True enough, but it doesn't address the motivation or the issues presented by California's proposed wealth tax.
It's a big democracy red flag when a majority wants to take a lot from a tiny minority; the moral hazard of the unfairness is that it's unclear where this ends. (Saying "one-time" and "1%" are trying to limit that risk)
It's a democracy red flag when an unpopular minority is vilified as the cause of society's problems. It short-circuits real policy making and distracts from real issues.
The bargain of private wealth is that it's better at innovation that should spread widely -- if it's subject to competition and does not export costs.
One problem is that one of the best investments is to change the law to reduce competition, increase market power, and export costs -- i.e., to weaken politics.
Another is that wealth used to mostly invest locally (information and transaction costs), so locals would see some benefit. No longer.
Finally, as an accelerant, enterprises are made of legions of managers and experts, who now compete more than ever; they would lose that competition by supporting less extractive policies or gentler politics.
Net result is that wealth seems not productive but extractive, and there is no negative feedback to reduce that.
Once the grand gambit of goodwill is lost, it cannot be recovered for at least a generation, but there's no real feedback to prevent that. The political viability of something like a wealth tax is just an early indicator.
> 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 risk-free rate of return is 5%.
This seems to only be true for people whose income entirely comes from their wealth, rather than their labor. 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.
It is a very sneaky way to argue that a wealth tax should be as across-the-board unpopular as a large income tax increase. 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.
> 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?
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.
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. It’s focused on the effects on the people they effect.
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.
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.
I think the assumption that we're looking for an equivalence here is fundamentally flawed and with it the entire post.
For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth.
The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income tax
> In fact the conversion rate between them is about 20. A wealth tax of 1% is equivalent to an income tax of 20%.
Sure, but you actually have to work for continued income. Wealth accumulates with no input once established.
Wealth has the ability to increase (capital gains) without having to pay tax until it changes hands, whereas when income increases it is immediately taxed at a higher rate. Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
> Wealth accumulates with no input once established.
This is incorrect, historically you'll pay a ~2%-3% loss via inflation if you keep your money in cash. If you invest (making it capital) in bonds or securities then you will see accumulation, but thats actually a risk premium.
> Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
This is true, its typically called "Buy, Borrow, Die" but the reality is that it is only available to a very small percent of wealthy individuals and exists because of the way inheritance is handled ("stepped-up basis"). Even reasonably (not fabulously) wealthy people will still pay retail rates on the loans making the tactic basically ineffective. Last I heard you needed something like 100M+ liquid for lenders to even consider it (presumably, because they will make more off of some other deal with you)
Wow, I like to actually see the numbers laid out like this. Most of the ultra-wealthy pay almost nothing on their income taxes from investments because they have found ways to avoid capital gains, and even if they were paying long term capital gains rates of 15%, pg’s assertion that the wealth tax adds another 20% doesn’t seem unreasonable at all. If anything, it makes me think 1% is not nearly enough of a wealth tax!
There's a related calculation you can do -- what percent of your net worth is your employability? Take your salary, divide by 0.05 (or multiply by 20) -- if you had that much additional wealth earning 5%, you could replace your job's income.
For most people their ability to earn is by far their largest asset. You can kind of get a feel for how difficult it is to bootstrap into generational wealth if you think about the math -- it takes time to replace that earnings portion of your own balance sheet, and even more to well replace it; a lot has to go right in the interim.
I don’t follow the debate and situation in the US that closely but isn’t (part of) the point of wealth tax to offset the fact that rich people are routinely avoiding paying income tax and taxes in general? Thus even if we assume the simplistic conversion here, it’s not that they’re moved from 40->60 bracket but more like <10 -> <30 ?
Yes. And that wealthy individuals are avoiding taxes via things like buy -> borrow -> die, in which high stock valuations that increase but are not sold are not ever taxed, and roll over the taxation potential upon death to their current value. Thus by borrowing against them until death, the inheritor will inherit with a tax basis at the current value upon receipt and thus all taxes are avoided. In which case the tax would go from 0% to 20% (functionally a small amount may be sold to pay interest, so really assume 1% or 2% taxes default). The horror!
The bigger difference between an income tax and a wealth tax isn't the numbers. A wealth tax, for better or worse requires some realization of paper gains that very wealthy folks normally go to great lengths to avoid because their wealth is largely based on a broadly shared polite fiction. So imposing some realization of that wealth requires accountability that doesn't always pan out.
There is a bit more to the story than a 1% wealth being "equivalent" to a 20% income tax. The primary difference is that unrealized gains are taxed by a wealth tax. We need a mechanism for assets to be sold by the richest in society. If those with assets keep accruing more assets the median person will suffer. When we're talking about real assets (housing, retail shops, warehouses, land) we don't need to be concerned about capital flight. The assets are still there on the ground. Reducing the cost of those assets is exactly what we need to help a local economy.
That being said, the richest are effectively _not_ paying the highest marginal tax rate considering all the tax structuring they do. Claiming that they would be paying the highest income tax in the world is misleading, for one. Secondly, the richest in the world _should be_ paying the highest income tax.
I think the post is correct in a one-period sense, though I’m not sure the equivalence survives once you model long-term compounding, additional capital gains taxation and liquidity constraints.
Not everybody uses money to make more money, Paul. Most people work, get paid, and spend the money on their needs. In other words, you are in a position to care about the question, it's OK if you are taxed a bit more.
A lot of countries require you to declare your total wealth on your tax forms. Then once someone gets audited, that gets checked. Obviously it’s possible to hide it, but that in itself is a crime, and not everyone is willing to risk going to jail over paying taxes.
The first step we need to take is to invest in the IRS. Every dollar invested in the IRS returns between $5-9. Couple that with fines that offset the cost of auditing, and "hidden wealth" becomes a liability too expensive for people to bother with.
Isn't PG's conflation of Denmark's high income tax with a proposed wealth tax a clear flaw in his math and argument re: "the highest taxes in the world"? Why wouldn't you instead compare to other countries that also have both income and wealth taxes?
This is misleading and not the point of the wealth tax.
If you’re lucky enough that you don’t need to work for your income, you should be taxed. A lot. How much? Enough to make sure you don’t become so rich that your children don’t need to work.
Being rich is not fair, it’s very rarely deserved, and it needs to be taxed unfairly.
A much more interesting formula would be how to convert between income and income tax - you'd think it worked according to the superficial bracket system, but in fact, it works along the lines of going to 0 at the top.
