My main concern with a wealth tax

Author: TheUnderdog ,

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  • TheUnderdog
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    A wealth tax would destroy the stock market and the American economy.  Here is why:

    Lets say you want to tax Jeff Bezos or Elon Musk at 8% of their wealth (what Bernie Sanders wants to do)(The Wealth Tax: Pros & Cons | taxlinked.net)

    Most of their assets aren't in cash, but in stock.  Taking away 8% of their wealth probably involves taking roughly 8% of their stock as well.  If you do this, the government has a bunch of stock that they control.  The only way they can reasonably get money from this stock is if they sell the stock to the public in general.  If this happens, due to the supply to demand ratio of stock skyrocketing, this causes stock prices to plummet(since there is so much more supply for stock).

    If the stock market ceases to go up, then people lose their incentive to invest.  If this happens, everyone is going to sell their stock all at once, and you've created a depression at this point and I don't see the depression ending anytime soon.  America does not deserve to be in a depression, and we would become a second or third world country at that point if the stock market gets destroyed because half the country owns stock and this half would lose pretty much all the value in your assets.  I would want to tell Elizabeth Warren, Bernie Sanders, and any other advocate of the wealth tax that a wealth tax will make the rich less rich, but it will make every stock holder less rich as well, and it would cause the American economy to collapse if companies become worthless.

    The wealth tax may have good intentions, but it leads to poor results.
  • Greyparrot
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    --> @TheUnderdog
      I would want to tell Elizabeth Warren, Bernie Sanders, and any other advocate of the wealth tax that a wealth tax will make the rich less rich, but it will make every stock holder less rich as well, and it would cause the American economy to collapse if companies become worthless.
    The ultra-rich all live in states run by these politicians. You don't have to worry about the rich under their rule.
  • oromagi
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    Well, if that's you're main concern then allow me to instantly relieve you.  The IRS does not accept stock certificates in lieu of cash.  Section 14 of the Federal Reserve Act prohibits the US Govt. from owning any stock.
  • zedvictor4
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    --> @oromagi @TheUnderdog
    Money is.

    A non-existent representative system, of assumptive value.

    Tax is no longer.

    A bag of corn.

    Or a pouch of gold.

    Or a bundle of paper.

    Tax is now rendered to.

    Ones and noughts.



    And so the USA has a multi-trillion dollar national debt.

    So what?

    Who do they owe it to?

    Martians?



    And people will either live or die.

    Same as it ever was.

    Mush rendered to dust.


    As money is rendered to.

    Technological indifference.


    Elon's got

    More important things to do

    Than you, TheUnderdog.





  • TheUnderdog
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    --> @oromagi
    A wealth tax taxes all of your wealth, and this includes stock.  Out of Jeff Bezos's $100 billion or so worth of assets, only around $2 billion of the assets are in cash.  The rest are mostly in stocks.  An 8% wealth tax (proposed by Bernie Sanders) would take all of Jeff Bezos's cash away from him and probably some of his stock as well.  Even if you impose a 2% wealth tax on people like Jeff Bezos and take away all his cash while leaving him with all of his stock, Jeff Bezos has all that cash for a reason that neither one of us know about.  If you take away his cash, he is going to sell huge amounts of stock to restore the cash the feds took from him, and this will slowly, but surely cause the stock market to lose some of it's annual growth, which causes less people to invest, which causes even less growth, and the cycle continues until we have a depression.
  • HistoryBuff
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    --> @TheUnderdog
    so your argument is that if the uber wealthy have to sell some of their stocks in order to cover their taxes, that the world will end? why would you think that? if the uber rich sell stocks, other people buy them. that is how the stock market works. 

    If a billionaire selling a tiny fraction of his stocks tanks a stock price, then it wasn't actually worth the price it was selling for. In this scenario, the wealth tax isn't causing less growth, it is exposing a problem that is already there, an inflated stock price. 
  • RationalMadman
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    progressive tax is already done by extremely successful nations such as those in Western Europe, East Asia (not China or North Korea but the others), Canada, Australia+NZ, South Africa (but it's not properly enforced) and some others but mainly the regions I just stated. The US is largely similar to South Africa, since they are supposed to have progressive tax yet barely enforce it on the top bracket.
  • Double_R
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    --> @TheUnderdog
    Even as a liberal, I’m not crazy about the wealth tax idea either. I think we should be taxing money people make, not the presumptive value of what someone owns. If I own a two million dollar painting as part of my estate, a wealth tax is essentially saying I have to pay an annual fee to hold onto this possession. I don’t think that is how it should work.

