[barretts]

For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post. He ignores asset growth and the fact that all the wealth tax proposals have a very high floor for the tax.

Saying the government will take 45% of your wealth above $100M is very different than saying the government will take 45% of your wealth.

[irq-1]

The time-value of money is basic. 1% wealth tax, 3% inflation and 5% annual growth leads to more money in the future, not less. (Those percents are conservative.) Is it possible that PG doesn't understand this? Or is it shallow politics; lying and using his platform spread FUD. For shame.

https://en.wikipedia.org/wiki/Time_value_of_money

[mathraki]

So 5% - 3% = 2% real annual growth.

So 1% wealth tax is equivalent to 50% tax on the return of the asset, every year.

Say what you want, but this makes holding the asset or investing a lot less attractive. It will affect people's decisions and willingness to invest. Maybe we're OK with less investment but we shouldn't assume there is no impact.

In addition what if this is a volatile asset (read: startup) whose value goes up and down? Will the gov't give you a refund if it loses 20% of its value 10 years in?

What if the asset is illiquid (again:startup)? Who will lend to an otherwise not-wealthy startup founder 1% of their company's paper value every year to pay the tax? Because if the startup fails most founders will have to declare bankruptcy (having paid years of paper wealth taxes with no positive outcome in the end).

[dlp211]

> Say what you want, but this makes holding the asset or investing a lot less attractive.

Not really. Where else is that money going to go? It's not enough to just say there is a disincentive, you have to show that the disincentive is so great that it makes other opportunities more attractive. But those other opportunities don't exist, because it is a wealth tax, it doesn't matter what instrument you use, the tax will still hit you.

Also, those numbers are pretty much non-sense in today's economy, with inflation consistently below 2% and nominal capital asset growth being closer to 10%, a 1% wealth tax represents a tax rate of ~12.5%.

I'm not losing sleep over a startup founder who owns so much of a company to be worth over $100MM on paper or otherwise. Startup founders have the ability to sell a part of their shares in liquidity events. If they choose to hold onto their shares above all else, it's on them to figure out how to pay the tax. It might even create a whole new financial instrument or class of investments.

[mathraki]

> Where else is that money going to go?

Other countries, for one. Capital is global.

> It might even create a whole new financial instrument or class of investments.

Absolutely. There will be a layer of, essentially, financial parasites taking value away from value creators to make this 'work'. Not sure what's great about that.

[dlp211]

Capital can move globally, but if you remain a citizen, you still owe on the wealth tax, because again, no instrument is restricted. If you want to renounce your citizenship to the US and pay the exit tax instead, be my guest, I'm sure we could tighten up any loopholes and remove access to American capital markets for those that want to flee.

I also love how creating liquidity is now considered being a financial parasite. The US is nothing without the financial innovations that we have developed and embraced over the last 150 years.

[mathraki]

Think about it, it will be cheaper/better for $1M of US capital to be invested in UK vs the US.

In the US both you and the founder/management team/other investors all pay tax if company is successful; in UK, only you (as US citizen) pay tax. You and the founders/management can split the difference and will be better off.

These things may sound small but play out significantly at scale (like interest rates etc)

[RIMR]

He also seems to be assuming that business owners earn 100% of their wealth at the beginning of their careers and that the government will be chiseling away at their lump sum earnings for their entire working life...

I think it's safe to call this propaganda.

[stickyricky]

Why does asset growth matter if you're taking n% no matter what?

Edit: After reading the responses, I think people are confusing themselves with dollar amounts. If I have 100 units of X. The government takes 1 unit in the first year, 0.99 units the next, and so on. Over time my total number of units decreases. The notional value of those units can fluctuate but the absolute number of units owed to the government remains the same.

My original question, which I suppose has been answered, centered on this concept that the notional value claimed by the government is the only thing of value being lost. A unit of wealth is lost and wealth compounds over time.

Disclaimer, I'm not advocating for or against a wealth tax. Just trying to understand an argument and now apparently teaching it.

[arnvald]

Let's say you have 1% wealth tax and $1,000.

Without asset growth, after 1 year you have $990. If you include let's say 5% asset growth, after 1 year you have $1,000 * 1.05 * 0.99 = $1,039.

Then after another year, without growth you have $980.1 With %5 growth you have $1,040 * 1.05 * 0.99 = $1,080.