P.S. a wealth tax is a property tax. They have existed in the US since before the income tax (which was originally considered unconstitutional by its opponents).
I think the limit it can reach without carried forward losses is 20% because that's the top long-term capital gains tax rate. The other thing I can think of is if you sell a QSBS business, then your capital gains are taxed at 0, and you wouldn't pay income tax at all on that money either. So it's in theory possible that someone could make millions tax free from selling a business, but that's a rare case and one the tax code explicitly allows for.
The conversion would be more accurate if it compared wealth and capital gains taxes, no?
A defining feature of wealth taxes is that they only tax those that make most of their income through capital gains. This is why they're popular among much of the population.
Now the question is, if we lowered capgains tax rate by 20% but instituted a 1% wealth tax, would that be better or worse? My guess would be worse because wealth taxes are nearly unenforcable, but I wonder if there are good arguments for the other position.
Are there serious proposals to just add a wealth tax on top of the existing income tax that would apply to the sort of people who actually pay much in income tax vs capital gains? It's an honest question; I haven't seen proposals of that sort, so I'm skeptical that the arguments are meaningful here. For an individual like Jeff Bezos, he's paying virtually no tax under the normal income tax rates referenced in the article, but rather capital gains tax, which tops out at 20%, not 37%.
The post goes out of it's way to mischaracterize the strategy (and purpose) of wealth taxes being proposed.
> Each 1% of wealth tax is equivalent to 20% of income tax.
Mathematically sound.
> Politicians understand that an additional 20% income tax would be a lot. And indeed a US state that added 20% to its top income tax rate would have extraordinarily high taxes.
That's the point.
> In the median case, US state politicians talking about adding a "mere 1%" wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.
Not "all of the residents". Specifically the ultra wealthy that have a billion dollars. 20% at that point, is 20% of lots. You still have lots left over.
Mathematical fairness isn't the point, which is one reason there isn't a flat tax rate.
I live in Switzerland. All residents are assessed a wealth tax. It would not be just the top x%. Wealth taxes are a bad idea tried in Europe and then later repealed.
If he can phone it in why cant I? His entire framing.
Income (or revenue), what is left over freom the paycheque (profits) and net worth (market cap) - applying a simple ratio to companies of revenue to market cap doesnt work, why would applying a simple ratio of income to net worth for people who live hand to mouth and billionaires work any better.
I think you may have missed the background: US tax rhetoric -- he's doing what I think is pretty fair math with a fair take -- the math is supposed to break down what percent income tax you need to get the same dollars in tax revenue as a 1% wealth tax (on the wealthy). I think you could quibble with his risk free rate of return number, but most conservative planners would recommend a 4 - 5 % budget for risk free rate of return.
It's not about companies - it's about showing an equivalency between a Piketty-style tax of wealth setup and what we're used to thinking about in the US, an income-style tax setup on individuals.
Anymore I think the question shouldn't be about some kind of economic fairness (the time value of money thing being discussed) but the idea that wealth accumulation is a disease that afflicts society. I don't think anyone should have the level of control or influence on others that having a billion dollars currently allows. If a millionaire gives $100 to a political candidate it probably doesn't require too much thought. It's impressive to note that a 10-billionaire can give $1M just as easily, and so we have a class of folks who can throw around influence, who can order a team of lawyers to do things, can employ their legion of sycophantic followers to harass people, or can threaten the employment of many people not-of-their-class because they can make decisions that threaten someone's employer's bottom line. And note that above I compared a millionaire to the 10-billionaire, but there are plenty of folks, especially around the planet, who economically live several orders of magnitude below the millionaire.
As a bit of an aside, "spending more time with family" is an often-used euphemism around someone being fired, but if you have more money than you know what to do with and you aren't using it to spend more time with those you love, then what on earth is it for?
The wealth tax that we should have is a federal property tax, in the form of a land-value tax. A property tax is more enforceable and produces much better incentives than an income tax or capital gains tax or death tax or wealth taxes in other forms.
I think it's underestimated how important ease of enforcement is for taxes and laws in general. Laws that are hard to enforce require more powerful law enforcement agencies, more invasion of privacy, more punishment, more restriction of freedom. Enforcing a death tax, for example, necessarily requires limiting and tracking of all transfers of money or assets between people including personal gifts. A property tax merely requires keeping track of land ownership, which is a function governments already do, and in the worst case you can simply physically go to the land and see who is using it or seize it.
This is wrong. You can’t convert between the two because it’s possible to have a lot of wealth with very little (even zero) income. Billionaires can completely avoid income taxes by paying themselves a very low salary and instead borrowing money against their assets (usually stock), which is not taxed as income.
Why choose the median state tax? The proposed wealth tax is in California, where the top tax rate is 13%. Also relevant would be Medicare (1.45% or 2.35% depending on your employment income) and presumably for billionaires, the Net Investment Income Tax, another 3.8%.
I understand why he simplifies things, but it doesn’t really jive with saying politicians don’t understand how taxes work.
I think politicians have a better understanding of taxes than Paul does, and they have a better understanding of how politics work - basically as in all things political, if you convince the majority that you’re dumping on minorities (billionaires, immigrants, trans people) you’ll do well.
Lots of confusion and misunderstanding in these comments. Not surprising, given the highly charged nature of the subject. I highly recommend Ray Madoff's book The Second Estate [1] to learn more about the topic.
I believe some of Ray Madoff's points are at least that ostensibly the tax code and most intuitions kinda differ.
There's the idea that "wealth" gains tend to not be taxed for a variety of reasons. The common parlance of "Buy, Borrow, Die" category things. The "step-up in basis" category things - i.e. no capital gains tax realized on lots of wealth. (The inheritance tax might trigger in some senses, but oddly the capital gains tax is not triggered on transferred assets because they were never sold and the new possessor will be taxed at the stepped up received value if they ever sell.) Trust related things.
So perhaps OP is suggesting that maybe there's some fungibility in income and wealth taxes ostensibly, but that when you look at the tax code the equivalency looks pretty weak currently.
Paul the billionaire ignoring that billionaires often don't pay any income tax at all. Come on man, we're not stupid just because we don't own superyachts.
Here is a better algorithm to edify the masses: if someone is such a massive billionaire as to have the boldness to teach the public basic 5th-grade math, their wealth tax rate should be set at 10%. From that point on, the rate goes in proportion to their level of condescension.
There are all kinds of irrevocable trusts that exist to remove assets from your taxable estate so that they can be passed to heirs without paying estate tax. Raising the estate tax (which is already 40%) would just make planning to use these techniques more attractive.
