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> The dollar value of shares tend to increase over time, a basic fact not reflected in this model. This is not reflected in the model because the price of the
by nybble41 6y ago
> The dollar value of shares tend to increase over time, a basic fact not reflected in this model.
This is not reflected in the model because the price of the shares cancels out: a higher price means a higher tax in absolute dollars, and a lower price means a lower dollar amount in tax. For a given tax rate you end up with the same fraction of the shares regardless of any appreciation or depreciation in their value.
A 1% wealth tax means that you cannot remain a majority owner of your own startup for longer than 70 years, at least not without sacrificing other assets above and beyond their own share of the wealth tax. At that point the government has claimed over 50% of the startup's value, regardless of any change in the share price.
A 2% wealth tax means you will lose your majority ownership within 35 years.
At a 5% wealth tax we're down to 14 years of owning your own startup.
- tehlike 6y agoYou can take a loan on your shares to pay for the tax, which happens all the time for most expenses.
- nybble41 6y agoYou have to pay back the loan eventually, with interest. This doesn't change the fundamentals. It just means you're paying a bit more overall to defer selling the shares. It does bring up an interesting point, however. Is this tax applied to net wealth? Can you subtract money that you owe to someone else? What if the lender is outside the country and thus not subject to the wealth tax? And what happens if your net wealth is negative—do you get a refund?
- tehlike 6y agoIt does change the calculation however. You can still end up owning your whole equity, with some debt that's potentially much less than the growth in the wealth (provided by keeping the equity that'd otherwise be sold).