So the article claims that with 1% wealth tax you'll lose 45% of your assets over time. With any growth above 1% every year, you will actually at least break even.

[defertoreptar]

That's one way to look at it. Another way is to say that if wealth tax offsets growth exactly, then the government has taken the difference of what your wealth would have been after 60 years. For example,

  1 - 1000*(1-.01+.01)^60 / [1000*(1+.01)^60] ~= 45% taken from the government

Which is the same as the author of the article found.

[nindalf]

Except the article implies that you might be nearly destitute. The article seems to imply that you'd have very little wealth left, even though that's not the case.

[defertoreptar]

I just read the article again, and I don't see any language in it to support the idea that it's implying you'd have any less wealth than it calculates that you would.

[RSchaeffer]

Then you're being far too generous with your interpretation

[arnvald]

I'm not saying his math is not correct, I'm saying it is misleading that he does not even mention growth at all. He presents carefully selected numbers, ignores tons of stuff around (growth, but also the fact that wealth would be marginal tax) and then makes a bold claim that people will believe in.

[weaksauce]

except the wealth tax is not at anything other that the most ridiculously wealthy people in society. the wealth tax is proposed for precisely the reason that it slows down the growth of the ultra elite ruling class type society in favor of a more equitable one that is, you know, a society. bezoar shouldn’t have billions of dollars and influence society like he does... it’s obscene.

[BurningFrog]

> ...the ultra elite ruling class type society

To me, the ruling class is the Ivy League graduate class. They run and rule this country to their benefit.

The Billionaires have fabulous lives, sure, but I don't think they have much political power at all.

If anything, I see them as one of the few counterweights to the real political power.

[theplague42]

You don't think billionaires have political power? What about the tax breaks states use to entice Amazon to build a new HQ? What about Elon Musk trying to shape public opinion against rail transit?

The US literally just elected a billionaire with no prior political experience to the Presidency four years ago!

[BurningFrog]

What I said is they're far from being a ruling class.

Of course they have some political power.

[logicchains]

>bezoar shouldn’t have billions of dollars and influence society like he does... it’s obscene.

Why not? People voluntarily gave him and his company this money, voluntarily invested in Amazon. What gives you the right to try and take it from him? "Envy makes right" is not the basis for a very good moral system.

[rswail]

What gives society the right to have a progressive tax system that expects those with more to contribute more to the common good? Because there is a general belief that everyone is dependent on the community in which they live and should contribute to it.

Currently, extremely wealthy people get tax breaks for contributing to "charity". The majority do so by creating a Foundation of their own to invest in the charitable causes that they prefer.

However, taxation goes to where the community has decided is needed, hopefully through a form of representative government.

We should not have to rely on Bill Gates deciding to invest in vaccine research to ensure that it occurs. Some of his wealth, now accumulated, should be returning to the common-wealth via taxation.

This ensures that wealth does not accumulate within very small groups of people to the extent that the rest of society does not also share that wealth.

In short, Ayn Rand was wrong.

[B4CKlash]

This is a strange response.

A). The parent doesn't claim morality as the foundation. B). Thriving in a capitalist system is also not a foundation for morality. C). There are no underlying structures that dictate/require the sum total of individual actions have to correspond to societal good (not that i'm aware of). This would be akin to claiming that drug dealers have moral superiority.

What we have here is a version of the tragedy of the commons (https://en.wikipedia.org/wiki/Tragedy_of_the_commons#:~:text...). Something that benefits the individual on the short term while negatively impacting large swaths of connected infrastructure. In a society where money == votes I can't seen how that's a valid and functioning path forward.

[NovemberWhiskey]

The word "obscene" used that comment literally means "offensive to the prevailing standards of morality", so I think you'll find it does claim morality as its basis.

[tehalex]

It's almost like this was intentionally misleading...

[jpttsn]

By this reasoning you’d “break even” on income tax if you got promoted?

[bitdivision]

Because if your asset is growing at 5% and the wealth tax is taking 1%, your asset is still growing overall

[bhupy]

But asset isn't guaranteed to grow at 5%, it only grows that much on average.

What you say makes sense if the wealth tax is applied on ETF/index fund holdings, but for most founders, the wealth is concentrated in holdings in their own company. On average, across all founders, the asset growth might be 5%, but for each individual there is significant variance. For nearly half of founders, wealth tax would take 1% on either a flat or a depreciating asset..

