President Biden to unveil new minimum tax on billionaires in budget
washingtonpost.com
washingtonpost.com
I appreciate the idea of making billionaires pay an effective tax rate that is similar to that paid by everyone else, but I think the amount needs to be viewed as a percentage of wealth and not just of income.
For example, the median US household has a net worth of $120k and pays about $10k in taxes per year, which would be equivalent to a wealth tax of 8%. Such a wealth tax (for households worth more than $100m) would be fair in the sense of what the tax burden feels like, not taking into account the diminishing marginal utility of wealth, i.e. not being "progressive" taxation.
Amazon, Facebook, and Tesla were unprofitable for a really long time. Would they be as successful or even exist if their CEOs lost majority control on year N+7 and public investors demand pivots to immediate revenues?
For context, Amazon was incorporated in 1994, IPO'd in 1997, and made its first profit in 2001, when it had a market cap of $4 billion. Also, Bezos currently owns only 11.1% of Amazon's shares. So I think that N could be as low as 5 to 10 years; but one of the major goals of a wealth tax would be to prevent multi-generational accumulation of wealth, so even 30 years of tax exemption might be an acceptable privilege to grant to founders of successful businesses.
> Would they be as successful or even exist if their CEOs lost majority control on year N+7 and public investors demand pivots to immediate revenues?
If the concern is that the founders lose majority control and the new owners make worse decisions, then the government could hold the shares (to be sold at some later date) but allow the founders to keep the voting rights that those shares represent for as long as they work at the company.
I get that people want to "tax billionaires" or have people pay an undefined and undefinable "fair share", and this wouldn't really tax people not trading aka the billionaires, but it acknowledges that the market - other people - cause billionaires to have so much notional wealth, which is light years ahead of the false dilemmas debates right now.
This would reach a goal of redistributing wealth along the way up, as the state is not currently getting any tax revenue from things that are not sold, and many billionaires borrow against their assets which also mitigates any tax event. This would at least create tax events as the price of assets go up.
So aren't you saying that we shouldn't even try to tax their income, because they'll find a way to avoid paying income tax? Should the government just give up and only tax the poor, who can't afford to pay people to find these clever schemes?
> moving wealth overseas
I actually think that a wealth tax, for practical reasons, needs to be agreed across all major democracies, like the recent global minimum corporation tax. If any country tries to compete by offering a lower tax for billionaires, then the billionaires who live there should be sanctioned (or the country itself).
That appears to be the status quo as-is, at least in the US? Thanks to the "herp derp don't tax me!!" republicans in power at various times, the US now has a dwindling middle class with ever-less money, a burgeoning lower class who by very definition have no money, and wealthy folks who can afford good accounts.
> I actually think that a wealth tax, for practical reasons, needs to be agreed across all major democracies
Good luck with that. Just look at how corporations fought the global 15% minimum tax tooth-and-nail over the past few years.
It's hard to list all the problems with this, but here are some obvious ones.
Wealth includes assets. Assets can be depreciating, like cars or stocks that have done badly. By taxing these assets, you are forcing the owner to realize a loss on the asset. That would make billionaires much more afraid to take risks with their money, which could easily harm society.
This scheme also means there's essentially a tax on all billionaires' assets in the US. The effect of this would just be that billionaires spend more time and money working around the laws or moving their money offshore. It is unlikely to result in the US substantially increasing its tax revenue.
It would be a lot better to do what some other developed nations do: reduce taxes on people's paychecks (and even corporate profits) to nearly 0% and increase capital gains taxes substantially.
This means that people and corporations that actually do something to make their income are taxed a lot less, encouraging that behavior. People who just make money by having money (and not actually producing anything) are taxed a lot more.
This would dramatically reduce the pool of venture capital in the US, but that is perhaps a good thing. It would ideally kill companies like WeWork without harming companies like Moderna.