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Comment by QuadmasterXLII | Hacker News Reader

My understanding of the proposal is that households worth more than $100 million would pay an annual minimum tax worth 25% of their combined income and unrealized capital gains. This doesn’t seem insane? In particular, that’s a hell of a residential property

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My city passed a "mansion tax" for people who own multimillion dollar homes. However the threshold for where the extra tax kicks in isn't adjusted for inflation or the top X percentile of most expensive homes. So we're on track for the average single family homeowner to be paying the "mansion tax" in another decade or so. It's already hitting some multifamily buildings.

Also reminds me of AMT. When it was originally created, one of the selling points was that it would only impact 155 wealthy families, households who made the then-insane income of over $200k but paid very little in income taxes. By 2017, over 5 million households were paying AMT, particularly those in states with high SALT taxes where $200k/year doesn't afford as lavish of a lifestyle as it used to.

Fully agree. Every piece of legislation that mentions a dollar amount should be adjusted for inflation. That should be true for income thresholds all the way down to parking tickets.

With all these sorts of things where they promise it'll only affect subset X of people, and then in the future once its been passed it's then changed/extended to affect subset Y in addition, I wish someone would suggest some way to just add a clause in, something like "This law is only to target X subset and if anyone tries to change it to affect a different subset of people, or pass a new law that extends its scope to a different subset, all such laws are instantly made invalid and dropped from the books". Or something along those lines.

If they promise it'll only ever affect the "super rich", then encode that in the law and ensure us, by law, that's what it'll be. If they truly don't want to expand its scope further, then have a mechanism that enforces that.

(Of course, this is a separate issue from whether it's even moral to target subset X in the first place, which I won't get into).

A: I think we should do more of X.

B: I'm concerned about that.

A: Okay, let's do X but in a much more limited way.

B: Okay.

<2 years later>

A: Hasn't X been great? Let's expand it.

B: Okay.

Yes here's the actual proposal. I'm sure it's not coincidence that it's left out of the Forbes article

> The proposal would impose a minimum tax of 25 percent on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth (that is, the difference obtained by subtracting liabilities from assets) greater than $100 million.

> Minimum tax liability would be reduced to the extent that the sum of minimum tax liability and uncredited prepayments exceeds two times the minimum tax rate times the amount by which the taxpayer’s wealth exceeds $100 million. As a result, the minimum tax would be fully phased in for all taxpayers with wealth greater than $200 million.

Yes, this is better framed as a new Alternative Minimum Tax on people with net worth >$100M than a blanket tax on unrealized capital gains.

Imagine step 2 to realize the insanity. That household likely doesn't have disposable income that is greater than 25% of their unrealized cap gains, so what do they do?

1. Hope they can get a low interest loan to pay their taxes?

2. Sell some assets. Think about what will happen to your 401k balance as wealthy people all over the US are forced to sell stocks. It will not be pretty.

lol come on. “I might have to sell some assets in order to pay money I owe” is not the end of the free market economy.

It is when a very large proportion of asset holders sell "some", increasing supply and therefore driving down prices.

I think AMZN and TSLA dropping 10% or whatever because Bezos and Elon have to sell more shares could be feelsbadman but it is not very close to the end of the free market economy.

Also, a household worth $100M is not going to suddenly be starving come tax time. And, they'll know in advance how much they need to pay because they have a CPA or a private wealth manager at the bank who can just tell them and set aside the money for April.

Hahaha. You think the people in that arena don't re-invest every possible dollar for more growth as soon as it hits their pockets? Cash flow is king to be able to pay for continuing leverage.

A sudden tax bill and the end of acquiring new debt are when massive wealth unravels.

Bubbles die when cash flows dry up.

I'm not talking about the economy failing. I'm talking prices. What do you think happens to asset prices when there are only sellers (everyone with wealth has to sell). You think poor people will have enough cash to keep prices up?

When Elon sold in his latest Tesla round the stock tanked 30% over a couple months. Repeat for Bezos, Gates, etc.

If there are only sellers and no buyers the market collapses entirely. Luckily though people buy and sell stock all the time and even if the entire OMB estimated revenue from the tax (about $500b) was funded by selling stocks, that would represent less than 1% of total market volume.

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