    I say create a millionaires tax bracket, and seriously increase the estate tax.
  • FLRW
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    Eisenhower's  top marginal income tax rate in 1953 was 92%. The 92% tax bracket applied to income over $400,000 in 1953, equivalent to an income of $3,439,611 today.
    The Gross Federal Debt was 71.4% of our GDP in 1953 and now  Gross Federal Debt is estimated at 107.4% of GDP.
  • TheUnderdog
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    --> @HistoryBuff
     why would you think that? if the uber rich sell stocks, other people buy them. that is how the stock market works. 
    If the ultra rich sell their stocks, since the supply to demand ratio of stocks in the stock market would skyrocket, the price of the stock would plummet and if the stock market ceases to grow because the rich are spamming stock into the stock market, people lose their desire to invest and as a result, they end up selling their stock in masses to get the cash while the stock is still valued high.  If this happens, the stock loses the vast majority of its value, and then the rich might buy out all the stock cheaper, so congratulations, by trying to help the common man out, you instead have deprived them of all their stock's value.

    If a billionaire selling a tiny fraction of his stocks tanks a stock price, then it wasn't actually worth the price it was selling for
    I'm not sure how this is accurate.


  • TheUnderdog
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    --> @Double_R
    I say create a millionaires tax bracket, and seriously increase the estate tax.
    I'd say repeal the income tax and replace it with a sales tax and a capitol gains tax.  Rich people barely pay anything in income tax since Jeff Bezos's annual cash salary is only around $80K a year(How Much Does Jeff Bezos Make a Second? (marketrealist.com)), so his income isn't that high.  He is only rich because of his stock.
  • Double_R
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    --> @TheUnderdog
    I'd say repeal the income tax and replace it with a sales tax and a capitol gains tax.  Rich people barely pay anything in income tax since Jeff Bezos's annual cash salary is only around $80K a year(How Much Does Jeff Bezos Make a Second? (marketrealist.com)), so his income isn't that high.  He is only rich because of his stock.
    As soon as I wrote my response I realized I forgot to add “close tax loopholes”. But regarding a sales tax instead of income tax... that has been looked at and would be one of the most regressive tax bills we could ever pass.

  • HistoryBuff
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    --> @TheUnderdog
    If the ultra rich sell their stocks, since the supply to demand ratio of stocks in the stock market would skyrocket, the price of the stock would plummet and if the stock market ceases to grow because the rich are spamming stock into the stock market, people lose their desire to invest and as a result
    if that were to happen, then that isn't a problem with a tax, it is a problem with the market. I.e. if the uber rich needing to sell a portion of their stocks causes the price of a stock to crash, then the stock was never worth that much to begin with. That is a market problem. So the tax would just be exposing a flaw that already exists. 

     by trying to help the common man out, you instead have deprived them of all their stock's value.
    the vast, vast majority of stocks are owned by the uber rich. The "common man" doesn't own that many stocks. A large percentage of the population owns no stocks at all. So saying you are "depriving the common man" doesn't make much sense. There might be a correction in the market where overpriced stocks fall as a result of the tax, but then the market will stabilize. This will hurt some of the "common" people (as you put it), but overwhelmingly it would affect the uber wealthy. But then the increased revenue from the wealth tax can be used to help the "common man". You could offer things like universal health care. And that would help the "common man" far, far more than what that might lose when the stock market corrects itself. 
  • TheUnderdog
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    --> @Double_R
    A sales tax and a capitol gains tax would be used to fund the government.  A sales tax taxes the poor (less than what the poor currently pay in taxes) and a capitol gains tax taxes investors (people who are generally rich).  I'd say it evens out.
  • TheUnderdog
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    --> @HistoryBuff
    if that were to happen, then that isn't a problem with a tax, it is a problem with the market. I.e. if the uber rich needing to sell a portion of their stocks causes the price of a stock to crash, then the stock was never worth that much to begin with. That is a market problem. So the tax would just be exposing a flaw that already exists. 
    If the stock of every company crashes, then our economy is destroyed and we go into a depression.

    The "common man" doesn't own that many stocks. A large percentage of the population owns no stocks at all. 
    For that common man, they own stock with the assumption that it would go up, and if it crashes, they end up selling all of their stock, and you've basically destroyed $30 trillion worth of wealth in the country.

