“Billionaires' Tax”—Latest Wealth Tax Scheme

In their desperate quest to find more pockets to pick, U.S. Democrat politicians are now floating a “billionaires’ tax” which would tax unrealised gains on liquid assets (stocks and bonds). Here’s a summary from one of the U.S. midwit financial porn channels.

This would be the first time unrealised gains would be deemed “income” under the U.S. constitution’s 16th amendment. “How can it be income when nothing has, you know, come in?” Well, just asking that shows you’re not an Imperium tax “expert”.

This would have a devastating impact on founder-shareholders of successful companies. As the video notes, if this tax were assessed at ordinary income rates (which is doubtless what they want, but may not get), Elon Musk would owe more than US$ 30 billion on his unrealised gains in Tesla stock over the last year. To pay this tax, he would have to sell a substantial fraction of his holdings, weakening his control over the company and its strategy. And if, after being forced to sell and pay the tax, Tesla stock were to give up most of those gains in a stagflationary recession resulting from disastrously flawed policies enacted by the same solons who picked his pocket, does he get the money back? “Sorry, mate. You immigrated to the wrong country.”

Democrat “moderate” Kyrsten Sinema is said to support this scheme.

“But, hey, it’ll only apply to 700 billionaires”, they say. Well, that’s what they said (re-gauging BidenBucks to gold-backed dollars) when the original income tax was enacted. Just wait a few years when the collapse of BidenBucks makes everybody a “billionaire” and the Legislature enacts a “common sense fairness amendment” to include nominal “appreciation” of home equity and retirement accounts among the assets subject to this tax.

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Another ‘like’ for the heads up but ‘hand me the barf bag’ for what it discusses. Poor Americans. Hope ti doesn’t get passed.

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This essay, unfortunately, might be far more right than wrong.

(Haven’t mastered how links work here yet.)

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This is a devastating essay, a précis of our accelerating destruction. A tour de force.

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Welcome aboard Cyrano!

It occurs to me that, like indigenous peoples of northern climes who have many, many words to describe snow and ice, we subjects of the erstwhile united States require additional vocabulary to express our ever more profound levels of disgust for the latest proposed socio-cidal plans of the ruling elite. Present vocabulary fails to capture the merited revulsion.

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I recall seeing some comic book-derived TV show in which the villain proclaims that [insert preferred pronoun] greatest regret was not having the opportunity to murder more people. In other words, a cartoon villain.

The real fearsome villains don’t see themselves as the bad guys. They’re convinced of their superiority, greater intelligence, and special insights. It’s not about $. They feel it is their right and responsibility to grasp power, by any means necessary, to protect us from ourselves.

Consider Soros. He’s literally investing millions into trying to breaking down the mortar of society. The DAs he buys in cities like LA and Philadelphia are making those cities more unsafe and worse places to live. He knows this. The question is: what is his motive? Is he a cartoon villain? Or is he fully committed to a great reset society, and knows that requires the mortar of our present society to be dissolved, by any means necessary, so the new society can be built on its ashes?

My vote is Soros is the worst of all possible villians: the rich utopian. All those DAs doing his bidding? Useful idiots. First up against the wall when his revolution comes.

C.S. Lewis: “Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”

A plot for a sci fi story: What if Paul Erlich and the Club of Rome and the other 1960s doomsayers had convinced us of what they so fervently believed - that we were years or months away from world famine, endless war, and perpetual shortages, and that only their totalitarian vision would assure our survival. It would portray a cowed, enslaved society completely convinced they had barely dodged extinction and unable to imagine how their dreary life might be any different or better.

Erlich’s mistake? He didn’t think of a pandemic. As 2020-21 shows, that might have worked.

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Forbes has calculated how much the 20 U.S. billionaires with the largest holdings of publicly traded stock would owe under the proposed “billionaires’ tax”, computing how much each would owe for the two years 2020 and 2021.

Jeff Bezos comes in first at US$ 39.7 billion, Mark Zuckerberg second at US$ 19.9 billion, and Elon Musk just behind. The tax due is not proportional to total wealth due to how the tax is assessed, the different components of the individuals’ portfolios, and the cost basis of their stock. The total tax for the top 20 for the first year would have been US$ 239 billion.

That sum would have funded the U.S. federal government at the levels of the fiscal year 2022 budget [PDF] for a little more than thirteen days.

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If those unfortunate billionaires can be taxed on unrealized gains, then presumably they will be allowed to write off unrealized losses against their normal taxes, When the stock market turns south (as it inevitably will), this could result in billionaires paying no taxes at all. That would undoubtedly soften the blow of declining paper wealth for the super-rich.

