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The issue is that many billionaires effectively have zero revenue. For example, Elon's salary at Tesla is 0$ per year. So you can increase the top bracket all y

The issue is that many billionaires effectively have zero revenue. For example, Elon's salary at Tesla is 0$ per year. So you can increase the top bracket all you want, they won't pay more. Instead they get liquidity through loans backed by their shares, on which they of course have no tax. I agree that taxing based on unrealised gains is not a good solution, but I don't see how raising the top bracket solves that either.

hedora 5y ago
Then tax the loans?
hn_throwaway_99 5y ago
People keep using this example, but it doesn't really make sense. If you take out a loan against the value of your increased shares, then you still have to pay that loan back eventually, and when you do, you have to pay tax on whatever you liquidate to get the funds to pay back the loan (in addition to paying interest on the loans). This is literally how all loans work. The one loophole here is that if you don't pay your loans back until you die, then your heirs have to pay back the loan. But there is a special "step up in basis" provision where your heirs wouldn't have to pay capital gains tax on the rise in the value of your shares (but you would). Close that loophole and then you'd have a fair system.
- nmfisher 5y ago
  As I understand, though, the USA CGT rate is basically half the income tax rate, so even if they eventually pay tax on disposal to meet the loan repayments (which they don't, at least not on a 100% basis), they still pay only half the effective tax rate.
- aluminum96 5y ago
  Even if heirs do have to pay tax eventually, do we really want to wait 40+ years to collect taxes on wealth that is being generated using today's resources? If I recall correctly, Elon has been rolling over his personal loans for a while now, in excess of a billion dollars. At this point, these are basically untaxed stock sales.

hedora 5y ago

Then tax the loans?

hn_throwaway_99 5y ago

People keep using this example, but it doesn't really make sense. If you take out a loan against the value of your increased shares, then you still have to pay that loan back eventually, and when you do, you have to pay tax on whatever you liquidate to get the funds to pay back the loan (in addition to paying interest on the loans). This is literally how all loans work. The one loophole here is that if you don't pay your loans back until you die, then your heirs have to pay back the loan. But there is a special "step up in basis" provision where your heirs wouldn't have to pay capital gains tax on the rise in the value of your shares (but you would). Close that loophole and then you'd have a fair system.

nmfisher 5y ago
As I understand, though, the USA CGT rate is basically half the income tax rate, so even if they eventually pay tax on disposal to meet the loan repayments (which they don't, at least not on a 100% basis), they still pay only half the effective tax rate.
aluminum96 5y ago
Even if heirs do have to pay tax eventually, do we really want to wait 40+ years to collect taxes on wealth that is being generated using today's resources? If I recall correctly, Elon has been rolling over his personal loans for a while now, in excess of a billion dollars. At this point, these are basically untaxed stock sales.