Because billionaires accumulate wealth through assets and unrealized gains, many of them skip taking a traditional income and pay. If the numbers in the links below are to be believed, according to paulgraham's calculations, this might bump them into a ~fair range (when comparing to average/median earners).
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Uh … sure I would? Why not? The top bracket was 70% in the 80s. So that 61% is still a fair bit short of what it was then. (And the 80s isn't the highest point, either.)
IDK if it would be a good idea or not, but I'd entertain the debate, certainly. To state that this is unarguable, though, well…
>It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
His core point seems to be that taking $20 from him is mathematically equivalent to taking $20 from a homeless girl's hat.
I guess mathematically it is the same number if you dont normalize for that, which he wont.
Income is money that comes from actually laboring and contributing to society. Wealth tax is tax from sitting on your ass doing nothing.
Also, taxes don’t have to be a flat percentage. Like income tax, a good wealth tax would be progressive. Only wealth beyond a certain amount would be taxed, and the percentages would scale.
This is why we should have income taxes that are as low as possible, but still progressively scaled. We should similarly have a progressive scaling wealth tax, but it should be much harsher than the income tax because we want people to work.
The very wealthy are paying very low effective rates on their investment gains. Various billionaires have publicly described the truth of this. This is not 20% on top of 35%. They are paying a marginal rate of 35% of deliberately minimized taxable income and zero on deliberately maximized unrealized gains. Then 20% when realized, but as we all know by now there are ways to make sure it’s never realized.
I don’t know what the best approach is here, but I know this framing is nonsense.
I think Paul thinks people care about the distinction, or think that a 20% marginal increase to the nation's wealthiest is something the public would find "unfair".
Rich people need to stop hanging out with other rich people.
> So in the median case, a state adding an additional 20% in income tax would have a total marginal tax rate of 37% + 4.75% + 20%, or 61.75%
Good! It should still be higher!
There's nothing more tone deaf than an uber wealthy man arguing he shouldn't pay more in taxes to the system that allows him to be uber wealthy and to be deliberately misleading at the same time.
1. Most people do not derive even a fraction of their income from interest on wealth.
2. Earning income from interest on wealth requires zero effort. That isn't true for salaries.
3. Income and wealth are totally different things. You can find a way to equate them in one contrived example but there are so many other factors involved in the real world.
I recently read 'the second estate' and reading about the number of loopholes the ultra wealthy exploit to pay almost no taxes and establish dynastic wealth does boil the blood.
Off the top of my head:
* 'Income' generated from loans using shares pledged as collateral should be treated the same as if you sold those shares.
* Someone receiving an inheritance over x million dollars (carve out 95% of family farms and small businesses if you want), should pay taxes on it as if it were any other windfall
* Donor advised funds should have a 5% distribution / yr requirement, same as private foundations
* capital gains should probably be treated as regular income. I have no idea why 50k in gains on INTC is somehow privileged over the salary paid to a roofer working in the hot sun.
According to Google, this claim is sourced to a person rather famous for baseless claims, from the founding of companies he owns, to the capabilities of his products, to cash prizes for registering to vote, to when he will send humans to mars.
Continuing to accept this person as a credible source of information isnt a reasonable thing to do.
Prof G Markets podcast just had an episode on this with Ray Madoff. They talk about the claim that "the top 1% of Americans pay 40% of the income tax". But Ray points out that is misleading because the 1% is basically lawyers, physicians, accountants etc that make like $500,000/yr. These people still pay income tax and that's the group paying 40% of income tax. What that claim misses is the 0.1% that pay 0 income tax because they have no income. The claim makes people believe that the billionaires are the ones paying that huge sum but we fail to realize that the 1% is our neighbours, not just the billionaires flying private jets across the world.
$0 just feels like a concept -- I can imagine a really high quality structuring exercise that gets tax low by making sure leverage on capital is what's used for spending, but I'd be really surprised to see a 0.1%-er (or 0.001%-er) post $0 income tax. For one, it's disadvantageous for certain kinds of bank interactions. But also, capital calls come in, investments that are made often require a step-up in basis, leverage is taken out on assets that require a margin call or a sale, there are alternative tax regimes, the corporations that are owned by these parties have their own tax burdens..
To say the wealthy can afford to radically optimize taxes and that our system taxes capital much more lightly than labor seems accurate to me, but I just haven't seen offers for "pay zero tax for all your life" from high grade professionals.
If US citizens want that, they generally give up their citizenship, pay their exit tax, and live in a low tax jurisdiction. I do know people like this, and they are very unlike the 0.1% types you're referring to here, and they've given up the benefits of being a US citizen in exchange for their preferred lifestyle. (And paid a mark to market exit tax on all assets on their way out of the country)
As a percentage of their income? Because that's the only number I care about. You don't get to hoard wealth off the backs of tens of thousands of workers and then act like paying a smaller percentage is some good deed being done. The more one benefits from society (and billionaires depend most on the financial security and infrastructure setup by society), the more one needs to pay back into the system they gained their wealth from.
I have some quibbles about the ProPublica definitions -- for instance market liquidity matters when calculating public company stock wealth -- and even if you're going to borrow against it, there are additional costs and pledges that must be made that significantly reduce the available capital.
The propublica number was like 4.5% or so if I recall, and does not count the taxes paid by the companies these people owned, nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds, nor does it reduce for effective wealth, nor does it reduce for unutilized wealth, e.g. if the stock price goes up and you don't sell or borrow against it, have you received benefit that makes sense to tax?
But if you net all those out and told me the effective rate was 12-15% on utilized capital, I wouldn't be surprised. I would be really surprised if it was $0 though.
This seems like such a poor understanding of reality. If you want to rank order people who contribute net taxes, you would put billionaires at the top, as they not only pay taxes themselves, but their businesses pay taxes, and their employees pay taxes, and their customers potentially pay taxes (VAT) as well.
The bottom of the list would be anyone who works for the state, as they are a massive net tax negative, followed by benefits recipients and pensioners, followed by low income workers, followed finally by the middle classes.
Are you sure you want that to be your guiding principle?
I think your blog post is confused. People on the left are pro-taxation because they (a) think billionaires do not have superpowers, and are benefiting from some combination of systemic injustices and plain old fraud gussied up for the modern era, and (b) think superheroes actually shouldn't be allowed to have 1,000,000 times the influence over the structure of the world and its economy compared to a mundane human, even if they existed.
