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> To convert between wealth and income tax rates, you have to divide by the rate of return on capital. The conversion rate of 20 comes from assuming that the ri

• clear-octopus 5mo ago
  [dead]
• arh5451 5mo ago
  If you mean that a person with 0 savings pays 0 wealth tax, then sure. Most people when they earn income save some of it. Therefore it is wealth taxed.
  • amanaplanacanal 5mo ago
    It seems fairly simple to have a standard deduction so that only folks with wealth over a certain amount get taxed.
    • deleted 5mo ago
      [deleted]
  • qzw 5mo ago
    Almost all wealth tax proposal I’ve seen start at the level of 8-9 figures of wealth. Why are we now talking about it as if it’s going to apply to your average person’s savings account? If we’re just going to accept these billionaire-invented narratives around the wealth tax, then there’s really no point in discussing the actual pros and cons of these proposals.
    • tclancy 5mo ago
      Because it’s the standard playbook for dealing with even the slightest suggestion of fairer taxation. Trot out an old dude in a suit from a Foundation, make sure to avoid anyone knowing exactly what that foundation does or who funds it and have him suggest it’s a really nice idea, but the unforeseen consequences will actually hurt “working people like you and me”. Present as fact, job done.
  • tclancy 5mo ago
    >Most people when they earn income save some of it. Therefore it is wealth taxed. This is one of those “check your privilege” moments and one where it is best to look at the median and not just the average when talking about household wealth in the US. Between 57% and 67% of U.S. adults are estimated to live paycheck to paycheck. They aren’t saving it, they’re going into debt because the only local grocery store is a Dollar General and it’s just a clever name nowadays.
    • bombcar 5mo ago
      Do they still live paycheck to paycheck after receiving a raise? If so, the problem likely isn’t the paycheck.
      • topaz0 5mo ago
        At most times during the last 50 years, wages have been growing slower than inflation.
      • tclancy 5mo ago
        Ah, the old moral failing! It’s not that there are flaws in the system that could be improved, it’s the poor people who are sinful. Got it!
• tyleo 5mo ago
  I feel the same way. I hear a lot of complains about wealth tax but it always seems like the problems mainly pertain to billionaires. I don't see why we should optimize for that small minority. If we moved to a wealth tax I'd be the first in line to pay it. So long as everyone else had to pay it too.
  • malfist 5mo ago
    WSJ Opinion Piece: "Why It'd Be A Mistake To Inconvenience Billionaires" -Some Other Billionaire
• skybrian 5mo ago
  I think it’s a good point that these taxes don’t apply to most people. Another reason they don’t apply is that most people save for retirement using retirement accounts. But nothing in the article implies that these wealth taxes apply to most people. The argument is that a 1% wealth tax is equivalent to a 20% income tax because, under certain assumptions, the government gets the same amount of money.
  • qzw 5mo ago
    Only in theory. In practice it’s not equivalent at all because once you reach a certain (very high) level of wealth, there’s the “buy, borrow, die” strategy that avoids realizing most of your capital gains. I’ve also heard of proposals to tax asset-backed loans above a certain threshold, which is aimed at the “borrow” part of the strategy. But the concern there is that the super wealthy may quickly find a different strategy for tax avoidance, so a blanket wealth tax should be harder to circumvent. But as with anything to do with the tax code, those with the best tax accountants and lawyers seldom end up losing.
    • jandrewrogers 5mo ago
      There is no evidence[0] that the wealthy use the "buy, borrow, die" strategy in any significant way. The underlying financial math doesn't make sense if the goal is to maximize wealth so it isn't surprising that wealthy people don't actually do it. [0] https://www.sciencedirect.com/science/article/abs/pii/S0047272725002178 https://www.sciencedirect.com/science/article/abs/pii/S00472...
      • avidiax 5mo ago
        That paper is looking at the top 1%. Buy, borrow, die is the realm of the top 0.1 % or 0.01%. Are you saying that billionaires are actually realizing capital gains to afford yachts, private jets, and mansions?
        • twoodfin 5mo ago
          Of course they are. You can read reports to the SEC on executive stock sales all day. Here’s billionaire Tim Cook last month: https://m.investing.com/news/insider-trading-news/apple-ceo-tim-cook-sells-165-million-in-aapl-stock-93CH-4597447 https://m.investing.com/news/insider-trading-news/apple-ceo-...
