I don't see the issue with the wealth tax compounding, because the wealth also compounds.

That's exactly the "problem" with wealth (from the perspective of society's growing wealth inequality). Wealth compounds much, much faster than income grows. Someone who inherits $3 million (not much from the point of view of the wealthy) can live comfortably on the growth alone while still compounding their wealth further every year.

The only way a wealth tax would compound faster than the wealth itself is if it is larger than the growth rate of the wealth. And since that's averaged at ~8-10% over the past few decades, a 1% tax is not going to eat into a person's wealth over time. It's simply going to slightly slow that growth down.

Land Value tax has a long history in economics; it acts very differently from capital and wealth taxes because Land really behaves differently from those two classes of things. I highly recommend reading Henry George on the subject, who originally popularized the idea.

Note "Land Tax" != "Property Tax." Land tax taxes only the value of the underlying "ground rent", NOT the value of the improvements (stuff you build on land). Property Tax taxes both.

https://en.wikipedia.org/wiki/Land_value_tax

Sam's proposal doesn't avoid the wealth tax compounds simple arithmetic that PG notes.

And yes many important questions for society to answer on this, e.g. how much does is disincentivize entrepreneurs if they have half of their wealth taxed away over the decades compared to current taxation system?

<joke>

Just a thought experiment: let's say we take Sam's ideas alongside something like UBI, where everyone has a baseline of income provided by the society they live in.

You succeed wildly, and get rich as an entrepreneur. Sadly, in a generation or two, your grandchildren will be back with the rest of the plebeians, despite grandpops launching YC, writing books on art and coding and creating an bunch of amazing companies. But, your grandkids are now not motivated by escaping the poverty they live in, but by a simple desire to live differently than the other normal people out there (also living on UBI).

This seems a lot like what happens in places like Russia or Venezuela or Brazil, where the best and the brightest (often from upper crust there) flee their countries to make it big in Europe, US or the Middle East, but not always because they have such horrible lives there.

Except that, unlike entrepreneurs driven by a mindset that has them feel like it is never enough, these ones are just trying to escape the ennui of boredom of suburbia, and slipping back into that isn't so awful. The alternative drive of escaping poverty does something very different and rapacious: see Tyco and Dennis Kozlowski: https://en.wikipedia.org/wiki/Dennis_Kozlowski, who despite enormous wealth couldn't stop himself from having his company pay for even his rugs.

It's like the best of communism, and the best of capitalism!

</joke>

Seriously, isn't there an interesting space for entrepreneurs in a new world like the one Sam is describing?

Is this actually realistic?

In the Soviet Union, there was no such problem - brilliant people by and large were happy to become scientists and engineers, and scientists and engineers got into the planning agencies and into the government too, in droves. Same in pre 1989 China.

I don't see why the USSR and Mao's China were able to retain (and sometimes even attract) these people, but the society you're describing wouldn't be able to.

Actually, after some digging, I found something Lenin wrote about what to do with the entreprising kind of people - he wanted them to be put to use in organising projects and production, whereas the Kozlowski type were to be ignored (or worse).

So I guess the solution he found was to allow them to create big organizations and projects, but instead of paying them in money, they were paid in social status and achievement. If that worked to retain people like Kolmogorov, Ilyushin, Kalashnikov, Korolev, etc..., couldn't simply socially different positions for people that are enterprising be sufficient?

The brilliant people that stayed in the USSR had no choice - they were kept there by force either directly (not allowed to leave) or indirectly (leave but your family will pay the price).

But they all wanted to leave. The more you knew how much better your life could be in the west, the more you hated staying.

See, I don't know if that's true. The main counter evidence to your hypothesis were the defections of scientists and engineers to the USSR, the amount of brilliant people that regretted the fall of the USSR, and so on.

For example, one of my brilliant math teachers was from a Soviet state, and had the opportunity to leave all along - he only did so as the USSR fell and he did not see any prospect in the East anymore.

Patriotism is a strong emotion. But beyond that, many brilliant people in communist countries really did enjoy a very elevated social status - if you see what children aspired too, being a scientist or engineer was really up there. And as far as job security and research freedom, for example, there was often quite a bit of it. On the other hand, you had drastically less freedom, but it doesn't seem the ones who chose to stay valued it as much as we would.

See, I know that is true. I was unlucky enough to grow up behind the iron curtain. I know the situation directly from the choices faced by my parents and their friends and after its fall I watched the best of my teachers slowly but surely emigrate to Canada or the Western Europe.

You can't really understand how it was unless you lived it. First of all, patriotism ceased to exist, except for propaganda. Struggle and fear - abject fear - replaced patriotism as the driving emotion. We ended up hating our country - we're still trying to re-learn how to love it 30 years later.

The ones in elevated status were collaborating with the authorities and the secret police. They ratted out on their friends and family. Everybody hated and feared them because of that.

