The Problem With Taxing the Rich

[Silvanus]

Why tax assets as income when they aren't spend?

Don't tax them "as income". Tax them as assets.

If Bezos owns 60% shares of Amazon which equals hundreds of billions of dollars but him not selling those shares to buy yachts, hookers and sports cars why tax those shares when they indirectly co-determine the stock price for other investors? Often with a public interest like pension funds? It makes no sense.

Because they have value, and tax should be proportionate to wealth (rather than just income) if it's to be in any way fair. If they're not being sold, and they're just sitting there, that essentially means that hundreds of billions of dollars are more-or-less inert: being used to inflate the perceived value of something else, but not actually having any direct stimulus effect. Inert monetary value should be taxed so that it can actually be of some use.

If investors currently base their arcane predictions of worth on inert stock-levels, then I suppose they'll just need to figure out a more meaningful and less ridiculous method of calculating worth.

Bezos would be much better off investing the value of those stocks in his other company, Blue Horizon.

If he was actually investing it and it was being spent, then it wouldn't sit as inert cash and be subject to the same asset tax. Blue Horizon's value would then presumably rise as a result of the investment, and then that would be taxed as an asset. Of course, Bezos would still be motivated to make the investment in the first place, because if the investment was a wise one than the rise in value of Blue Horizon would be larger than the money he'd have saved by keeping it in stocks.

 

[Worgen]

Calculate or adjust tax rates based on the value of assets.

I mean... when I say "taxing the rich", I'm clearly not envisaging a system in which someone who doesn't work because they have £100,000,000 in the bank doesn't get taxed. That would just be a bit silly.

Wouldn't that be a bad thing? I mean wouldn't that also be a tax on retirement and saving and such, to just tax assets? Or what if someone's assets were over inflated in value? It seems weird to tax potential money before its sold.

 

[Agema]

But it's true. 'Taxing the rich' usually tantamounts to a European progressive tax which only puts very high tax on work.

Right. And we are literally in this thread arguing that it's better to tax the stupendously wealthy ideally through investments (capital gains, dividends) and other assets, etc. rather than income.

I don't know if that's true. Europe has very prestiguous universities as well and arguably makes it way easier for people to enter due to the low cost. The continent also adopts new technologies very quickly. If European companies could attract the same kind of investment capital as their American counterparts I don't think the situation would be much different. There are simply too many rules and regulations that hinder their development by making access to capital difficult until some vulture scoops them up. I do agree having excessive regulations coupled to market forces without the benefit of protectionism is the worst of both worlds. The E.U. should do the same thing as South Korea did with Hyundai.

The USA may have better capital markets, but I think the key thing to remember is that the USA is a single country. The European common market may exist, but it's really not as frictionless as internal US trade. A startup has extremely easy access to a huge market; in contrast a European startup will operate in an economy anywhere from about a hundredth to a fifth of the size, with expansion to neighbours requiring a whole host of issues - language translations, different laws, etc. adding to the burden of expansion. I also think it's in large part attitude, not regulations. Europe tends to be more risk-averse than the USA. Take Uber: over ten years, never run a profit, loses billions every year. And yet it's still going strong. I suspect a European equivalent would have been forced to stop expansion and show profitability long before. On the other hand, Europe hasn't had a Theranos, either.

The point might also be: is a higher hit rate for the next Uber worth the cost of billionaires running rampant over your society and breeding an unhappy populace?

 

[stroopwafel]

Don't tax them "as income". Tax them as assets.

Why create incentives for people to dump their stock to tax capital that isn't even spend? Why disincentivize investment and venture capital by taxing assets?

Because they have value, and tax should be proportionate to wealth (rather than just income) if it's to be in any way fair. If they're not being sold, and they're just sitting there, that essentially means that hundreds of billions of dollars are more-or-less inert: being used to inflate the perceived value of something else, but not actually having any direct stimulus effect. Inert monetary value should be taxed so that it can actually be of some use.

If investors currently base their arcane predictions of worth on inert stock-levels, then I suppose they'll just need to figure out a more meaningful and less ridiculous method of calculating worth.

