[scottlamb]

> The annual turnover for e.g. Apple stock is ~0.4%, so a 0.8%/year wealth tax would triple the number of sellers without adding any new buyers.

Is that assuming the tax money is going into the void? I agree it might force roughly 0.8% of shares to be sold in a given year. But as to not adding any new buyers: no one's being forced to buy stock in the same way, but shouldn't someone be getting the money and potentially using it to buy Apple stock?

Let's imagine for a second the wealth tax money is simply given to people who are below the threshold. Most of them may waste it on silly things like food and rent, but some might end up with a surplus and become investors. Same effect if say the income tax is lowered to make the wealth tax revenue-neutral. Or if say it's used to expand Medicare. It's hard to for me to imagine a way to spend taxes that doesn't help someone. Even if the money is used on war—a net destruction of value and lives—there are some people selling missiles better off a result.

[AnthonyMouse]

> Is that assuming the tax money is going into the void?

It assumes that it's going somewhere else, which, if it wasn't, would cause it to have no purpose or effect.

> shouldn't someone be getting the money and potentially using it to buy Apple stock?

Going from "predominantly what happens" to "it's theoretically possible occasionally" is a question of magnitude rather than direction.

> Most of them may waste it on silly things like food and rent, but some might end up with a surplus and become investors.

Or their spending it on food and rent results in an increase in rents, even for the people who didn't get any, which rents go in part to foreign investors who remove it from the jurisdiction, and then domestic people have even less to invest than before.

Compare this to the thing where you e.g. relax zoning rules to reduce housing scarcity so that rents come down and then domestic people have that money to invest.

> Same effect if say the income tax is lowered to make the wealth tax revenue-neutral.

Which is to say, same problem -- you've now created a preference for spending rather than saving/investing while increasing your reliance on the taxation of saving/investing.

> It's hard to for me to imagine a way to spend taxes that doesn't help someone. Even if the money is used on war—a net destruction of value and lives—there are some people selling missiles better off a result.

Things have both opportunity costs and externalities. If you take a billion dollars from a company building grid battery storage whose investors would will the profits to a malaria charity then the grid burns more fossil fuels, consumers pay more for electricity, more people get malaria, the pointless war kills innocent people, those populations get pissed off and commit acts of terrorism, and the defense contractor gets a billion dollars (this is supposed to be the benefit) which it uses to bribe the government to increase the amount of bombings. This is obviously a massive overall net loss and would be better off not happening notwithstanding that the defense contractor likes it.

[scottlamb]

> Going from "predominantly what happens" to "it's theoretically possible occasionally" is a question of magnitude rather than direction.

Okay, fair enough. I took "without adding any new buyers" literally but yes, I can imagine this creating some downward pressure on stock prices.

> Or their spending it on food and rent results in an increase in rents, even for the people who didn't get any, which rents go in part to foreign investors who remove it from the jurisdiction, and then domestic people have even less to invest than before. ... Compare this to the thing where you e.g. relax zoning rules to reduce housing scarcity so that rents come down and then domestic people have that money to invest.

Are these mutually exclusive? I concede that people being unable to afford rent limits rent to some extent, but it's not my preferred price control. Giving them more money that they could use on rent might make it more clear we need to make other changes, and I can live with that.

> you've now created a preference for spending rather than saving/investing while increasing your reliance on the taxation of saving/investing.

Yes. Is that worse than the status quo? There's a lot of spending now that should be happening and is not—people literally dying from inability to afford medical treatment. You'll probably say—just as with the rent example—that people being more able to pay will cause medical costs to increase further, and I agree that should be addressed, but again I think people being flat-out unable to afford it is not the best way to control medical spending.

> [...pointless wars are a massive overall net loss...]

I think you understand this, but just to be clear in case anyone was wondering: I also hate pointless wars, just was making the point that even in the stupidest use of the tax money I can imagine there's still someone getting money to buy Apple stock, even though as a whole we're worse off.

[iso1631]

> Most of them may waste it on silly things like food and rent,

Which then goes to the owners. I believe this is called "trickle up economics", and unlike trickle down actually has evidence in reality.

[roenxi]

Although the argument does look fundamentally reasonable, I think its biggest weakness is it doesn't make an attempt to prioritise - yes taxes always make someone better off. So does wealth. A decision has to be made. Which is more valuable? We've got a highly reliable and effective system for working that out (aka the free market economy) and no alternative in 2nd place that doesn't typically lead to mass starvation because someone underestimated how much food was needed. They people benefiting from the taxes are going to be making very different allocations to the places that the capital is being drained from.

