It's such an odd argument - the wealthy always seem to know what their net worth is. We could just make them declare it. If they lie, straight to jail.
Do they? I think exactly the opposite is true - if you ask any sufficiently wealthy person, they’d need a team of people working for a bit to arrive at a very hazy net worth number. Private stock is extremely illiquid and doesn’t usually have a good mark to market, ditto most artwork. My impression is that even most public stock doesn’t generally have the depth of liquidity to absorb a founder selling any significant fraction in a short timeframe without cratering in value.
How do we know whether they lie without a solid definition of net worth?
I'm not defending billionaires and I believe they should be heavily taxed, and huge inheritances should be outlawed, but what's Elon Musk's net worth, for example? He surely doesn't have $369 billion in cash. Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? It's tricky.
> How do we know whether they lie without a solid definition of net worth?
They get to tell us what they are worth. Generally speaking, if you want to lie about your net worth you are choosing between tax fraud and insurance fraud. There are some areas that are tricky, like pre-market startups, but we have things like 409A valuations that help with that. Penalties should have no statute of limitations - if you lie about it, you get to look over your shoulder forever. It's not perfect, but as you have clearly recognized, there is no perfect system that allows for a reasonable degree of freedom.
> Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year?
Not really tricky! He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2. If the value goes down 99%, you pay way less tax (or none if he's no longer wealthy enough to qualify). He can sell his shares to pay it, and I honestly do not care if he is not liquid enough to do that - that's a situation he put himself into. No he doesn't get a tax break on the loss - the rich have a sense of entitlement that their wealth belongs to them free of charge, and I think they should have to pay maintenance. Without public utilities (roads, electricity, air and sea traffic control, etc) and social stability, most of these billionaires would lose their wealth to warlords very quickly.
> He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2.
That doesn't make any sense. If I have $8B worth of shares and I have $2B in cash, and if the wealth tax is 20% I will have to pay all my cash this year. If my shares goes down to zero next year I'm broke. I couldn't just sell $2B worth of shares in the first year either because that would have affected the value of the shares. This is not how taxes should work.
Everyone agrees on income tax or capital gains tax because they are both cash, and the tax is also in the same currency. If we can find a way to tax wealth in the same "currency" (for example 20% of your share portfolio, plus 20% of your cash) then it might work. Obviously the state may not always be able to use shares to fund infrastructure, and cashing out those shares would diminish the value. Also it's still hard to do that for, say, real estate investments.
What doesn't make sense? He'd owe $1.6B the first year, and then he'd be shit out of luck because he drove the stock to 0. Not my problem. And you should stop putting yourself in his shoes - you will never be a billionaire, and you probably won't be a mega-millionaire either. Start worrying about your own situation.
In any case, the whole thread about "net worth" is really besides my original point, which is that collateralizing stock for loans should be a taxable event. The only reason we got into net worth was because I said I'd only apply it to high net worth individuals, since they have almost exclusively benefitted from the economy over the last 10-20 years. This is also super achievable because to get the bank to loan you money, you have to declare the value of the assets and the bank has to agree with the valuation - super easy to determine tax on that number.
I don't feel that strongly about it if he is just sitting on the assets, but if he's leveraging them to buy Twitter, OpenAI or to donate money toward overthrowing the Democratic order, then yes, he should absolutely pay taxes for the privilege.
I'm not worrying about billionaires. I'm discussing about hypothetical ways we can tax them. They own the government, and obviously your idea of potentially making them homeless will be immediately rejected and we will be in this status quo forever.
> collateralizing stock for loans should be a taxable event
> They own the government, and obviously your idea of potentially making them homeless will be immediately rejected and we will be in this status quo forever.
Disagree. We've been negotiating from the middle. We got the New Deal because the alternative for the wealthy was facing a socialist revolution.
I'm all for threatining them with a socialist revolution if possible. However, I'm afraid they are better prepared this time. In today's world a (metaphorical) guerilla war that targets one small win at a time might be more prudent. The wealthy is not necessarily smart. Not all will see it coming.
It's such an odd argument - the wealthy always seem to know what their net worth is. We could just make them declare it. If they lie, straight to jail.
