Sam's suggestion to

by xrd 6y ago

There are some really smart ideas in here, and some really smart assessments of existing policies. The thing I was most taken aback by was Sam's suggestion to tax privately held land, and capital (as opposed to labor tax). I would love to have Sam and PG go toe to toe and discuss how Sam's proposal is different from the wealth tax post PG made. I don't immediately see how Sam's idea avoids the "wealth tax compounds" problem (his words not mine) that PG is worried about. http://paulgraham.com/wtax.html http://paulgraham.com/wtax.html

adambaybutt 6y ago
Sam's proposal doesn't avoid the wealth tax compounds simple arithmetic that PG notes. And yes many important questions for society to answer on this, e.g. how much does is disincentivize entrepreneurs if they have half of their wealth taxed away over the decades compared to current taxation system?
- xrd 6y ago
  <joke> Just a thought experiment: let's say we take Sam's ideas alongside something like UBI, where everyone has a baseline of income provided by the society they live in. You succeed wildly, and get rich as an entrepreneur. Sadly, in a generation or two, your grandchildren will be back with the rest of the plebeians, despite grandpops launching YC, writing books on art and coding and creating an bunch of amazing companies. But, your grandkids are now not motivated by escaping the poverty they live in, but by a simple desire to live differently than the other normal people out there (also living on UBI). This seems a lot like what happens in places like Russia or Venezuela or Brazil, where the best and the brightest (often from upper crust there) flee their countries to make it big in Europe, US or the Middle East, but not always because they have such horrible lives there. Except that, unlike entrepreneurs driven by a mindset that has them feel like it is never enough, these ones are just trying to escape the ennui of boredom of suburbia, and slipping back into that isn't so awful. The alternative drive of escaping poverty does something very different and rapacious: see Tyco and Dennis Kozlowski: https://en.wikipedia.org/wiki/Dennis_Kozlowski https://en.wikipedia.org/wiki/Dennis_Kozlowski, who despite enormous wealth couldn't stop himself from having his company pay for even his rugs. It's like the best of communism, and the best of capitalism! </joke> Seriously, isn't there an interesting space for entrepreneurs in a new world like the one Sam is describing?
  - sudosysgen 6y ago
    Is this actually realistic? In the Soviet Union, there was no such problem - brilliant people by and large were happy to become scientists and engineers, and scientists and engineers got into the planning agencies and into the government too, in droves. Same in pre 1989 China. I don't see why the USSR and Mao's China were able to retain (and sometimes even attract) these people, but the society you're describing wouldn't be able to. Actually, after some digging, I found something Lenin wrote about what to do with the entreprising kind of people - he wanted them to be put to use in organising projects and production, whereas the Kozlowski type were to be ignored (or worse). So I guess the solution he found was to allow them to create big organizations and projects, but instead of paying them in money, they were paid in social status and achievement. If that worked to retain people like Kolmogorov, Ilyushin, Kalashnikov, Korolev, etc..., couldn't simply socially different positions for people that are enterprising be sufficient?
    - xrd 6y ago
      This is a fascinating and out of the regular narrative of communism (at least to me). Thanks.
    - nickpp 6y ago
      The brilliant people that stayed in the USSR had no choice - they were kept there by force either directly (not allowed to leave) or indirectly (leave but your family will pay the price). But they all wanted to leave. The more you knew how much better your life could be in the west, the more you hated staying.
