This is a general article about the merits of a wealth tax. I'm mostly sharing because I think this one hack he proposes is fiendishly clever: The rest of the article is also detailed and well...
This is a general article about the merits of a wealth tax. I'm mostly sharing because I think this one hack he proposes is fiendishly clever:
But suppose that the MacMillans and Cargills feel cheated by the IRS—they complain that the IRS, out of an interest in generating tax revenue, over-estimates the value of their firm. Perhaps Cargill has fundamentally changed since 1992, in ways that state-of-the-art valuation techniques may fail to capture. Perhaps it has weaknesses that its competitors do not share. What is to be done?
The heart of the problem is a missing market: while there is an active, liquid market for Archer Daniels Midland and Bunge shares, no such market exists for Cargill’s stock. The solution to this problem, in our view, is for the government to step in and create the market that is missing. The IRS would give the option to Cargill’s shareholders to pay the wealth tax in kind—with Cargill shares—rather than in cash. If they used this option (which they would do only if they believed the IRS valuation was exaggerated), the tax authority would then sell the shares to the highest bidders on a market open to any and all bidders—venture capitalists, private equity funds, foundations, or other rich families interested in acquiring a stake in the agribusiness giant.
The rest of the article is also detailed and well argued. I don't fully agree with the breadth of the proposal out of fairness concerns. But it's clear he's starting from an ambitious negotiating position.
I think it only seems clever on the surface. It’s not clear how it would actually work. Selling to “any and all bidders” means going public, and the SEC would have a few things to say about that....
I think it only seems clever on the surface. It’s not clear how it would actually work.
Selling to “any and all bidders” means going public, and the SEC would have a few things to say about that. There are a lot of regulations to make sure investors aren’t being defrauded. Public companies need to do quarterly financial statements and any material information needs to go out to everyone at the same time.
But, given the examples of potential investors, I think the proposal is to sell shares to private investors?
Private investment is different because there aren’t regular financial statements, usually there is no market price, and normally you can’t sell your shares without company permission. The reason these investments have value is because eventually the company will go public. As a small shareholder (like an employee) you get little or no financial information and no control over the timing so you can’t count on your investment being worth anything. It’s a lottery ticket. Large investors like VC’s get preferred shares and often a seat on the board.
I suppose it could be done, but investing in a private company that doesn’t want minority investors, having no plans to go public and no plans to return money to investors with dividends or stock buybacks, doesn’t sound like a good deal? I don’t think it would be hard for a company to implicitly say, “yeah, we have to sell this class of stock to the IRS for tax reasons, but you shouldn’t expect it to be worth anything.”
To fix this, there needs to be some kind of payoff for minority investors. What’s in it for them? The investors need to have faith that they really own a fixed share of the company’s future profits or the market value of the stock isn’t going to correspond to the company’s worth.
But once that’s fixed, the IRS doesn’t need to auction off the stock. It could hold onto it and claim a share of whatever profits investors get.
This is sort of like a state-owned company, except that the state only has a minority share. Maybe a wealth tax, or corporate taxes, wouldn’t be necessary if the state just owned some percentage of the stock market and got paid whenever there’s a dividend or stock buyback?
The approach I would favor would be to permit all wealth tax payments, public or private, to be provided either in cash or in kind to the IRS. These would then become assets under the management...
To fix this, there needs to be some kind of payoff for minority investors. What’s in it for them? The investors need to have faith that they really own a fixed share of the company’s future profits or the market value of the stock isn’t going to correspond to the company’s worth.
The approach I would favor would be to permit all wealth tax payments, public or private, to be provided either in cash or in kind to the IRS. These would then become assets under the management of a specially set up sovereign wealth fund and used as the seed for The American Solidarity Fund.
Of course Americans will never go for it because that is literal "control the means of production" Socialism, not just "the government is doing stuff" bogeyman socialism.
Pretty minor honestly. I just think relying so heavily on market valuations opens the door to a lot of gaming of the system and probably winds up punishing people whose money is in publicly traded...
Pretty minor honestly. I just think relying so heavily on market valuations opens the door to a lot of gaming of the system and probably winds up punishing people whose money is in publicly traded companies. Privately held ones will have more flexibility to do accounting shenanigans to mess with valuations.
I also think you'd want early-stage, high growth companies to not get heavily taxed to encourage their growth so the pie gets big before we start slicing it off.
I think that only becomes a problem if a company truly has no competitors to which their valuation can be compared. While publicly traded companies have their data exposed for easy review, the...
Pretty minor honestly. I just think relying so heavily on market valuations opens the door to a lot of gaming of the system and probably winds up punishing people whose money is in publicly traded companies. Privately held ones will have more flexibility to do accounting shenanigans to mess with valuations.
I think that only becomes a problem if a company truly has no competitors to which their valuation can be compared. While publicly traded companies have their data exposed for easy review, the privately held ones still have to submit tax info to the IRS, so the IRS knows whatever accounting shenanigans they're up to and can still value them against competitors/reality.
I also think you'd want early-stage, high growth companies to not get heavily taxed to encourage their growth so the pie gets big before we start slicing it off.