[nrmitchi]

If your company, or your ownership value in said company, is valued at over the wealth tax floor ($50M?), and is "flat or depreciating" every year over the (according to PG) 60 years you control the asset, then you have much bigger worries than a 0.5% wealth tax.

[bhupy]

Yes, you do. So why add yet another worry (a 0.5% wealth tax).

Keep in mind that "flat or depreciating" companies are way more common than you think. Not every company enjoys the annualized returns of the S&P500. Almost any non-tech or non-tech-adjacent company has remained either flat or depreciated, in the last 10 years.

That's the entire reason why lay people invest in the index, because it's relatively safe from depreciation. Most of the super-wealthy don't achieve that wealth on the back of the S&P500, they achieve that on the back of owning a single zero-to-one stock. It's one thing for the company to grow from 0 to {insert equilibrium valuation}, and another thing entirely for the company to continue to grow at a rate that outpaces inflation.

[nrmitchi]

The argument you'll get back though is that that 0.5% wealth tax will no longer impact you _at all_ if your asset value drops below $50M.

A 0.5% wealth tax is not going to make you poor. It could, _at absolute worst_, make you worth "only $50M". If you still manage to go from $50M -> $20M, a wealth tax had absolutely nothing to do with that.

As well, although it's not explicitly mentioned, I would expect any floor-value (such as $50M) to be set to keep pace with inflation.

[KarlKode]

> Most of the super-wealthy don't achieve that wealth on the back of the S&P500

Are you saying that most of the super-wealthy do not (at least to a certain point) diversify their investements? Or is your point that most super-wealthy individuals acquired their wealth themselves by investing (or founding) a single corporation themselves?

[bitdivision]

I agree there will be huge variance. I'm only suggesting that if you model growth of assets as well as a wealth tax then your numbers will look different.

[bobcostas55]

By the same reasoning income tax doesn't exist because people sometimes get raises. Come on.

[bitdivision]

I don't think that's a fair comparison.

The article does not model asset growth in any way, and if you do model asset growth you would get significantly different numbers.

[throwaway2048]

Yet somehow people keep working and the entire world of "labour investment" dosen't collapse

[sumtechguy]

Most assets do not 'grow in value'. Take a building any building. Sell it today. Sit on the cash for 50 years. How much building can you buy in 50 years? Not nearly as much.

The only reason we are even talking about wealth tax is because of the crazy unable to be funded programs some people are proposing. These programs sound nice on paper until you do the math on them. Then they realize they can not pay for it at all.

Remember wealth != cash value.

[SmooL]

This is a ridiculous comparison - of course pure cash depreciates, but we're talking about the literal opposite of that - an asset.

Take a building, any building. Sit on the building for 50 years. How much is building worth? Probably way more.

[sumtechguy]

I would posit that most assets are in relation to other real assets worth about the same. If I sell that building and buy the one that is say about the same right next to it am I going to 'pay more'? Cash wise most certainly. Utility wise not so much. Do not confuse cash with value. It is easy to get them mixed up.

[thundergolfer]

Not the only reason at all. So many people are concerned with inequality beyond its connection the USA’s inability to fund public goods.

[logicchains]

>Not the only reason at all. So many people are concerned with inequality beyond its connection the USA’s inability to fund public goods.

"Being concerned with inequality" doesn't give people the right to go and arbitrarily expropriate other people's assets.

[enragedcacti]

> The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States

We absolutely do have that right in the US.

[jakelazaroff]

Cash, specifically, doesn’t grow in value — but most ultra-millionaires aren’t sitting on tens or hundreds of millions of dollars in cash. If you’d held onto the building for 50 years, it’d probably be a very different story.

[sumtechguy]

My parents have owned their home for about 50 years now. If they sold it today and turned around and bought another house they pretty much could get about the same sized house. The about 20k they paid for it 50 years ago in some places would not even get you a down payment.

Wealth is not the same as cash value. It is easy to miss the distinction. We may be agreeing? We also already have a 'wealth tax' on many items already. We call it property tax.

[foogazi]

Asset growth does not matter here since the wealth tax is setup as a percentage - the government will still take 45% over time

[awinder]

Yeah but if your wealth has compounded 400% over 40 years, and they took 40% compounded, then that paints a different picture. He’s playing games around the idea that 100% is the cap because that’s how most people would think about money.