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Putting aside the potential suffering of billionaires under this proposed scheme, I wonder what participants here think about general economic inequality (as measured by the Gini coefficient), let’s say between the US and European countries?

I’m not sure that Gini, by itself, is particularly useful in evaluating the quality of life for the population of a country. You find the very highest Gini in countries with a tiny élite and a large poor population, for example South Africa (62.5), Haiti (60.8), and Honduras (57.7). In the mid range are a number of what I call “railroad-era continental-scale empires” such as Brazil (48.8), the U.S. (47.0), China (46.5), and Russia (42)—these countries have large, diverse populations (except for China, but there you have major regional differences and the rural/urban divide) and a broad spectrum of industries and occupations. Many European countries with large welfare states cluster in a tier near the low end, for example the U.K. (32.4), France (30.1), Switzerland (28.7), Germany (27.0), and Sweden (24.9). (All Gini figures are from the CIA World Factbook.)

But I think one also should take into account the overall level of wealth in the country, not just how evenly it is distributed. For example, look at the median household income of the population of countries in purchasing power parity. This is the figure which half of households earn less and half earn more. Here we find that in the U.S., with a relatively high Gini of 47.0 the median household has a purchasing power of US$ 34,514, while in very low Gini Sweden (24.9), this figure is US$ 29,765. In fact, among the OECD countries, only Switzerland and Norway have greater median household income than the U.S., and Norway can be considered a special case due to its petroleum wealth, small population, and sovereign wealth fund.

I think that if you look at the detailed distribution of income and wealth in most countries, you’ll find it follows the Pareto 80/20 rule. (As I like to say, “Once Pareto gets into your head, you’ll never get him out.) Many countries with low Gini got and stay that way by making it very difficult to become wealthy—in many European countries a large fraction of the very wealthy inherited their money, while in the U.S., great fortunes are much more likely to have been made starting from humble beginnings. It is not clear this improves the prosperity for the population in general.

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That is a very interesting analysis, and has expanded my approach to this, though I was in possession of all the mentioned facts. I think my preference might be for policies that actually improve the lot of those at the bottom of the pile (call it a British preference for the underdog, if you like :wink: ).

A good proxy for measuring the relative welfare of such folks might be a measure of inequality of life expectancy and/or DALY between the top and bottom quintiles (why not, since you mentioned Pareto :wink: ) of income. I find myself wondering what if any correlation there might be between that and that nation’s Gini coefficient. I also wonder how one would find if any such study had already been done. If it hasn’t, I might do it myself!

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As far as Gini goes, there is also the issue of whether the European statistics get distorted because the Euro-rich seem to have a high tendency to vote with their feet – move their official residence to some lower tax jurisdiction. It is surprising how many UK celebrities seem to spend a lot of their time outside the UK, for example.

Another proxy might be to look at the relative numbers of all the people who vote with their feet. The common perception is that most of the Europeans who migrate to, say, Switzerland are high net worth individuals, while more of the low net worth individuals migrate to North America. Of course, as New Zealand shows, politicians can quickly turn yesterday’s hot destination into today’s must to avoid.

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Switzerland has been a popular destination for wealthy Europeans because some of the cantons, particularly the small ones in the mountain areas, offered attractive tax deals to attract those who would invest in the local economy. Overall, although it varies quite a bit from canton to canton, taxes in Switzerland are about the same as those in the U.S. unless you have one of these tax deals, which have become much more difficult to obtain. The big difference between the U.S. and Switzerland is that the bullshit and paperwork associated with tax preparation and filing is far less in Switzerland, although that difference has eroded during the time I’ve been here. The tax authorities, which are entirely at the cantonal level (federal taxes are simply a fraction of what the canton assesses), are enormously less intrusive and abusive than the IRS or (brrrr…) the California tax Nazis (Franchise Tax Board).

But among Europeans moving to and living and working in Switzerland, the rich are a small minority (Pareto!). The overwhelming majority are those from southern and eastern Europe who come to take jobs in the hospitality, manufacturing, and service industries which the well-educated Swiss population are disinclined to do. EU citizens who have lived and been employed six years in Switzerland have essentially all the rights of citizens (“Permis C”, which is the equivalent of the U.S. green card) except they can’t vote in federal elections (but aren’t subject to military conscription) and have the right to stay as long as they like. Many, in fact, choose to take their Swiss earnings and pension, which may be 40% more than those in their country of origin, and go back to Portugal or Romania or wherever for retirement, but they don’t have to.

So, the Europeans who migrate to Switzerland are, by the numbers, primarily blue collar with lower income jobs than the Swiss median.

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