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Comment by uejfiweun | Hacker News Reader

I will NEVER vote for a wealth tax. It will inevitably be abused, loopholed, and twisted by the most powerful to preserve the status quo, and it will be the middle and working classes that get screwed by it. The income tax was originally passed as an emergency temporary measure only levied on the top percentages of earners, and over the years it has been contorted to become an enormous extraction of middle class purchasing power while the rich use loopholes like 1 dollar salaries. If a wealth tax is passed then I am absolutely certain that the same thing would happen, and the middle class would get screwed even more. It's human nature.

And besides, it's freaking Davos that's calling for this... this is just PR. Catharsis.

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> It will inevitably be abused, loopholed, and twisted by the most powerful to preserve the status quo, and it will be the middle and working classes that get screwed by it.

as opposed to our current tax system? afaik, it's also "abused, loopholed, and twisted by the most powerful to preserve the status quo, and it [is] the middle and working classes that get screwed by it."

Uh no, not as opposed to our current tax system. My entire point is that a wealth tax will be circumvented, just like our current tax system. If it was up to me I'd get rid of the income tax as well as a whole bunch of wasteful government programs.

> as opposed to our current tax system?

Wealth tax is proposed [0] as a distraction from fixing the elite favoritism in the taxation of labor (income + payroll tax) vs. normal (just income tax) vs. capital (capital gains tax) vs. transfer (gift and/or estate tax) income.

It's a means of protecting the current tax system.

[0] Or, encouraged by elites as a focus when proposed by well-meaning activists who haven't really thought through the problems in the existing system well.

> as opposed to our current tax system?

Who said anything about replacing the current tax system? They just propose to slap additional tax on your RSUs.

I wanted to disagree with your post, but after giving it some thought, I believe that you're right.

People will simply start to shift their wealth into areas that are loophole advantaged or hide it altogether in trusts, relatives and even something as banal as precious metals under the pillow.

It will never work.

This is a little like saying that we just shouldn't have laws, because people will find ways to circumvent them.

If the target of a law can circumvent the law, and the law ends up harming regular middle and working class people, then yes we should not have this law.

I'm fairly convinced that "wealth tax" is one of these things like "forgive student loans" that gets floated by people whose goal is to actually do nothing.

Because the idea is very bad, but it sounds good. So instead of the people who understand the dynamics and the people who want to make positive change working together to support something that would actually work, they spend all their time fighting each other. You spend years arguing and the best case is that you defeat the proposal for a bad idea that makes things worse, which is also the goal of the people distracting you away from doing something that would actually work.

Can you please tell the supposedly low tax state of Texas that these wealth taxes are a bad idea? I've got to pay mine to them in a few days.

Texas has a wealth tax? When did this happen?

> Texas has a wealth tax?

Every US jurisdiction has at least one; it's called “property tax”, a wealth tax that has very broad exceptions (i.e., everything except real estate.) Texas has the 6th highest of the 50 states + DC.

Taxing land is kind of different because the owner didn't create it and it's not possible for anyone to cause more to exist. See discussion of Georgism etc.

Taxing buildings is a bad idea for the same kinds of reasons as a wealth tax is a bad idea, but an actual wealth tax doesn't have exceptions. Or if it does, that makes it even worse, because whatever the exceptions are will create a powerful arbitrage opportunity. Which, in the case of property tax, is one of the reasons we under-invest in housing construction and have high housing costs. (Restrictive zoning is an even larger factor, but might not be if property tax mill rates were higher.)

> Taxing land is kind of different because the owner didn't create it and it's not possible for anyone to cause more to exist.

Neither one of those things is categorically true of land (artificial land is a thing.)

> Taxing buildings is a bad idea for the same kinds of reasons as a wealth tax is a bad idea.

Whether or not it's a bad idea, it in fact exists, which was the question.

> but an actual wealth tax doesn't have exceptions

That's an unusual definition and doesn't seem like it matches any actual proposals that have been discussed with that name.

> Or if it does, that makes it even worse, because whatever the exceptions are will create a powerful arbitrage opportunity.

Why is this unconditionally a bad thing?