There isn't a level of competence or ability that shifts the answer to the morality of power. There's not an earning threshold you can cross that entitles you to own a fiefdom or a level of genius that grants you moral right to dictate how others use your inventions. We create democracy and grant everyone an equal vote in matters that impact their lives. The economy gets layered on top to allocate resources efficiently. If the economy is deciding that some people live like kings and some like serfs, then we've failed to construct an economy that lives up to liberal values.
That is not illuminating at all. Like, the author just imagines the premise and finds three ways to repeat it. There is no exploration into why people think inequality is unfair; the underlying assumption is that it is perfectly natural and trying to address it is hypocritical and harmful.
The other major assumption is that billionaires are rich because of something they did or are good at doing, better than anyone else could in their position. There is no challenge to this assumption in the text.
This belies a deep disconnect with reality, and an unwillingness to confront the idea that maybe excessive inequality is caused by too much concentrated power changing the rules to further concentrate power. Taxation is just one mechanism to combat this tendency; another way is the guillotine.
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.
If you count luck, maybe.
> But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be just as eager to tax them to reduce unfair inequality?
Yes, I would.
> But if those few very rich folks had real physical super-powers, we would be a lot more afraid of their simple physical retaliation. They might be very effective at physically resisting our attempts to take their stuff.
Yes, and this is why a lot of superhero movies involve fighting the greedy superpowered villain.
I can't speak for others, but this doesn't match my thinking at all.
I want to heavily tax the ultra rich because money is power, and vast inequality in power is undemocratic and just plain dangerous.
I don't really care if somebody buys ten massive yachts. It's annoying and seems wasteful but it's not worth too much of my attention.
But it's another matter if somebody buys politicians, laws, social change. The issue with someone like Elon Musk isn't that he owns a private jet, or even that he owns a rocket company, it's that he bought his way to taking an axe to major parts of our government by pouring unimaginable amounts of money into buying a presidential election.
It's not about grabbing stuff, it's about preventing people from accumulating too much power. The ultra-wealthy should be heavily taxed for the same reason the President shouldn't be given unlimited power to do whatever they want.
It's the degree of power they hold, not a binary. A politican in Switzerland has much less power than a politician in China.
When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power. But when it is e.g printing money the calculus is massively different.
this is some of the most insipid dreck i've read in a long time. the only thing illuminated here is the author's complete lack of understanding regarding ability and worth and total inability to think beyond a system imposed upon him by others. i think the kids would say he's "billionaire glazing".
The vibe I get is that he's saying "you poors are just jealous of the billionaires who are smarter and richer than you, so you want to take it away from them"
The comparison to _literal super heroes_ from comic books definitely made me roll my eyes
My problem with billionaires is that their gains are in part from exploitation. I just don't believe that one person can actually produce billions of dollars of value all by themselves. They extract that value from other people and our whole system is structured to promote this.
There are probably millions people who could have been Mark Zuckerberg or Bill Gates or Elon Musk or whoever. A million people with the right skills who maybe were born a few years too late or didn't have the right connections or just didn't have rich enough parents. It's a little too "winner take all" for my taste. And then those few winners end up having disproportionate affect on politics and issues that affect us all. It's just not a great system.
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.
There are certainly sometimes unusual abilities in a positive sense, but the common case likely falls closer to having an unusual degree of sociopathy. It is unclear to me how else one could view the state of perfectly solvable human suffering in the world and continue to prioritize accumulating wealth over all else, moreover and overwhelmingly at the cost of being party to the suffering itself. Indeed, I suspect having such callous disregard for your fellow person is prerequisite to encountering these unfathomable sums.
When people with an intact capacity for empathy come into huge amounts of money I think it's far more common to give a large proportion of it away (say, Jane Street workers have a culture of doing this). And thus you only stay 'comfortably' wealthy, rather than accumulating so much that it distorts society around your singular existence.
True enough, but it doesn't address the motivation or the issues presented by California's proposed wealth tax.
It's a big democracy red flag when a majority wants to take a lot from a tiny minority; the moral hazard of the unfairness is that it's unclear where this ends. (Saying "one-time" and "1%" are trying to limit that risk)
It's a democracy red flag when an unpopular minority is vilified as the cause of society's problems. It short-circuits real policy making and distracts from real issues.
The bargain of private wealth is that it's better at innovation that should spread widely -- if it's subject to competition and does not export costs.
One problem is that one of the best investments is to change the law to reduce competition, increase market power, and export costs -- i.e., to weaken politics.
Another is that wealth used to mostly invest locally (information and transaction costs), so locals would see some benefit. No longer.
Finally, as an accelerant, enterprises are made of legions of managers and experts, who now compete more than ever; they would lose that competition by supporting less extractive policies or gentler politics.
Net result is that wealth seems not productive but extractive, and there is no negative feedback to reduce that.
Once the grand gambit of goodwill is lost, it cannot be recovered for at least a generation, but there's no real feedback to prevent that. The political viability of something like a wealth tax is just an early indicator.
> 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 risk-free rate of return is 5%.
This seems to only be true for people whose income entirely comes from their wealth, rather than their labor. 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.
It is a very sneaky way to argue that a wealth tax should be as across-the-board unpopular as a large income tax increase. 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.
> 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?
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.
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. It’s focused on the effects on the people they effect.
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.
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.
I think the assumption that we're looking for an equivalence here is fundamentally flawed and with it the entire post.
For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth.
The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income tax
> In fact the conversion rate between them is about 20. A wealth tax of 1% is equivalent to an income tax of 20%.
Sure, but you actually have to work for continued income. Wealth accumulates with no input once established.
Wealth has the ability to increase (capital gains) without having to pay tax until it changes hands, whereas when income increases it is immediately taxed at a higher rate. Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
> Wealth accumulates with no input once established.
This is incorrect, historically you'll pay a ~2%-3% loss via inflation if you keep your money in cash. If you invest (making it capital) in bonds or securities then you will see accumulation, but thats actually a risk premium.
> Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax.
This is true, its typically called "Buy, Borrow, Die" but the reality is that it is only available to a very small percent of wealthy individuals and exists because of the way inheritance is handled ("stepped-up basis"). Even reasonably (not fabulously) wealthy people will still pay retail rates on the loans making the tactic basically ineffective. Last I heard you needed something like 100M+ liquid for lenders to even consider it (presumably, because they will make more off of some other deal with you)
[delayed]
Ironically, a wealth tax of 1% is equivalent to 20% of the risk free earnings on that wealth.
