Opinion

Felix Salmon

Mark Zuckerberg and the case for a wealth tax

By Felix Salmon
February 8, 2012

The Economist has a cute chart today, showing the net worth of the world’s richest men (and one woman), divided by their age. Warren Buffett has, on average, built just over $600 million of net worth per year of his life, putting him just behind Bernard Arnault and well behind Bill Gates and Carlos Slim, who right now constitute the billion-dollar-a-year club. (I’ll save you the math: that’s $2.7 million per day.)

There’s a good chance that when Facebook IPOs, Mark Zuckerberg will join that tiny group: he’s 27 years old, so the market cap we’re looking for here is $95 billion. If Facebook is worth more than that, Zuckerberg will have increased his wealth by $1 billion a year, on average, from the day he was born onwards.

Which helps to put Zuckerberg’s ten-figure tax bill in perspective. If you’ve been getting a billion dollars wealthier every year for 27 years, a one-off payment of $2 billion doesn’t seem particularly excessive, in tax terms — especially if all your other tax bills, before and since, are relatively minuscule.

What’s more, Zuckerberg’s $2 billion tax bill is only coming about because of a quirk in the way his Facebook equity has been structured: on top of his 414 million shares of Facebook, he also owns 120 million options. Zuckerberg’s shares are generating no tax bill at all; it’s only the fact that he’s exercising the options which is giving him $5 billion or so of taxable income, for this year only. (And even that income is offset by the fact that Facebook itself gets an equal and opposite corresponding deduction — and since Zuckerberg owns 28.4% of Facebook, what he’s losing personally he’s partially making up through his corporate shareholding.)

David Miller explains how founder-billionaires get off even more lightly than private-equity GPs when it comes to taxes:

If Mr. Zuckerberg never sells his shares, he can avoid all income tax and then, on his death, pass on his shares to his heirs. When they sell them, they will be taxed only on any appreciation in value since his death.

Consider the case of Steven P. Jobs. After rejoining Apple in 1997, Mr. Jobs never sold a single Apple share for the rest of his life, and therefore never paid a penny of tax on the over $2 billion of Apple stock he held at his death. Now his widow can sell those shares without paying any income tax on the appreciation before his death. She would have to pay taxes only on the increase in value from the time of his death to the time of the sale.

Miller has a rather complicated way of getting America’s ultra-rich to pay taxes: if you earn more than $2.2 million per year, or own $5.7 million or more in publicly traded securities, then you have to mark your wealth to market every year and pay income tax on the amount that it has gone up. Conversely, if your wealth declines, then you can get a massive rebate.

Personally, I think it would be much better idea if we simply implemented a small wealth tax, on top of income tax, for the very wealthy: last year I proposed that any wealth over $5 million should be taxed, annually, at a 1% rate. For someone with $5.7 million in wealth — that’s the top 0.1% — such a tax would increase their tax bill by just $7,000 a year. But for Mark Zuckerberg, it would bite. Right now, he stands to pay essentially no taxes in 2013. But if there was a 1% wealth tax and he was worth $27 billion at the end of 2013, that would generate a $270 million tax bill.

When politicians talk about taxing the rich, a common rejoinder is that income is not the same as wealth, and it’s wealth, not income, which really makes you rich. Fair enough. So let’s tax wealth. It’s fair, and it could provide some very useful revenue for anybody looking to balance the national budget.

Comments
41 comments so far | RSS Comments RSS

Absolutely – along with harmonizing the rates for wage and capital gains/dividend income, this is the best way to both raise some (though probably not a lot of) revenue, while at the same time attacking the real inequality crisis the country is facing (I personally don’t see the gap between people making the median income and those taking home a couple of hundred grand constituting a genuine crisis). At the same time, we should be careful that a) the combined burden of such a wealth tax and fairer treatment of non-wage income isn’t onerous in world terms (which will indeed make the country less competitive); b) it can’t be easily gamed (like here in Europe!); and c) it doesn’t start like the income tax did in the US – as a special levy on the very rich – only to get progressively expanded to the point that everyone is paying it.

Posted by ErikD | Report as abusive
 

Agree in theory, but it’s quite difficult to reliably track wealth. For example, what should Mark Zuckerberg’s 2011 tax bill be? What about 2006?