> Which, in the case of property tax, is one of the reasons we under-invest in housing construction and have high housing costs.

It’s really not, if it was, that problem would be inversely correlated with property tax rates, since those would determine the strength of that incentive.

> Neither one of those things is categorically true of land (artificial land is a thing.)

"Land" is the surface of the planet. You can make "artificial land" in the sense that you e.g. cover the ocean with something that passes for ground, but that's just a type of building. It doesn't change the size of the earth. The ocean has land under it that was there before you showed up.

> Whether or not it's a bad idea, it in fact exists, which was the question.

There is obviously a meaningful difference between a "property tax" and a "wealth tax" or else people would not be talking about instituting a wealth tax instead of just adjusting the rate (if desired) on the existing "wealth tax."

> Why is this unconditionally a bad thing?

Suppose you have a wealth tax that applies to everything except precious metals. Stock market immediately crashes to the level that risk adjusted returns match those of holding metals while not paying the wealth tax, and metal prices skyrocket.

Insert whatever you like as the exception, same thing happens. How is that not unconditionally a bad thing?

And you get something similar even if there are no formal exceptions, because there will be types of property which are harder to measure and wealth will pour into them with high inefficiency in order to avoid the tax.

> It’s really not, if it was, that problem would be inversely correlated with property tax rates, since those would determine the strength of that incentive.

Measuring this is confounded by several other strong forces, zoning being the main one, but also just differences between housing markets in different areas. So it's hard to measure above background noise with low absolute differences in property tax rates.

But what makes you think this doesn't happen? If rents are $2000/month and you can build a new unit of housing for a risk-adjusted net present cost equivalent to $1999/month, it's profitable to do so. If the new unit will have $100/month worth of property tax due, now the rent has to be $2100/month before it's profitable to do so, and less housing is constructed causing rents to remain higher. What would cause this not to be true?

I'm pretty sure you're trying to relabel property tax as a "wealth tax". Which it is in fact a tax on a subset of wealth. But it's not what all the rest of us are referring to when we say "wealth tax" in this thread. Your post therefore looks like a deliberate attempt at distraction.

To the best of my knowledge, Texas does not have a wealth tax in the sense that is under discussion.

I would say it's less a deliberate attempt at distraction and more of an impotent expression of annoyance at the discussion.

Yeah and it would be much better if land value was taxed instead because that is effectively equivalent to paying for the share of society that you own, instead of taxing the wealth you created.

Right now the tax system is basically designed to make humans do as little work as possible. I don't mean that in a positive light. Employers don't want to hire people, they would rather hire machines because they are taxed less. Homeowners don't want to improve their home because they fear higher property taxes.

> It will inevitably be abused, loopholed, and twisted

The unwillingness to do the right things, to head the right direction, for fear that the things is not perfectly done is a paralysis to be avoided.

There's two issues you raise that get conflated: 1. The above, that it will be loopholed, and dodged. Yet for many of the very rich it will have a meaningful impact. I'd rather start, than worry. 2. The fear that this gets used to extract wealth from the middle class. This is where the bulk of your words reside. Yet, even far-left democratic-socialist US politicians like Bernie Sanders only proposes taxing the top 0.1%[1], those presently making over 32m$.

To be so bound up in fear & uncertainty, to make oneself unwilling to act or try, to hold the belief of doom & misery as the only outcome of trying: it's far short of what a peoples should permit themselves.

[1] https://berniesanders.com/issues/tax-extreme-wealth/

> The unwillingness to do the right things

Taxing people so the government can waste more money is not "the right thing".

> even far-left democratic-socialist US politicians like Bernie Sanders only proposes taxing the top 0.1%

As the GP pointed out, this is exactly how income tax was originally pushed through: by saying, oh, don't worry, it will only apply to the very top earners. Now look at it.

The fundamental problem with taxation of any sort is that, most of the time, the government is worse at spending the money than the people that it gets taxed away from. I don't see why a wealth tax would be any different.

