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points by TrackerFF 1 day ago | 0 comments

The vast, vast majority of wealth (to the wealthy) are in form of company ownership, stocks.

So let's say you start taxing the ultra-wealthy based on their assets. They then have the option of:

1) Make the company pay out dividends, so that owners can afford to pay their wealth tax. Not ideal, because what happens during bad years where there's no dividends to be paid out? Or if companies want to re-invest in the company?

2) Sell stocks. Again, not ideal. This would mean that you lose some ownership year by year.

3) Take up personal loans to cover taxes.

etc.

Note, I'm NOT saying that we shouldn't do anything. But this is just the consequence of such assets (stocks) being the dominant asset among the wealthy.

[–] snaking0776 1 day ago

Why is 2 a direction to be avoided? Is it really so bad to prevent an individual from having majority voting rights over a corporation which has power on par with most nation states? I’m not sure a billion dollar cap is the answer here but surely there must be some kind of reasonable ceiling. Is it so bad to think that one individual shouldn’t have majority ownership over a company dominant for the US space program? Or control over major international internet access that’s useful during conflicts? Or major social media platforms which provide algorithmic dials to tweak what information is visible?

I think there’s really only a few solutions to it which all involve some kind of divestiture, it just depends on if you want to target corporations or individuals:

1) a new wave of anti-trust ala Lina Khan and breaking up most major tech companies.

2) passing laws limiting the behavior of, and allowing for the punishment of corporations and group agents as a whole. There’s a lot of philosophical work about how to hold a group accountable for their actions, try searching List and Pettit Group Agency. There’s been a lot of development since then but I’m less aware of it.

3. Caps on decision making power (potentially measured via some weighted stock ownership, or wealth more generally) like suggested above. I agree there would be a lot of second order effects here which are beyond the scope of this comment but I think we’ve clearly gone too far in one direction where single individuals are now essentially funding national party midterms, have increasing power over real world conflicts, and any other of the myriad of corruption issues you can find out in the wild.

[–] _DeadFred_ 1 day ago

Every year I have to come up with the money to pay property taxes on my home based on an unrealized gains valuation. It's one of my largest expenses. I don't even really have the option of just selling some of my home to pay them. Even with this tax people still own homes.

[–] ksec 1 day ago

This thesis assumes all billionaires are holding on to companies that "has power on par with most nation states".

In reality majority of billionaires are in industries and companies that does not even remotely have the same benefits or power.

[–] Obscurity4340 1 day ago

Can everyone just reverse the damn burden and play People's advocate for one damn second?

Why is it normal that regular people would have to sell their homes just to have a prayer of paying their minimum nut but its aways "muh unrealized stocks" when it comes to billiionaires?

Why should they be exempt from a propoetionate burden to pay the societys on a from whom they are fundamentally predicated to be feasible?

[–] ksec 1 day ago

>Why is it normal that regular people would have to sell their homes just to have a prayer of paying their minimum

Because that is not normal and shouldn't happen either. And I dont understand why this is used as an example.

I dont expect normal people to have to sell their stock. Nor do I believe in tax on asset for anyone. Capital Gain Tax should just be Income tax.

[–] bigbadfeline 8 hours ago

> Because that is not normal and shouldn't happen either.

I would believe this if you had started fighting existing property taxes first and waited until you have finished that job before trying to prevent non-existent asset taxation.

> I dont expect normal people to have to sell their stock.

Selling stock isn't abnormal, it's done every day. More importantly, people don't have to sell stocks to pay taxes, instead they could use dividends or part of the income they normally use for buying more stocks. The current obsession with growth stocks is part of the problem.

> Capital Gain Tax should just be Income tax.

I wish a good economy could be built without any asset/property taxes but I don't think that's possible. As with everything else, asset taxes can be quite harmful if implemented the wrong way, but that's a different conversation.

[–] ffsm8 1 day ago

I don't think forcing majority stakeholders to sell their stocks over the years would have your proposed effect. The position of power here is mostly with the CEO of those companies. And that's not gonna change with this scheme.

Honestly, there isn't a clean solution to this problem- or at least none that doesn't come with unpredictable consequences. I think everyone can agree that companies growing too large inevitably become harmful for the society they're enabled by, but there are no previously established solution we can reach for... And every decision you can make will have trade-offs. Also, were pretty late game into free market capitalism. Any changes to the status quo will dis-/advantage someone, and they will utilize the tools available to them to stop you. So such deep cutting changes are beyond unlikely without first descending into complete chaos. Which would likely be worse for the majority of people...

