6 ms·

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 r

• 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.
    • lazide 5mo ago
      I read it, and was replying in context.
  • malfist 5mo ago
    These wealth taxes are not proposed to apply to everyone evenly, that would be a regressive tax policy. There is a wealth cutoff, most commonly proposed to be around $50M. If grandma has $50M in her house and pension, she can afford to pay a tiny tiny tiny fraction of her wealth to make sure her grandkids still have a place to live that's not falling apart.
  • analog31 5mo ago
    All of the people I mention wealth tax to give me the same two counter cases: Grandma and Elon. I think there's no reason why a wealth tax can't be progressive. Just making up numbers here, it could be zero for your first 30 million, and rise to some palpable amount for your first billion. This would protect granny from being taxed out of her house, and in fact would affect relatively few salary earners. I'm not overlooking the possibility that such a tax structure could create an effective wealth cap at some level. The problem in California is that it's very hard to change laws. Likewise in my state, where many aspects of the tax system are constrained by the state constitution.
    • lazide 5mo ago
      Sure. The issue I’d see is in 20 years inflation might mean that applies to almost everyone, like AMT, but that is a future us issue. The biggest personal complaint I have is why should the government be getting more tax money when all they seem to use it for is blowing up random countries in the Middle East and spying on law abiding citizens for whatever random reason.
      • Epa095 5mo ago
        Then let's bake it into a compromise, we add a wealth tax and decrease income tax with the same amount of money. Labour is what actually creates value in society, let's tax it less and ownership more.
        • lazide 5mo ago
          You have my vote!
      • harimau777 5mo ago
        You could peg the numbers to inflation. Personally, I see a big benefit of a wealth tax being lowering wealth inequality; even if the money isn't actually used for anything useful. That would at least help prevent the ultra wealthy from being able to unilaterally ruin society.
  • pessimizer 5mo ago
    > 20% tax on wealth Thank god no one is talking about this, then. According to Graham, a 20% wealth tax is equivalent to a 400% income tax.
    • lazide 5mo ago
      Read my comment - it likely would be equivalently impossible. That is my point.
      • pessimizer 5mo ago
        Read my comment - it is completely irrelevant to the discussion being had about the linked article, and no one on the planet is suggesting a 20% wealth tax. That is my point.
        • lazide 5mo ago
          The argument was that it was ludicrous to say a wealth tax of x percent > income tax of x percent in actual impact, yes? It is clearly the case if you try to apply the income tax rate as a wealth tax using concrete real world examples. Even a 3% property tax makes it very difficult for many normal people to own those assets in many real world economic circumstances.
          • harimau777 5mo ago
            I don't think that those issues would be too difficult to fix. The tax could be made progressive so that it doesn't impact people who can't afford it. Someone's primary home and vehicle could be omitted from the tax.
            • lazide 5mo ago
              It does change that there is a multiplier. Even 5% is likely a deathknell for all but a couple percent of assets owned by the most aggressive ‘sharks’. A good way to make owning anything unaffordable though! The carve outs would just defacto set a cap for normal people. No more than one house, etc.
  • naijaboiler 5mo ago
    whats all this talk about 20% wealth tax. We are asking for 1% per year, and the rich are still screaming. damn I pay more than that on my house.
• SoftTalker 5mo ago
  It's 20% equivalent income tax rate if you have no conventionally taxable income. Otherwise it's 20% on top of your marginal rate. In his $100 example, you'd pay $1 in wealth tax on the $100 and $1 in tax on the $5 income earned, so your total tax is $2 on $5 of income, an effective tax rate of 40%. But any real wealth tax is going to have exemptions, only apply to wealth above some threshold, and for the wealthy who structure their finances so as to have little or no taxable income, well they end up paying 20% like all the rest of us do.
  • Dylan16807 5mo ago
    > an effective tax rate of 40%. It's not. That calculation would say that if you have $1000 of wealth and $5 of income your effective tax rate is 220%. It's bad math. Your conventional income is taxed separately. A wealth tax sort of stacks with capital gains, but capital gains is way too low anyway.
    • SoftTalker 5mo ago
      Yes it is. ($1,000 * 1%) + ($5 * 20%) = $11 tax due on $5 income. They are separate taxes but he's expressing them both in terms of an effective income tax rate. In this case, since you owe more taxes than income you've earned, you'll need to sell off some of your wealth to pay up. If you have no income at all, but do have wealth, then you get a division by zero error so I do get that it's maybe absurd to frame it this way, but the premise of TFA was "how to convert between a wealth tax and an income tax" and the context is a presumed 5% return on capital.
      • philipallstar 5mo ago
        But when you liquidate assets you... pay tax! Capital gains tax. So you liquidate, pay capital gains, and use the proceeds to pay a wealth tax?
        • SoftTalker 5mo ago
          In the contrived example, the 5% return was "risk free" so assume it was something like CDs, no capital gains.