• tengbretson 5mo ago
  > The math doesn't math for someone on the other extreme end of the spectrum who has zero savings or investments and obtains all his income from labor: To him, a N% wealth tax = 0% income tax for all N. Those with -some- savings are somewhere in the middle. Productivity comes from labor AND assets though. You need the farmer and the tractor. Why would we create a tax system that encourages people to divorce themselves from having a stake in the means of production?
  • ryandrake 5mo ago
    The current system without wealth taxes already largely divorces labor from equity stake. Unless you're one of the relatively few tech or office workers who get equity compensation or have a large savings rate, you currently don't have much of a stake in any means of production.
    • tengbretson 5mo ago
      I'm not disputing the claim that few people are able to save and invest into having a stake in the means of production. However, if your goal is to increase stakeholdership, how would a policy that explicitly disincentivizes that behavior fix anything?
      • svachalek 5mo ago
        How does it disincentivize "stakeholdership"? Are people expected to say, please don't make me rich, because I'd have to pay 1% of it?
      • smallmancontrov 5mo ago
        Why do I get the feeling that you would never field the structurally identical complaint against disproportionately taxing labor and consumption, even though that's a much more prominent feature of our current tax policy? In any case, taxes do not go into a black hole, no matter how much the right likes to encourage this self-serving fiction. Taxes generally get spent down the economic ladder and move people up the economic ladder, increasing their marginal propensity to save. People must have money if you want them to save money. Even more concretely: reversing the policies which dissolved the middle class might reasonably be expected to restore the middle class, or at least slow their demise.
• ximm 5mo ago
  Corrected version: A wealth tax of 1% is equivalent to an income tax of 20% on capital gains.
  • Glyptodon 5mo ago
    With different issues than the ones caused by deferring gains forever through shenanigans.
  • outside1234 5mo ago
    It isn't, because the ultra rich have no capital gains. They get ultra low interest rate loans against assets so they never have to sell assets and trigger capital gains. Google "Buy, Borrow, Die" if you don't understand this strategy.
    • deleted 5mo ago
      [deleted]
    • Manuel_D 5mo ago
      They have to sell eventually to pay off the loans. And if they die, their estate has to sell the assets to pay off the loans, and then their heir will pay inheritance taxes on top of that. Unless their spouse is still alive. In the US, assets' cost bases are reset when a spouse dies. That is the main way that rich people avoid capital gains taxes. I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax.
      • AnthonyMouse 5mo ago
        > I'd much prefer simply stopping that cost basis reset instead of implementing a wealth tax. Neither of these would really work against the people you actually want it to work against. If you don't have a basis reset then they just do a transaction that has the same effect, e.g. create a new corporation owned by the recipient and then have it repeatedly enter into slightly favorable transactions with the one owned by the donor until the new one has all the assets, or any of a hundred other things. If you try to do a wealth tax then their assets end up in another country under whatever arrangement is necessary to give them de facto control but not formal ownership. The best way to solve the "buy, borrow, die" thing is actually a consumption tax because then borrowing money in order to spend it doesn't avoid the tax.
• colinmarc 5mo ago
  I can't tell what's worse: intentionally obscuring the fact that the vast majority of people would pay ~no wealth tax or unintentionally forgetting that the vast majority of people would pay ~no wealth tax.
  • outside1234 5mo ago
    The ultra rich are desperate to maintain their exclusive access to essentially pay no taxes through their "Buy, Borrow, Die" strategy (if you don't understand what that is you should stop and read this: https://gemini.google.com/share/e230bcecaaeb https://gemini.google.com/share/e230bcecaaeb) and so they are using scare tactics / gaslighting around wealth taxes because a wealth tax would disrupt this essentially zero tax strategy.
    • WalterBright 5mo ago
      There's a federal estate tax of 40%. WA state has an estate tax of 20%.
    • scarmig 5mo ago
      "Buy, borrow, die" is a bit of a bogeyman of the Left; it's not a common strategy for HNW or UHNW individuals, and to the extent it is used, there are much better ways to close it than a wealth tax, which is coarse and rife with implementation issues.
      • kccqzy 5mo ago
        The main implementation issue with a wealth tax is that it doesn’t at all interact with the capital gains tax. It’s easy to fix the implementation issue by integrating the wealth tax into the capital gains tax (call it unrealized capital gains tax for starters), make the tax refundable when an asset loses value, and netting it against the actual capital gains tax. With this framing, the wealth tax isn’t a new tax; it is only prepaying the capital gains tax instead of allowing it to be deferred forever.