At the very least it would probably require onerous new disclosure requirements which in turn would add to a whole set of weird new rules (e.g. do liabilities offset assets? how do you consider assets in trust?) and a new layer of political weirdness to mark-to-market philosophical debates.

Posted by right | Report as abusive
 

My back of the envelope calculation (using the 2004 wealth numbers available from the Census Bureau’s 2012 statistical abstract) indicate that a wealth tax of this design would raise about $20 billion. You can double that by reaching down to fortunes above $2 million, and of course you can increase the amount raised by increasing the rate.
(please someone check my math – I could easily be off by an order of magnitude or two)

I’m all for soaking the rich, but I have two questions. First, at the levels of revenue this would produce, would it really be worth the political fight?

My other question is of a technical nature. 1% of a big fortune is a lot of cash, and if you raise the rate it becomes more cash. Is there a point where the tax becomes difficult to pay because of liquidity issues, and what is that point?

Posted by dr_eats_babies | Report as abusive
 

You planning to give them back the money when their “wealth” goes down?

Posted by Danny_Black | Report as abusive
 

As with so much of the tax code, this are is an extremely complicated topic, but a couple points. Miller’s point about Steve Jobs’ widow not paying tax does highlight an inconsistency in tax law (assuming that Miller is correct). Generally, the recipient of an estate does receive stepped-up basis in assets held by an estate, but estate tax is also paid by the estate, so a large estate is paying tax on the increase in value (and at a 35% rate, a higher rate than capital gains rates, by the way). I was aware that estates generally pass to spouses without capital gains rates, but I was not aware that step-up in basis still occurred. If that’s the case, it doesn’t make sense – the step-up in basis should only happen if tax on the increased value (either capital gains or estate tax) has been paid. Something similar happens when donating appreciated property to charity – there’s a deduction for the appreciated value, but no tax is due on the increase in value. Changing that rule so that tax is due on the increase in value (or alternately, the deduction is only for the original basis) makes all the sense in the world. It would be a better “Buffett rule” than then one proposed, and appropriately named based on his large donations of massively appreciated Berkshire Hathaway stock to the Gates Foundation.

Posted by realist50 | Report as abusive
 

I don’t agree in theory. A tax on wealth is bad for the same reasons that taxes on capital gains are bad, but are probably even worse. Dan Mitchel uses an example of a 3% wealth tax where you have 100mn, earn 5mn in investment income, and are taxed 3mn in wealth taxes. That’s a 60% tax on investment, waaayyyy higher than we have now. It actually has the punishing effect of being a bigger tax the lower your returns are (which would promote people to hold riskier portfolios also). Ridiculous to think that we wouldn’t get some amount of brain drain if we were to do that.

Posted by jmh530 | Report as abusive
 

morer tax to go for more overpaid, iddle, public staff?
rather set up direct debits to be credited to jobless people’s accounts;

Posted by Paats-W. | Report as abusive
 

Mr. Salmon,

While I agree with both the morality and the economics behind the code you propose, I wonder about the financing. Do you really propose that a founder who has created paper wealth (albeit billions) and realized relatively little of it should be taxed in such fashion? It seems unworkable (if not unfair) that the founder should be forced to realize gains that the market has imposed in order to pay tax bills …

Posted by Dr_Stonewafer | Report as abusive
 

I personally assume that like Larry Ellison, Zuckerberg or his family trust have a small army of people working feverishly to determine which tax dodges apply to his situation and even if the IPO is wildly successful, he won’t pay anywhere near $2 billion in taxes, in this or any other year.

The rich really are different from you and me. They can pay large numbers of people to figure out ways to keep them rich, and have water carriers such as “Paats-W” and “Danny_Black” arguing their case in public forums like this one for free.

Posted by Strych09 | Report as abusive
 

I’ll echo other commenters regarding the issues with a wealth tax. If it’s set at $5 million, that requires annual valuations of tens of thousands of private companies. Bear in mind that this will be necessary even for many businesses worth less than $5 million, if they are partially owned by an investor who is worth more than $5 million. Then there’s the question of valuing all sorts of personal property – cars, jewelry, art, furniture, etc. – with some categories being ripe for evasion since they aren’t generally titled. If we exclude them, however, we’ve created an incentive to park money in these assets, and who could argue that a rational tax system should privilege an investment in jewelry over investing capital in a business.