Wow, I like to actually see the numbers laid out like this. Most of the ultra-wealthy pay almost nothing on their income taxes from investments because they have found ways to avoid capital gains, and even if they were paying long term capital gains rates of 15%, pg’s assertion that the wealth tax adds another 20% doesn’t seem unreasonable at all. If anything, it makes me think 1% is not nearly enough of a wealth tax!
There's a related calculation you can do -- what percent of your net worth is your employability? Take your salary, divide by 0.05 (or multiply by 20) -- if you had that much additional wealth earning 5%, you could replace your job's income.
For most people their ability to earn is by far their largest asset. You can kind of get a feel for how difficult it is to bootstrap into generational wealth if you think about the math -- it takes time to replace that earnings portion of your own balance sheet, and even more to well replace it; a lot has to go right in the interim.
I don’t follow the debate and situation in the US that closely but isn’t (part of) the point of wealth tax to offset the fact that rich people are routinely avoiding paying income tax and taxes in general? Thus even if we assume the simplistic conversion here, it’s not that they’re moved from 40->60 bracket but more like <10 -> <30 ?
Yes. And that wealthy individuals are avoiding taxes via things like buy -> borrow -> die, in which high stock valuations that increase but are not sold are not ever taxed, and roll over the taxation potential upon death to their current value. Thus by borrowing against them until death, the inheritor will inherit with a tax basis at the current value upon receipt and thus all taxes are avoided. In which case the tax would go from 0% to 20% (functionally a small amount may be sold to pay interest, so really assume 1% or 2% taxes default). The horror!
No it's just harder to accurately tax each and every form of wealth so we proxy it by taxing income.
The bigger difference between an income tax and a wealth tax isn't the numbers. A wealth tax, for better or worse requires some realization of paper gains that very wealthy folks normally go to great lengths to avoid because their wealth is largely based on a broadly shared polite fiction. So imposing some realization of that wealth requires accountability that doesn't always pan out.
There is a bit more to the story than a 1% wealth being "equivalent" to a 20% income tax. The primary difference is that unrealized gains are taxed by a wealth tax. We need a mechanism for assets to be sold by the richest in society. If those with assets keep accruing more assets the median person will suffer. When we're talking about real assets (housing, retail shops, warehouses, land) we don't need to be concerned about capital flight. The assets are still there on the ground. Reducing the cost of those assets is exactly what we need to help a local economy.
That being said, the richest are effectively _not_ paying the highest marginal tax rate considering all the tax structuring they do. Claiming that they would be paying the highest income tax in the world is misleading, for one. Secondly, the richest in the world _should be_ paying the highest income tax.
I think the post is correct in a one-period sense, though I’m not sure the equivalence survives once you model long-term compounding, additional capital gains taxation and liquidity constraints.
Not everybody uses money to make more money, Paul. Most people work, get paid, and spend the money on their needs. In other words, you are in a position to care about the question, it's OK if you are taxed a bit more.
I think 1% wealth tax should be a replacement for income tax. That way only the wealthy will pay taxes.
How do you propose we measure a person's wealth, when wealth is easily hidden? When it needs to be done now, it is usually a years long audit.
A lot of countries require you to declare your total wealth on your tax forms. Then once someone gets audited, that gets checked. Obviously it’s possible to hide it, but that in itself is a crime, and not everyone is willing to risk going to jail over paying taxes.
The first step we need to take is to invest in the IRS. Every dollar invested in the IRS returns between $5-9. Couple that with fines that offset the cost of auditing, and "hidden wealth" becomes a liability too expensive for people to bother with.
Isn't PG's conflation of Denmark's high income tax with a proposed wealth tax a clear flaw in his math and argument re: "the highest taxes in the world"? Why wouldn't you instead compare to other countries that also have both income and wealth taxes?
As a layman, bringing up a purely income based argument with Denmark, seemed to be an odd juxtaposition.
This is misleading and not the point of the wealth tax.
If you’re lucky enough that you don’t need to work for your income, you should be taxed. A lot. How much? Enough to make sure you don’t become so rich that your children don’t need to work.
Being rich is not fair, it’s very rarely deserved, and it needs to be taxed unfairly.
A much more interesting formula would be how to convert between income and income tax - you'd think it worked according to the superficial bracket system, but in fact, it works along the lines of going to 0 at the top.
P.S. a wealth tax is a property tax. They have existed in the US since before the income tax (which was originally considered unconstitutional by its opponents).
I think the limit it can reach without carried forward losses is 20% because that's the top long-term capital gains tax rate. The other thing I can think of is if you sell a QSBS business, then your capital gains are taxed at 0, and you wouldn't pay income tax at all on that money either. So it's in theory possible that someone could make millions tax free from selling a business, but that's a rare case and one the tax code explicitly allows for.
The conversion would be more accurate if it compared wealth and capital gains taxes, no?
A defining feature of wealth taxes is that they only tax those that make most of their income through capital gains. This is why they're popular among much of the population.
Now the question is, if we lowered capgains tax rate by 20% but instituted a 1% wealth tax, would that be better or worse? My guess would be worse because wealth taxes are nearly unenforcable, but I wonder if there are good arguments for the other position.
What makes them unenforceable?
Are there serious proposals to just add a wealth tax on top of the existing income tax that would apply to the sort of people who actually pay much in income tax vs capital gains? It's an honest question; I haven't seen proposals of that sort, so I'm skeptical that the arguments are meaningful here. For an individual like Jeff Bezos, he's paying virtually no tax under the normal income tax rates referenced in the article, but rather capital gains tax, which tops out at 20%, not 37%.
It's clear from the way paulgraham talks about the subject that they not only don't know the answer, but don't even realize there's such a question.
You can tell from the way they talk about the subject that they don't understand what they're talking about.
The post goes out of it's way to mischaracterize the strategy (and purpose) of wealth taxes being proposed.
> Each 1% of wealth tax is equivalent to 20% of income tax.
Mathematically sound.
> Politicians understand that an additional 20% income tax would be a lot. And indeed a US state that added 20% to its top income tax rate would have extraordinarily high taxes.
That's the point.
> In the median case, US state politicians talking about adding a "mere 1%" wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.
Not "all of the residents". Specifically the ultra wealthy that have a billion dollars. 20% at that point, is 20% of lots. You still have lots left over.
Mathematical fairness isn't the point, which is one reason there isn't a flat tax rate.
I live in Switzerland. All residents are assessed a wealth tax. It would not be just the top x%. Wealth taxes are a bad idea tried in Europe and then later repealed.
