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> a wealth tax is a percentage of the dollar value of wealth, not a percentage of the number of shares of stock you own. If I expropriate 5% of your wealth, an
by cltby 6y ago
> a wealth tax is a percentage of the dollar value of wealth, not a percentage of the number of shares of stock you own.
If I expropriate 5% of your wealth, and ~100% of your wealth is in shares of stock, what percent of your shares have I taken?
- hkhanna 6y agoThe answer is: it depends on the fair market value of the shares of stock I own. If the shares are publicly traded, there's an easy answer. If they're not publicly traded, it depends on how FMV is determined, but it would not surprise me if the wealth tax allowed the 409A valuation to be used for this purpose.
- cltby 6y agoYou have x shares of stock, each worth $a. Your net worth is $ax. The government wants p% of your wealth, so it takes p * (ax) dollars from you. I hope we can agree that this is the same as a * (px). In other words, they've taken p% of your shares. Why does any of this depend on mumbo jumbo about FMV and 409A valuations?
- hkhanna 6y agoYou are assuming that you know $a. You don’t know $a for shares of stock in a pre-IPO company. That’s why FMV and 409A matter here. They allow us find $a in a way that’s acceptable to the IRS. We are talking about taxes, after all.
- cltby 6y ago$a is arbitrary. It doesn't matter how you arrived at it. As long as you provide a reasonable assessment to the IRS, pg's original point (which you objected to) is completely correct: an f% wealth tax is an f% seizure of your shares. And if you object that you can just lowball that assessment; well yes, and by the way you've just conceded nearly every point made by opponents of the wealth tax.
- tehlike 6y agoIf the stock is public, none. Take a loan, and let the equity grow
- cltby 6y agoRecent history has shown us that financing equity positions with debt (i.e. leverage) can be... risky. In any event, I consider leverage to be outside the scope of the parent comment's observation.
- tehlike 6y agowell for wealth tax, you don't need more than a percent or two. It wouldn't be a problem at all. You may not consider leverage, but it's fairly known & well used practice to take loan out of equity. People do it with their stocks as FANG employees. Founders with the wealth could have access to even cheaper loans.