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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 k

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 11mo 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 11mo 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 11mo 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.
    - nlitened 11mo ago
      I think the major problem with your described system is how you quantify wealth. For example, you start a startup, get almost no salary, but you raise a 20M investment on 100M valuation — with your proposed method of calculation, the government already wants you to pay tax on your shares of a 100M enterprise, whereas you may not see a dollar of profit for another 10—20 years (or ever, if the startup fails). It's very difficult to quantify wealth, especially taking into account that a lot of it is risk-bound and long-term. One interesting aspect of trying to quantify wealth and tax based on that — is that it gives enormous advantage to bearers of wealth that is difficult to quantify. For example, political followers is wealth that you can't tax, but one can turn into profit very easily and in many sneaky ways. Also power in general (power to collect taxes, power to control law enforcement and army, or people with guns in general) is wealth that isn't quantifiable in monetary amounts. So in this system powerful people will be much more powerful because they will start accumulating all other forms of wealth, and very difficult to restrict — why would they use their power to restrict themselves? They would use their power to remove any restrictions at the highest priority. So instead of the current system (people willing to invent new things and work overtime for years to bring value to millions of people for a chance of outsized returns — and sometimes earning them) you get a system where political class seizes all power, removes all checks and balances, redistributes wealth production to themselves, and unleashes violence to rule forever. It has been tried many times. > Government employees doing as you describe would also be subject to severe penalties This only works in capitalistic open societies where wealth doesn't concentrate with government employees. > The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small Not all businesses can be small. How can a small business construct an airplane? Organize a nation-wide or international postal delivery service? Build millions of cars with spare parts available for decades? Make food, clothing, and shelter for millions? These things require economies of scale to be affordable. And yes, government-managed big businesses have also been tried, they tend to be very unproductive, and produce expensive and low-quality items (with tendencies to significantly decline over years).

BrenBarn 11mo 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 11mo 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 11mo 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.
  - nlitened 11mo ago
    I think the major problem with your described system is how you quantify wealth. For example, you start a startup, get almost no salary, but you raise a 20M investment on 100M valuation — with your proposed method of calculation, the government already wants you to pay tax on your shares of a 100M enterprise, whereas you may not see a dollar of profit for another 10—20 years (or ever, if the startup fails). It's very difficult to quantify wealth, especially taking into account that a lot of it is risk-bound and long-term. One interesting aspect of trying to quantify wealth and tax based on that — is that it gives enormous advantage to bearers of wealth that is difficult to quantify. For example, political followers is wealth that you can't tax, but one can turn into profit very easily and in many sneaky ways. Also power in general (power to collect taxes, power to control law enforcement and army, or people with guns in general) is wealth that isn't quantifiable in monetary amounts. So in this system powerful people will be much more powerful because they will start accumulating all other forms of wealth, and very difficult to restrict — why would they use their power to restrict themselves? They would use their power to remove any restrictions at the highest priority. So instead of the current system (people willing to invent new things and work overtime for years to bring value to millions of people for a chance of outsized returns — and sometimes earning them) you get a system where political class seizes all power, removes all checks and balances, redistributes wealth production to themselves, and unleashes violence to rule forever. It has been tried many times. > Government employees doing as you describe would also be subject to severe penalties This only works in capitalistic open societies where wealth doesn't concentrate with government employees. > The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small Not all businesses can be small. How can a small business construct an airplane? Organize a nation-wide or international postal delivery service? Build millions of cars with spare parts available for decades? Make food, clothing, and shelter for millions? These things require economies of scale to be affordable. And yes, government-managed big businesses have also been tried, they tend to be very unproductive, and produce expensive and low-quality items (with tendencies to significantly decline over years).