> If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system
This is to once again mistake net worth for money. Net worth is not real. It is not a good measure of the money someone may be able to realise. They do not have hundreds of billions. There is nothing to tax until they sell some shares.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes. If "net worth is not real" neither is equity in real estate.
People absolutely make that argument about property taxes. That's where deferrals or abatements for e.g. elderly or low-income homeowners, or caps on property tax increases come from. Someone may own a home that property taxes price them out of, forcing them to leave their community because they can't actually conjure money from a higher priced home.
I think a lot of tax authorities also don't really aggressively reassess that regularly without a sale, so it also kind of ends up baked in that if you didn't pay that much for the property, it's only theoretically worth that much.
Predatory property taxes were a part of how so many black American farmers lost their land: https://archive.is/exkhR
Their fault for not developing it to it's highest and best use so they could afford to pay the taxes /s
This is all conceding the argument already. Many of us would happily accept these sorts of limitations on a wealth tax if it means there is a wealth tax.
The only reason it works with real estate is because they can put a lien on the house and block the sale of it. They don't have any useful mechanism to stop the sale of a share of stock, but since the government is involved in the transfer (due to the registering of the new house deed) of a house, they can stop that one.
> They don't have any useful mechanism to stop the sale of a share of stock
The SEC exists. As do many other mechanisms by which the government regulates direct and brokered securities trades and sales. You can make the case that some of those controls are poorly/ineffectively implemented, but you can’t claim that it’s not something the government routinely regulates, intervenes in, and sometimes prohibits outright.
Society has deemed it "ok" for a real estate transaction to take days or weeks to process and mountains of paperwork, probably because it is done so rarely in an average person's life. But stock trades are expected to be done quickly in minutes or even milliseconds with high frequency trading. It just isn't feasible to inject government paperwork in the middle of a transaction. Wall Street would revolt if they even tried.
Nah. Look up the SEC’s reporting requirements, specifically form 4. The paperwork requirement already exists.
https://www.sec.gov/files/forms-3-4-5.pdf
Here are Musk’s. https://www.secform4.com/insider-trading/1494730.htm
Exactly... that's why sales tax and VAT don't exist anywhere -- because there's no way to stop the purchase of goods or services.
This type of low-hanging sarcastic rebuttal doesn't belong here
Why can't govt block the sale of stocks? It's not like you would be selling non digitalized assets, govts often freeze and reverse stock sales/trades when they find it to be illegal already.
It's harder for private companies sure, but who will stand in the way of govts if they said we will sanction your if you buy X or Y company?
This entire argument doesn't really hold IMHO
The main reason real estate taxes work so well is that tax evasion is very difficult.
Because the building is standing right where it is, in the open, lit by the sun every day. If you don't pay your tax, the government can just take it.
This compensates for the several philosophical and moral problems with it, and I've seen several economists declare it the best form of taxation there is.
I feel like there's think tanks thinking up talking points that sound reasonable to convince internet communities against taxing the wealthy.
> It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes.
I don't like property taxes either, and at minimum would rather they were called something else, and preferably replaced with per-service charges where possible.
But either way they exist to pay for things, and not to just degrade the value of your property simply because you worked to own it.
Property taxes are use taxes, not wealth taxes. Apples and oranges.
If I sell my house, there's a reasonable expected range of money I can expect for it.
If a majority stock holder in a company sells all of their stock, the price first the first share sold is likely going to be completely different (and substantially less!) than the last share sold.
"It's difficult to accurately value" isn't an argument against taxing net worth. It's like the old (likely apocryphal) Winston Churchill joke, "We already established what type of woman you are, now we are just haggling over price". Just take whatever the proposal is, cut in half, quarter, or whatever fraction you want and you no longer have an argument against it.
Personally my favorite idea for this stuff that I have heard thrown around is to allow people to self value everything. However, that self valuation then becomes a price tag. Let a billionaire's accountants put their own evaluation on their equity in a business. But that becomes a binding offer and some other billionaire could come along and buy them out at that valuation. That creates pricing pressure in both directions, the person is prevented from underpricing their assets due to the threat of another buyer coming in and a person is prevented from overpricing because it increases their taxes. And suddenly all the problems regarding how the government appraises these things disappears.
I don't get it. What if the person doesn't want to sell at all? Self-value at +inf and pay 1% of that?
Forcing people to write a call option on their property without an offsetting risk premium only sounds like a good idea if you neither understand the implications nor the math. Asset values would collapse because risk would go to the moon.
And that ignores that it trivially enables large-scale exploitation and looting by construction.
>without an offsetting risk premium
Once again, this is simply haggling over price. Name the premium you think is justified and add that into the law.
It's like saying cash isn't real until you spend it. Which is true in one sense but not what they mean.
The actual mistake is pretending like they can't leverage those shares to access fiat, for example securities-backed loans. The proceeds aren't taxable income, the bank gets its interest, and the latter is typically substantially cheaper than realizing the shares and paying capital gains tax. Meanwhile, they keep the assets, which on average continue appreciating.
The obvious correct solution is to tax securities-backed loans the same as selling the securities.