[–] fooqux 1 day ago

Maybe it's just me, but I don't see much wrong with any of the options above. Most of my assets aren't liquid either, yet I'm still taxed at a much much higher rate (when compared to total assets) than the top. I have to make decisions like "how much will I need good health care coverage next year?", which I shouldn't have to say isn't "ideal" either.

[–] rickydroll 1 day ago

You're taxed on income, like anyone else, but the big difference is that wealthy people get liquid cash through tricks like borrow, spend, die. They also have other ways to gain wealth that don't involve a cash phase.

I'll get hate from some corners on this, but I'm coming to see the wisdom in not significantly increasing the tax rate on the rich, but instead broadening the tax base. For example, count tricks like borrow, spend, die as cash; make stock buybacks illegal; treat compensation in the form of assets as cash income at the valuation price when the transfer happens; count inheritances above $X million as income, cash income.

[–] Obscurity4340 1 day ago

If the low end of welfare recipients tried anything like the shit the rich get up to they would be sqatted yesterday

[–] rickydroll 15 hours ago

Personal Panama Papers? :)

[–] kshri24 1 day ago

Wealth tax is not on Assets. It's on Stocks. The top pay the same tax on their personal income. Wealth tax is different. It taxes Ownership of Stocks not Assets.

[–] SAI_Peregrinus 1 day ago

How are stocks not assets? They're shares of ownership in a company, without personal obligations to that company. They're certainly not liabilities. So what do you think they are?

[–] kshri24 1 day ago

They are assets from personal perspective yes. But they are in the form of equity in company's balance sheet in which it is invested. Which is why it is on the liability side of the equation (A = L + E).

If you impose a wealth tax on this, which side are you imposing it on? Company or individual investor in the company? You cannot impose a tax on what is technically a liability on the company's books. So you would have to impose on the individual investor. Lets try with an example: assume the wealth tax is 10%. Lets also assume I hold 5 million common stock, pre-seed, in a startup I founded (45% equity). How would the stock be valued? It should be zero. So I pay zero wealth tax. Then I get an investor onboard, who invests say $1 million at 10%, valuing the company at $10 million. Lets assume, because of this capital infusion, my equity gets diluted to 40%. That means I am on paper worth $4 million. I immediately owe 10% of it or $400,000 to tax authorities. Without having made a single cent in revenue. My co-founder would also owe $400,000. We have no money of our own except to use the investment money to pay the taxes. That is $400,000 + $400,000 = $800,000. We are left with only $200,000 in the bank. Before we even started the company.

You might say 10% is too much. Lets reduce the wealth tax to say 1%. Or even 0.1%. Then the entire idea becomes meaningless. Might as well just charge extra corporate tax.

[–] Obscurity4340 1 day ago

What are you actually living off is the "million dollar" question? Normal people have to pay income tax and its on the gross or whatever, how are you paying your bills is completely absent here

[–] SAI_Peregrinus 15 hours ago

Rich people take out loans against the value of their stocks. Those loans are liabilities. Then when they sell stocks (presumably after the value has increased) to repay the loans they only pay tax on the capital gains, not the total income. As long as capital gains tax + interest on loans is less than the equivalent income tax, they pay less tax.

[–] Obscurity4340 1 hour ago

So that should probably change. That needs to stop being treated as a liabillity and apply an income-akin designation to it that makes it eligible for equitable taxation

No more of this "cheap to be rich" crap, they can pay same as everyone else who doesnt have a choice, join us Great Unwashed

[–] angusturner 1 day ago

Is this concerning? Can you explain your point a bit more clearly, for the benefit of people like me that don't want individuals to have more power (whether its in "stocks" or "assets") than entire nations?

[–] kshri24 1 day ago

It is concerning for the simple reason that you have a stake in a company based on a future bet that the company will succeed. There is no guarantee for success. It's because owner has a stake will he/she work towards building a vision for his/her idea that is put into execution. Asset is not tied to any idea whatsoever nor is there any vision to strive towards. Infact the investment itself exchanges stock for introduction of asset (capital infusion). So money is being put into the company by owners or investors in exchange for stake. Beneficiaries of this capital investment will be employees first typically. Only once the company takes off and finds success can owners/investors cash in on their investment that too if they sell their stock. So in effect the rich have their money locked-in.