You are kind of contradicting yourself here. First you say assets should be taxed then you say assets have perceived value that is inflated. High index prices have a direct effect of increasing the value of investment portfolios like those in retirement or pension funds. Indirectly it also frees up capital that allows businesses to borrow money. The stock market predicts speculative value but it isn't arcane. It accurately follows growth markets and economic trends even if individual businesses fail.

If he was actually investing it and it was being spent, then it wouldn't sit as inert cash and be subject to the same asset tax. Blue Horizon's value would then presumably rise as a result of the investment, and then that would be taxed as an asset. Of course, Bezos would still be motivated to make the investment in the first place, because if the investment was a wise one than the rise in value of Blue Horizon would be larger than the money he'd have saved by keeping it in stocks.

But that is the point, there is no market for Blue Horizon. Just as for a long time there was no market for SpaceX. No market means no investors. That is why if you tax assets you will never have any such company. It's a promise that takes time to grow and develop but still costs billions. Visionaries like Bezos and Musk need to have access to those funds to create this kind of innovation and technology. They need to invest their own capital otherwise those companies wouldn't exist.

Agema mentioned how DoD gave pioneers in technological growth industries an advantage but the irony is that companies like SpaceX and Blue Horizon actually innovate where Nasa doesn't because of budget cuts. It are private companies that breathe new life in these industries. If not for SpaceX Nasa astronauts would still travel to the ISS in a Sojoez.

 

[Silvanus]

Wouldn't that be a bad thing? I mean wouldn't that also be a tax on retirement and saving and such, to just tax assets? Or what if someone's assets were over inflated in value? It seems weird to tax potential money before its sold.

I'm sure that there would be adjustments/ allowances that could be made. Maybe exclude pensions under a certain threshold, and allow a fairly generous cut-off point for savings.

Stocks have an accepted value at any single given time; that's the metric it'd have to use.

 

[Silvanus]

Why creative incentives for people to dump their stock to tax capital that isn't even spend? Why disincentivize investment and venture capital by taxing assets?

If both liquid money and stocks both inform tax rate in the same manner, then there is no incentive to liquidise stocks.

You are kind of contradicting yourself here. First you say assets should be taxed then you say assets have perceived value that is inflated. High index prices have a direct effect of increasing the value of investment portfolios like those in retirement or pension funds. Indirectly it also frees up capital that allows businesses to borrow money. The stock market predicts speculative value but it isn't arcane. It accurately follows growth markets and economic trends even if individual businesses fail.

The monetary value of the assets themselves isn't just perceived; stocks have an accepted monetary value at any given time. But you brought up the impact that stock-ownership has on investors' willingness to invest. That is a perceived value outside of their monetary worth.

But that is the point, there is no market for Blue Horizon. Just as for a long time there was no market for SpaceX. No market means no investors. That is why if you tax assets you will never have any such company. It's a promise that takes time to grow and develop but still costs billions. Visionaries like Bezos and Musk need to have access to those funds to create this kind of innovation and technology. They need to invest their own capital otherwise those companies wouldn't exist.

They can invest their own capital. Nobody is stopping them, and they would still do it. I'm merely suggesting we take its value into account, rather than link taxes solely and exclusively to income (which has allowed the utter farce of Amazon paying 0% in Federal US taxes whilst still receiving a rebate).

And frankly, multi-billionaires like Bezos and Musk are perfectly capable of accepting that cost.

Agema mentioned how DoD gave pioneers in technological growth industries an advantage but the irony is that companies like SpaceX and Blue Horizon actually innovate where Nasa doesn't because of budget cuts. It are private companies that breathe new life in these industries. If not for SpaceX Nasa astronauts would still travel to the ISS in a Sojoez.

And what value is "breathing new life" if it solely ends up enriching a small cabal of shareholders and industrialists?

They would still be perfectly capable of innovating and investing. They have hundreds of billions of dollars, lots of it inert. A little uptick in the amount they pay (when they currently pay fuck-all) is not going to stifle the creativity of these people.

 

[meiam]

I'm sure that there would be adjustments/ allowances that could be made. Maybe exclude pensions under a certain threshold, and allow a fairly generous cut-off point for savings.

Stocks have an accepted value at any single given time; that's the metric it'd have to use.