Please make higher quality posts -- what in specific do you think pg has missed or does not understand?
If he can phone it in why cant I? His entire framing.
Income (or revenue), what is left over freom the paycheque (profits) and net worth (market cap) - applying a simple ratio to companies of revenue to market cap doesnt work, why would applying a simple ratio of income to net worth for people who live hand to mouth and billionaires work any better.
I think you may have missed the background: US tax rhetoric -- he's doing what I think is pretty fair math with a fair take -- the math is supposed to break down what percent income tax you need to get the same dollars in tax revenue as a 1% wealth tax (on the wealthy). I think you could quibble with his risk free rate of return number, but most conservative planners would recommend a 4 - 5 % budget for risk free rate of return.
It's not about companies - it's about showing an equivalency between a Piketty-style tax of wealth setup and what we're used to thinking about in the US, an income-style tax setup on individuals.
So make income tax a deduction on a wealth tax, and avoid penalizing people who do indeed pay top marginal rate income tax on a large salary/bonus.
Given that the ultrarich pay very little to no income tax then Paul’s argument is “don’t increase my income tax from unnoticeable to 20%”
Anymore I think the question shouldn't be about some kind of economic fairness (the time value of money thing being discussed) but the idea that wealth accumulation is a disease that afflicts society. I don't think anyone should have the level of control or influence on others that having a billion dollars currently allows. If a millionaire gives $100 to a political candidate it probably doesn't require too much thought. It's impressive to note that a 10-billionaire can give $1M just as easily, and so we have a class of folks who can throw around influence, who can order a team of lawyers to do things, can employ their legion of sycophantic followers to harass people, or can threaten the employment of many people not-of-their-class because they can make decisions that threaten someone's employer's bottom line. And note that above I compared a millionaire to the 10-billionaire, but there are plenty of folks, especially around the planet, who economically live several orders of magnitude below the millionaire.
As a bit of an aside, "spending more time with family" is an often-used euphemism around someone being fired, but if you have more money than you know what to do with and you aren't using it to spend more time with those you love, then what on earth is it for?
The wealth tax that we should have is a federal property tax, in the form of a land-value tax. A property tax is more enforceable and produces much better incentives than an income tax or capital gains tax or death tax or wealth taxes in other forms.
I think it's underestimated how important ease of enforcement is for taxes and laws in general. Laws that are hard to enforce require more powerful law enforcement agencies, more invasion of privacy, more punishment, more restriction of freedom. Enforcing a death tax, for example, necessarily requires limiting and tracking of all transfers of money or assets between people including personal gifts. A property tax merely requires keeping track of land ownership, which is a function governments already do, and in the worst case you can simply physically go to the land and see who is using it or seize it.
This blog post is incredibly tasteless. Really Paul should take it down and get the butler to wipe the egg off his face
This is wrong. You can’t convert between the two because it’s possible to have a lot of wealth with very little (even zero) income. Billionaires can completely avoid income taxes by paying themselves a very low salary and instead borrowing money against their assets (usually stock), which is not taxed as income.
Source: The Second Estate by Ray Madoff (2025)
Why choose the median state tax? The proposed wealth tax is in California, where the top tax rate is 13%. Also relevant would be Medicare (1.45% or 2.35% depending on your employment income) and presumably for billionaires, the Net Investment Income Tax, another 3.8%.
I understand why he simplifies things, but it doesn’t really jive with saying politicians don’t understand how taxes work.
I think politicians have a better understanding of taxes than Paul does, and they have a better understanding of how politics work - basically as in all things political, if you convince the majority that you’re dumping on minorities (billionaires, immigrants, trans people) you’ll do well.
Lots of confusion and misunderstanding in these comments. Not surprising, given the highly charged nature of the subject. I highly recommend Ray Madoff's book The Second Estate [1] to learn more about the topic.
[1] https://press.uchicago.edu/ucp/books/book/chicago/S/bo256019...
Mind sharing with what commenters are getting wrong?
I believe some of Ray Madoff's points are at least that ostensibly the tax code and most intuitions kinda differ.
There's the idea that "wealth" gains tend to not be taxed for a variety of reasons. The common parlance of "Buy, Borrow, Die" category things. The "step-up in basis" category things - i.e. no capital gains tax realized on lots of wealth. (The inheritance tax might trigger in some senses, but oddly the capital gains tax is not triggered on transferred assets because they were never sold and the new possessor will be taxed at the stepped up received value if they ever sell.) Trust related things.
So perhaps OP is suggesting that maybe there's some fungibility in income and wealth taxes ostensibly, but that when you look at the tax code the equivalency looks pretty weak currently.
Paul the billionaire ignoring that billionaires often don't pay any income tax at all. Come on man, we're not stupid just because we don't own superyachts.
https://www.propublica.org/article/the-secret-irs-files-trov...
Here is a better algorithm to edify the masses: if someone is such a massive billionaire as to have the boldness to teach the public basic 5th-grade math, their wealth tax rate should be set at 10%. From that point on, the rate goes in proportion to their level of condescension.
Wealth tax is highly impractical. Very high and inescapable death taxes is what we need. Like 80% after an initial exemption amount. https://www.yesigiveafig.com/p/the-summer-slide-part-3-the-t... https://m.youtube.com/watch?v=mX5U5DNUfBc
There are all kinds of irrevocable trusts that exist to remove assets from your taxable estate so that they can be passed to heirs without paying estate tax. Raising the estate tax (which is already 40%) would just make planning to use these techniques more attractive.
Because billionaires accumulate wealth through assets and unrealized gains, many of them skip taking a traditional income and pay. If the numbers in the links below are to be believed, according to paulgraham's calculations, this might bump them into a ~fair range (when comparing to average/median earners).
https://www.nber.org/papers/w34170 https://www.propublica.org/article/how-we-calculated-the-tru...
> It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
Uh … sure I would? Why not? The top bracket was 70% in the 80s. So that 61% is still a fair bit short of what it was then. (And the 80s isn't the highest point, either.)
IDK if it would be a good idea or not, but I'd entertain the debate, certainly. To state that this is unarguable, though, well…
I used to be against wealth taxes but as inequality gets out of hand I've more and more felt like they are the right move.
Hell, I'll be the first in line to pay the damn tax so long as billionaires are right in line with me too.
>It's clear that politicians don't get this from the way they talk about a "mere 1%" wealth tax. None of them would speak of adding a "mere 20%" to the income tax rate, even though that's mathematically the same thing.
