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Think about how hard Founders work to efficiently divide up the equity pool of their company in order to entice and retain top talent. Consider that the State a

• garmaine 6y ago
  This. The California wealth tax would kill the startup ecosystem in California, simply because every founder dreams of being a unicorn, but being a unicorn puts you in an untenable position of owing a six or seven figure tax bill every year while you have no liquid assets.
  • zentiggr 6y ago
    Sounds like the bubble would naturally dry up and the "burn the cash, take the payout and run" culture would start to heal. Having startups that grow profitable, useful things at a healthy pace and that give back a small slice of their overall growth sounds like a pretty stable business model.
• dalbasal 6y ago
  IMO, the honest way to think of a wealth tax is as am implied income tax. That is, a tax on the implied income from wealth. Instead of calculating CGT, which doesn't work very well in practice, just tax the wealth. This avoids all the problem incentive structure, and even worse tax code structure dealing with the fact that some years you make a return and in other years you make a loss. Liquidity is solvable, if we're actually talking about a super wealthy tax with a floor of $50m and above. At that point, you are dealing with people individually. In terms of "reducing the portion left which has to justify the risk/return proposition..." I don't think this applies. You have $1bn. You owe $10m in taxes. You owe that tax regardless of what you invest in, conservatively or otherwise. It even solves some of that problem, if it replaces CGT. A CGT without loopholes (doesn't exist, and won't) disincentivizes risk. If you win big, you pay big. But of you lose, the IRS doesn't pay you. That incentivizes playing it safe. IRL tax credits exist, and those more than compensate big CGT payers. In some famous example (eg Trump) derivative policies are big money generators. IE, invest for tax credit, not market gains.
  • zozbot234 6y ago
    The implied income from wealth is zero, because e.g. $10 being spent ten years from now is less valuable than $10 being spent today, in a way that - in expectation - accounts precisely for the apparent "income" yielded by $10 (as 'wealth') over ten years.
    • zxcmx 6y ago
      Billionaires don't hold cash, they hold assets. Property, shares, anything that throws off revenue or grows in value.
      • zozbot234 6y ago
        Sure, but that seemingly-extra "revenue" or "growth" is not free - it comes with offsetting risks. Should people be taxed merely because they made a risky bet that happened to pay off for them?
        • zxcmx 6y ago
          Nothing in this world is risk-free, because the world is inherently uncertain. Holding cash is also risky. We can calculate a risk free rate of return however, and we can also look at historical returns and rates wealth growth to estimate what a "fair" rate might be. But since this is really a "should" question (aka about values), theres not really a right answer. We can mostly just talk about fairness, of which there are many different conceptions. My take: Society has to work hard to preserve the billionaire's wealth. You can't be king without an army, and billionaires exist because of laws, police and a social fabric that lets them keep owning so much stuff. You would otherwise have to be a warlord to keep your hands on so much, and that has its own costs and risks. Perhaps we could look at it as a fee or compensation for the aggregate social guard labour required to preserve the social order that ensures the safety of the billionaire's assets.
          • Mirioron 6y ago
            What happens when some of those billionaires band together and decide that they are better at defending what they have? It'll result in governments being overthrown or the billionaires leaving for somewhere else. Billionaires are still people. If they become too unsatisfied with their treatment, then they will do something about it. Just like everyone else.
• epistasis 6y ago
  > and while the government might take your last 409a valuation as the means to valuing your net worth, they aren't accepting your shares as payment, only cold hard cash. There aren't any wealth taxes of this nature on the books in the US, so assuming that they will only take cash and not shares is premature. But I think you raise a good point that payment in shares is far more tenable, and likely probably, for highly illiquid economic assets.
  • lostdog 6y ago
    AMT still applies to illiquid gains and can bankrupt people. They still haven't fixed this.
• gnopgnip 6y ago
  The CA wealth tax (that is only .4% a year) addresses liquidity. The taxes can be delayed until there is a sale for illiquid assets.
  • dpoochieni 6y ago
    Ooof that sounds like a big loophole. What would prevent me from establishing a new entity (I the inheritor, control), having it buy assets from the old one for pennies on the dollar and then sell the old entity for a nominal amount?
    • gnopgnip 6y ago
      The tax is assessed based on what you own each year, not only on the final "sale" amount