Stock don't have a value, stock have a current single sale price. Very different and the mistake that pretty much everyone who compile list of richest people makes. If Bezo decided to sell every single share he had tomorrow he probably wouldn't even make half of his stocks value. Also if you introduce a wealth tax that apply to stock held, then stock become a lot less appealing to hold, it's illiquid and you can't enjoy it like a piece of art/house while holding it.This means price will crash and investor will ask for more dividend and share buyback to hold it, which will decrease the amount of money company will spend toward other things, like RnD and salary.

Wealth tax are also famous for creating weird incentive, like the window tax causing people to board up window. It turn out it's really hard to properly value things people own, and the more exception and loophole you create the more people will take advantages of those creating all kinds of distortion.

 

[Agema]

But that is the point, there is no market for Blue Horizon. Just as for a long time there was no market for SpaceX. No market means no investors. That is why if you tax assets you will never have any such company.

Yes, without private enterprise to take the lead, man would never be able to get into space, never mind set foot on the moon.

Oh, wait.

 

[stroopwafel]

Yes, without private enterprise to take the lead, man would never be able to get into space, never mind set foot on the moon.

Oh, wait.

Different time, different circumstance. If not for the Cold War and the space race man would indeed never have set foot on the moon. Too high cost, too risky.

 

[Agema]

Different time, different circumstance. If not for the Cold War and the space race man would indeed never have set foot on the moon. Too high cost, too risky.

And so it is still true. There is no market for these because there is no societal gain.

These people are not answering problems facing our society, they are big kids playing with their toys. You want novelty that's going to really matter and make a difference within our lifespans? Nuclear fusion, carbon sequestration, plastic-eating bacteria, maybe? There are a hundred, thousand, million ways of introducing far more novelty and practical advancements than expensive fireworks and wasted cars. That's glory-tripping for people whose one-upmanship has decided to bypass the norms of competing for the world's most expensive luxury megayacht.

 

[Silvanus]

Stock don't have a value, stock have a current single sale price. Very different and the mistake that pretty much everyone who compile list of richest people makes. If Bezo decided to sell every single share he had tomorrow he probably wouldn't even make half of his stocks value.

That's their value at that single point in time. Judging by that would be the least subjective metric available; anything else would be speculation.

Also if you introduce a wealth tax that apply to stock held, then stock become a lot less appealing to hold, it's illiquid and you can't enjoy it like a piece of art/house while holding it.This means price will crash and investor will ask for more dividend and share buyback to hold it, which will decrease the amount of money company will spend toward other things, like RnD and salary.

As I addressed above: if stocks and liquid money were subject to the same considerations, there would not be the incentive to switch one's wealth between the two to lessen the impact of tax.

Stocks would still perform the function they are actually supposed to perform: present a value dependant on the performance of the company. The only thing they would lose is the function of a pseudo-currency used to avoid tax.

Wealth tax are also famous for creating weird incentive, like the window tax causing people to board up window. It turn out it's really hard to properly value things people own, and the more exception and loophole you create the more people will take advantages of those creating all kinds of distortion.

Yes, every tax system has holes which need careful consideration. I can't see this being any worse than the current system, in which the richest company on the planet can pay no tax in the US, and the US still gives them a rebate, because it's all based on bizarre interpretations of income with no allowance made for wealth.

 

[Worgen]

I'm sure that there would be adjustments/ allowances that could be made. Maybe exclude pensions under a certain threshold, and allow a fairly generous cut-off point for savings.

Stocks have an accepted value at any single given time; that's the metric it'd have to use.

I mean yeah, but its still perceived value rather then actual value. If the stock takes a sudden dip then the accepted value is way down, infact such a method of taxation could be open to manipulation by adjusting stock value at the time or times of year that the value is determined for taxation. And then you also have the issue of kinda wonky markets for things, like art where appraised value is often wildly different then what the actual value someone would pay for a thing would be, plus even if someone did pay a huge value for a piece of art, doesn't mean someone else would.

 

[Silvanus]

I mean yeah, but its still perceived value rather then actual value.

Only insofar as the value of anything is just "perceived". No value is intrinsic.