Then there are liquidity issues in having the cash to pay, as there’s lots of non-liquid “wealth”. That could equal plenty of perverse incomes – think of someone who had unvested options or restricted stock in a dot-com that went public at a bubble valuation in the late ’90′s. Especially with unvested options, they could have paid a wealth tax for a couple years on what turned out to be zero realized value once the options vested. And, of course, if we start excluding certain classes of securities from “wealth” – whether unvested/vested options, or restricted stock, or private company ownership – we will simply incent taxpayers to find structures that change publicly-traded, liquid securities into a non-public or non-liquid asset that is not defined as “wealth”. Our tax code is already twisted into knots defining “income”, and “wealth” is even tougher to define.

Posted by realist50 | Report as abusive
 

I’m glad you pointed out that the estate tax is not a ‘death tax’ but for many is actually a tax break. They don’t have to pay capital gains on inherited shares, so they pay estate tax instead.
A wealth tax is a great idea but practically impossible to institute, given capital flows. That’s why the only wealth tax is the property tax (which means we have a highly regressive wealth tax).
Valuation, though, would not be an issue if you allowed owners to value their own holdings, under the proviso that they would have to sell to anyone who offered to buy it from them at the value they assessed it at.

Posted by RZ0 | Report as abusive
 

I like the idea of a wealth tax in theory, but in practice it may be difficult. I assume the proposal about the tradeable securities instead of just assets is to get around the fact that some assets are illiquid and indivisible. If someone owns a valuable asset that isn’t easily tradeable, how do they get the cashflow to fund the taxes? And if only tradeable securities are included to avoid this problem, won’t there be loopholes where people intentionally buy restricted shares to avoid taxes? The point is this seems *fair* but it doesn’t seem that practical. The reason we charge cap gains at sale is that’s when you have the cash. A consumption tax would be easier. True, it would only be paid when the rich (or their heirs) consume — but in a sense isn’t that ok? If they just invest or give to charity maybe that shouldn’t be taxed.

Posted by TGDC | Report as abusive
 

Actually, Zuckerberg could be making out like a bandit on those taxes. To the extent that Facebook is valued at a multiple of current earnings, then every dollar of tax deduction for Facebook increases the value of his stake by tens of dollars.

Posted by Hayes | Report as abusive
 

What a terrible idea! Why should anyone tax someones wealth, earned or inherited! Somewere along the way someone paid taxes on their assets they either accumulated or earned!

As for Mr. Zukerberg and his wealth, did he or did he not have the vision, idea and work ethic to formulate and refine his company, Facebook! why do people feel they should tax (punish) his success. No one is entitled to his paper wealth, be it in stock,options,cash,realestate etc. If and when Mr. Z or anyone else for that matter decides to monitize their wealth then the tax should be paid on the profits made. Capital gains taxes should not be taxed a the same rate as earned income for the simple reason that risk is taken and rewards are earned accordingly. How many people have benifitted from Mr Z’s company or Mr Jobs apple products! How many people have jobs because they have and had the forsite to build companies and products that we like nad can’t get enough of!How many thousnads of people havethese successful people/companies provided with jobs and opportunities!

Wealth tax! what is the reason for this envy! Why if it is so easy to accumulate wealth do it yourself! Then if you feel you have to much give it away. Mr Gates and Mr Buffet have the option to give it all away if they choose. If they feel that they should not of had that kind of wealth then they had the option not to gather it in the first place. Don’t be fooled by their false statements. Bill G. fought his property tax bill for years feeling he should not pay such a high tax amount. Mr Buffet has countless experts working to limit his tax bill. Mr B owes the Fed for back taxes that he is contesting. What is up with these people!

I am pointing out just two examples for contrast. A flatter and fairer tax is the solution and not class war or envy.

Posted by speede | Report as abusive
 

What a terrible idea! Why should anyone tax someones wealth, earned or inherited! Somewere along the way someone paid taxes on their assets they either accumulated or earned!