Security backed loans for what though? Personal spending? Building a factory to great jobs?
That’s just a decision we made about what is taxable.
Purely an accounting artifact. We can pass a wealth tax tomorrow and it’ll suddenly be taxable.
Net worth is real money, and is usually a very accurate measure of what people can realize. There are a few outliers who own so much that they’d move the market if they sold it all. Selling 2% to cover taxes? Not going to move the market very much.
Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”
You’d think they’d jump over each other to lend money against such a stable, secure asset right?
Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”
Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.
Your 401k/Roth IRA (subtracting early withdrawal penalty) amortized over the loan period literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. You do not actually have to make distributions. It's just standard procedure that it counts when determining whether you can pay the loan.
Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself
Is Larry page borrowing “up to $50000”?
No but he’s also not borrowing against his 401k? You and I can also go and borrow against stocks held in regular accounts? https://us.etrade.com/bank/line-of-credit
Does Larry Page’s brokerage account pay no taxes on dividends like a 401(k)?
You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.
What evidence do you have that people borrow against assets as some tax avoidance strategy? What are the details of this brilliant, often repeated plan? In particular, where do you get interest rates that are low enough to make it worth it to avoid capital gains even with an asset that's grown 100x over its cost basis (and are you accounting for reinvestment of income like dividends that can't indefinitely defer taxes, creating regular tax lots with higher basis that you could sell first)? e.g. are they getting better interest than SOFR somewhere?
The framing was slightly glib, and you're correct that current rates impacts the equation, but there has been real damage caused by how extremely attractive this strategy has been over the past decade. We sitting on an unprecedented peace time deficit due to a failure to properly tax an economy that has been massively prosperous during this same period. This strategy is small part of it, but it is a real part.
So why isn't the suggestion to tax the loan instead of the asset (that is 10x more volatile than say property)?
That may be a perfectly viable solution. Seems like an easier path to me, at least. But the point is that these assets are a lot more fungible than you imply.
> It is not a good measure of the money someone may be able to realise.
And as such, when you get into the higher ranges, net worth is quite a good indicator.
>into essentially unlimited untaxed cashflow
Loans must be paid back. Loans are cash flow neutral (cash flow negative with interest) over the maturity. That's why loans are not counted as income.
In theory, maybe, but in practice that is not what happened over the past decade(s). Instead our retirement funds are paying it back.
When the market grows it makes the collateral worth more, which lets the borrower keep refinancing the debt instead of selling assets and realizing taxable gains. As long as the assets appreciate faster than the debt grows, the borrowing can effectively roll forward for decades. Eventually the estate pays the debt out of the assets themselves, but this is not necessarily out of taxable income earned during the person's lifetime. The US markets has seen exceptional genuine growth, but the trillions of 401(k), IRA, etc money flowing in to them over the last 40 years is no small consideration.
And even so, you could say it all settles out in the end, but that ignores the fact that there have constant constant efforts (and successes) in eroding away the e̶s̶t̶a̶t̶e̶ ̶t̶a̶x̶ "death tax" during this same period.
I dont know why it's so complicated to just say "Money is Money when it's Liquid, tax it then". Any loans on wealth should be taxed..nationwide.
But even in California's case this doesn't feel like anything anybody would object to. Given how much California Billionaires liquidate using loans on their wealth, I bet, they could do a middle class tax cut too to offset it a little bit too.
I am little baffled as to why the politicos haven't latched on to this whole-heartedly. You can still proudly say you're taxing Billionaire wealth. Because you are! Just more sensibly.
Yeah, it's all illiquid illusory non-wealth when they have to pay taxes, but when they want to buy a newspaper or social network they suddenly have 40 billion in hand.
Forced liquidation hurts more than the sticker price, but with billionaire taxes, that's a feature, not a bug. They make the most sense as a check on concentrated power rather than a revenue driver.
> Net worth is not real.
Well then why are people able to borrow against it and then also deduct taxes on the interest on that borrowed amount?
Also I pay property taxes. Somehow the worth of the property goes up every year and gets gets taxed accordingly. Then why can’t wealth get the same treatment?
I’d be willing to take some of the “not real” money.
> There is nothing to tax until they sell some shares.
This is a very strange claim when we have property taxes. Shares are property so they can be taxed just like houses and land.
Another thing with taxing unrealized gains is that no one in the government is willing to return any money if the unrealized losses happened. Somehow it's all hunky-dory when someone loses 1M in stock value, but as soon as someone's stock went up 1M they all want to tax it right away.
> Net worth is not real.
Good way to find out it this is the case: take it away. Not real, right? Why would they mind?
There is no way to take anything like that. Net worth is quite similar with me saying you are worth 1 billion dollars, but you have zero money in the bank. What do you take, super-rich billionaire person?
The net worth is simply the sum of assets minus the sum of liabilities. Take away the assets and you take away the net worth. I can't think of an asset category that you can't transfer if you are willing to sacrifice its value (which presumably doesn't matter, because it's not real anyways)
In the rare cases where contract law makes the transfer impossible legally the government could trivially step in to make it possible
You take control of the shares and distribute the proceeds and make it impossible to leverage them for loans, credit etc.