[smallgovt]

My guess is that you're the one misunderstanding the math here.

At a 1% wealth tax, you will end up being 45% less wealthy in 40 years than you would be without the wealth tax.

There is a 100% cap on what the government can take from you. And, with a 1% wealth tax, they are taking 45% of it (spread over 40 years).

Put another way, the 1% wealth tax is similar to a 45% capital gains tax (where the cap is also 100%). Capital gains is just more front-loaded (paid upon liquidation) whereas wealth tax is paid over time.

[dlp211]

And every dollar that I pay in income taxes makes me less wealthy in 40 years since I am at the point that every marginal dollar I make is invested. We all need to pay taxes and need to do so in proportion with our ability to do so, whether that is income, sales, property, excise, import, impact, sin, payroll, wealth, estate, or otherwise. We are running $1,000,000,000,000+ deficits every year in this country because people think they are taxed too much despite having the lowest tax rates in modern history, what utter hogwash.

[awinder]

I’m not misunderstanding anything, but that’s a cool way to blaze into a convo lol. Most/borderline all of these plans kick in above income thresholds, ie you dip down below 50M and you’re not paying the tax. So that’s one way you’re not getting 45%. The other way is that asset growth will play a huge role in how this tax effects you. The only way to get the 45% number is to say your assets didnt grow in 60 years, which is not realistic. In fact if your assets are growing even around average rates over 60 years you could pay in huge excess of the original principal, while also making a killing.

[smallgovt]

> The only way to get the 45% number is to say your assets didnt grow in 60 years, which is not realistic.

This is the misunderstanding I'm pointing out. You will end up being 45% less wealthy regardless of whether your assets grow or not. If your assets grow YoY, you will still end up being 45% less wealthy bc your YoY gains are also taxed by the 1% wealth tax.

[awinder]

I get it (and don’t know why i went down this road on a whim). My (original) point was that at something like 8% avg return you’re up 5900% over 60 years instead of being 10900% up.

[simonh]

Only if your wealth is so far above say $50m that a few tens of millions is completely inconsequential. If it's closer to $50m, then it will be a whole lot less than 45% and possibly nothing.

[dodnest]

45% of wealth OVER 50 million. How do you not see the difference? The idea is that you wont discourage anyone from doing anything because they're already a multi millionaire. Who is going to be bitter about being a multi millionaire?

[mbesto]

> For a guy who's always railing about the value of honest, rational discourse, he's unbelievably misleading and political in this post.

Where does pg rail about honest rational discourse? If you follow him on twitter for the last couple of years it's been nothing but pontification.

[sillysaurusx]

Eh? Pg’s twitter account is one of the most interesting. I follow over a thousand, and pg is hardly a blip when it comes to pontification. (That word is surprisingly hard to spell out.)

[shin_lao]

Asset growth is taxed by capital gains tax.

[rswail]

Yes, but we're talking about a wealth tax. Which specifically does require that a wealthy person actually liquidate some of that wealth every year.

Not sure why people are discussing this as if it's not exactly that. PG is right in what he's saying, but wrong on the impact.

Assuming his figures are correct, then I would expect to own 45% of something much bigger than what I owned 100% of 60 years before.

[h4kor]

But not with 100% tax. Your wealth still increases.

[aww_dang]

From the bottom of the page:

>"Even a .5% wealth tax would start to keep founders away from a state or country that imposed it. That's more than a quarter of your stock."

[Miner49er]

The point is that he arrived at this conclusion by building up a strawman.

That 26% is over 60 years, ignores the fact that the stock will appreciate over time, ignores the fact that all wealth taxes have high floors, etc.

[Simon_says]

The amount of the wealth tax also appreciates over time.

[aww_dang]

I read it as deterring start up founders from investing in a region. If they plan for success, then they should plan to exceed the floor.

[manquer]

100M being the most commonly discussed floor. That usually means about 400-500M value of the company

Not ever founder thinks it’s either unicorn or broke . Most normal founders want build something good and make a good amount of money.

And where else I am going to go? There are few places where it is possible to make 100M from scratch and without being corrupt .

[aww_dang]

All things being equal, people prefer to do business in jurisdictions with lower taxation. I don't see that as a strawman argument.

[manquer]

True , if all things are equal , Bay Area is so far ahead of rest of the world this won’t be the decision point for most founders .