If you tax stocks, the rich will have no incentive to keep their money locked-in. They will encash and exit to a jurisdiction that allows them to invest their proceeds into stocks again. Lets assume a hypothetical scenario where all jurisdictions impose a tax on stocks. Then they'll retire by investing in assets or heck just keep it in their banks.

What you are asking for won't work in a capitalist society (which is pretty much every society on Earth). The only way out is UBI.

[–] croon 1 day ago

> Lets assume a hypothetical scenario where all jurisdictions impose a tax on stocks. Then they'll retire by investing in assets or heck just keep it in their banks.

What untaxed assets would those be? Are you saying the bank interest would be higher than other investments minus tax?

I am having trouble following your argument to your last conclusion.

[–] kshri24 1 day ago

Taxed assets are always going to be way lesser than any hypothetical tax on stocks. Lets assume investment is in housing. Rent collected can easily be used to offset property tax on the asset. Now you cannot collect rent on stocks the way you can collect rent on assets like a residential/commercial property. So the only way to pay tax on stock value (which is assessed by a valuer at that particular point in time) is by either paying it out of personal pocket, taking a loan or selling the stock. None of those options are feasible.

> Are you saying the bank interest would be higher than other investments minus tax?

It absolutely will. When you tax stocks, you are eroding its value. Why would anyone want to continue to keep their wealth in stocks when they could just cash out and not lose any of that value?

[–] croon 1 day ago

> Taxed assets are always going to be way lesser than any hypothetical tax on stocks.

This is not a universal truth.

> Rent collected can easily be used to offset property tax on the asset. Now you cannot collect rent on stocks

You actually can, it's called securities lending.

> So the only way to pay tax on stock value (which is assessed by a valuer at that particular point in time) is by either paying it out of personal pocket, taking a loan or selling the stock. None of those options are feasible.

1) Why not. 2) Sounds like someone needs an income (which is already taxed and would have solved much of the tax avoidance).

> It absolutely will. When you tax stocks, you are eroding its value. Why would anyone want to continue to keep their wealth in stocks when they could just cash out and not lose any of that value?

A lesser gain is not a loss.

[–] _DeadFred_ 1 day ago

paying it out of personal pocket is what I have to do when I pay property taxes on the unrealized value of my home. And I don't have the option to sell partial shares of it. This tax is my biggest expense.

[–] vrganj 1 day ago

UBI would mean forever locking in autocratic control by the few owners, reducing the rest of us to depend on the graciousness of those who have time and time again shown they have none. An allowance is not a solution to the power distribution problem.

We cannot claim to live in a democracy while Elon Musk gets to decide whether our allies can use communications or close down entire branches of government.

There's many other solutions you gloss over, from capital controls for the more near-term issue to moving past capitalism for the more long-term systemic fix.

You dont need incentives for the rich. You can just pass laws limiting their options.

[–] kshri24 1 day ago

UBI can be implemented in a different way. Tax a portion of the profits earned and reserve it specifically for UBI. It is not an allowance either. It is what will keep economy afloat. Else if no one can buy the products/services the rich sell, then their stocks will be worth nothing.

> We cannot claim to live in a democracy while Elon Musk gets to decide whether our allies can use communications or close down entire branches of government.

This can be fixed with laws around lobbying.

> capital controls for the more near-term issue

Capital controls won't solve much because it is a one time exit tax that stakeholders have to pay to move out of the jurisdiction taxing stocks. Those who cannot move will shutdown their companies and invest those proceeds into assets, typically immovable (like land/houses etc), which will drive housing prices up. It has cascading effects that affect the economy in a different way.

This causes displacement of those who cannot afford housing, which will incentivize the rich outside the jurisdiction to buy up assets and then that causes a change in voting structures. The rich can then vote their candidate who will reverse capital controls. Or maybe they won't and keep it that way so they have their own gated society so to speak with no entry for those who cannot afford to be there. You can already see it happening in few places in the World where such controls exist.

> You dont need incentives for the rich. You can just pass laws limiting their options.

You are missing the point. The incentives are for everyone who want to give it a shot at trying to take their idea, implement a vision and then execute on it. Does not mean they will succeed. The tiny percentage who do succeed end up becoming rich. See the number of startups that succeed vs those that failed. You are not disincentivizing the rich by imposing wealth tax. You are disincentivizing the average Joe who wants a shot at making it.

