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Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that. If not, then it

by BrenBarn 10mo ago

Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that. If not, then it means the introduction of robots led to more broadly-based benefits. Either way, I'm so sick and tired of people talking about the effect on GDP. GDP is a terrible way to measure anything remotely meaningful. GDP has gone up and up and things have gotten worse and worse for more and more people; GDP could go down a lot and things could still get better for many people. Without some kind of (in)equality adjustment, GDP is meaningless at best and misleading at worst.

PaulHoule 10mo ago
Taxing income is straightforward in that there is a stream of it going by and some of it can be diverted. Taxing wealth is difficult because you don't really know what it is. Arguably the value of a publicly traded corporation can be known because it is being traded continually. [1] For a privately held corporation it's quite opaque. Right now, for instance, Open AI is estimated to be worth $500B and might IPO at $1T but for all we know it could be a smoking hole in the ground in two years. Should we charge them a big bill in 2025 and then have the investors asking for a refund in 2027 when the real value is revised down to negative? Owners of imagined wealth could face big bills that, in the end, they couldn't pay. [2] There would certainly be an incentive to avoid the taxation by minimizing bubbliness which might be a good thing but administering it would be a nightmare and manipulating the system to hide wealth would become a national sport. [1] ... but it could be wrong seen from a future viewpoint [2] I spent a lot of time in the 2010s calling up people in financial services on the phone and talking on the phone and there was no phrase that struck more fear into them than "mark-to-market", I could hear the voices crackle and feel the flinch. A bank or other institution that is perfectly able to make all its obligations as they unfold over time could be nominally insolvent at times when the market fluctuations down but winds up OK in the end -- the kind of accounting it would take to make wealth taxation accurate might be the end of fractional reserve banking and send us back to the giant Bitcoins of the Yap islands.
- BrenBarn 10mo ago
  I think I am fine with taking an approach to that that is just brutally tilted against large values and brutally tilted in favor of transparency. So like, you can't do anything with your ownership share in that privately-held company --- can't use it as collateral for a loan, can't present it to investors to get more funding, can't trade it, can't sell it, can't in any way derive any benefit from it --- without committing yourself to a valuation and paying a tax on the increase in the valuation since the last such assessment. Also you can have a "sound dues"-like system where committing yourself to such a valuation also gives the government the right to immediately compel you to sell them the asset at your valuation. Any inaccuracies or procedural missteps in these calculations will incur minimal penalties until the amounts in question rise above a threshold (maybe like $50 million), at which point attempts to conceal or misrepresent the value of an asset is punishable by an increasing share of the asset, scaling up eventually to total forfeiture. All in all it should be excruciatingly painful to accumulate anything approaching the large wealth holdings we have today. Most of the large privately-held companies simply should not exist with the opaque valuations they have today. Either open the books completely, or lose everything.
  - nlitened 10mo ago
    So why would anyone start businesses or continue doing business in such a country? You’re literally just describing an end to private property, where a privileged government representative can take anything you have. The “government job” will become so lucrative that the position would be passed down within families, father to son. It is already known how these economic systems function, I think.
    - BrenBarn 10mo ago
      I am describing a system where the government can take anything you have over a certain amount. (Or more precisely perhaps can take a proportion of what you have that asymptotically approaches 100% as your total wealth increases.) In my conception this money would then immediately be redistributed (as direct cash payments) to people with less. Government employees doing as you describe would also be subject to severe penalties. The purpose is to entirely eliminate massive wealth concentration. As for why would anyone start a business? There's no disincentive to start a business in this scheme. I'd say the current system has greater obstacles to starting a business in many cases, due to high barriers to entry and regulatory capture by large players. The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small. You can grow your business up until its value is around that taxation threshold and then just kick back. We don't want people taking big businesses and making them bigger.
cubefox 10mo ago
> Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that. It has been tried. Wealth tax means rich people (who already pay most of the taxes) are leaving the country, then the state gets fewer taxes, not more.
bmitch3020 10mo ago
I support the concept of taxing wealth, but I've yet to find a good way to implement it. The two biggest issues are that wealth is easily moved to places where it can't be taxed, and those making the tax decisions are easily influenced by those with wealth. Wealth moves in lots of ways. Yes, as has been pointed out, we over value stock assets. When you own a significant percentage of a company, you can't just sell that ownership at the last trading price (the stock price would quickly crash). Wealth is also moved between national borders, allowing the wealthy to shop for the lowest tax location to stash their funds. Property can't be moved, but it can be financed with debt, making it taxed at effectively 0%. And the other side of that debt may just be an overseas shell company. There will be entire industries formed around avoiding a wealth tax, funded by the wealthy. But probably the most capital efficient way to avoid the wealth tax is to buy politicians, influence the elections, and invest in lobbyist, which the wealthy do in the US to avoid taxes. Until money is removed from politics, I'm not holding out any hope that we'll find a way to tax the wealthy.
robocat 10mo ago
> Why not just tax wealth at steeply progressive rates? You likely live in a wealthy country - your wealth should be taken from you and given to a poorer country. You don't deserve a car when there's people who don't have a bicycle.
- BrenBarn 10mo ago
  I'm actually receptive to this argument, but there are two problems. One is that we have no mechanism for implementing international policy of this sort even in theory (i.e., there is no jurisdiction with authority over both those to be taken from and those to be given to). The other is that, absent such a mechanism, most attempts to implement such transfers will likely increase inequality, because, for instance, the elites of whatever country we want to benefit will simply appropriate all the intended transfers. In other words there is no even remotely reliable way to convert, en masse, cars in my country to bicycles in a poor country somewhere else. This makes it unwise to attempt to do such transfers on a large scale. That said, I would support something like a tax whose revenues are specifically directed towards improving the lives of much-worse-off people elsewhere in the world in ways that are carefully chosen so as to be less vulnerable to graft. (These would likely be in-kind benefits like latrine construction, etc., rather than monetary grants.)

