> That would destroy the incentive to save. Why put aside a dollar now, only to have it taxed every year?
Ok? If you choose to spend a dollar instead of saving it, that implies some business will get that dollar. That implies someone will still invest in, build, and run businesses.
> These are things not to mess with lightly.
I agree. It requires a lot of thinking, discussion, deliberation and all that. But the basic math doesn't lie. We will have fewer workers in the future. Machines will make more and more stuff. If you want to continue supporting retirees as promised, then taxing the machines is the only answer.
Otherwise you'll have to break some promises to retirees and pensioners; now that's a real disincentive to save.
Depends on implementation. For example, a wealth tax that has a "cap" at some ludicrous amount of wealth, like $10M, would effect very few people and therefore be insignificant for the average worker. So 99% of people would continue saving with no change at all to their behavior. The externalities could be nice though, since it'd distribute capital more efficiently. Sort of a general stimulant to the economy.
This line of thinking though assumes it would have no impact on the largest players though. It hinges on a "calling their bluff", that high NW individuals won't change anything despite now being forced to annually liquidate assets to cover taxes. And this doesn't even touch on the immense impracticality of annually valuing assets. Or how to manage assets in illiquid markets, or how to sell 30% of a painting to cover 1% of it's mark-to-market value by year end.
The reason wealth taxes never go anywhere is because when you sit down and learn what wealth is, how it works, and what is practical, it makes the most sense by far to just tax things whenever they go back to cash.
Really the only genuine tax loop-hole is the step-up basis on inheritance. Everything else is just an elaborate deferral to pay taxes later.
> despite now being forced to annually liquidate assets to cover taxes
Allow paying the tax with assets. Put the assets into a black box sovereign wealth fund that's controlled by some mechanical algorithm which sells things at random as needed to fund the government budget. At scale this will be indistinguishable from a whole-economy index fund.
The best part about this is rich people can't beg off by saying "I have to liquidate stuff".
How do you pay with assets for real estate or boats or paintings? An IOU that can be cashed in when the asset is sold. Oh the boat is owned by an LLC so it never changes hands? No problem, the government has a share in the LLC too. (IANAL, IANAA so working out the loopholes is left as an exercise for the reader).
A second benefit is startup shares don't have to get hit with a capital gains tax before the startup goes public. Right now people sometimes pay taxes on shares that are eventually worth zero. Instead if this tax could be paid in startup shares, then there's no unfair tax bill.
As a condition of paying in assets, forbid the government from exercising any control over the assets. No shareholder voting, no board seats, not even choosing the paint color on the boat.
Additionally, this tax can't be on top of income tax. The whole point is to fix the worker-funded tax pyramid scheme. It has to be revenue-neutral with respect to income tax.
The bigger issue is, at least in the US, roughly 2/3 of assets of the wealthy have no meaningful liquidity. There is also no mark-to-market because in many cases these are idiosyncratic goods that may only find a buyer once over decades. Even some real estate markets only clear a single transaction on the scale of decades so any valuation is mostly fiction -- there are no comparables.
You could pay for these using the 30% of the assets that have some practical degree of liquidity but now you are putting massive downward pricing pressure on those because it is essentially a leveraged liquidation. Effectively, the total percentage of assets that are non-liquid would increase.
People tend to underestimate just how non-liquid the assets of the wealthy are. Most of that wealth isn't in stocks and bonds.
Real estate is a bad example because it's already subject to property taxes, which is a form of wealth tax. Maybe it doesn't need another wealth tax.
Private businesses are a better example. They don't trade on markets, sometimes don't have multiple shareholders. There already exist methods for valuing businesses (discounted cashflow, for example). Let the taxpayer pick one and make them stick to it.
> You could pay for these using the 30% of the assets that have some practical degree of liquidity
I already said "no liquidations, pay with assets". For non-liquid assets pay with IOUs on said assets. The government cashes in the IOU when the asset changes hands - whether it's by sale, gift, or inheritance. Yes that's an inheritance tax; who cares? If you want to add a wealth tax to real estate, this is the way to do it.
There are a surprising number of edge cases out there.
Quite a few assets can never clear a market — they have value in some abstract sense but no concrete sense. For example, assets that are legal to own and transfer but illegal to buy or sell.
Some commodity assets have value that it is nonetheless not always transferrable. A common example relevant to wealth taxes is intangible assets where value is bound in who owns it and not the asset per se. Most of the value vanishes the instant you transfer to e.g. the government.
Another common issue is that wealth taxes can directly conflict with existing load-bearing contracts. As a practical matter, these government can’t just void most contracts, including contracts the government is a party to, for the purposes of generating tax revenue.
All of which is why most real-world wealth taxes limit scope to a handful of liquid, legible securities and similar. But as a percentage of wealth, these are pretty small so you don’t collect much revenue.
we have property taxes, and its taxed every year. and somehow people keep trying to buy yet more property.
plenty of incentive to put money there, ditto for saving.
a saved dollar does not stimulate the economy, either. the whole idea of microloans is that the money gets spent ASAP and goes straight into the economy
Yes, that's the whole point. That's a good thing. Money is meant to be spent, not be hoarded and slept on forever. Money velocity is terrible right now, capital generates more income than wages, this is neither healthy nor sustainable, and certainly isn't fair to the ones actually doing the productive work.
In the ideal society there'd be no Epstein or Thiel, everyone would have a rewarding and productive economic activity.
I just left Reddit, where a Cuban that moved to America is hosting an AMA.
It’s incredible. The guy seems to be giving brutally real opinions, the good and the bad, and telling his life’s story. Reddit readers ( admitting they’ve never been to Cuba ) try to shout him down and tell him what he should be thinking.
It’d be nice to hear more first hand stories like that.
Perhaps the next great opportunity is to be the person that designs the best process for setting up and running Schmidt’s ‘invisible AI coding sweat shop’.
Running such an operation is going to be multi-faceted. You have to have the know-how to bring in the AI coding assistants. You have to have a very tight framework for quickly specifying tests, and staying ahead of the bots. The integration. The build processes. The source code management. Etc.
Maybe one person can really be that super productive bot overseer, but they’re going to need tools and strong processes.
That changes future value calculations, too.
These are things not to mess with lightly.
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