[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.

[bhupy]

Okay, $50M was just the number for the sake of the argument, but the core argument still applies for those individuals worth $100M in the same circumstance, or $500M, etc etc etc.

Your argument doesn't refute my central argument, it refutes an unimportant implementation detail.

[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?

[bhupy]

Most of the super-wealthy derive their wealth from owning significant ownership in extremely valuable corporations. Outside of hedge fund managers and Warren Buffett, most of the super-wealthy do not have sufficiently diverse investments whose annualized returns may cover the annual wealth tax bill.

[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.

[dragonwriter]

No, the federal government does not have that power; Art. I, Sec. 2, Cl. 3: “Representatives and direct taxes shall be apportioned among the several states which may be included within this union, according to their respective numbers”. A wealth tax (or other real or personal property tax) is a direct taxes not apportioned as Constitutionally required.

State governments may or may not have that power, according to their own Constitutions (most, I would imagine, do.)

[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.