    But then the increased revenue from the wealth tax can be used to help the "common man".
    You've destroyed all the wealth.  If the government sells tens of billions of shares of stock all at once, there will be a huge influx of supply, which causes the price to plummet and the government gets pennies on the dollar of stock value.  They destroyed $30 trillion of stock value to get $300 billion in revenue.  And they destroyed the wealth, so they aren't going to be able to get revenue in the future.  At best, America goes into a depression.  At worst, the whole world does.  I imagine the latter scenario is more likely.

    And that would help the "common man" far, far more than what that might lose when the stock market corrects itself. 
    The stock won't correct its self.  We would go into a depression and I don't know how we are going to get out of it.

  • HistoryBuff
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    --> @TheUnderdog
    If the stock of every company crashes, then our economy is destroyed and we go into a depression.
    so your argument is that passing policy will show us the horrible problems that exist. so we should do nothing, allow those horrible problems to continue to exist and pray no one realizes? That doesn't seem like a good idea. 

    For that common man, they own stock with the assumption that it would go up, and if it crashes, they end up selling all of their stock, and you've basically destroyed $30 trillion worth of wealth in the country.
    you have a giant flaw in your premise. the "common man" doesn't own many, if any, stocks. 45% of americans own no stocks at all. of the 55% that do, most are in retirement accounts like a 401k where they are unlikely to sell their stocks. 

    So the idea that a stock market recalculation would cause the "common man" to sell off stocks is silly. Most "common people" have no stocks to speak of, and those that do probably aren't in a position to sell them off anyway. 

    The stock market falling would overwhelmingly affect the richest 10% of the population as they own about 84% of all stocks (as of 2016).

    But then the increased revenue from the wealth tax can be used to help the "common man".
    You've destroyed all the wealth.
    lol, no. If common sense policy causes the value of a stock to fall, then it was never worth what it was trading for. The market is simply over valuing it. So you haven't "destroyed" any wealth at all. You have simply exposed a market overvaluation. If this were to happen, it is the market that is wrong, not the policy "destroying wealth".

     If the government sells tens of billions of shares of stock all at once, there will be a huge influx of supply, which causes the price to plummet and the government gets pennies on the dollar of stock value. 
    The government cannot sell shares because the government cannot own shares. So your assertion makes no sense. 

     At best, America goes into a depression.  At worst, the whole world does.  I imagine the latter scenario is more likely
    your conclusion is incorrect because you are using faulty assumptions to come to it. IE that the government can and would sell of shares. But the government cannot own shares. therefore they cannot sell them. Therefore they cannot trigger the rest of your assumption.

    The stock won't correct its self.  We would go into a depression and I don't know how we are going to get out of it.
    if the rich being forced to sell some of their shares in order to pay common sense taxes causes the share price to drop, then it is because the market is over valuing the shares. If more shares being traded tanks the price, then the market simply hasn't been calculating the price correctly. This happens all the time in the stock market. The market doesn't ever show you what something is worth, it shows you what a handful of rich investors thinks it is worth. And often it does not even show what they think it's worth, it just reflects the hopes and fears of rich people. 
  • Greyparrot
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    --> @TheUnderdog
    I remember reading Freidman and he came up with a remarkable statement.

    All government spending is inevitably a tax on the entire population. It does not matter what system you have in place to tax, eventually, the entire population pays for ALL government spending, one way or the other.

    1) in the case of progressive taxes, either the costs get passed onto the poor through increased prices, or standards of living for the poor drop as consumer items become unavailable due to investors and producers leaving.

    2) In the case of borrowing, the costs get passed along when the loan is due.

    3) In the case of inflation due to printing money to cover debts, every person pays as money becomes worth less and less.

    It doesn't matter what scheme you can devise, everyone pays for EVERY penny spent by the government.
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  • thett3
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    --> @TheUnderdog
    Yes, there’s a reason that even countries like Sweden and France repealed their wealth taxes: capital flight. And while admittedly it would be harder to untangle your wealth from the US than either of those countries, people would find a way and I don’t really have an interest in encouraging wealth to leave the country. 

