Modeling a Wealth Tax
18th August 2020
Paul Graham runs the numbers.
Some politicians are proposing to introduce wealth taxes in addition to income taxes. Let’s try modeling the effects of various levels of wealth tax to see what they would mean in practice for a startup founder.
Suppose you start a successful startup in your twenties, and then live for another 60 years. How much of your stock will a wealth tax consume?
Suppose the wealth tax is 1%. That means each year you get to keep 99% of your stock. Which means after 60 years the proportion of stock you’ll have left will be .99^60, or .547. So a 1% wealth tax means the government will over the course of your life take 45% of your stock.
Wealth confiscation by drip-drip-drip. Socialism in slow motion.