As for Mr. Zukerberg and his wealth, did he or did he not have the vision, idea and work ethic to formulate and refine his company, Facebook! why do people feel they should tax (punish) his success. No one is entitled to his paper wealth, be it in stock,options,cash,realestate etc. If and when Mr. Z or anyone else for that matter decides to monitize their wealth then the tax should be paid on the profits made. Capital gains taxes should not be taxed a the same rate as earned income for the simple reason that risk is taken and rewards are earned accordingly. How many people have benifitted from Mr Z’s company or Mr Jobs apple products! How many people have jobs because they have and had the forsite to build companies and products that we like nad can’t get enough of!How many thousnads of people havethese successful people/companies provided with jobs and opportunities!

Wealth tax! what is the reason for this envy! Why if it is so easy to accumulate wealth do it yourself! Then if you feel you have to much give it away. Mr Gates and Mr Buffet have the option to give it all away if they choose. If they feel that they should not of had that kind of wealth then they had the option not to gather it in the first place. Don’t be fooled by their false statements. Bill G. fought his property tax bill for years feeling he should not pay such a high tax amount. Mr Buffet has countless experts working to limit his tax bill. Mr B owes the Fed for back taxes that he is contesting. What is up with these people!

I am pointing out just two examples for contrast. A flatter and fairer tax is the solution and not class war or envy.

Posted by speede | Report as abusive
 

Thank you Mr. Salmon and thank you Reuters for putting a wealth tax on the table. I believe that bold reform will not happen unless the media accurately reports that income, sales and even net wealth can be part of an expanded tax base to produce the same amount of revenue in a much better way. [I am opposed to using a wealth tax as a surtax only on the well-to-do].

At the risk of oversimplification, try to contrast a 30% income tax (the Buffet Rule rate) with an 8% income tax combined with a 2% wealth tax for each of the next 11 years. The latter combined tax would permit an individual to keep 22% more salary each year and tax another 2% of the amount not consumed for the next 11 years. If one saved the 22% for 3 years it would be like having a year’s take home in the bank on top of what might have otherwise been saved under a 30% flat tax rate (conservatively assuming the 2% wealth tax was offset by 4% investment interest).

In August of 2006, I made the following suggestion to the President’s Advisory Panel on Tax Reform: tax Net Individual Wealth at 2%, Consumption/Sales at 4% and Income at 8%. The exact same rates apply to the rich and poor. There are no different tax brackets, credits, and no favoritism. The three taxes would yield about $2.6 trillion per year (slightly [about $400 billion] more than the current combination of Income, Social Security, gasoline and other federal taxes and fees).

It is also important to consider that deductions such as mortgage interest are not needed because the homeowner would get the benefit of deducting the mortgage principal in computing net wealth. A similar benefit would apply to those with credit card and student loan debt. Over the years, as debt is paid off and wealth was accumulated, the taxes paid would obviously be a little more. The blend of taxes, taken together, is progressive even thought the rates are the same for all.

It is hard to imagine anyone that wouldn’t welcome a 2% tax on net wealth and a small 4% sales tax, in exchange for drastically reduced 8% individual income tax rate. Even the “fair and balanced” Bill O’Reilly (a/k/a the Factor) supports a national sales tax (of 3%) as a necessary component of tax reform. The concurrent elimination of social security, capital gains, estate and gift taxes; and a significant reduction of the corporate income tax rate to 8% should guarantee near universal support from social liberals and business conservatives alike (he defiantly stated as he waited for someone to find a flaw in the plan rather than the obvious lack of political will).

The 2-4-8 Tax Blend expands the tax base to achieve the lowest possible rates (while yielding about the same government revenue). Upward mobility is encouraged by lowering the tax burden on earned income. A corporate tax rate of 8% should also be a very big plus for job creation and the economy.

Eugene Patrick Devany, JD, MPA

http://www.TaxNetWealth.com

Posted by 248TaxPlan | Report as abusive
 

Small problem, Felix: a wealth tax is almost certainly unconstitutional for the federal government. The 16th amendment says “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” What you are talking about is emphatically not income taxation.

And while I am very much in favor of taxing those with extraordinary wealth more, David Millar does miss a rather critical step when he says: “If Mr. Zuckerberg never sells his shares, he can avoid all income tax and then, on his death, pass on his shares to his heirs. When they sell them, they will be taxed only on any appreciation in value since his death.” If they are still his shares and he hasn’t been able to take advantage of a Mitt Romney-style gaming of the estate and GST contribution limits to trusts, then those shares will be subject to the estate tax on their value at his death–essentially taxed at mark to market, with the heirs’ sale taxed on what is called a stepped-up basis.

