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Comment by hliyan | Hacker News Reader

Good. I didn't think such a global minimum was politically possible. There was recently an article on HN where the author claimed that high tax rates don't impact high net worth individuals because they have already made their money. It just makes it harder for others to join the club. Perhaps what we need is a global maximum wealth (rather than income) cap, as a multiple of global median per-capita wealth. Perhaps start with a large multiplier (say 10,000x) and reduce 1% annually?

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The secret of high net worth individuals is they don't own anything and they don't earn anything.

They pretend they don't.

What?

"Some folks are born silver spoon in hand Lord, don't they help themselves, yeah But when the taxman comes to the door The house look a like a rummage sale" -Fortunate Son, Creedence Clearwater Revival

The trick is to not own things (personally) but control them, e.g. if you want a yacht, you create a holding somewhere that buys the yacht and owns the yacht, and you can use it whenever you like. The holding then has contracts with other companies renting you out. And you work for 0 EUR for the holding and have no income. The holding also owns the house you live in. If you're a high risk person the company can be owned by your wife(example is simplified, the setup is more complex and implemented my EY e.g.).

For example I want a computer. If I pay for the computer as a private citizen, I have to pay income tax, social security on the money before I can spend it and then I have to pay VAT on the item.

Hamilton got too greedy here [1] and the setup wasn't the best, but you get the idea:

"Hamilton set up another Isle of Man company to purchase a €1.7m motorhome that he uses at racetracks. [..] He is contracted to Mercedes, with whom he secured his fourth world championship last month, via a Guernsey company."

See Hamilton doesn't get the money from Mercedes, his "Guernsey company" does. He doesn't own the motorhome, he owns the company that owns the motorhome. No VAT payed, no income tax payed. And the company he owns might be through several shell companies so no IRS knows what he owns. And when it knows, the company only makes losses (see Trump setup), so no taxes payed on owning the company either.

[1] https://www.theguardian.com/news/2017/nov/06/lewis-hamilton-...

That semantic/legal quirk stuff will get harder and harder as the government’s need for funds grows:

https://www.loeb.com/en/insights/publications/2021/02/new-tr...

The only protection I would count on is if you were high up politically, like Putin or a Saudi prince.

But these arrangements are clearly fake to avoid tax. There are already laws that see through it, just there is nobody that would dare to do anything about it. In the UK for example, for a long time people paid themselves in loans, to completely avoid tax. This was at first available only to the rich, HMRC knew about it and did nothing. Only when the "pleb" learned about it and started using it, they woke up and applied the tax retrospectively and called it "disguised remuneration". Many people lost everything they had, many committed suicides.

Why HMRC does not do the same with companies using fake charges to hide profits? Those companies got huge competitive advantage over local small companies who cannot afford such creative accounting. So many businesses didn't happen because of that.

I think it's time HMRC doubled down and destroyed this gravy train.

I am sure we have clever people that would build a new Facebook, that is ethical and pays taxes.

https://www.wolframalpha.com/input/?i=y+%3D+10000+*+0.99%5Ex...

It will then take slightly over 229 years until the multiplier has shrunk from 10,000 to 1,000.

After another 229 years the multiplier will have shrunk another order of magnitude, from 1,000 to 100. And it makes sense mathematically that if it shrinks an order of magnitude in the first 229 years then it will shrink another order of magnitude in the next 229 years.

https://www.wolframalpha.com/input/?i=y+%3D+10000+*+0.99%5Ex...

As a layperson this seems reasonable I think. But I also think there is no "right" or "wrong" in this case, and it will boil down to personal views.

I mean, that clearly doesn't seem reasonable long-term to any mathematically literate layperson, since after ~917 years, the maximum wealth would be less than the median. (10'000x * .99^917 = 99.42%) But I suppose it's not like it'll last that long before corruption sets in anyway.

I was more thinking like, we stop at 1 or some point before that.

The problem is a wealth tax is almost impossible to implement. People will form crappy charities or put the money in their kids' names or move it to the Caribbean or some other gymnastics that will make worse use of the money overall.

There is one asset you can't hide - land. Tax that.

I predict your proposal will significantly increase the demand for yachts.

Yachts are depreciating assets that don't confer the ability to rent-seek. Let them buy yachts.

If the wealth tax is uniform it doesn't matter if they put it in crappy charities or their kids names or whatever - the crappy charity or kids will still need to pay the tax.

I see bigger problems with evasion and valuation. Evasion can be solved by coupling the wealth tax with enforcement of property rights. You own an offshore bank account, somebody steals from that offshore bank account, you show up in court to prosecute them, and the government says "I'm sorry, we don't have any record of your ownership of this bank account, and you have never paid taxes on it." Oops. Also makes logical sense, as the function of the state is to enforce property rights.

Valuation is tricky, as a lot of wealth-producing assets are illiquid and it's hard to pin a specific value on them in the absence of a specific transaction. The way LVTs handle this is through statistics: you know what comparable land sells, you know what improvements are on it, you can run a regression against all the features that impact valuation and subtract them out to get a reasonable estimate of the value of the land itself. Something similar could work for income-producing assets: you know all the cash flows from the asset (because you've been declaring your income, right?), you can do a discounted cash flow analysis that smooths them out and arrives at an estimate of the NPV of the asset under current cash flow & interest rate conditions.

Tying property rights to declared wealth only, is how I envision solving this problem as well. The proposal may have flaws, but I suspect it's still better than what we have now.

This'll be hard to do when voting power in corporations is directly tied to paper wealth.

Although one idea I was playing around with in my mind was around whether the tax could be made payable in public stock, provided that the voting rights are still assigned to the holder for a guaranteed minimum window (5 years?) that could extend pretty much indefinitely until the government chooses to close a position, e.g to pay for things.

I have no idea how good or bad an idea it is, but it's an idea.

Or you can request their books, highlight fake arrangements that hide profits, slap tax on them. Job done. Easy. Don't even need to change any laws.

E.g. what is this IP charge by Cayman company that belongs to you as well? NON DEDUCTIBLE.

This is corporate tax, not personal tax.

Maximum wealth cap? What are you, Stalin?

This anxiety about being able to join the club is the key to keeping the 99% imprisoned. We are all just temporarily embarrassed millionaires.

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