PaulHoule 10mo ago

Taxing income is straightforward in that there is a stream of it going by and some of it can be diverted. Taxing wealth is difficult because you don't really know what it is. Arguably the value of a publicly traded corporation can be known because it is being traded continually. [1] For a privately held corporation it's quite opaque. Right now, for instance, Open AI is estimated to be worth $500B and might IPO at $1T but for all we know it could be a smoking hole in the ground in two years. Should we charge them a big bill in 2025 and then have the investors asking for a refund in 2027 when the real value is revised down to negative? Owners of imagined wealth could face big bills that, in the end, they couldn't pay. [2] There would certainly be an incentive to avoid the taxation by minimizing bubbliness which might be a good thing but administering it would be a nightmare and manipulating the system to hide wealth would become a national sport. [1] ... but it could be wrong seen from a future viewpoint [2] I spent a lot of time in the 2010s calling up people in financial services on the phone and talking on the phone and there was no phrase that struck more fear into them than "mark-to-market", I could hear the voices crackle and feel the flinch. A bank or other institution that is perfectly able to make all its obligations as they unfold over time could be nominally insolvent at times when the market fluctuations down but winds up OK in the end -- the kind of accounting it would take to make wealth taxation accurate might be the end of fractional reserve banking and send us back to the giant Bitcoins of the Yap islands.

BrenBarn 10mo ago
I think I am fine with taking an approach to that that is just brutally tilted against large values and brutally tilted in favor of transparency. So like, you can't do anything with your ownership share in that privately-held company --- can't use it as collateral for a loan, can't present it to investors to get more funding, can't trade it, can't sell it, can't in any way derive any benefit from it --- without committing yourself to a valuation and paying a tax on the increase in the valuation since the last such assessment. Also you can have a "sound dues"-like system where committing yourself to such a valuation also gives the government the right to immediately compel you to sell them the asset at your valuation. Any inaccuracies or procedural missteps in these calculations will incur minimal penalties until the amounts in question rise above a threshold (maybe like $50 million), at which point attempts to conceal or misrepresent the value of an asset is punishable by an increasing share of the asset, scaling up eventually to total forfeiture. All in all it should be excruciatingly painful to accumulate anything approaching the large wealth holdings we have today. Most of the large privately-held companies simply should not exist with the opaque valuations they have today. Either open the books completely, or lose everything.
- nlitened 10mo ago
  So why would anyone start businesses or continue doing business in such a country? You’re literally just describing an end to private property, where a privileged government representative can take anything you have. The “government job” will become so lucrative that the position would be passed down within families, father to son. It is already known how these economic systems function, I think.
  - BrenBarn 10mo ago
    I am describing a system where the government can take anything you have over a certain amount. (Or more precisely perhaps can take a proportion of what you have that asymptotically approaches 100% as your total wealth increases.) In my conception this money would then immediately be redistributed (as direct cash payments) to people with less. Government employees doing as you describe would also be subject to severe penalties. The purpose is to entirely eliminate massive wealth concentration. As for why would anyone start a business? There's no disincentive to start a business in this scheme. I'd say the current system has greater obstacles to starting a business in many cases, due to high barriers to entry and regulatory capture by large players. The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small. You can grow your business up until its value is around that taxation threshold and then just kick back. We don't want people taking big businesses and making them bigger.

cubefox 10mo ago

> Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that. It has been tried. Wealth tax means rich people (who already pay most of the taxes) are leaving the country, then the state gets fewer taxes, not more.

bmitch3020 10mo ago

I support the concept of taxing wealth, but I've yet to find a good way to implement it. The two biggest issues are that wealth is easily moved to places where it can't be taxed, and those making the tax decisions are easily influenced by those with wealth. Wealth moves in lots of ways. Yes, as has been pointed out, we over value stock assets. When you own a significant percentage of a company, you can't just sell that ownership at the last trading price (the stock price would quickly crash). Wealth is also moved between national borders, allowing the wealthy to shop for the lowest tax location to stash their funds. Property can't be moved, but it can be financed with debt, making it taxed at effectively 0%. And the other side of that debt may just be an overseas shell company. There will be entire industries formed around avoiding a wealth tax, funded by the wealthy. But probably the most capital efficient way to avoid the wealth tax is to buy politicians, influence the elections, and invest in lobbyist, which the wealthy do in the US to avoid taxes. Until money is removed from politics, I'm not holding out any hope that we'll find a way to tax the wealthy.

robocat 10mo ago

> Why not just tax wealth at steeply progressive rates? You likely live in a wealthy country - your wealth should be taken from you and given to a poorer country. You don't deserve a car when there's people who don't have a bicycle.

BrenBarn 10mo ago
I'm actually receptive to this argument, but there are two problems. One is that we have no mechanism for implementing international policy of this sort even in theory (i.e., there is no jurisdiction with authority over both those to be taken from and those to be given to). The other is that, absent such a mechanism, most attempts to implement such transfers will likely increase inequality, because, for instance, the elites of whatever country we want to benefit will simply appropriate all the intended transfers. In other words there is no even remotely reliable way to convert, en masse, cars in my country to bicycles in a poor country somewhere else. This makes it unwise to attempt to do such transfers on a large scale. That said, I would support something like a tax whose revenues are specifically directed towards improving the lives of much-worse-off people elsewhere in the world in ways that are carefully chosen so as to be less vulnerable to graft. (These would likely be in-kind benefits like latrine construction, etc., rather than monetary grants.)