    And like you say, people imagine that Bezos has 100 billion in his checking account, when he of course doesn’t. Confiscating his wealth would be significantly more complicated than people think and there would be a lot of unintended consequences. That said it does bother me that there’s essentially a wealth tax on the middle class via property taxes! My property taxes are so high that I basically pay two mortgages, but the mega billionaires can see their wealth steadily grow and only realize taxes when they sell. Oh well

    It’s better to focus on helping future wealth be captured more equitably through progressive taxes and pro worker reforms like ending outsourcing, bringing back blue collar jobs, not requiring incredibly expensive college degrees to do anything, etc.
  • thett3
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    --> @HistoryBuff
    the vast, vast majority of stocks are owned by the uber rich. The "common man" doesn't own that many stocks. A large percentage of the population owns no stocks at all. So saying you are "depriving the common man" doesn't make much sense. 
    This is half true. While it’s true that the vast majority of the stock market is owned by the wealthy, the common man actually does own stock these days through retirement accounts. The $150k in the 401k of 60 year old Joe working class may not represent a huge portion of the US market cap, but it’s a big deal to him. Outside of social security and maybe a house it’s probably all he has and a large stock market crash would actually hurt him more than the Uber wealthy who lose millions on paper but see no actual decline in lifestyle 
  • HistoryBuff
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    --> @thett3
    he common man actually does own stock these days through retirement accounts.
    45% of americans own no stocks at all. who are they if not the "common man"?

    The $150k in the 401k of 60 year old Joe working class may not represent a huge portion of the US market cap, but it’s a big deal to him. Outside of social security and maybe a house it’s probably all he has and a large stock market crash would actually hurt him more than the Uber wealthy who lose millions on paper but see no actual decline in lifestyle 
    i'm not arguing that a market crash is a good thing. It obviously isn't. But if the wealthy being forced to sell of a small percentage of their shares causes those shares to fall, then the problem isn't the tax. it is the fact that market has over valued the stocks. Your argument does not actually argue that a wealth tax is bad. It argues that the fact that it might reveal structural problems in the economy is bad. But those problems would exist either way. Revealing such problems doesn't mean the tax would be a bad idea. especially if the profits of the tax are then used to help the "common man". The large majority of people would end up better off.
  • thett3
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    45% of americans own no stocks at all. who are they if not the "common man"?
    Where are you getting that number? According to this, by 60 only 13% of Americans don’t have retirement savings. Some of those “savings” are in defined benefit pensions instead of privately held retirement accounts but pension funds invest in equities too. https://www.forbes.com/sites/niallmccarthy/2019/06/03/report-a-quarter-of-americans-have-no-retirement-savings-infographic/amp/

    I’m not happy about it, but the entire American  system basically is predicated on the big line going up. A permanent or long term stock market crash would harm the average person more than the wealthy even if they don’t hold as much. Joe Six Packs $100k turning into $65k is a much bigger deal than Robert Bruce III’s $10 mil turning into $6.5 mil. 

    Before supporting a policy that would place permanent and extremely strong downward pressure on stock prices you’d need to find some way to decouple average Americans with the stock market. I’ve thought about it and I can’t really think of a good alternative. This is why I’m against social security privatization because the fortunes of average Americans are already too dependent on the stock market.

    All this assumes that the tax would be successful at taking their wealth which I doubt it would. In the long run the state would probably get less revenue. I can see why it pisses people off that Bezos has two hundred billion when there are homeless people, people who can’t afford medical treatment, etc but that doesn’t mean trying to take his wealth would actually solve the problem, as opposed to creating even more. That impulse comes from a good place, but it’s wrong about the way the world works, doesn’t understand the consequences any more than your sweet tooth understands diabetes.  

    i'm not arguing that a market crash is a good thing. It obviously isn't. But if the wealthy being forced to sell of a small percentage of their shares causes those shares to fall, then the problem isn't the tax. it is the fact that market has over valued the stocks. Your argument does not actually argue that a wealth tax is bad. It argues that the fact that it might reveal structural problems in the economy is bad. But those problems would exist either way. Revealing such problems doesn't mean the tax would be a bad idea. especially if the profits of the tax are then used to help the "common man". The large majority of people would end up better off.
    But what’s value other than what someone is willing to pay, right? Zuckerberg owns about a third of Facebook (a company he founded), so the price of Facebook is based on the two thirds the market actually has access to. That doesn’t make it inherently “over valued.” This is why stock buy backs (which I don’t think should be allowed) work—they create fewer existing on the market shares, but the underlying company is worth the same. So of course it goes up. 