      - sudosysgen 6y ago
        See, I don't know if that's true. The main counter evidence to your hypothesis were the defections of scientists and engineers to the USSR, the amount of brilliant people that regretted the fall of the USSR, and so on. For example, one of my brilliant math teachers was from a Soviet state, and had the opportunity to leave all along - he only did so as the USSR fell and he did not see any prospect in the East anymore. Patriotism is a strong emotion. But beyond that, many brilliant people in communist countries really did enjoy a very elevated social status - if you see what children aspired too, being a scientist or engineer was really up there. And as far as job security and research freedom, for example, there was often quite a bit of it. On the other hand, you had drastically less freedom, but it doesn't seem the ones who chose to stay valued it as much as we would.
tvanantwerp 6y ago
As far as I can tell, it's not different. Unless you could consistently generate the 2.5% property value to pay the tax each year (in a world where AI has sent incomes to zero!), then you'll eventually lose your property.
- goesnowhere 6y ago
  But if everyone is poor then prices drop...
larsiusprime 6y ago
Land Value tax has a long history in economics; it acts very differently from capital and wealth taxes because Land really behaves differently from those two classes of things. I highly recommend reading Henry George on the subject, who originally popularized the idea. Note "Land Tax" != "Property Tax." Land tax taxes only the value of the underlying "ground rent", NOT the value of the improvements (stuff you build on land). Property Tax taxes both. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
SamBam 6y ago
I don't see the issue with the wealth tax compounding, because the wealth also compounds. That's exactly the "problem" with wealth (from the perspective of society's growing wealth inequality). Wealth compounds much, much faster than income grows. Someone who inherits $3 million (not much from the point of view of the wealthy) can live comfortably on the growth alone while still compounding their wealth further every year. The only way a wealth tax would compound faster than the wealth itself is if it is larger than the growth rate of the wealth. And since that's averaged at ~8-10% over the past few decades, a 1% tax is not going to eat into a person's wealth over time. It's simply going to slightly slow that growth down.
colinmhayes 6y ago
The estimation of 15% loss of market cap due to the 2.5% cap tax is laughable. That is effectively a reverse buyback of 2.5% every year. It would leave many companies with 0 or negative profit. Any company with P/E above 40 immediately loses money. 20 has their profit chopped in half. The values of these companies would be reduced by at least 50%.
- kilotaras 6y ago
  Um....so what? Stock market is the way to efficiently allocate capital. If value of every company is halved it changes nothing to relative performance of them.
  - colinmhayes 6y ago
    This tax would raise much much less money than Sam expects.
imtringued 6y ago
That's just an argument for why wealth taxes should never go above 2%. If you can't double or triple your wealth in 60 years what are you doing with it?
neilparikh 6y ago
Another way to look at a land tax (instead of as a wealth tax) is that it's sort of "user fee". You're paying society "rent" (a land tax was called ground rent by Adam Smith) for depriving the commons of that land. Typically, land value tax is based on the rental value of land rather than the market value, so it's even more in line with this model. We want to move to a society where land is not treated as wealth, but rather as a resource to use (because that leads to less land speculation, and more productive use of land), so this model is fine.