His core point seems to be that taking $20 from him is mathematically equivalent to taking $20 from a homeless girl's hat.
I guess mathematically it is the same number if you dont normalize for that, which he wont.
You obviously can’t convert between the two directly and suggesting that is disingenuous.
Income tax doesn’t affect unrealized capital gains (where the rich “hide” most of their income).
A wealth tax (even without a minimum threshold) doesn’t apply to the poorest who can’t accumulate enough to even have any savings.
This conversion only works for income that is entirely saved and reinvested, which the majority of people can’t afford to do.
His math is correct, but the conclusion is wrong.
Income is money that comes from actually laboring and contributing to society. Wealth tax is tax from sitting on your ass doing nothing.
Also, taxes don’t have to be a flat percentage. Like income tax, a good wealth tax would be progressive. Only wealth beyond a certain amount would be taxed, and the percentages would scale.
This is why we should have income taxes that are as low as possible, but still progressively scaled. We should similarly have a progressive scaling wealth tax, but it should be much harsher than the income tax because we want people to work.
This is a transparently misleading framing.
The very wealthy are paying very low effective rates on their investment gains. Various billionaires have publicly described the truth of this. This is not 20% on top of 35%. They are paying a marginal rate of 35% of deliberately minimized taxable income and zero on deliberately maximized unrealized gains. Then 20% when realized, but as we all know by now there are ways to make sure it’s never realized.
I don’t know what the best approach is here, but I know this framing is nonsense.
I think Paul thinks people care about the distinction, or think that a 20% marginal increase to the nation's wealthiest is something the public would find "unfair".
Rich people need to stop hanging out with other rich people.
> So in the median case, a state adding an additional 20% in income tax would have a total marginal tax rate of 37% + 4.75% + 20%, or 61.75%
Good! It should still be higher!
There's nothing more tone deaf than an uber wealthy man arguing he shouldn't pay more in taxes to the system that allows him to be uber wealthy and to be deliberately misleading at the same time.
Yeah this ignores at least three things:
1. Most people do not derive even a fraction of their income from interest on wealth.
2. Earning income from interest on wealth requires zero effort. That isn't true for salaries.
3. Income and wealth are totally different things. You can find a way to equate them in one contrived example but there are so many other factors involved in the real world.
Billionaires gonna billionaire.
Imagine, poor person, if you had to pay an additional 20% in income tax! That would not be fair!
Fuck off paul. Billionaires aren’t paying anything in income tax when they should be paying 60 or even 90.
So, yes, let’s hit them with a 5% wealth tax.
I recently read 'the second estate' and reading about the number of loopholes the ultra wealthy exploit to pay almost no taxes and establish dynastic wealth does boil the blood.
Off the top of my head:
* 'Income' generated from loans using shares pledged as collateral should be treated the same as if you sold those shares.
* Someone receiving an inheritance over x million dollars (carve out 95% of family farms and small businesses if you want), should pay taxes on it as if it were any other windfall
* Donor advised funds should have a 5% distribution / yr requirement, same as private foundations
* capital gains should probably be treated as regular income. I have no idea why 50k in gains on INTC is somehow privileged over the salary paid to a roofer working in the hot sun.
This just isn't true, unless you're the president.
Who is the single largest taxpayer in US history? I'll wait while you google it.
According to Google, this claim is sourced to a person rather famous for baseless claims, from the founding of companies he owns, to the capabilities of his products, to cash prizes for registering to vote, to when he will send humans to mars.
Continuing to accept this person as a credible source of information isnt a reasonable thing to do.
Prof G Markets podcast just had an episode on this with Ray Madoff. They talk about the claim that "the top 1% of Americans pay 40% of the income tax". But Ray points out that is misleading because the 1% is basically lawyers, physicians, accountants etc that make like $500,000/yr. These people still pay income tax and that's the group paying 40% of income tax. What that claim misses is the 0.1% that pay 0 income tax because they have no income. The claim makes people believe that the billionaires are the ones paying that huge sum but we fail to realize that the 1% is our neighbours, not just the billionaires flying private jets across the world.
$0 just feels like a concept -- I can imagine a really high quality structuring exercise that gets tax low by making sure leverage on capital is what's used for spending, but I'd be really surprised to see a 0.1%-er (or 0.001%-er) post $0 income tax. For one, it's disadvantageous for certain kinds of bank interactions. But also, capital calls come in, investments that are made often require a step-up in basis, leverage is taken out on assets that require a margin call or a sale, there are alternative tax regimes, the corporations that are owned by these parties have their own tax burdens..
To say the wealthy can afford to radically optimize taxes and that our system taxes capital much more lightly than labor seems accurate to me, but I just haven't seen offers for "pay zero tax for all your life" from high grade professionals.
If US citizens want that, they generally give up their citizenship, pay their exit tax, and live in a low tax jurisdiction. I do know people like this, and they are very unlike the 0.1% types you're referring to here, and they've given up the benefits of being a US citizen in exchange for their preferred lifestyle. (And paid a mark to market exit tax on all assets on their way out of the country)
As a percentage of their income? Because that's the only number I care about. You don't get to hoard wealth off the backs of tens of thousands of workers and then act like paying a smaller percentage is some good deed being done. The more one benefits from society (and billionaires depend most on the financial security and infrastructure setup by society), the more one needs to pay back into the system they gained their wealth from.
Musk paid $11B in a year his wealth went up $86B on his way to likely being the first trillionaire. Are we supposed to cry about it?
The median net worth in the US is ~$200k. A lot of middle-class folks have likely paid more taxes in their lifetime than their entire net worth.
Nope. Just not post things like "billionaires pay no taxes."
They don't pay zero tax, for sure.
But they certainly get clever about techniques to keep it as low as possible, for shockingly low effective tax rates.
https://www.propublica.org/article/the-secret-irs-files-trov... has a whole bunch of examples.
I have some quibbles about the ProPublica definitions -- for instance market liquidity matters when calculating public company stock wealth -- and even if you're going to borrow against it, there are additional costs and pledges that must be made that significantly reduce the available capital.
The propublica number was like 4.5% or so if I recall, and does not count the taxes paid by the companies these people owned, nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds, nor does it reduce for effective wealth, nor does it reduce for unutilized wealth, e.g. if the stock price goes up and you don't sell or borrow against it, have you received benefit that makes sense to tax?
But if you net all those out and told me the effective rate was 12-15% on utilized capital, I wouldn't be surprised. I would be really surprised if it was $0 though.
