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You start a business, and against the odds it’s successful! You hire employees as it grows to scale operations, only now it’s now worth 11 million dollars. Now

You start a business, and against the odds it’s successful! You hire employees as it grows to scale operations, only now it’s now worth 11 million dollars. Now what? Do you have to pay 100k in taxes to cover a totally illiquid asset? Who is doing the buying here that isn’t subject to the same tax? Do you give away shares to family? Do you sell off ownership and lose control? What’s the point of taking any business past that threshold? Seriously, now what?

analog31 5y ago
You take 100k out of the kitty and pay the tax. Your investors knew up front that this could happen. The point of taking a business past that threshold is that it can make enough money to cover the tax while also growing itself. What does a homeowner do when they don't have the cash to pay their property tax?
- kansface 5y ago
  In this scenario, I can only assume that corporations are not subject to the same tax, less you would destroy every medium to large business that competes internationally? This would be all domestic manufacturing for instance. If so, I don’t imagine that funneling even larger amounts of capital into corporations is what you have in mind. The point isn’t that the tax couldn’t be paid for, it that it’s an extremely perverse incentive against growing your business. Why bother trying when you will be forced to divest, or take on millions in personal loans on bad terms (illiquid asset), inevitably losing control? This policy would be a disaster.
  - analog31 5y ago
    The tax could be imposed on the owners of corporations. It boggles my mind that a 1% tax is a cap on the size of a business. The other way to raise the money is that the business could sell something, such as a product.
    - kansface 5y ago
      A tax on capitalization is fundamentally different than one on profit or income. A chip fab is a 20 billion investment over 3 or more years. They'd pay out upwards of a billion dollars before they begin to sell anything. Any domestic industry that is capital intensive with low margins or high risk would die. A wealth tax is a terrible incentive for investment and growth of local businesses.

analog31 5y ago

You take 100k out of the kitty and pay the tax. Your investors knew up front that this could happen. The point of taking a business past that threshold is that it can make enough money to cover the tax while also growing itself. What does a homeowner do when they don't have the cash to pay their property tax?

kansface 5y ago
In this scenario, I can only assume that corporations are not subject to the same tax, less you would destroy every medium to large business that competes internationally? This would be all domestic manufacturing for instance. If so, I don’t imagine that funneling even larger amounts of capital into corporations is what you have in mind. The point isn’t that the tax couldn’t be paid for, it that it’s an extremely perverse incentive against growing your business. Why bother trying when you will be forced to divest, or take on millions in personal loans on bad terms (illiquid asset), inevitably losing control? This policy would be a disaster.
- analog31 5y ago
  The tax could be imposed on the owners of corporations. It boggles my mind that a 1% tax is a cap on the size of a business. The other way to raise the money is that the business could sell something, such as a product.
  - kansface 5y ago
    A tax on capitalization is fundamentally different than one on profit or income. A chip fab is a 20 billion investment over 3 or more years. They'd pay out upwards of a billion dollars before they begin to sell anything. Any domestic industry that is capital intensive with low margins or high risk would die. A wealth tax is a terrible incentive for investment and growth of local businesses.