The freedom was, of course, gone, and we got used to that. Freedom is just not that important when you're hungry. But the feeling that best described our state of mind then was: hopelessness. We did not, could not hope for a better future, for better times for us or our children. We could not see any escape, any chance at change. Because as individuals, there was nothing we could do. We were completely robbed of our agency, of our power, of our rights. The past, present and future was a single color: gray.

People who somehow went to the West came back changed. They just could not believe one could live with so much freedom, choices and wealth. Their stories inspired others. I was maybe 12 and I remember clearly dreaming up ways of running out of the country, to my father's absolute horror. I would cry rivers if my own children would have to go to through that.

I don't doubt the experience.

The issue is, you're just someone on the internet. The real people I know disagree with you, and so do statistics, so while I completely empathize with you, I can't agree.

Use your logic then. Ask yourself who was defecting where. Ask yourself who had a the better level of life and who had the gulags. Ask yourself why so many countries and their hundred of millions of inhabitants violently overthrew the communist regime at the end of the '80s.

Better yet, go ahead and pay a visit to the communist success stories of N Korea, Cuba or Venezuela. They are still around. Maybe they will convince you.

Then finally look around at the very tools you are using. The car you are driving, the furnace heating your house, the computer you write on. They are all success stories of capitalism. Ask yourself where are the success stories of communism. What things it built, what hard, concrete, useful stuff it created. Believe the proof presented to you by the real world - and reject the propaganda.

You're still making bad arguments.

The majority of the citizens of the USSR were against its dissolution - but that didn't matter, it was mostly an elite affair.

I look at statistics and what people that I know and lived there told me. Most people who were adults at the time seem to regret the fall of the Soviet Union, and most people from post-Soviet states had to leave when they couldn't make a living anymore as the economy collapsed - despite post Soviet states being squarely in the middle of what you can expect from life on earth and above the median in all relevant metrics.

So certainly, it wasn't perfect, but it was very far from hell on earth, and squarely above the middle.

Your argument would also be stronger if you didn't classify Venezuela, a country with a bigger private sector relatively than France, as a communist country - Cuba, I've went there, was far from bad, much better certainly than where I came from, and despite debilitating American sanctions has a GDP PPP of over 21000$ which is quite impressive and above the average for the world, let alone Latin America, and by far the best of any country sanctioned by the US, and North Korea abandoned communism for a long time for their own "Juché" ideology which is basically Strasserism, preaches the superiority of the Korean race, and now allows private markets too.

Your stories are also quite telling - the computer I'm using was only possible under capitalism because the government gave itself the power to control ideas, as capitalism is otherwise incompatible with large-scale intellectual innovation. I drive no car, as it is far inferior to good quality public transportation plus walkable neighborhood, and my house is electrically heated by 100% renewable energy because we had the good sense of nationalizing the power grid and making massive investments in renewable energy (which we now produce at costs lower than any free market of energy, renewable or not).

The actual evidence when I try to look it at critically, shielding myself from all forms of propaganda (in the classical sense of the word), makes it clear that reality is far more nuanced than is common wisdom in these circles, and one of those results after careful study of history and data is that the USSR did not, in fact, have much of an issue retaining engineers and scientists, and relative to its size and prosperity did an okay job at innovating and keeping its population happy. Far from the best, but much better than most.

Wow, you are so clueless is not even funny. Try living there then. Good luck!

It doesn't exist anymore, but I know many people that did, and they seem to agree with my assessment.

This is a fascinating and out of the regular narrative of communism (at least to me). Thanks.

As far as I can tell, it's not different. Unless you could consistently generate the 2.5% property value to pay the tax each year (in a world where AI has sent incomes to zero!), then you'll eventually lose your property.

But if everyone is poor then prices drop...

Another way to look at a land tax (instead of as a wealth tax) is that it's sort of "user fee". You're paying society "rent" (a land tax was called ground rent by Adam Smith) for depriving the commons of that land.

Typically, land value tax is based on the rental value of land rather than the market value, so it's even more in line with this model.

We want to move to a society where land is not treated as wealth, but rather as a resource to use (because that leads to less land speculation, and more productive use of land), so this model is fine.

The estimation of 15% loss of market cap due to the 2.5% cap tax is laughable. That is effectively a reverse buyback of 2.5% every year. It would leave many companies with 0 or negative profit. Any company with P/E above 40 immediately loses money. 20 has their profit chopped in half. The values of these companies would be reduced by at least 50%.

Um....so what?

Stock market is the way to efficiently allocate capital. If value of every company is halved it changes nothing to relative performance of them.

This tax would raise much much less money than Sam expects.

That's just an argument for why wealth taxes should never go above 2%. If you can't double or triple your wealth in 60 years what are you doing with it?