        • 5mo ago
• booleanbetrayal 5mo ago
  Billionaires gonna billionaire, I guess.
  • abletonlive 5mo ago
    [flagged]
    • voidhorse 5mo ago
      I don't think anyone is simply envious. People mean to point out that allowing individual accumulation of wealth to extreme degrees lead to runaway structural problems. Billionaires and companies existing and providing wages are not inextricably intertwined. It's entirely possible to have one while preventing the other. The idea that the only way you can incentivize individuals to start companies is to allow them to accumulate so much wealth that they become tiny kings is patently absurd. The world has thousands of companies and founders who happily sustain their businesses without ever reaching this ungodly and idiotic level of uber wealth.
      • abletonlive 5mo ago
        > I don't think anyone is simply envious. I think most are. > The idea that the only way you can incentivize individuals to start companies is to allow them to accumulate so much wealth that they become tiny kings is patently absurd. The world has thousands of companies and founders who happily sustain their businesses without ever reaching this ungodly and idiotic level of uber wealth. And how many of those companies and founders have given back to society at the scale that these uber wealthy people have? Entire new economies have been built up. > ungodly and idiotic level of uber wealth. This is still just envy. You should try to prove that you're being oppressed by the systems these billionaires have created because we don't have to go very far back to observe when these systems and economies did not exist. I'll remind you that for example, in NYC before Uber, taxi medallions were being sold for over a million dollars and people were going into debt just for the opportunity to drive a cab. If you go far back enough creating a virtual store front to sell your ideas and goods was a gate that was actually very high. Thanks to the systems that are in place now you have the opportunity to spin this up for very little risk and prove out your idea. Structural problems such as what? The idea that wealth is power? That's the same structural problem that has always existed, except that there are more players than ever before. You can launch an entire grass roots political campaign on social media for free. Does that sound like a system that oppresses or is that a system that has given you opportunity to enact change? Even the barrier to invest in companies and participate directly in the profits and value creation has been erased or lowered. Hundreds of millions of people are directly benefitting from this everyday. It is now a few simple clicks of a button and you're in. Who lowered that barrier? It was the billionaires. And yes, because they did that they will get an asymmetrical reward because their impact and value creation for society is asymmetrical to yours. You're not doing this, but when you try to have this conversation amongst the general population what is the response? Once you start poking holes at the concept it always reverts to "you're a bootlicker", "why are you defending billionaires, they don't care about you". These responses highlight envy, not reality or the desire to be objective. Deep down a lot people either don't realize how much free will and agency they now have in this society or they are just living with contempt because everywhere they look they see people that are using that free will to accomplish more than them. It's lack and envy all the way through.
• irchans 5mo ago
  I'm retired. I hope to get a 3% per year income from my savings every year after inflation and taxes. If my state implemented a 1% wealth tax on savings each year, I would go bankrupt in 20 years. I am hoping that I will live 20 years.
  • blmarket 5mo ago
    But why wage earners should support you by paying more taxes? Reduce your spending by 33% to keep up.
    • MattPalmer1086 5mo ago
      I can't tell if this is sarcasm or a serious point. Obviously people who have retired and based their entire life plan on making that work have many fewer options than those who are still working. You are arguing that nobody can plan for any kind of secure retirement, including you.
      • blmarket 5mo ago
        It depends on the net wealth we're discussing. I'm sorry if I touched someone who lives with $1M saving. But should I be sorry for someone with $10M, which might be way more than 30 years of lifetime earnings of p80 population? Wealth tax is obviously targeting the latter. Having progressive tax rate might be a better way to discuss, instead of blaming whole points.
  • scientator 5mo ago
    I'm sure any wealth tax would only apply to wealth above a certain amount. For instance, inheritance tax only applies to $15mil and above. Likewise, when you sell a house the first $500K (I believe) in capital gains from the sale is tax free. I don't think people with savings of $15mil and above (assuming that would be the cutoff) are in danger of going bankrupt in 20 yrs from a 1% wealth tax. Assuming your 3% return, they'd be earning $450,000 a year that wouldn't be touched by the wealth tax.
    • 5mo ago
• satvikpendem 5mo ago
  > But Graham's math is only applicable to those flush with investments and with relatively small salaries from labor, so a wealth tax is only unpopular to that particular group. That can be quite a lot of people on HN, and also including FIRE people, so I can see why it's unpopular.