> does not count the taxes paid by the companies these people owned
Why should they? Should I get to count the taxes paid by my local water treatment plant workers because I shit in the toilet?
> nor does it imagine the financial benefits to say California teachers or firemen who co-own the companies through pension funds
They get taxed on that!
The only reason he paid $11B that year was because he exercised Tesla options. Many other years his tax bill has ranged from zero to millions.
What did he pay in previous years? To borrow a phrase, I’ll wait while you google it.
This seems like such a poor understanding of reality. If you want to rank order people who contribute net taxes, you would put billionaires at the top, as they not only pay taxes themselves, but their businesses pay taxes, and their employees pay taxes, and their customers potentially pay taxes (VAT) as well.
The bottom of the list would be anyone who works for the state, as they are a massive net tax negative, followed by benefits recipients and pensioners, followed by low income workers, followed finally by the middle classes.
Are you sure you want that to be your guiding principle?
In what reality does a business owner get to claim their customers’ taxes as their own contribution?
Do you think employees and "customers" of the government don't pay tax?
Get rid of the employees and the taxes no longer get paid.
Get rid of the billionaire and the taxes still get paid.
Why do we credit those taxes to the billionaire rather than the employees?
If you want to understand why someone would even propose taking from the rich and complain about inequality, this post titled "Inequality Talk Is About Grabbing " is illuminating: https://www.overcomingbias.com/p/inequality-is-about-grabbin...
I think your blog post is confused. People on the left are pro-taxation because they (a) think billionaires do not have superpowers, and are benefiting from some combination of systemic injustices and plain old fraud gussied up for the modern era, and (b) think superheroes actually shouldn't be allowed to have 1,000,000 times the influence over the structure of the world and its economy compared to a mundane human, even if they existed.
There isn't a level of competence or ability that shifts the answer to the morality of power. There's not an earning threshold you can cross that entitles you to own a fiefdom or a level of genius that grants you moral right to dictate how others use your inventions. We create democracy and grant everyone an equal vote in matters that impact their lives. The economy gets layered on top to allocate resources efficiently. If the economy is deciding that some people live like kings and some like serfs, then we've failed to construct an economy that lives up to liberal values.
That is not illuminating at all. Like, the author just imagines the premise and finds three ways to repeat it. There is no exploration into why people think inequality is unfair; the underlying assumption is that it is perfectly natural and trying to address it is hypocritical and harmful.
The other major assumption is that billionaires are rich because of something they did or are good at doing, better than anyone else could in their position. There is no challenge to this assumption in the text.
This belies a deep disconnect with reality, and an unwillingness to confront the idea that maybe excessive inequality is caused by too much concentrated power changing the rules to further concentrate power. Taxation is just one mechanism to combat this tendency; another way is the guillotine.
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.
If you count luck, maybe.
> But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be just as eager to tax them to reduce unfair inequality?
Yes, I would.
> But if those few very rich folks had real physical super-powers, we would be a lot more afraid of their simple physical retaliation. They might be very effective at physically resisting our attempts to take their stuff.
Yes, and this is why a lot of superhero movies involve fighting the greedy superpowered villain.
Right, as presented, these people are closer to Lex Luthor than Superman.
And I would still want to tax Superman.
> If you want to understand why someone would even propose taking from the rich and complain about inequality,
Because they want to take back what was taken from them.
Why is that the case?
Wow, what a piece of text. Just, wow. Our poor billionaires and their tasty, tasty boots.
I can't speak for others, but this doesn't match my thinking at all.
I want to heavily tax the ultra rich because money is power, and vast inequality in power is undemocratic and just plain dangerous.
I don't really care if somebody buys ten massive yachts. It's annoying and seems wasteful but it's not worth too much of my attention.
But it's another matter if somebody buys politicians, laws, social change. The issue with someone like Elon Musk isn't that he owns a private jet, or even that he owns a rocket company, it's that he bought his way to taking an axe to major parts of our government by pouring unimaginable amounts of money into buying a presidential election.
It's not about grabbing stuff, it's about preventing people from accumulating too much power. The ultra-wealthy should be heavily taxed for the same reason the President shouldn't be given unlimited power to do whatever they want.
Easily solved, remove the power centers and then the billionaires will have no power to buy or influence with their money.
Define "easily" for us, please.
Don't hand over power to politicians, bureaucrats and NGOs. It's not rocket science to need further explanation.
Politicians, by definition, have power. How do you easily remove or withhold it?
It's the degree of power they hold, not a binary. A politican in Switzerland has much less power than a politician in China.
When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power. But when it is e.g printing money the calculus is massively different.
> When your power is to determine which day the recycling truck is dropping-by, hardly anyone wants to coerce that power.
I take it you've never encountered a homeowner's association.
I thought you said it was easy?
"Don't want to be ruled by billionaires, peasants? Have you tried dismantling your government so they can't buy it? That will surely save you."
this is some of the most insipid dreck i've read in a long time. the only thing illuminated here is the author's complete lack of understanding regarding ability and worth and total inability to think beyond a system imposed upon him by others. i think the kids would say he's "billionaire glazing".
The vibe I get is that he's saying "you poors are just jealous of the billionaires who are smarter and richer than you, so you want to take it away from them"
The comparison to _literal super heroes_ from comic books definitely made me roll my eyes
My problem with billionaires is that their gains are in part from exploitation. I just don't believe that one person can actually produce billions of dollars of value all by themselves. They extract that value from other people and our whole system is structured to promote this.
There are probably millions people who could have been Mark Zuckerberg or Bill Gates or Elon Musk or whoever. A million people with the right skills who maybe were born a few years too late or didn't have the right connections or just didn't have rich enough parents. It's a little too "winner take all" for my taste. And then those few winners end up having disproportionate affect on politics and issues that affect us all. It's just not a great system.
> People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.
There are certainly sometimes unusual abilities in a positive sense, but the common case likely falls closer to having an unusual degree of sociopathy. It is unclear to me how else one could view the state of perfectly solvable human suffering in the world and continue to prioritize accumulating wealth over all else, moreover and overwhelmingly at the cost of being party to the suffering itself. Indeed, I suspect having such callous disregard for your fellow person is prerequisite to encountering these unfathomable sums.
When people with an intact capacity for empathy come into huge amounts of money I think it's far more common to give a large proportion of it away (say, Jane Street workers have a culture of doing this). And thus you only stay 'comfortably' wealthy, rather than accumulating so much that it distorts society around your singular existence.