The people behind wealth taxes generally handwave explaining how their system will be better at allocating than the people who make a living of allocating wealth effectively because it is all just obvious that it doesn't need to be justified. Poor people will get more money if rich people have less, duh, QED. So far no compelling cases where they've turned out to be right. If they could do a better job, why even allow private wealth at all?

> Even if the money is used on war—a net destruction of value and lives—there are some people selling missiles better off a result.

Case in point, there is a topical example of Trump going in to Iran like a maniac. Yes there are some people who are better off as a result who wouldn't have been. And yet we can be pretty confident that not forcing US citizens to fund the debacle would have been a better allocation of capital.

[IanCal]

> We've got a highly reliable and effective system for working that out (aka the free market economy) and no alternative in 2nd place that doesn't typically lead to mass starvation because someone underestimated how much food was needed.

This is an absolutely wild comparison. The choice is not "everything is purely market forces" vs "everything is centrally planned". We have all kinds of implementations across the world that have different systems.

> The people behind wealth taxes generally handwave explaining how their system will be better at allocating than the people who make a living of allocating wealth effectively

They have different targets though surely? The effective part here is that for one group it's getting more into the hands of the less well off, or funding (say) schools, healthcare, etc. The effective part for someone else is making a single person or family richer.

> So far no compelling cases where they've turned out to be right. If they could do a better job, why even allow private wealth at all?

Because utility is not linear. It is entirely reasonable to assume that the very extreme ends of a scale are not likely the most beneficial under almost any measure. If wealth getting concentrated is so good, why not only allow one person to have everything? See how odd that seems?

It is not surprising to me that it's a good idea overall to let people benefit from figuring out how to do things that people want.

It is also not surprising to me that it can be a good idea to take some of that benefit, and use it to do some of the following

* Alleviate suffering * Long term planning/research to benefit all and speed up progress * Core infrastructure that everybody benefits from but is hard to structure with pure market forces

For example, companies benefit from an educated workforce - are they individually going to fund schooling for young kids?

The goal is to try and hit some of those other things while not discouraging people too much from doing the things we want.

> taxes always make someone better off. So does wealth. A decision has to be made.

Sure. So we could ask, say, can we compare educating 500 children for 12 years vs Taylor Swifts net worth going from $2.1B to $2B? How much would she be hurt and how much would other benefit? What would be the impact if she was slightly less wealthy?

[roenxi]

> If wealth getting concentrated is so good, why not only allow one person to have everything? See how odd that seems?

Isn't that fairly close to what we have now? I don't see any theoretical issues. Obviously if we literally mean one person I don't think the market would pick that as an optimum outcome, but there isn't an issue with the idea in principle.

Besides, the alternative is to have a relative small committee that, in practice, decides when to give and when to take away. That is the most practical aspect of wealth control and there is still a small number of people controlling it.

> Sure. So we could ask, say, can we compare educating 500 children for 12 years vs Taylor Swifts net worth going from $2.1B to $2B? How much would she be hurt and how much would other benefit? What would be the impact if she was slightly less wealthy?

Worst case is she gets angry and a bunch of people go hungry and uneducated, she donates quite a lot of money. $26m going out some time soonish according to a recent heaadline. https://www.theguardian.com/music/2026/jul/02/taylor-swift-t.... She's more effective with that donation than getting outcomes like educating 500 kids. It turns out to be nontrivial coming up with good examples in practice.

[IanCal]

> Isn't that fairly close to what we have now? I don't see any theoretical issues.

Massive concentration of wealth has a few outcomes you may find disagreeable or sub-optimal

* Huge concentration of power in smaller numbers of people, chosen for unrelated skills, heavily tied to luck

* People with huge amounts of power being able to make extremely sub-optimal decisions and still be entirely fine. Elon can buy and run a business into the ground on a whim and be entirely fine.

* Concentration of direction of human labour - it is more worthwhile to spend many lifetimes of humans to very slightly increase the comfort of one multi-billionaire.

For the last example, Americans earn more typically than anyone else in the world and data is easy to find. Assume lifetime earnings of $3M. Bezos' yacht cost more than enough for 100 full lifetimes of US median worker labour, and requires ten lifetimes every year to maintain.

For one ship, for one person.

You can look at that and say "this is optimal" but I am very unsure as to what you're then measuring.

> Obviously if we literally mean one person I don't think the market would pick that as an optimum outcome

Well it being a daft choice is rather the point, taking the absolute extremes is rarely a sensible approach. Total abolition of private wealth is not the point anyone is making. The argument people are making is to take money from those that have so much that the impact to their lives would be negligible, and use it to improve the lives of many others. It may even make them wealthier!