by xrd 6y ago

adambaybutt 6y ago

Sam's proposal doesn't avoid the wealth tax compounds simple arithmetic that PG notes. And yes many important questions for society to answer on this, e.g. how much does is disincentivize entrepreneurs if they have half of their wealth taxed away over the decades compared to current taxation system?

xrd 6y ago
<joke> Just a thought experiment: let's say we take Sam's ideas alongside something like UBI, where everyone has a baseline of income provided by the society they live in. You succeed wildly, and get rich as an entrepreneur. Sadly, in a generation or two, your grandchildren will be back with the rest of the plebeians, despite grandpops launching YC, writing books on art and coding and creating an bunch of amazing companies. But, your grandkids are now not motivated by escaping the poverty they live in, but by a simple desire to live differently than the other normal people out there (also living on UBI). This seems a lot like what happens in places like Russia or Venezuela or Brazil, where the best and the brightest (often from upper crust there) flee their countries to make it big in Europe, US or the Middle East, but not always because they have such horrible lives there. Except that, unlike entrepreneurs driven by a mindset that has them feel like it is never enough, these ones are just trying to escape the ennui of boredom of suburbia, and slipping back into that isn't so awful. The alternative drive of escaping poverty does something very different and rapacious: see Tyco and Dennis Kozlowski: https://en.wikipedia.org/wiki/Dennis_Kozlowski https://en.wikipedia.org/wiki/Dennis_Kozlowski, who despite enormous wealth couldn't stop himself from having his company pay for even his rugs. It's like the best of communism, and the best of capitalism! </joke> Seriously, isn't there an interesting space for entrepreneurs in a new world like the one Sam is describing?
- sudosysgen 6y ago
  Is this actually realistic? In the Soviet Union, there was no such problem - brilliant people by and large were happy to become scientists and engineers, and scientists and engineers got into the planning agencies and into the government too, in droves. Same in pre 1989 China. I don't see why the USSR and Mao's China were able to retain (and sometimes even attract) these people, but the society you're describing wouldn't be able to. Actually, after some digging, I found something Lenin wrote about what to do with the entreprising kind of people - he wanted them to be put to use in organising projects and production, whereas the Kozlowski type were to be ignored (or worse). So I guess the solution he found was to allow them to create big organizations and projects, but instead of paying them in money, they were paid in social status and achievement. If that worked to retain people like Kolmogorov, Ilyushin, Kalashnikov, Korolev, etc..., couldn't simply socially different positions for people that are enterprising be sufficient?
  - xrd 6y ago
    This is a fascinating and out of the regular narrative of communism (at least to me). Thanks.
  - nickpp 6y ago
    The brilliant people that stayed in the USSR had no choice - they were kept there by force either directly (not allowed to leave) or indirectly (leave but your family will pay the price). But they all wanted to leave. The more you knew how much better your life could be in the west, the more you hated staying.
    - sudosysgen 6y ago
      See, I don't know if that's true. The main counter evidence to your hypothesis were the defections of scientists and engineers to the USSR, the amount of brilliant people that regretted the fall of the USSR, and so on. For example, one of my brilliant math teachers was from a Soviet state, and had the opportunity to leave all along - he only did so as the USSR fell and he did not see any prospect in the East anymore. Patriotism is a strong emotion. But beyond that, many brilliant people in communist countries really did enjoy a very elevated social status - if you see what children aspired too, being a scientist or engineer was really up there. And as far as job security and research freedom, for example, there was often quite a bit of it. On the other hand, you had drastically less freedom, but it doesn't seem the ones who chose to stay valued it as much as we would.

tvanantwerp 6y ago

As far as I can tell, it's not different. Unless you could consistently generate the 2.5% property value to pay the tax each year (in a world where AI has sent incomes to zero!), then you'll eventually lose your property.

goesnowhere 6y ago
But if everyone is poor then prices drop...

larsiusprime 6y ago

Land Value tax has a long history in economics; it acts very differently from capital and wealth taxes because Land really behaves differently from those two classes of things. I highly recommend reading Henry George on the subject, who originally popularized the idea. Note "Land Tax" != "Property Tax." Land tax taxes only the value of the underlying "ground rent", NOT the value of the improvements (stuff you build on land). Property Tax taxes both. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax

SamBam 6y ago

I don't see the issue with the wealth tax compounding, because the wealth also compounds. That's exactly the "problem" with wealth (from the perspective of society's growing wealth inequality). Wealth compounds much, much faster than income grows. Someone who inherits $3 million (not much from the point of view of the wealthy) can live comfortably on the growth alone while still compounding their wealth further every year. The only way a wealth tax would compound faster than the wealth itself is if it is larger than the growth rate of the wealth. And since that's averaged at ~8-10% over the past few decades, a 1% tax is not going to eat into a person's wealth over time. It's simply going to slightly slow that growth down.

colinmhayes 6y ago

The estimation of 15% loss of market cap due to the 2.5% cap tax is laughable. That is effectively a reverse buyback of 2.5% every year. It would leave many companies with 0 or negative profit. Any company with P/E above 40 immediately loses money. 20 has their profit chopped in half. The values of these companies would be reduced by at least 50%.

kilotaras 6y ago
Um....so what? Stock market is the way to efficiently allocate capital. If value of every company is halved it changes nothing to relative performance of them.
- colinmhayes 6y ago
  This tax would raise much much less money than Sam expects.

imtringued 6y ago

That's just an argument for why wealth taxes should never go above 2%. If you can't double or triple your wealth in 60 years what are you doing with it?

neilparikh 6y ago

Another way to look at a land tax (instead of as a wealth tax) is that it's sort of "user fee". You're paying society "rent" (a land tax was called ground rent by Adam Smith) for depriving the commons of that land. Typically, land value tax is based on the rental value of land rather than the market value, so it's even more in line with this model. We want to move to a society where land is not treated as wealth, but rather as a resource to use (because that leads to less land speculation, and more productive use of land), so this model is fine.