Ask HN: Can a Capital-Flipping Tax System Pay Off the U.S. Debt
No synthesized answer yet. Check the discussion below.
If I understand this right (and I might not) it sounds like you’re just making this into a flat tax that is wildly regressive.
It sounds like your system essentially has 0 taxes for the trust fund kids who have no income and live on asset appreciation and trading. No payroll, no tax.
I think it should be pointed out that there’s nothing wrong with the current system in terms of being able to pay down debt to a more reasonable level, it has been the conscious choice of the donor class to continue to cut taxes to the wealthy (tax cut and jobs act, big beautiful bill). Without those cuts the US system would easily produce a surplus. Instead, we have a system that transfers wealth from the federal government to oligarchs.
Do you think you can address how this can be made to be fair to the working class?
It sounds like this means that trust fund kids and landlords never pay any tax, and are highly incentivized to hire as few people as possible. (I guess you can say that payroll taxes have the same effect but corporate, property, and capital gains taxes do not).
For example, with no property, corporate, or capital gains taxes in place, this appears to heavily incentivize hoarding of rental properties by those with the means to do so.
As an upper middle class person myself, if this tax system came into place I would immediately liquidate my life savings and buy as many rental properties as I could afford and then quit my job. I’m pretty sure that I would make a better income than I do now doing productive work as my tax rate would drop from like 40% to 0%.
When you see someone like Jeff Bezos paying an effective tax rate of 12% you want that rate to be zero, while the median worker is getting a tax hike paying 50% ($600 per week is about half the median weekly individual income).
You’ve also made the tax so flat that it disregards regional economic differences. If you live in Alabama you’re paying a wildly higher tax rate than if you live in California. (You gave the example of $600 rather than a percent, please correct if you meant something else)
You call it an income-driven economy but only the income of the people doing labor is taxed.
If anything you’re doubling down on the most flawed aspects of our current system, introducing insane new ones, and possibly the most annoying bit is you seem to have zero interest in making even the most half-hearted elevator pitch as to how this could possibly make life better for the 99%.
For now, the more answers I get the hazier it is. I still don’t understand if this is payroll based.
I am skeptical at the idea this frees up the worker especially due to its “flat” nature, but I don’t really have enough information until you hash this out better.
The last thing I’ll point out is that federal taxes are NOT 50% as you describe, nowhere close.
It seems like when you say “flip” (a term you must abandon for something more specific) you mean unsecured debt. I’m not sure how that makes the US solvent, it just caps the debt, a limit we already have (and blow through every year).
While economics is basically voodoo, it appears you've stumbled onto a fast track to derailing the country.
The federal reserve flipping $600 capital into $5400 of capital also creates $5400 of debt. Possibly more over time as interest weighs of the $5400. The way banks "flip" assets into higher amounts via fractional banking is by loaning it out. It doesn't just become 9x'd on their books magically. Someone has to take on the debt.
I'm not seeing how this is self-financing anything; it looks more like refinancing while causing gigantic inflation of the money supply by 9x. A $1 today is worth $0.10 after this. This is circular investment with leverage, backed by an increasingly unstable government.
Can you explain more on this actually works in practice? Where is any upside? Current debt goes away, but is replaced by 9x as much debt held by the federal reserve or swf?
This is playing musical chairs with money while at the same time using leverage to do it. The poor get way poorer because what few dollars they do have will be worth less. The rich get way richer because there are more dollars to go into their coffers. The poor don't get many new dollars in their coffers because they have no extra money to play musical chairs with, so they never join the capital pool in proportion nor do they receive its investment dollars.
There is no where to look. This is a fraudulent scheme. There is no way this works in any capacity when coupled with fractional reserve banking to increase the capital amount.
Th core of the idea that could maybe work is allow individual citizens to invest into a SWF and get some kind of priority as an early investor. This could allow some alignment of incentives.
But it's not real. A bigger problem emerges. Investors expect returns (especially if you offered favorable terms to jump start the fund), making it not really sovereign anymore. It comes under the whims of investors, which will all be proportionally high earners. Leaving the bottom earners poorer relatively.
Then you need to consider how it's managed, which investments are made, how are investment decisions made in terms of preferred vendors, vendor a vs vendor b. Becomes a nightmare logistically and really just becomes a target for corporate raiders via regulatory capture or even just kickbacks and hush money.
All of this just becomes redistribution with questionable chances for returns with high risks of fraud due to, among other items listed above, extreme moral hazard of the borrowers.