  • Glyptodon 5mo ago
    Most FIRE people aren't going to have $50 million plus and be hit by this.
    • everfrustrated 5mo ago
      It will never stop at $50M. Once the law is created it is sooo much easier to just lower the threshold. Even if not lowered, in 30 years inflation means it will capture a whole different number of people - maybe you. Maybe it will bankrupt your children.
      • throwaway173738 5mo ago
        30 years is plenty of time to change the law. We change the tax code all the time. In 2020 or so it was recently amended to substantially increase the standard deduction. Slippery slope is a fallacy unless you can prove the pattern already exists.
      • topaz0 5mo ago
        "taxes only ever go up" is an incredible belief to hold in a historical run of decades of tax cuts.
    • satvikpendem 5mo ago
      I said on HN including those who are FIRE, where the net worth of the average individual here is much higher than the average and some do, yes, have $50 million or more in assets.
• Glyptodon 5mo ago
  On top of that it seems to imply that a 20% effective tax rate is outrageous even though that's totally normal for most. Maybe it's not what you're used to as really wealthy person who avoids realized income and has a 0 or 5 or 10 percent effective rate. But it's totally normal for most middle and median income folks who actually pay income taxes.
  • lazide 5mo ago
    20% tax on wealth (aka the potentially liquidatable value of an asset) would absolutely destroy anyone using an asset. For a classic example, look at property taxes which are a classic wealth tax. Grandma’s, people on pensions, and even middle class folks who own a home but have relatively low rates of salary increases get destroyed (and have to sell and move out) in places like Texas where property taxes aren’t capped/controlled like California under prop 13 when property prices go up. Having your house get ‘too expensive to live in’, in fact, is a classic issue with property taxes, and was happening in California - which is exactly why prop 13 happened. And most of those locations the maximum tax is around 1-3%! ‘Wealth’ is not the same as income, because wealth is potential money, if you can sell - and if you sell, you lose access to it. A 20% wealth tax would mean any asset which doesn’t earning free cash flow returns of at least 20% a year, or which isn’t appreciating at least 20% a year in a risk free way would be impossible to hold for anyone except the most rich people. And even they couldn’t do it for long. I can’t think of anything which that realistically describes. A 20% income tax reduces actual cash in hand to 80% of what you’d otherwise have, which isn’t great. But you still get the actual 80% cash in hand right now, and can use it. You can’t have ‘80% control/ownership for the year’ of a house in a meaningful way, and especially for people actually using/relying on the asset to live, they can’t find 20% (or in most cases even 5%!) of the value in cash for the asset every year. They’d go bankrupt.
    • Glyptodon 5mo ago
      You obviously didn't read the thing. 20% is not on wealth. The argument in the piece is that 1% on wealth is the same as 20% on income, and therefore 1% on wealth is obscene. Please read before making replies that don't make sense in context. When I refer to 20% I'm referring the PG's characterization of a 1% wealth tax as an effective 20% income tax, not a 20% wealth tax.
• AnthonyMouse 5mo ago
  > But Graham's math is only applicable to those flush with investments and with relatively small salaries from labor, so a wealth tax is only unpopular to that particular group. Not quite, because you're using the opposite extreme where someone has no assets. Meanwhile the median net worth in the US ~$200k, which would be $2000/year in tax for every 1% in wealth tax. That's certainly enough for ordinary people to notice. On top of that, the conversion is even worse than that implies for ordinary people, because the primary reason the median is ~$200k isn't that the median person has $200k their whole lives, it's that they have ~$0 when they're 18 and ~$400k when they retire and the median person is about halfway to retirement age. If you transfer tax burden from income tax to wealth tax then that means they'll be paying more in wealth tax in the second half of their life, which means they need to be saving rather than spending the money not paid in income tax, including during the first half of their life. But that causes their net worth to go up on paper by more/sooner, because they're essentially holding extra money they'll only have to pay in tax later, which in turn causes them to pay more in tax for a tax on holding assets. Moreover, then you can't say that Alice always benefits because she has no assets and Bob always pays more because he has $400,000 because what's actually happening is that Alice pays less when she's 20 and more when she's 60. That's going to be unpopular because the 20 year olds are generally expecting to be 60 someday but the 60 year olds never expect to be 20 again.