You said optimum there, but optimal for what? Even if it's just efficient allocation of capital, doesn't that rely on pressure to invest well? The reward for doing so is more wealth, but what if you don't need more, or don't need to constantly try and get more?

The wealthiest could sit with vast sums as cash and be fine, which is sensible for them but surely a terrible use of capital.

> the alternative is to have a relative small committee that, in practice, decides when to give and when to take away.

That's a government.

> Worst case is she gets angry and a bunch of people go hungry and uneducated,

Why would anyone go hungry and uneducated if Taylor Swift is angry? What is the process by which you see that happening?

> She's more effective with that donation than getting outcomes like educating 500 kids.

How do you figure that? And you can simply swap over fully educating those kids for something else if you want, unless the argument is that Taylor Swift specifically is better at allocating resources for whatever outcomes the population wants.

Let's take TS as an example. What is it she is being rewarded for, is it efficient allocation of capital? Is that why people buy her songs? Is that what's made her so incredibly wealthy?

Do you think that if she was rewarded somewhat less, that she'd stop making music? Stop touring?

In fact, imagine she never got more money. Do you think she's making music because she's saving up for something she cannot currently afford? Does she have a lifestyle that's unsustainable without earning even more money?

edit -

To be clear, I think the market is an incredible way of constructing a ludicrously large graph of how to use the worlds resources and human labour, tied to what people want as an outcome, allowing fractional voting through the network in a way that's extremely simple for end users (I buy things for prices I'm happy with, the "market" of millions of other people optimise the back end of that) and is self-optimising.

The problem comes when some people have enormously more votes than others, distorting it all, or are able to manipulate the graph, or where hill climbing optimisation cannot reach the more optimal states (infrastructure classically, legal systems are another good example).

[roenxi]

While I have no objection to long ranty posts - I write enough of them myself - as a matter of practicality I'm going to ignore most of it and stick to the questions to keep the walls of text under control.

> You can look at that and say "this is optimal" but I am very unsure as to what you're then measuring.

Well, we started back in ~1,000AD with 0 people who own such a boat. Now in ~2,000AD we have >1 person with such a boat. Ideally we'd like to be as close as possible to a world where everyone has such a boat. So 1 person isn't ideal but, y'know it is a start and we're going to need to have 1 person before we get to 2. Probably it is about as good as we can manage right now. Bezos is a good candidate for the 1st person, he's done some pretty amazing things.

> Why would anyone go hungry and uneducated if Taylor Swift is angry? What is the process by which you see that happening?

She might not donate the money. She's choosing to give money away because it won't impact her lifestyle, so if you take money from her on the theory that it doesn't impact her lifestyle maybe she stops. And she's probably more efficient in spending it than the practical alternatives.

> Let's take TS as an example. What is it she is being rewarded for, is it efficient allocation of capital? Is that why people buy her songs? Is that what's made her so incredibly wealthy? Do you think that if she was rewarded somewhat less, that she'd stop making music? Stop touring? In fact, imagine she never got more money. Do you think she's making music because she's saving up for something she cannot currently afford? Does she have a lifestyle that's unsustainable without earning even more money?

Yes to all of the above. I assume. I don't know much about Taylor Swift except she's got a lot of money and she sings.

[IanCal]

If you're measuring it as "how many people own superyachts" that's probably different from how most people want to measure "how well is the planet being run".

> And she's probably more efficient in spending it than the practical alternatives.

Why? This seems like an odd statement. Why is a singer more efficient at doing this than a team of analysts?

> Yes to all of the above. I assume.

I have to point out that you are likely looking at the world in a drastically different way to most.

You think that

1. We should be pushing for more superyachts, as an immediate measure of efficient allocation of resources

2. Taylor Swift is being rewarded for efficient allocation of capital and not her songwriting, singing, etc.

3. Taylor Swift, who has been singing for many years at lower amounts of wealth, would stop if her fortune dropped and she had to release songs in order to gain more wealth

4. Taylor Swift is making music because there is something she wishes to purchase that she is saving up for. She does not wish to make music, and is putting up with it to finally afford something.

I think most people believe that musicians who are extremely popular for their music would continue to make music if they could live an extremely lavish lifestyle without a care in the world for money but their net worth didn't increase. I think that most people would prefer some measure of how well things are going that look at their own life, or how many people have food.

[inigyou]

Besides, modern market forces are central planning. Bezos central plans. So does Musk. So does whoever is in charge of Microsoft right now.

To avoid this you need a wide variety of small to medium sized businesses instead of a few large ones. A wealth tax may help this happen.

[AnthonyMouse]

What budget incentive does a wealth tax create for Congress when considering a non-tax policy that would reduce the wealth of billionaires by allowing more small and medium businesses to compete with them in their industries?