[–] vrganj 1 day ago

Of course UBI is an allowance. You can't just say it isn't without making an argument. The problem isn't just money. It's ownership. If a few dudes control most productive forces, that is inherently antidemocratic. No amount of trying to pay off the public with some elaborate scheme that doesn't remove their control will fix that.

> This can be fixed with laws around lobbying.

No it can't, and lobbying has nothing to do with the problem of one guy being the petty autocrat on top of his empire rivaling democratic states.

> Capital controls won't solve much because it is a one time exit tax that stakeholders have to pay to move out of the jurisdiction taxing stocks.

Who said that? You've defined your own narrow version of capital controls to then argue against. States could just ban moving capital out of the country. Countries can just pass laws! They don't need to do whatever makes rich people happy.

> You are missing the point. The incentives are for everyone who want to give it a shot at trying to take their idea, implement a vision and then execute on it.

You are missing the point. People do all sorts of stuff for all sorts of reasons. Many companies are founded because somebody saw a real issue and wanted to fix it. Others are founded because somebody found a loophole or a way to extract capital by moving some numbers around or monopolizing something others need.

I would posit that if the only reason somebody opens a company is greed, then maybe that company would be a net-negative for society anyways?

[–] belorn 1 day ago

The way Sweden taxes stocks is to give people a choice between two options. They can either tax the total change in ownership value between each year (profit vs loss), or to pay a fixed (lower) tax on the total value regardless of profit or loss.

The first option guaranties that you don't pay more in taxes than you earn on the stocks, and the later has higher risk vs reward. For some reasons, the later seems to be the most popular choice, despite the risk that the owner need to cover the cost of taxes regardless of what happens in the stock market.

[–] xeyownt 1 day ago

How would losing ownership be a bad thing?

Isn't that exactly what we are trying to achieve by re-distributing the wealth, and avoiding that few people have such huge ownership that they have more power than governments ?

We are still living in a middle-age system, where the lords don't own lands but stocks and companies, but they still dictate the laws.

[–] Etheryte 1 day ago

You didn't really highlight how any of this is a problem? Yes, if you sell some of your assets, whatever kind, to pay for taxes then you'll have less assets in the end. That's literally how taxes work.

[–] kshri24 1 day ago

You are not selling Assets but Stocks. Stocks come under Equity not Assets.

[–] Etheryte 1 day ago

We are talking about people here, not corporate accounting. Stocks are financial assets.

[–] kshri24 1 day ago

Stocks are still owned by people who have a stake in the company. They are not owned by the company.

Edit: Again, stocks are not financial Assets.

[–] newsclues 1 day ago

Why start a business in this sort of economic environment?

Work hard, so that the government can redistribute your success?

Or you have the problem of businesses slowly losing their owners, who then stop caring about their clients or community.

What is the result of these taxes? Where does the money go? Does it lead to more economic activity or less?

[–] adwn 1 day ago

> Why start a business in this sort of economic environment?

Why take on a job when you have to pay income tax? Because you'll still have much more left over than if you didn't. And this answers your question: because you'll still have much more left over than if you didn't start a business.

[–] newsclues 1 day ago

If taxes are high enough, they will disincentivize work.

I'm on disability, and if I make over $1000 a month, anything over $1000 gets taxed at 75%.

Do you think I work enough to make over $1000 a month? Do you think I'd scrub toilets for $20 per hour and take home only $5?

Hint: after $1000, I either get paid cash or don't work

[–] UncleMeat 1 day ago

Sure. If a wealth tax was set at 99% it'd be dumb. But this is not itself an argument against all taxes.

[–] UncleMeat 1 day ago

We already have income tax. Why start a business in this sort of environment? Work hard, so that the government can redistribute your success?

Amazingly, people still start businesses.

[–] vrganj 1 day ago

Why do anything in life?

[–] angusturner 1 day ago

The phrase "your success" is doing a lot of heavy lifting here.

You understand that billionaires don't make money from labor right? They get their money from rents and the return on capital. Roughly 5-7% per year, compounding, risk free, for perpetuity.

[–] rich_sasha 1 day ago

A nice idea I heard is to introduce a minimum tax rate based on wealth. Let’s say the magic number is 0.5%. Then you say, every individual (over some threshold etc) needs to pay max(normal tax calculation, 0.5% of wealth) .

What I like about it is that it doesn’t penalize people who already pay taxes. It’s a lower bound, not an extra.