Do they? I think exactly the opposite is true - if you ask any sufficiently wealthy person, they’d need a team of people working for a bit to arrive at a very hazy net worth number. Private stock is extremely illiquid and doesn’t usually have a good mark to market, ditto most artwork. My impression is that even most public stock doesn’t generally have the depth of liquidity to absorb a founder selling any significant fraction in a short timeframe without cratering in value.
> If they lie, straight to jail.
How do we know whether they lie without a solid definition of net worth?
I'm not defending billionaires and I believe they should be heavily taxed, and huge inheritances should be outlawed, but what's Elon Musk's net worth, for example? He surely doesn't have $369 billion in cash. Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? It's tricky.
> How do we know whether they lie without a solid definition of net worth?
They get to tell us what they are worth. Generally speaking, if you want to lie about your net worth you are choosing between tax fraud and insurance fraud. There are some areas that are tricky, like pre-market startups, but we have things like 409A valuations that help with that. Penalties should have no statute of limitations - if you lie about it, you get to look over your shoulder forever. It's not perfect, but as you have clearly recognized, there is no perfect system that allows for a reasonable degree of freedom.
> Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year?
Not really tricky! He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2. If the value goes down 99%, you pay way less tax (or none if he's no longer wealthy enough to qualify). He can sell his shares to pay it, and I honestly do not care if he is not liquid enough to do that - that's a situation he put himself into. No he doesn't get a tax break on the loss - the rich have a sense of entitlement that their wealth belongs to them free of charge, and I think they should have to pay maintenance. Without public utilities (roads, electricity, air and sea traffic control, etc) and social stability, most of these billionaires would lose their wealth to warlords very quickly.
> He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2.
That doesn't make any sense. If I have $8B worth of shares and I have $2B in cash, and if the wealth tax is 20% I will have to pay all my cash this year. If my shares goes down to zero next year I'm broke. I couldn't just sell $2B worth of shares in the first year either because that would have affected the value of the shares. This is not how taxes should work.
Everyone agrees on income tax or capital gains tax because they are both cash, and the tax is also in the same currency. If we can find a way to tax wealth in the same "currency" (for example 20% of your share portfolio, plus 20% of your cash) then it might work. Obviously the state may not always be able to use shares to fund infrastructure, and cashing out those shares would diminish the value. Also it's still hard to do that for, say, real estate investments.
What doesn't make sense? He'd owe $1.6B the first year, and then he'd be shit out of luck because he drove the stock to 0. Not my problem. And you should stop putting yourself in his shoes - you will never be a billionaire, and you probably won't be a mega-millionaire either. Start worrying about your own situation.
In any case, the whole thread about "net worth" is really besides my original point, which is that collateralizing stock for loans should be a taxable event. The only reason we got into net worth was because I said I'd only apply it to high net worth individuals, since they have almost exclusively benefitted from the economy over the last 10-20 years. This is also super achievable because to get the bank to loan you money, you have to declare the value of the assets and the bank has to agree with the valuation - super easy to determine tax on that number.
I don't feel that strongly about it if he is just sitting on the assets, but if he's leveraging them to buy Twitter, OpenAI or to donate money toward overthrowing the Democratic order, then yes, he should absolutely pay taxes for the privilege.
I'm not worrying about billionaires. I'm discussing about hypothetical ways we can tax them. They own the government, and obviously your idea of potentially making them homeless will be immediately rejected and we will be in this status quo forever.
> collateralizing stock for loans should be a taxable event
I fully agree with this.
> They own the government, and obviously your idea of potentially making them homeless will be immediately rejected and we will be in this status quo forever.
Disagree. We've been negotiating from the middle. We got the New Deal because the alternative for the wealthy was facing a socialist revolution.
I'm all for threatining them with a socialist revolution if possible. However, I'm afraid they are better prepared this time. In today's world a (metaphorical) guerilla war that targets one small win at a time might be more prudent. The wealthy is not necessarily smart. Not all will see it coming.
> Generally speaking, if you want to lie about your net worth you are choosing between tax fraud and insurance fraud.
Funnily enough there is (was?) legal activity about exactly this with our current POTUS.
Real estate assets when being accounted for tax purposes: "Worth: $x"
Same real estate assets when being accounted for loan collateral: "Worth: $10x".
But of course like most legal activity against POTUS, it's just been "abandoned".