Strongly disagree. The road to hell is paved with good intentions. Moreover, you are actually proving my point. Sure, it starts out as a tax on the top 0.1% making over 32M. What happens with inflation, when 32M has the same value as 1M today? Who is to say the 0.1% might not become 1%, then 10%, then 100%? To ignore these possibilities is to be naïve. We have very recent historical PROOF of the fact that these goalposts get moved, in the income tax.

Bernies' Extreme Wealth Tax says a couple with worth of $32m would taxed ~$5000 a year. That sounds like such a pittance. Worlds smallest fiddle playing for your slipperly slope government-is-evil shitholeness, this aspersion that this would be some terrible plight. It's a toxic straw man you've propped up. I don't see your fearmongering as an entertainable idea: it is meant to intimidate & bully, and it's so far, so very very many magntitudes, outside the intent & nature of what's really being discussed.

We have to start doing something. The current situation is catastrophic. The 0.1% need to contribute, needs to chip in to the society they benefit from having around & working/selling-to, and in large part this super-strata of society is so busy re-investing their capital that they rarely have to directly help our society, fund our government; they face less tax burden than most. A wealth tax is a basic, simple, easy idea to make the well-monied investor class contribute something to society.

Ultimately government has to be able to respond & adapt. Once a law stops fitting it's purpose it needs to be amended, fixed, rewritten. To simply say we should admit defeat & give up government is defeatism that gets us nowhere. We need progress. We need progressivism. We need to be able to enact laws easier, to monitor their impact, to adjust them as we go. Legislating in my lifetime has been roadblocked by the most shrill, hostile, negative, condescending anti-government forces imaginable. At some point we need some space & time when we decide we are going to allow governing, when we will let ourselves make & adapt & improve laws. That has not happened in modernity, and that, that is the poison eating us away, and that is why disbelief is such a reigning popular toxin. When we say government degrades, saying things get worse, we're mistaking the symptom of this popular toxic anti-governance roadblocking for a cause; it's not government's fault it's been unable to make progress, to govern: it's been by design, by specific factions within America.

>while the rich use loopholes like 1 dollar salaries

explain?

You pay income tax on a salary in the year that you receive it. You pay capital gains tax on stock, which is at a lower rate, and don't pay the tax until you sell the stock. So Steve Jobs took a $1 salary but owned billions of dollars in Apple stock, which means when the iPhone came out he made billions of dollars in stock price appreciation and could defer paying any tax indefinitely by not selling the shares.

Major executives also commonly make use of the company's private jets etc. for "business purposes" and so get to use them without it being considered taxable income -- and the corporation itself gets to deduct the cost. Meanwhile "business meetings" are so often in Las Vegas or some kind of tropical paradise.

>You pay income tax on a salary in the year that you receive it. You pay capital gains tax on stock, which is at a lower rate, and don't pay the tax until you sell the stock.

You're still taxed on the value of the stock at the you received them. The reason why steve jobs had billions in apple stock isn't because apple paid him billions in stocks in the 2000s, it's because he had those shares decades ago when they were worthless. The billions came from appreciation on his part. It's independent of his position as CEO. Framing it as "loopholes like 1 dollar salaries" doesn't make any sense.

> The billions came from appreciation on his part. It's independent of his position as CEO.

You don't think his work as CEO might have had something to do with it? Was he doing the job for $1 out of pure altruism?

And displacing a salary isn't really the point. Jeff Bezos could retire from working whatsoever and still be making more money than you (entirely in stock price appreciation) while not paying any taxes at all.

This isn't necessarily wrong -- they have to pay the tax if they want to spend the money -- but that's kind of the point. It's not really a loophole, and there are actually good reasons why it works that way, but it's also in practice a thing that enables very rich people to pay lower effective tax rates than random doctors and engineers.

>You don't think his work as CEO might have had something to do with it? Was he doing the job for $1 out of pure altruism?

maybe he gasp likes working as CEO?

>And displacing a salary isn't really the point.

right, but then it's not really the "$1 salary loophole", it's the "capital gains are treated differently than regular income" loophole. Specifically, getting a $1 salary has nothing to do with the loophole working. In a parallel universe where steve jobs were paid 1M/year and still had his initial stock grants, he'd still be a billionaire and benefit from the same tax lopphole.