What makes me weary about any such tax is that in practice, it seems to target the broad middle class - people who have enough assets to be interesting to the tax man, but who don’t have enough to hide it or avoid taxes.

[–] teroshan 1 day ago

> What makes me weary about any such tax is that in practice, it seems to target the broad middle class

If you're talking about the "Zucman tax" it explicitely targets the ultra-high-net-worth individuals because that's the population that manages to avoid income tax and thus pay a lower effective tax rate than the rest of the population.

source: https://gabriel-zucman.eu/files/report-g20.pdf

[–] rich_sasha 1 day ago

Yes that’s what I was referring to (I couldn’t remember his name).

Still my concern would be that the other Zuck would show he has no income and no assets, while a doctor or coder would end up paying extra tax on their retirement savings.

[–] xjm 1 day ago

They can pay with shares into a state fund and the state could even return the voting power. It can be done if we want it. That was in a proposal in French legislation for example, so it's not 100% crazy and to me it seems completely natural.

How is that not the obvious comeback to the argument "wealth is stocks so we can't tax it"? Is there an obvious downside?

[–] viraptor 1 day ago

> This would mean that you lose some ownership year by year.

What's the problem? It's not like you'll have to sell over 50%. Even then the are schemes for non-voting shares. But when close to 1% of population works for Amazon, maybe forced sharing of ownership isn't a bad idea.

[–] angusturner 1 day ago

I don't understand the problem.

Besides any argument about fairness, wealth inequality is highly destabilizing and historically has only been corrected by revolutions, wars, crises etc.

If a few billionaires need to sell stocks to avoid such an outcome, that seems quite desirable to me.

[–] GeoAtreides 1 day ago

Do you know that if I own a house and can't pay property taxes, it gets repossessed and sold? this is common. Let's apply it to stocks and billionaires too.

[–] UncleMeat 1 day ago

Yes if you tax people's wealth they will own less stuff. I see no reason why #2 isn't ideal.

[–] vrganj 1 day ago

Why is 2 not ideal? That is exactly what should happen.

Wealth concentration is a problem because wealth concentration is power concentration.

Why should a few dudes have autocratic control of entire industries?

If you force them to sell off their stakes over time through a wealth tax, you make the economy more democratic.

[–] alistairSH 1 day ago

Um, tough, if you want to be a billionaire, you get to sell a tiny fraction of your assets to pay taxes. If they don't want to sell assets, they can pay themselves a larger salary or something. Or, like you said, take loans which is literally what they do to afford their lifestyles, just use that for taxes. I don't really care which.

"Taxing the rich" is literally solving the thing that is a problem today.

[–] cpill 1 day ago

this guy makes a good point that if we don't all the weather/assets will naturally concentrate at the top. option 2 is the only real way to go, we do it when these rich guys get divorced, we can do it for tax https://youtube.com/shorts/o2J7SmssHY0?si=FQxafqRL6dqCUdk3

[–] surgical_fire 1 day ago

You know what is actually not ideal?

Having hordes of people in poverty while we bend over backwards to not inconvenience the rich with "selling stocks" to pay taxes".

[–] choeger 1 day ago

The thing is: You cannot eat, or live inside, or get medical treatment from, stocks.

Wealth taxation cannot redistribute the kind of wealth we care about most. At least not by itself.

You need someone to buy the stocks in exchange for labor. So you need to keep the stocks themselves valuable.

As an extreme example, if you'd just take away all the SpaceX and Tesla stock from all shareholders and redistribute them, they would probably be near worthless because you just demonstrated that their value is more or less random.

I think that wealth taxation will only work if you give ironclad guarantees that people that are merely rich or middle-class will never be subject to it. If you can show that a stock is more valuable to, say, a medical doctor, then to the CEO of a hyperscaler, you might have a working system.

[–] vincnetas 1 day ago

But somehow these rich people take loans of real money that they buy real things for. So it looks like you could eat or live from stocks.

[–] angusturner 1 day ago

The main purpose of wealth tax is not redistribution, but curbing the tide of power concentration.

If large fortunes keep doing 5-7% per year compounding, outpacing the avg. growth rate of economy, wages etc. then we keep ending up with Musk-like figures with such outsized amounts of power and influence that it basically destabilizes democracy altogether.

You can't get rid of these people because they just have too much influence -- i mean, literally buying entire social media platforms. C'mon.

Its really just a question about whether you want society to continue functioning with some semblance of fairness and stability.