    Would it be better if Zuckerberg gave most his wealth to the poor and kept only a measly billion dollars, yes. But would a wealth tax actually force him to liquidate his assets, or would they just be moved overseas? If the liquidation actually did occur, would it trigger a long term glut in stock prices? What would the money be spent on? There’s a cost benefit analysis needed here that won’t reflect too favorably on a wealth tax when you look at it with a skeptical eye. Remember, Sweden and France both gave up on theirs 
  • HistoryBuff
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    --> @thett3
    45% of americans own no stocks at all. who are they if not the "common man"?
    Where are you getting that number? 
    this isn't the same source i was using for my last post (i don't remember precisely which one i was looking at). But here is a different one saying that 52% of americans "have some market investment mostly from owning retirement accounts such as 401(k)s." So according to the federal reserves most recent info (2016), about 48% of americans own no stocks whatsoever. 

    I’m not happy about it, but the entire American  system basically is predicated on the big line going up. A permanent or long term stock market crash would harm the average person more than the wealthy even if they don’t hold as much. Joe Six Packs $100k turning into $65k is a much bigger deal than Robert Bruce III’s $10 mil turning into $6.5 mil. 
    I don't disagree with that. But that still isn't an argument against a wealth tax. Your argument seems to be the system is broken and if we tax rich people, then it will expose the broken system and we will see the problems we need to fix. But assuming the tax did cause a serious market downturn (which i don't necessarily agree that it would) the problem is the market, not the tax that exposes the problem.

    Before supporting a policy that would place permanent and extremely strong downward pressure on stock prices you’d need to find some way to decouple average Americans with the stock market.
    I don't understand why you would think it would be a permanent downward pressure? Having the uber rich need to sell of stocks would shake up the market, that is true. It would create some uncertainty and result in downward stocks prices (because the market hates uncertainty). But then the market would get used to it and it would get priced in. Then the downward pressure is resolved. Having more stocks being traded doesn't mean the stocks are worth any less. And if it does cause the stocks to be worth less, it is because the market was over valuing them. Which, again, is not a flaw of a wealth tax. It is just exposing the flaws of the market that already exist. 

    All this assumes that the tax would be successful at taking their wealth which I doubt it would. In the long run the state would probably get less revenue.
    how so?

    but that doesn’t mean trying to take his wealth would actually solve the problem, as opposed to creating even more.
    it would solve lots of problems. It would make lots of projects attainable. Things like universal health care, educational programs etc would be able to be funded. It would be hugely beneficial to the "common man" who routinely gets screwed over with massive debts trying to get an education or healthcare.

    Would it be better if Zuckerberg gave most his wealth to the poor and kept only a measly billion dollars, yes. But would a wealth tax actually force him to liquidate his assets, or would they just be moved overseas?
    the beauty of a wealth tax is that it doesn't matter if he moves his assets overseas. US tax law already says that US citizens are subject to US taxes no matter where in the world they are. So if he is a US citizen and he has wealth, then it could be taxed no matter where in the world it is. European countries didn't really use this method, so millionaires could just move to another country and dodge the tax. But that wouldn't work for an american wealth tax. The only way to dodge it is to renounce your citizenship. But that has huge business and personal implications. Also, depending on which tax plan you take, you can implement an "exit tax" as part of the plan. IE if you are a billionaire and you renounce your US citizenship, you must pay a tax of X% (for example Elizabeth warren's plan was 40%). This would make doing this much less desirable. 

    Another flaw in European efforts was that they built in loopholes. They made exceptions for things that were harder to value (art, antiques etc). So rich people could pour their money into the exempted categories of stuff and dodge the tax too. If you create a wealth tax without those exemptions, it is harder to dodge. 

    yet another flaw of the wealth tax laws was they set the bar low. They were intended to hit millionaires as well as billionaires. So there were lots of people who might own their own business worth a million dollars, but have little actual cash. This created a larger pool of people who were affected by the tax, and a significant number who couldn't actually pay it without crippling their business. Most proposals i have seen for this in the US set the bar pretty high (in the 10's or hundreds of millions). So it isn't likely to affect someone who just owns a business. It would affect people with huge stock portfolios or own multiple businesses. It makes it easier to enforce. 
  • thett3
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    this isn't the same source i was using for my last post (i don't remember precisely which one i was looking at). But here is a different one saying that 52% of americans "have some market investment mostly from owning retirement accounts such as 401(k)s." So according to the federal reserves most recent info (2016), about 48% of americans own no stocks whatsoever. 
    That data includes young households who haven't started saving yet, though. By age 60 roughly 90% of people have SOME kind of retirement savings tied to the stock market, even if that is through entitlement in a defined benefit pension whose fund invests in equities. That said, I'm perfectly happy to concede that for the most part the poor do not have any financial assets. My only objection is against the idea that the fortunes of the typical American aren't related to the stock market, that it only matters for rich people. The reality is the exact opposite, they are entangled to a degree I think is dangerous. I'm incredibly wary about messing with the stock market until we go through the decades long process of decoupling the middle class and the stock market (if indeed we should...it's arguable.)