Is it Zuck's networth or salary that makes it possible for him to own his ranch in Hawaii?
Why not? Net worth is the estimated sell value of a list of assets. It is entirely possible to take those assets, or charge a tax based on that estimated sell value. Why would it even be a little difficult, let alone impossible?
And certainly ceejayoz was being a bit glib by suggesting we take all of it, but it would not be remotely insurmountable to tax billionaire wealth.
Because that would involve seizing assets? The parent meant it's not "real" in the simple-minded sense that people think it is: the average person imagines Elon Musk and other billionaires have a checking account that keeps increasing by tens of thousands of dollars per second because that's the only frame of reference they have. The reality is the wealth is mostly tied up in assets that ain't exactly liquid. Yes yes, they apparently have access to this supposed infinite money glitch where banks will endlessly loan them money without requiring interest payments (which would require liquidating assets for payment and therefore triggering a taxable event, the very thing people think never happens for billionaires). But the fact of the matter is the wealth isn't money in a bank, and therefore not "real" in the sense the parent was referring to. But it is at the same time something they would miss if it was just "taken away", much the same way you'd miss the numbers in your 401k if voters decided you had a few too many millions saved up for retirement.
> Because that would involve seizing assets?
Oh, are those real now?
Simply let them pay the tax with shares. Problem solved!
Well one thing is, they'd sell shares to pay the taxes. Then dilute their own ownership of the thing (Tesla, Amazon) and it would serve as another form of wealth distribution.
Charitably speaking: I suspect the commenter above you was indicating that the government should have a stock portfolio you can transfer stocks to to pay taxes in a non-taxable event type scenerio.
If you're taxing wealth (and not income) then switching stocks into cash doesn't change the wealth. Then use the cash to pay the taxes which reduces the wealth.
Absolutely ridiculous statement, it's not an accurate measure but it's definitely a good measure of money.
If you have 100B to your name even if it's post IPO stock in a possibly ponzi company that's your current wealth and you can easily convert a staggering portion of it into material realized wealth depending on several factors.
If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?
The value may not be exactly convertible agreed so let's just force everyone to book all gains every year, and force sell a net percent of your share.
Not 100B$ of share, but 2% of 100 Million units of stock that you own. Why does this not work?
If I take 2% of your shares why can't it work the same way? I can then pick and sell it over the next year or two however I see fit, in case of govt they can slowly sell back this share to not affect the prices too much.
I am baffled by the fact that we have a tractible quantity and people call it hard to use to measure money.
Paintings, Jewels, etc. are what's truly the hard part of the wealth equation not the stocks, which is over 99% of what a wealthy billionaire owns.
I am not even considering pro or against taxes on billions people make but it's ridiculous to say stocks aren't money? Then what is money really... Currency is also traded, it's value can also go up or down....
I hate this argument.
Would you rather have 1M dollars in cash or 10B in stock that you can't sell?
Depends -- can I use the 10B as collateral?
Nah, just make them pay taxes when it's valued as collateral and it's over a certain amount. Anyone saying you can't do that is lying to you.
>Net worth is not real.
You wont mind if we tax it then will you?
You do, of course.
p.s. liquidity != wealth. try not to confuse them.
If you have $2bn worth of the same listed stock and go sell half of those, now you have a net worth of $1400m because your gargantuan order drained the order depth, tanked the stock value and triggered a panicked selloff at the stock market which further drove down that stock's price.
You can't take net worth away because it's just an estimate of what someone is worth. It may eventually be possible to turned into dollars and cents without losing too much in the process, but almost universally it can't immediately be exchanged in such a fashion.
Even more so when we're talking shares in a company that is not yet public, e.g. a founder's shares. At that point the valuation is complete speculation, based on what the company may be worth in some hypothetical future IPO. There's no actual price discovery since there's no public trading of such shares.
you confused liquidity and wealth.
illiquid wealth != unreal wealth.
as I said, if it were unreal you wouldn't mind losing it.
if it is illiquid, you clearly do.
economic illiteracy is not the best foundation for arguing against taxing the wealthy. by pretending the wealth "doesnt really exist" and "isnt there" to tax it highlights the underlying greed motivating the argument.
if you dont agree, perhaps elucidate on a more legitimate reason you might have had for confusing unreal with illiquid?
The lack of reality is mostly from how much net wealth is a guessestimate. The actual realizable wealth is largely unknowable. There isn't enough price information to give a certain answer.
But sure, how do you propose to pay taxes with assets that can't be liquidated and may not even be possible to valuate?
Even if you somehow pay taxes in assets that can't be liquidated, now the government has the same problem instead. What is the government gonna do, pay its employees in unlisted stocks, yachts and famous paintings? How will it even know how much taxes it's gathered?
If the tax isn't isn't just satisfying some sense of petty envy, and the tax is intended to cover some budget deficit, I don't see how this would help.
Net worth is usually not fully realizable unless it is in the form of cash. The larger the net worth, the smaller the realizable fraction usually is. In some cases, including some highly visible billionaires, the realizable fraction is likely tiny.