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Another article on 2% tax on assets of the wealthy. I wonder how that would change the payoff calculations for business founders? If winning means you just ge

Another article on 2% tax on assets of the wealthy. I wonder how that would change the payoff calculations for business founders? If winning means you just get your winnings taken by taxes over the rest of your life, why work to win? https://80000hours.org/2014/05/how-much-do-y-combinator-founders-earn/ https://80000hours.org/2014/05/how-much-do-y-combinator-foun... The median return for a founder is essentially $0. Because most startups fail. The average return for a YC founder is skewed heavily upwards by one or two ultra-successful unicorns. Plenty of founders are motivated by non-monetary goals (especially status). But would people still be incentivised to become founders if the amount you get to own after decades of taxes rounds to $0? Some pundits suggest a cap on wealth "limitarianism". Incentive structures matter. It appears to me that a lot of small businesses are run by people investing huge amounts of their time to go from having a few million to a few million more. A 2% tax above a cliff means that people will stop developing their businesses once they reach the cliff. Socialism via taxation policy?

kmos17 3y ago
What if the 2% only kicks in for people with over $100M in assets?
- seanmcdirmid 3y ago
  I’m not sure how that is workable. If they have investments, they deprecate at 2%/year no matter what after $100m? Of course, the IRS doesn’t take a share of those assets, only cash, so they have to liquidate 2% of their assets each year, but only if they are worth more than $100m (assets - debts I guess?). Sounds like an auto economic cash given what has to be liquidated each year.
- robocat 3y ago
  Then no founder continues building their business once they near having $100M equity. Basically it creates a cap on private business size? Maybe reasonable, maybe not. It is a negative incentive to never try to work more to earn more. Suddenly you lose your serial entrepreneurs. Disincentives matter as much as incentives. In New Zealand, the party suggesting a wealth tax, was going to levy it if you had more than $1 million equity. There is no reason they wouldn't reduce the limit from $100M over time. Politicians want power, why would they want to allow anyone to have significant assets? One fundamental strength of capitalism is that it finds compromises between competing needs - compromises that our politicians can't or won't make.
jemmyw 3y ago
So they have to sell off a small bit of wealth to pay the tax? That seems reasonable if their wealth is so large that they're over the tax threshold. For most founders this will never be an issue and for those that it is... they've basically got so much wealth they could just cash it all out and live a good life, so it's unlikely they're working more for the money.
jemmyw 3y ago
> Socialism via taxation policy All Western capitalist nations, including the US, implement a degree of socialism via taxation. So whenever I see this "that's socialism" argument my thought is so what? We already have socialism, that's not an argument. A good argument is on the effect in either direction.

kmos17 3y ago

What if the 2% only kicks in for people with over $100M in assets?

seanmcdirmid 3y ago
I’m not sure how that is workable. If they have investments, they deprecate at 2%/year no matter what after $100m? Of course, the IRS doesn’t take a share of those assets, only cash, so they have to liquidate 2% of their assets each year, but only if they are worth more than $100m (assets - debts I guess?). Sounds like an auto economic cash given what has to be liquidated each year.
robocat 3y ago
Then no founder continues building their business once they near having $100M equity. Basically it creates a cap on private business size? Maybe reasonable, maybe not. It is a negative incentive to never try to work more to earn more. Suddenly you lose your serial entrepreneurs. Disincentives matter as much as incentives. In New Zealand, the party suggesting a wealth tax, was going to levy it if you had more than $1 million equity. There is no reason they wouldn't reduce the limit from $100M over time. Politicians want power, why would they want to allow anyone to have significant assets? One fundamental strength of capitalism is that it finds compromises between competing needs - compromises that our politicians can't or won't make.

jemmyw 3y ago

So they have to sell off a small bit of wealth to pay the tax? That seems reasonable if their wealth is so large that they're over the tax threshold. For most founders this will never be an issue and for those that it is... they've basically got so much wealth they could just cash it all out and live a good life, so it's unlikely they're working more for the money.

jemmyw 3y ago

> Socialism via taxation policy All Western capitalist nations, including the US, implement a degree of socialism via taxation. So whenever I see this "that's socialism" argument my thought is so what? We already have socialism, that's not an argument. A good argument is on the effect in either direction.