[inigyou]

What is that non-tax policy?

[scottlamb]

> The people behind wealth taxes generally handwave explaining how their system will be better at allocating than the people who make a living of allocating wealth effectively because it is all just obvious that it doesn't need to be justified. Poor people will get more money if rich people have less, duh, QED.

Even your straw man version of this argument is pretty convincing to me alongside graphs showing the extent to which our inequality is growing. https://inequality.org/facts/wealth-inequality/ see the "The Top .01% Don't Pay Their Fair Share as They Hoard More Wealth" graph in particular.

This is more a disagreement of values than facts, I think. Some people see the richest man's net worth go from $100B to >$1T and think he deserves that for starting these companies, and taking any of it from him is class warfare. Others think that rich people's pissing contests and lifestyles would be essentially the same if their wealth capped out at say $100B instead, we're morally obligated to use that money to try to meet Americans' basic needs, and using other's taxpayer dollars to allow him to reach those heights (see <https://en.wikipedia.org/wiki/You_didn%27t_build_that>) is class warfare.

High marginal income taxes (it was 91% in 1963, 70% until 1981, there's your compelling case where they turned out to be right, inequality was not growing then like it is now) or a wealth tax are not the same as Soviet style socialism. They still give an incentive for entrepreneurs, innovators, and hard workers.

[AnthonyMouse]

> This is more a disagreement of values than facts, I think.

It's a disagreement over policy. Increasing inequality is bad, the question is what's the best way to do something about it? There are many alternatives with better characteristics than a wealth tax, like antitrust enforcement to break up concentrated industries and lower corporate profits through increased competition, zoning reform to reduce housing costs so that ordinary people keep more of what they earn instead of paying it to banks or landlords, tax reform to remove existing advantages in the tax code for huge multinational corporations over domestic small businesses owned by ordinary people, etc.

> High marginal income taxes (it was 91% in 1963, 70% until 1981, there's your compelling case where they turned out to be right, inequality was not growing then like it is now)

The high marginal rates in the mid-20th century were fake. The tax code at the time had so many loopholes that nobody really paid them. When the rates were lowered in the 1980s, many of the loopholes were closed at the same time, resulting in the "federal receipts as a percent of GDP" chart looking like this:

https://fred.stlouisfed.org/series/FYFRGDA188S

Which is to say, you'd have trouble using that chart to even guess when it changed.

[scottlamb]

> Increasing inequality is bad

I'm not at all sure everyone in these discussions agrees on this point!

I agree with you not only that this is bad but also that wealth taxes are not the only way to address it. They are a way that is getting momentum right now, AFAICT more than the other things you mentioned, and we may have to choose between voting for a wealth tax (or candidates who support one) or doing nothing.

fwiw, I'm really not sure which approach(es) I'd choose if I could single-handedly decide how to reduce wealth inequality.

> The high marginal rates in the mid-20th century were fake.

I think "federal receipts as a percent of GDP" isn't the right chart to answer this question. Overall tax rate != how progressive the tax is or how high the "effective" marginal tax rate is. On https://inequality.org/facts/wealth-inequality/ the "The Top .01% Don't Pay Their Fair Share as They Hoard More Wealth" shows a clear cross-over point where before about 1980 the top .01%'s share of tax was greater than their share of wealth, and after it reversed. That's consistent with the 1981 change I mentioned.

[roenxi]

> Even your straw man version of this argument is pretty convincing to me...

Wouldn't that make it not a straw man argument? It isn't an argument as pointing out an assumption that voting or committee can be better at allocating resources than a free market. It isn't a very well grounded one and it looks wrong when presented on its own but there isn't much I can do about that. It is popular and people find it convincing.

[scottlamb]

>> Even your straw man version of this argument is pretty convincing to me...

> Wouldn't that make it not a straw man argument?

I think the "even" and "..." are doing a lot of work in my sentence. You presented a less strong version of the argument than that given by people who support it, thus it is a straw man, period.

> an assumption that voting or committee can be better at allocating resources than a free market

Would you say we had a free market in the 1970s, when the chart I linked showed the top .01% by wealth's share of taxes exceeded their share of wealth? That's essentially what I'd like to go back to, perhaps by a wealth tax. I would say we had a free market then, showing progressive taxation and free markets are absolutely compatible. This isn't Soviet-style central planning.

[roenxi]

I'm still a bit lost on what the point of difference is. You seem to be saying that you've seen evidence that makes this "strawman argument" convincing to you, but you don't seem to accept that I've generally argued with people who believe it. If you think there is evidence and it is convincing evidence then the obvious interpretation of what I said seems to be that I'm just being logical and straightforward. I don't see the strawman.