  • SoftTalker 5mo ago
    Nobody is talking about a wealth tax on someone with a net worth of ~$200k or ~$400k.
    • moralestapia 5mo ago
      We don't know, actually. If the threshold for "wealth" is set to be >100k, then we are.
      • SoftTalker 5mo ago
        And almost nobody will support that. It would be political suicide for any lawmaker to implement that.
• underlipton 5mo ago
  Not even that. Someone who got laid off by one of Paul Graham's friends likely has decent investments and is receiving relatively small salaries from labor (that is, 0, unless you're counting unemployment insurance, and then, is that saved-up labor pay, delayed and amortized, or "investment" income from your taxes?). And if that person is class-conscious, or at least self-interested, they should be 100% on-board with a wealth tax.
• whodidntante 5mo ago
  As I commented elsewhere, everyone gets affected by a wealth tax, as it will affect how assets are priced and how businesses operate across the board. For those who have little hope of the wealth tax applied to them (me for example), but as as someone who has investments and need them for retirement, I need to decide if this will affect bond prices or equity prices in a positive or negative way as their attractiveness will change in relative terms, or if publicly accessible funds will get devalued in favor of private investment opportunities and all public assets get devalued. Oh, wait, I am not wealthy, so I do not have the option of private equity, and cannot participate in what would be an attractive investment opportunity when investments shift towards more opaque assets. For those that have zero assets, I do not think that a shift by the wealthy to private equity is a good thing, unless you want to work for a private equity company. A government job would be your best bet. And a shift to private equity would have a downward pressure on tax collections, so whatever projections for how much a wealth tax would generate, I am suspect. A lot of people complain about private equity. This scourge was, to a small or large degree depending on your viewpoint, an unintended side effect of SOX compliance, meant to protect investors, and in the end narrowed down the amount of public companies, and created more opportunities/demand for PE. I think it is debatable how much protection investors actually received. We live in a system, and making a fundamental change to one part of that system has effects on all parts. Raising the amount of taxes under the current system ? That is one thing. Introducing a whole new tax concept, difficult to predict. Especially if this is done by states, which could cause capital movements with their own unexpected consequences.
• hedora 5mo ago
  Also, this seems to ignore a major problem with how progressive income tax rates are figured in the US. You can work for years at a startup at a depressed wage, then have a windfall that makes up for it on average. That windfall (in California) will be taxed at a marginal rate of 52%. The only people that ever pay nearly that much are middle class. Some sort of time averaging would help. Anyway, the US tax code is complicated. Personally, I’d prefer a flat tax with universal basic income. This could replace income, capital gains and inheritance taxes in their entirety. (Along with a lot of social services bureaucracy).
• closeparen 5mo ago
  Is this situation so uncommon? Almost everyone who lives in a house in California, for example, is living primarily off the unrealized gains on their home equity. Very few have the wage income to qualify for a mortgage on what their lifestyle is worth now. California contains a lot of houses!
  • PopAlongKid 5mo ago
    > living primarily off the unrealized gains on their home equity. How is that paying for food? Insurance? Electricity? Gasoline? Health care? Gifts and charity? Or even taxes?
    • closeparen 5mo ago
      Illustratively, living in the house is worth about $15,000/month and everything else combined is maybe $2,000.
• jgord 5mo ago
  Australia is proposing a CGT tax of 30% on "capital gains" .. essentially taxing the _income_ from wealth. This is more of a fair comparable to reason about when comparing taxing wealth and taxing wages. In nerd-speak, taxing the Derivative of Wealth is comparable to taxing Income. You could argue that a fair comparison of wages and wealth would first subtract the minimum cost of living, so that wage tax is effectively a tax on the growing wealth of wage-earners. This would arguably be a fairer tax comparison - in both cases it is the derivative of wealth that is being taxed. If a large portion of the populace spends all their income on basic food, rent and petrol then they have no chance of wealth increase, and perhaps should fairly be charged 30% of their $0 growth in annual wealth.
• raincole 5mo ago
  In other words, PG is so rich now that he forgets the existence of less fortunate citizens.
• 3uler 5mo ago
  Also when most of you income comes from your wealth, your income tax rate is effectively 0%… So complaining about having to contribute to the society that gave the conditions for your vast wealth is going to get you 0 sympathy
• Henchman21 5mo ago
  Did you expect honesty? Forthrightness? If so, why?