Yeah, that was a thought while I was reading it as well. On the one hand you don't want a startup's investors to get so heavily taxed that the sources of the investment are run out of town before the startup can succeed. On the other hand, the random ass massive valuations of startups that haven't produced a damn thing, let alone profit, are honestly just another form of tax avoidance.
My view on a wealth tax is that there are two benefits: generates government revenue, reduces wealth of the ultra-rich. If the first benefit magically disappeared, a wealth tax would still be...
My view on a wealth tax is that there are two benefits: generates government revenue, reduces wealth of the ultra-rich. If the first benefit magically disappeared, a wealth tax would still be worth seriously considering.
I think even firm believers in capitalism should support a wealth tax if they want to keep capitalism from falling apart. Virtually everyone already implicitly believes in a limit on wealth. If one person were worth the size of the US annual gdp, I don't think anyone could argue that one individual should be able to have that much power. The debate that's being had now is if there are already people who have crossed that threshold.
I'm not sure even a 3% tax is enough to meaningfully curb the power of the ultra rich. At least not for a couple of generations. I've said in another topic before that the only way to do that is...
I'm not sure even a 3% tax is enough to meaningfully curb the power of the ultra rich. At least not for a couple of generations. I've said in another topic before that the only way to do that is structural reforms to improve labor power and change corporate governance.
This is a general article about the merits of a wealth tax. I'm mostly sharing because I think this one hack he proposes is fiendishly clever:
The rest of the article is also detailed and well argued. I don't fully agree with the breadth of the proposal out of fairness concerns. But it's clear he's starting from an ambitious negotiating position.
I think it only seems clever on the surface. It’s not clear how it would actually work.
Selling to “any and all bidders” means going public, and the SEC would have a few things to say about that. There are a lot of regulations to make sure investors aren’t being defrauded. Public companies need to do quarterly financial statements and any material information needs to go out to everyone at the same time.
But, given the examples of potential investors, I think the proposal is to sell shares to private investors?
Private investment is different because there aren’t regular financial statements, usually there is no market price, and normally you can’t sell your shares without company permission. The reason these investments have value is because eventually the company will go public. As a small shareholder (like an employee) you get little or no financial information and no control over the timing so you can’t count on your investment being worth anything. It’s a lottery ticket. Large investors like VC’s get preferred shares and often a seat on the board.
I suppose it could be done, but investing in a private company that doesn’t want minority investors, having no plans to go public and no plans to return money to investors with dividends or stock buybacks, doesn’t sound like a good deal? I don’t think it would be hard for a company to implicitly say, “yeah, we have to sell this class of stock to the IRS for tax reasons, but you shouldn’t expect it to be worth anything.”
To fix this, there needs to be some kind of payoff for minority investors. What’s in it for them? The investors need to have faith that they really own a fixed share of the company’s future profits or the market value of the stock isn’t going to correspond to the company’s worth.
But once that’s fixed, the IRS doesn’t need to auction off the stock. It could hold onto it and claim a share of whatever profits investors get.
This is sort of like a state-owned company, except that the state only has a minority share. Maybe a wealth tax, or corporate taxes, wouldn’t be necessary if the state just owned some percentage of the stock market and got paid whenever there’s a dividend or stock buyback?
The approach I would favor would be to permit all wealth tax payments, public or private, to be provided either in cash or in kind to the IRS. These would then become assets under the management of a specially set up sovereign wealth fund and used as the seed for The American Solidarity Fund.
Of course Americans will never go for it because that is literal "control the means of production" Socialism, not just "the government is doing stuff" bogeyman socialism.
What fairness concerns do you have about it?
Pretty minor honestly. I just think relying so heavily on market valuations opens the door to a lot of gaming of the system and probably winds up punishing people whose money is in publicly traded companies. Privately held ones will have more flexibility to do accounting shenanigans to mess with valuations.
I also think you'd want early-stage, high growth companies to not get heavily taxed to encourage their growth so the pie gets big before we start slicing it off.
I think that only becomes a problem if a company truly has no competitors to which their valuation can be compared. While publicly traded companies have their data exposed for easy review, the privately held ones still have to submit tax info to the IRS, so the IRS knows whatever accounting shenanigans they're up to and can still value them against competitors/reality.
Yeah, that was a thought while I was reading it as well. On the one hand you don't want a startup's investors to get so heavily taxed that the sources of the investment are run out of town before the startup can succeed. On the other hand, the random ass massive valuations of startups that haven't produced a damn thing, let alone profit, are honestly just another form of tax avoidance.
My view on a wealth tax is that there are two benefits: generates government revenue, reduces wealth of the ultra-rich. If the first benefit magically disappeared, a wealth tax would still be worth seriously considering.
I think even firm believers in capitalism should support a wealth tax if they want to keep capitalism from falling apart. Virtually everyone already implicitly believes in a limit on wealth. If one person were worth the size of the US annual gdp, I don't think anyone could argue that one individual should be able to have that much power. The debate that's being had now is if there are already people who have crossed that threshold.
I'm not sure even a 3% tax is enough to meaningfully curb the power of the ultra rich. At least not for a couple of generations. I've said in another topic before that the only way to do that is structural reforms to improve labor power and change corporate governance.