> maybe he gasp likes working as CEO?

Maybe he does. But if he has a billion dollars in stock and his being CEO caused the company to grow 6% a year instead of 4% under some other CEO, being CEO that year earned him an extra twenty million dollars.

> right, but then it's not really the "$1 salary loophole", it's the "capital gains are treated differently than regular income" loophole. Specifically, getting a $1 salary has nothing to do with the loophole working.

But it does, because a salary would be taxed at the ordinary income rate. Effectively zeroing it out avoids that. Meanwhile the company might grant him some stock options instead, which under the right circumstances might be taxed as capital gains.

>Maybe he does. But if he has a billion dollars in stock and his being CEO caused the company to grow 6% a year instead of 4% under some other CEO, being CEO that year earned him an extra twenty million dollars.

I agree in this case you would have "earned" 20 million dollars or whatever by being CEO, but I disagree with equating this to regular income (and therefore worthy as labeling it a "loophole"). Let's push this to the extreme. If you owned a bunch of stocks in a company, and believed voting for a particular board chair would cause the company to grow 6% a year instead of 4%, does that also mean you "earned" $20 million dollars, and exploited a "loopphole" to avoid paying regular income taxes on it?

>But it does, because a salary would be taxed at the ordinary income rate. Effectively zeroing it out avoids that.

Right, but your "income" is composed of two parts:

1. your salary

2. whatever capital gains you stand to earn

Regardless of what the company paid you for your salary, you still stand to gain from the capital gains. The capital gain is where all the "loopholes" what we discussed are (ie. taxes being due only when you sell, being able to borrow against it). Regardless of whether you got paid $1M or $1 salary, you still benefit from the capital gains, and the tax loopholes on those gains. I suppose not having a salary will allow your tax return to show $0 owing rather than $xxx,xxx or whatever, but that's not really an accurate depiction of what the loophole is. Besides, I'm sure that bezos/jobs has other other stocks that pay dividends which are taxed immediately, and so his tax owing will never be $0.

>maybe he gasp likes working as CEO?

Okay so we have this dude who likes working for no pay but he's getting all the money.

Meanwhile there are lots of poor people who need to work to feed themselves but don't get paid. Do you see a problem here? It's a quite simple market failure.

>Do you see a problem here? It's a quite simple market failure.

It's not a market failure because shareholders don't want just anyone (ie. "lots of poor people who need to work to feed themselves ") to be CEO, they want the best (ie. steve jobs). I'm sure steve jobs can ask for a multi-million dollar salary if he wanted it, and the board wouldn't even blink. As for why he's not asking for such a salary when he could, my guess is that he's doing it for non-monetary reasons (to appear more humble?), not as some part of diabolical tax-dodging scheme. The board certainly wouldn't consider hiring one of the "poor people who need to work to feed themselves" for minimum wage as CEO, just to save a few million dollars. The opportunity costs and/or damage that an incompetent person can do is too high to risk it.

You can also borrow money using your stock as collateral, avoiding selling it and paying tax.

https://www.forbes.com/sites/johnhyatt/2021/11/11/how-americ...

> You're still taxed on the value of the stock at the you received them.

That's true; in practice executives may create a little flexibility in determining when they were received. This was a problem for Apple/Jobs:

https://www.cultofmac.com/460003/jobs-backdating-scandal/

regarding Jobs having super-appreciated Apple stock, I'm not a Jobs history expert but IIRC he sold all of his stock when he was ousted out of spite, keeping some token amount (internet suggests to be just one share to still get shareholder reports). That could be urban legend. IIUC his net worth dipped a lot in the 90s and he became a billionaire from Pixar's sale to Disney.

>That's true; in practice executives may create a little flexibility in determining when they were received. This was a problem for Apple/Jobs:

Yeah in that case it's less of a "loophole" and straight up fraud.

FWIW you can't take a $1 salary anymore. The IRS requires every to make minimum wage, even owners, and you must get paid "commensurate with your experience". ie. You can't work as an engineer in the Bay Area and pay yourself $30K. The IRS lets you get away with it for the first few years of the business, but a public company can't do it.

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