If the stock takes a sudden dip then the accepted value is way down, infact such a method of taxation could be open to manipulation by adjusting stock value at the time or times of year that the value is determined for taxation.

Yeah, that'd be a problem. Perhaps it could be avoided by applying the adjustment according to the aggregate value of a stock portfolio over the duration of a year.

I don't honestly know how it would best be put into practice. But some form of consideration given to wealth needs to be made; the current situation is so wildly, wildly unequitable.

And then you also have the issue of kinda wonky markets for things, like art where appraised value is often wildly different then what the actual value someone would pay for a thing would be, plus even if someone did pay a huge value for a piece of art, doesn't mean someone else would.

I suppose a separate system for artistic considerations, wherein tax is only levied at the point of sale.

 

[stroopwafel]

And so it is still true. There is no market for these because there is no societal gain.

These people are not answering problems facing our society, they are big kids playing with their toys. You want novelty that's going to really matter and make a difference within our lifespans? Nuclear fusion, carbon sequestration, plastic-eating bacteria, maybe? There are a hundred, thousand, million ways of introducing far more novelty and practical advancements than expensive fireworks and wasted cars. That's glory-tripping for people whose one-upmanship has decided to bypass the norms of competing for the world's most expensive luxury megayacht.

It's not glory-tripping, it's about wanting life to be more than just dealing with the same miserable problems every day. Not everything starts out practical. Bezos wants to move all polluting industry off planet. Musk dreams of humanity taking it to the stars. Yeah, it might sound ridiculous but without people like this society will never make any kind of progress. SpaceX already have lots of practical applications like dragon and starlink. Astronauts are flying to the ISS in an American rocket for the first time in a decade. Starlink will provide high speed internet in the most bumhole outbacks in the world. Just because there is no market for investors(atleast in the short term) doesn't mean there is no societal gain. But you need visionary people at the forefront.

 

[Silvanus]

Bezos wants to move all polluting industry off planet.

I don't believe he wants that or cares much about it. Or if he does, he's more concerned with the all-consuming pursuit of enormous wealth. If he was concerned with the plight of his fellow man, he wouldn't be so monstrously unethical.

 

[stroopwafel]

I don't believe he wants that or cares much about it. Or if he does, he's more concerned with the all-consuming pursuit of enormous wealth. If he was concerned with the plight of his fellow man, he wouldn't be so monstrously unethical.

Obviously Bezos isn't a saint but his ambitions about converting lunar ice into energy with the artemis program and off planet heavy industry are definitely for the better of mankind.

 

[Seanchaidh]

Yeah, that'd be a problem. Perhaps it could be avoided by applying the adjustment according to the aggregate value of a stock portfolio over the duration of a year.

I don't honestly know how it would best be put into practice. But some form of consideration given to wealth needs to be made; the current situation is so wildly, wildly unequitable.

Come to think of it, a handy way of avoiding some of these problems is to just make businesses owned by their workers. Don't need to value Bezo's ownership of Amazon if he doesn't own (more than a democratic share of) Amazon.

 

[stroopwafel]

Come to think of it, a handy way of avoiding some of these problems is to just make businesses owned by their workers. Don't need to value Bezo's ownership of Amazon if he doesn't own (more than a democratic share of) Amazon.

The incentive would still be to maximize profits so how would a business owned by workers be any more altruistic than one owned by shareholders? You either go up or down.

 

[Worgen]

Yeah, that'd be a problem. Perhaps it could be avoided by applying the adjustment according to the aggregate value of a stock portfolio over the duration of a year.

I don't honestly know how it would best be put into practice. But some form of consideration given to wealth needs to be made; the current situation is so wildly, wildly unequitable.

You would probably get better results from just funding the IRS more so they could actually go after wealthy tax cheats. And change the law so ignorance isn't as much of a get out of fraud free card.

I suppose a separate system for artistic considerations, wherein tax is only levied at the point of sale.

The point is its complicated enough that there will almost always been loopholes and the rich have more incentive to find those loop holes.

 

[Specter Von Baren]

Different time, different circumstance. If not for the Cold War and the space race man would indeed never have set foot on the moon. Too high cost, too risky.

Not to mention that the reason we stopped going to the moon is because there's no incentive for it when it brings no benefits.