Selling off securities, real estate and other assets is extracting wealth from companies. One reason the general ROI of generalized wealth is higher than 1% is

Selling off securities, real estate and other assets is extracting wealth from companies. One reason the general ROI of generalized wealth is higher than 1% is because the sort of people who accumulate it are allowed to do so without it all being taken away in taxes, so they're incentivized to grow their investments. The assumption that average ROI remains constant even after changes to the tax system is the sort of bad economic modelling that the article criticizes, and apparently someone won a "Nobel prize" for (economics isn't AIUI a real Nobel prize) just for pointing that out. A lot of rich people are rich on the back of investments, so clearly if they leave there are fewer people around creating that 4-5% to begin with. You're right that wealth taxes interact very badly with startups. In fact in Zürich, Switzerland they had to adjust the wealth tax rules because it was basically killing any chance of a US-style startup scene. The moment you raised money from investors you would be considered really rich, not just paper rich, thus forcing the company to give huge payments to the founders so they could settle the wealth tax, and those payments would themselves be considered income immediately pushing the founders into the highest possible tax bracket, etc. Even if they're actually living on ramen! Unfortunately the fix for this took the form of the government granting special privileges to companies classed as "startups", which leads to a strange bureaucratic process in which the taxmen try to decide if your business model is "innovative" or not, using some internal definition, because "startups" are defined to have "innovative" business models. This is well beyond the scope of what a tax official should be deciding IMO, but it's the kind of thing that seems inherent to trying to implement a wealth tax.