    I don't understand why you would think it would be a permanent downward pressure? Having the uber rich need to sell of stocks would shake up the market, that is true. It would create some uncertainty and result in downward stocks prices (because the market hates uncertainty). But then the market would get used to it and it would get priced in. Then the downward pressure is resolved. Having more stocks being traded doesn't mean the stocks are worth any less. And if it does cause the stocks to be worth less, it is because the market was over valuing them. Which, again, is not a flaw of a wealth tax. It is just exposing the flaws of the market that already exist. 
    There are a couple reasons I think that it would lead to ongoing downward pressure: 

    -The majority of the megabillionaires like Musk, Zuckerberg, and Bezos gained their wealth through an ownership stake in a company they created that became huge. If there's a wealth tax, Bezos isn't likely to dump all of his shares in Amazon at once but would presumably liquidate the amount required to pay the tax every year. This would create a constant stream of new shares entering the market every year at tax time. Obviously that would create downward pressure

    -Executives now have an extremely powerful incentive to LOWER stock prices, as opposed to prop them up 

    -There is now an extremely powerful incentive to direct your wealth away from assets such as stocks, which have easily verifiable values, and towards assets with less obvious values that you could argue down, such as art and privately owned businesses. Less demand!

    I also don't understand how a wealth tax would be calculated. There's a reason that the Forbes estimates of the wealth of billionaires are estimates, because these things fluctuate regularly. A lot of wealth of ultra high net worth individuals is also held in *private* businesses, which are notoriously difficult to value. This causes another economic distortion I just thought of, btw. All of the best companies in the future would have a gigantic incentive to remain private rather than going public, so the typical American wouldn't be able to invest in them. I highly suspect you would witness an extremely suspicious stock market crash every around tax time. I also don't really agree with taxing unrealized gains on principle because investments do change value frequently. Imagine if a wealth tax were assessed in February 2000. Poor Pets.com owners! (https://en.wikipedia.org/wiki/Pets.com)

    it would solve lots of problems. It would make lots of projects attainable. Things like universal health care, educational programs etc would be able to be funded. It would be hugely beneficial to the "common man" who routinely gets screwed over with massive debts trying to get an education or healthcare.
    I think you are overselling how much revenue it would bring in. Elizabeth Warren herself estimated $2.75 trillion over ten years, independent estimates were a lot lower, like 40% of that number (https://www.factcheck.org/2019/06/facts-on-warrens-wealth-tax-plan/). The $1400 stimulus checks cost $400 billion, for reference. So even if we take Warrens best case scenario her tax, which we have absolutely zero reason to believe, its equivalent to an annual stimulus check of $962. This just doesn't seem like enough money to be worth the potential risks, and it certainly doesn't seem like enough to solve systemic problems like poverty and healthcare. By contrast, merely raising the top marginal tax rate to 45% (only an 8% increase) on ONLY the top 1% brings in $276 billion a year (https://www.nytimes.com/2015/10/17/business/putting-numbers-to-a-tax-increase-for-the-rich.html) which as as much as Warren says her plan will bring in. Personally, I feel that a marginal tax rate of 45% for income over $500k a year is more than fair, and not nearly high enough to damage the economy. I would prefer higher marginal income tax rates to a wealth tax any day