I mean I might not know what a strawman is, but I thought it was claiming people were making an argument that in fact they were not.

> Would you say we had a free market in the 1970s, when the chart I linked showed the top .01% by wealth's share of taxes exceeded their share of wealth? That's essentially what I'd like to go back to, perhaps by a wealth tax. I would say we had a free market then, showing progressive taxation and free markets are absolutely compatible. This isn't Soviet-style central planning.

I mean, sure. I've long argued that the US strategy of printing money and giving it to asset owners is bad. I doubt a wealth tax would help, IMO the real issue is the welfare for wealthy people. Seems kinda dumb and the people claiming that the economy would collapse without it appear to be making up their principles as they go along. But we should all want to encourage wealth. It makes people wealthy.

[scottlamb]

> I mean I might not know what a strawman is, but I thought it was claiming people were making an argument that in fact they were not.

What I mean is: I expect you originally heard a version of this that was more nuanced and supported by data than what you presented. Your paraphrased form is weaker, which I call a strawman. (The "duh, QED" was kind of a give-away.)

Wikipedia lists (among other things) "Oversimplifying an opponent's argument, then attacking this oversimplified version." and "Exaggerating (sometimes grossly) an opponent's argument, then attacking this exaggerated version." as characteristics of a strawman.

btw the opposite is sometimes called a "steelman": arguing against the most solid version of the opponent's argument that you can imagine.

> I mean, sure. I've long argued that the US strategy of printing money and giving it to asset owners is bad. I doubt a wealth tax would help, IMO the real issue is the welfare for wealthy people. Seems kinda dumb and the people claiming that the economy would collapse without it appear to be making up their principles as they go along.

As in Quantitative Easing? I confess I don't understand it as well as I probably should, but I think it's cyclical? and inequality is increasing even when it is not happening? Would a pinky-promise that we will stop and never do it again achieve start reducing inequality, as opposed to just lessening the increase? If not, I don't think that's radical enough on its own. What serious alternative is there to a wealth tax or going back to 70+% highest marginal tax rate?

> But we should all want to encourage wealth. It makes people wealthy.

To the extent anyone and everyone can become wealthy, I agree. What policies would you suggest to achieve that meaningfully (obviously inflation doesn't count)? What I see in these charts is instead a zero-sum game in which the most wealthy become even more so at the expense of the least wealthy.

[tancop]

the utility of wealth is not linear. a billionaire getting $100 probably has no use for it and they wont notice either way. but a homeless person getting $100 makes a big difference for them no matter if they use it to buy new clothes and apply for a job or spend it all on liquor. redistribution is actually good by itself because it maximizes the total wellbeing of society.

all the negative effects on economic output come from the fact that there is always some minimum amount of capital you need to start a successful business in each industry, and if nobody has enough wealth to match that requirement the business has no way to take off. but that argument only works if crowd funding or state investment are not practical, which is mostly true in our economic system but its not a law of nature.

we dont have to go all in on soviet style five year plans. in fact we know its one of the worst possible systems because the real world is unpredictable and large scale inflexible plans usually fail. its not always a disaster but its always unstable. but neoliberal capitalism is not the only form of a non-command economy.

"there is no alternative" only makes sense if you ignore all the things in between and outside to create a false binary. there is also tito style market socialism, decentralized commune systems, continuous planning, hybrid systems like china and vietnam, capitalism with worker ownership, and a lot of others i dont even know. not all of them are practical (like anarchy) but the ideas already exist and i think its worth it to try and make them real. a better world is possible as long as ours is not perfect.

[opo]

Marginal utility tends to diminish as you consume more of a good, but you can't compare utility between individuals. Utility is ordinal, has no common scale and is subjective. It doesn't make sense to try and claim that redistribution will always maximize the total wellbeing of society.

[scottlamb]

I agree: there is no precise, objective way to compare the utility of two arbitrary wealth distributions, and redistribution does not always maximize the total well-being of society.

Yet I assert it's useful to ask if the status quo—one person has >$1T and many others don't have enough for basic needs like shelter, medicine, and food—is optimal or if it'd be better to redistribute some of this.

* We don't need the ability to quantify or rank all wealth distributions, just compare some of immediate relevance. That's much easier, in the same way that even though the halting problem is undecidable, we can prove some realistic program A will halt and some realistic program B may not.

* We don't need objectivity. Democracies decide many subjective things by majority vote (sometimes 2/3rds or whatever), directly or through representatives. I don't always agree with the outcome, but it's the system we have here in the US/California, and I assert it's better than a dictatorship or requiring 100% consensus to take any action.