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I’m still not sure why the debate has converged around a wealth tax rather than just making the income tax rate on every dollar above $1 billion 100% (or close

by bhupy 6y ago

I’m still not sure why the debate has converged around a wealth tax rather than just making the income tax rate on every dollar above $1 billion 100% (or close to 100%). That way, on the day that the super rich decide to liquidate their assets, they only get taxed on the capital gain, and for billionaires that means they only keep some small portion of it in liquid cash. You also wouldn’t have to amend the Constitution to do this.

defen 6y ago
They would just take out loans against their assets and pay the interest using relatively small asset sales.
- bhupy 6y ago
  But even if they take out a collateralized loan, they need to be realize some gain somewhere to pay back that loan. Wherever that happens, it is taxed either as income or capital gain. Nobody is going to loan Bezos billions and expect not to be eventually paid back, and that repayment can only happen if the wealth is realized as income, and then taxed. > using relatively small asset sales Those "small asset sales" are ultimately taxed. We can even talk about increasing this tax.
  - defen 6y ago
    Someone like Bezos could probably take out a 100 million dollar loan at 2% interest and just pay $2 million/year in interest in perpetuity, right (via realized capital gains)? Then they'd be well under any plausible 100% tax window.
    - bhupy 6y ago
      Depending on the proposal, a 1% annual wealth tax on Bezos would amount to $2 billion per year. If he borrowed that at 2% interest, that's $40 million/year in interest in perpetuity. Even at a more modest 0.1%, Bezos does not have $2 million / year in cash, his book income is $82,000/year, and Amazon doesn't pay dividends. Also, this is just for Bezos — depending on how volatile the paper-wealthy founder's company is, the interest would be higher, and the long run ability to pay off just the interest would be lower.

by bhupy 6y ago

defen 6y ago

They would just take out loans against their assets and pay the interest using relatively small asset sales.

bhupy 6y ago
But even if they take out a collateralized loan, they need to be realize some gain somewhere to pay back that loan. Wherever that happens, it is taxed either as income or capital gain. Nobody is going to loan Bezos billions and expect not to be eventually paid back, and that repayment can only happen if the wealth is realized as income, and then taxed. > using relatively small asset sales Those "small asset sales" are ultimately taxed. We can even talk about increasing this tax.
- defen 6y ago
  Someone like Bezos could probably take out a 100 million dollar loan at 2% interest and just pay $2 million/year in interest in perpetuity, right (via realized capital gains)? Then they'd be well under any plausible 100% tax window.
  - bhupy 6y ago
    Depending on the proposal, a 1% annual wealth tax on Bezos would amount to $2 billion per year. If he borrowed that at 2% interest, that's $40 million/year in interest in perpetuity. Even at a more modest 0.1%, Bezos does not have $2 million / year in cash, his book income is $82,000/year, and Amazon doesn't pay dividends. Also, this is just for Bezos — depending on how volatile the paper-wealthy founder's company is, the interest would be higher, and the long run ability to pay off just the interest would be lower.