    the beauty of a wealth tax is that it doesn't matter if he moves his assets overseas. US tax law already says that US citizens are subject to US taxes no matter where in the world they are. So if he is a US citizen and he has wealth, then it could be taxed no matter where in the world it is. European countries didn't really use this method, so millionaires could just move to another country and dodge the tax. But that wouldn't work for an american wealth tax. The only way to dodge it is to renounce your citizenship. But that has huge business and personal implications. Also, depending on which tax plan you take, you can implement an "exit tax" as part of the plan. IE if you are a billionaire and you renounce your US citizenship, you must pay a tax of X% (for example Elizabeth warren's plan was 40%). This would make doing this much less desirable. 
    I think you would be amazed at how easily it is dodged. Taxing wealth held overseas seems extremely problematic. If I'm a very rich US citizen and I own a company incorporated in Germany I don't think the German government would look too kindly on the US government demanding to take a bite out of that company every year. I imagine people would find a way around that exit tax (is it even legal to tax someone for renouncing their citizenship? By what authority, since they are no longer a citizen?) I see no reason to encourage the uber wealthy to leave...I understand the bitterness over inequality but you're so much better off creating a more equitable society through higher taxes on wealth created in the future and pro-worker reforms instead of blowing up the whole system. 

    Another flaw in European efforts was that they built in loopholes. They made exceptions for things that were harder to value (art, antiques etc). So rich people could pour their money into the exempted categories of stuff and dodge the tax too. If you create a wealth tax without those exemptions, it is harder to dodge. 
    I don't see this as a loophole so much as a necessity. How much is a particular Picasso painting worth at auction? You have no clue until its ACTUALLY auctioned!
  • HistoryBuff
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    My only objection is against the idea that the fortunes of the typical American aren't related to the stock market, that it only matters for rich people.
    that is a fair point. I did not mean to imply that it would have no effect on "common people". It would have a short term effect on the market. That seems pretty likely. But any significant change to the economy or tax laws will do that. So I don't see that as an argument against a wealth tax. I see that as an important factor to take into account when implementing it to help to protect those people. 

    The majority of the megabillionaires like Musk, Zuckerberg, and Bezos gained their wealth through an ownership stake in a company they created that became huge. If there's a wealth tax, Bezos isn't likely to dump all of his shares in Amazon at once but would presumably liquidate the amount required to pay the tax every year. This would create a constant stream of new shares entering the market every year at tax time. Obviously that would create downward pressure
    this is a pretty big assumption. That would require him to give up more and more control over his company that could potentially lead to him losing control of it. I assume that he would certainly need to liquidate some of his stock, certainly early on. But once the uber wealthy adapt to the existence of the new tax, they would learn to keep more of their wealth in a more liquid form. I don't see Bezos slowly selling off all his stock. 

    And even if it did, more people would be happy to buy into the stock. So as long as the company is continuing to do well, there is no reason why demand wouldn't meet the supply. 

    Personally, I feel that a marginal tax rate of 45% for income over $500k a year is more than fair, and not nearly high enough to damage the economy. I would prefer higher marginal income tax rates to a wealth tax any day
    I would agree if the effective tax rate was that high. but it is nowhere near that. The effective tax rate on the richest people has been falling for decades and is about half of what you are proposing. So yeah, doubling the tax rates on the top tax bracket would probably raise lots of money too. But they are very good at lobbying for exceptions, which is why they probably pay a lower effective tax rate than you do. 
    If I'm a very rich US citizen and I own a company incorporated in Germany I don't think the German government would look too kindly on the US government demanding to take a bite out of that company every year.
    no one is talking about the US government taking a "bite" of the company. Since the US government cannot own shares of a company, you could not pay with such. You would be taxed (assuming your net worth is 10's or 100's of millions) an amount in USD. 

     I imagine people would find a way around that exit tax (is it even legal to tax someone for renouncing their citizenship? By what authority, since they are no longer a citizen?)
    I'm not a lawyer, but why wouldn't it be? You would be taxing them before they renounce it. 

    I see no reason to encourage the uber wealthy to leave...I understand the bitterness over inequality but you're so much better off creating a more equitable society through higher taxes on wealth created in the future and pro-worker reforms instead of blowing up the whole system. 
    I'm certainly open to the idea of a much higher effective tax rate on the rich instead. However the last 70 years have proven that this is very difficult, if not impossible. They simply have too much leverage on the US government. They find ways to put in loopholes to avoid it. The only way to prevent that is to make a cut and dry system with little to no exceptions. Otherwise the lobbyists for the uber wealthy will simply write in so many exemptions we get where we are now, where the rich pay a lower tax rate than the poor. 

    I don't see this as a loophole so much as a necessity. How much is a particular Picasso painting worth at auction? You have no clue until its ACTUALLY auctioned!
    I didn't say it was simple. But you could require that such assets get professional appraisal of value every X number of years. But excluding them entirely just makes it super easy to avoid the tax.