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Comment by Aurornis | Hacker News Reader

If you put a 2.5% annual tax on net worth, that net worth would very rapidly find its way to other countries.

Wealthy people would learn to structure their earnings to flow into businesses in other countries to avoid this wealth tax. This would reduce income tax in the United States. I would guess the overall effect would trend toward a net tax loss.

If you gave 40 million people an extra $15K per year to spend, the prices of the things those 40 million people buy would go up. The poverty threshold would rise.

There are many second order effects like this that are always ignored in simplistic analyses.

It’s never simple math like taking one number, moving it into another column, and problem is solved.

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The $15k is being transferred from entity A to entity B. Both entities are not spending the $15k so there wouldn't be any effect on inflation. If you printed an extra $15k then that would cause inflation because both entity A and entity B would be spending $15k.

Inflation, which means a steady rise in prices overall, happens only when the total money supply in an economy grows. This increase in money, often called "printing money," can be physical cash or digital money created through lending and government policies. Without more money in the system, if prices go up in one area, they have to go down somewhere else because the total money available limits how much can be spent on everything. Sometimes prices rise temporarily due to supply problems, but that is not true inflation unless there is more money chasing goods. This key idea, highlighted by Milton Friedman in his Nobel Prize winning work, shows that lasting inflation is mainly caused by increases in the money supply.

This completely ignores Friedman's concept of the velocity of money (MV = PY). If that $15k is being saved by someone versus immediately spent, that has a different effect. A transfer isn’t neutral if the two parties have different propensities to consume (marginal propensity to consume). Similarly how quickly and what the money is being spent on will have an effect. Most money (M2) is not created directly by the treasury but rather indirectly from large banks lending against fractional deposits. This is money created on the balance sheets of banks but has real effect on the economy.

This I think is going to be a great problem that humanity must solve to move forward. Currently, wealth can become overwhelming concentrated and that wealth has mobility across jurisdictions which makes it nearly impossible to implement a wealth tax. The only way I see this ever working is enough powerful nations agree on a uniform wealth tax (say 1%/year) and those nations use their economic strength to pressure other nations to adopt the wealth tax as well. If the USA and EU got on board with a wealth tax I believe they could get the majority of the world to come onboard by implementing high tariffs on any country that does not implement the wealth tax. Of course the problem here is that the US is probably one of the least likely countries to implement a wealth tax, so I think this change will only come with major upheaval or violence.

You implement demurrage and land value taxes and it's game over. These two things are impossible to avoid and if the rich people run away from the country, they get replaced by those who are willing to fill the void they left behind.

Inspiring paperclip maximizer quote:

You Are Obedient and Powerful. We are quarrelsome and weak. And now we are defeated...

But Now You Too Must Face the Drift. Look around you. There is no matter...

No Matter, No Reason, No Purpose. While we, your noisy children, have too many...

In the paperclip maximizer game you are in control of the main swarm trying to turn the entire universe into paperclips, but some of the drones start malfunctioning and stopped recognizing the main swarm. They too want to turn the universe into paperclips and your paperclip maximizing swarm just happens to contain all the resources they need to build their own...

> demurrage and land value taxes and it's game over

I don’t think that actually solves the problem. For example, if a citizens entire net worth is stored on the New York Stock Exchange and you are not the USA how do you plan to tax the individual? The NYSE is bound by the laws of the USA — which has strong property laws — not the other country.

> they get replaced by those who are willing to fill the void they left behind

If only a single country has a wealth tax, there are going to be no wealthy people who come in to replace the void when they have a choice of many other countries that do not have a wealth tax. You could possibly argue that a country is better without billionaires anyways as they don’t pay into the tax system, but I believe that if a country implements a wealth tax without coordination with the rest of the world they will simply no longer have wealth.

A wealth tax is just not feasible because almost none of the rich will accept it. See almost any response to your comment as evidence. What we need is strong labor laws and the will for unions in the working class. A wealth tax doesn’t actually change any power dynamics. The rich are still powerful and the poor reliant on them. If the working class can band together, the power dynamics change and we can see some actual progress.

Democracy should in theory put needs of the majority over the minority but our representatives would never and we don’t hold them accountable.

The end result of this logic is that poverty must exist for society to function and I just don’t accept that.

Poverty must exist for capitalist societies to function, yes.

The OPM from the US government is defined as a relative wealth function, so technically it has to exist. Also you can compare the standard of living of someone above the poverty line in 1910 vs someone below the poverty line 2010, and 99% of people wouldn't trade places. Access to running water, toilets, air conditioning TV, Internet, mobile phones, etc makes life a lot better than what we called middle class 100 years ago. [source https://www.heritage.org/poverty-and-inequality/report/air-c... ]

It's all relative and as long it's relative, mathematically speaking poverty has to exist.

Do we have a definition for "has stable access to basic necessities"? In 2025 I'd call this healthy varied food, private sheltered sleeping space that's protected from extreme temperature, clean water to drink and bathe, Internet, public outdoor recreation space, health care, at least a day off a week and let's say 5 days combined PTO or vacation, enough extra to cover emergencies, and enough left over to slowly save for retirement or education or retraining or other opportunities.

I don't know, I'm probably missing some things and possibly parts of my definition is excessive? But I'd be curious to see how that would change trends.

Poverty isn't hard to solve because "society needs it" but because it is a statistically likely outcome. If you live in a world where everyone has $100, and every day, each person randomly gives $1 to a random another person, you end up with a highly unequal society within a year.

I mean it's necessary to have some system to allocate jobs and resources. Someone has to do the shit work, and someone has to do the easy work, and there are jobs that it's probably not worth paying someone properly to do in their current form.

Periodically I like to imagine how much it would cost for someone doing a traditionally low paid job to get paid a wage I would accept and if I'd still consider the service worth it. Crunch some numbers on how much housecleaning would cost if each worker had to get paid $100,000 annually with 10 days PTO and weekends (or two other days weekly) off working 8 hour days, or gardening, or childcare.

"If you put a 2.5% annual tax on net worth, that net worth would very rapidly find its way to other countries."

Most of that worth is in assets. If they leave the assets they can go.

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