Posted by Hippopotamus | Report as abusive
 

“If Mr. Zuckerberg never sells his shares, he can avoid all income tax and then, on his death, pass on his shares to his heirs. When they sell them, they will be taxed only on any appreciation in value since his death.”

Unless he meets an early demise, his heirs won’t have any facebook stock to pay taxes on, it will most likely be gone by then. Even if Zuckerberg only lives for another 50 years (his life expectancy should be much greater than that), the odds on FB being around then are slim. They will be obsoleted by one thing or another.

Consider the case of Steven P. Jobs. After rejoining Apple in 1997, Mr. Jobs never sold a single Apple share for the rest of his life, and therefore never paid a penny of tax on the over $2 billion of Apple stock he held at his death. Now his widow can sell those shares without paying any income tax on the appreciation before his death. She would have to pay taxes only on the increase in value from the time of his death to the time of the sale.

Most likely there was no inheritance. Jobs was married before the run-up in his Apple and Pixar wealth, and all that wealth was community property with his wife. She would have the same capital gains tax bill as Jobs would have had (still only 15%).

A wealth tax sounds good at face value, but implementing one would be difficult and subject to all kinds of distortion and corruption. It is easier to tax wealth as it accumulates, by applying a high tax rate on all income and giving generous tax credits for investing that income. Unrealized gains, however, would not be taxed, as there is no income until people sell things. That’s o.k.; if you own shares and don’t sell them, you are not extracting wealth from the economy. When people start companies and hold on to their shares, they are not taking money out of circulation, in fact they are doing the opposite.

Posted by KenG_CA | Report as abusive
 

On the one hand, I’m all in favor of soaking the rich. They’ve been soaking the rest of us for decades. On the other hand, when you talk about a wealth tax you’re starting to get scary. We know what happens when you institute one. Britain has one and now the vast majority of the old estates are in the hands of the government because the descendants didn’t make enough money to pay the wealth taxes. I know that a one percent tax, for example, isn’t going to break any of them but remember that when they instituted the income tax nobody thought that the tax rate would ever get above 5%.

Posted by majkmushrm | Report as abusive
 

There are very good reasons for taxing wealth and leveling it as was done after the last two world wars. Calling it class envy is beside the point and disingenuous.

The lower income people tend to be the cannon fodder and the upper income people become the well connected and safer officer class. They tend to eat better, have better health care and can live in better surroundings that are a lot safer. They will also tend to associate only with people as wealthy or wealthier then themselves. They may be too polite (or know better) then to say so – but they have the irritating habit of considering people, with lower incomes, garbage and somehow disposable.

Even their corruption and bribery is very polite and nearly abstract. My sister and father have suggested that they like the idea that society is composed of predators and the prey. They fancy themselves the predators. They haven’t learned the fine art of never admitting their motivations.

The Iraq vet I mentioned in many posts back (in other articles) was burned out by the relatives who were staying with him. They burned the stove far too hot for too long. He had no property insurance and it is unlikely that house will be rebuilt. There are many wealthy people in the is state NH – the tenth wealthiest – but I think that guiy is homeless for good.

Zuckerburg didn’t have to work that hard. One could even say he was on a thrill ride and founded a very lucrative scam. In many ways it gets easier at the top. Everyone else does the heavy lifting for you. The true old time Robber baron capitalist’s families did nothing but spend money. I think the only working Vanderbilt of the third generation was Frederick, and he sat on very lucrative boards all day. His wife was a charming ditz who had nothing to do all day but dress and plan parties. That was true of most of the gilded age upper class here and in Europe. I think that is what so many – Romney and even Obama want for their children. It’s lovely to live in a gilded cage.

BTW – so many of those palaces in Britain were abandoned to the national Trust not just because of the estate taxes but because they were enormously expensive to maintain, required armies of very low paid servants, and had gigantic heating bills. Fitting some of them out with modern plumbing and electrical service could be like renovating a hotel. Who’s got the disposable income to care for hundreds of acres of formal gardens? The social order had changed after WWI and it was no longer expected that a wealthy person would share his roof with dozens of servants. The servants themselves found better paid employment elsewhere. The maids, butlers and footmen found it easier to live on their own than bow to the hypocritical moral strictures imposed by numerous vain women with nothing more to do with their time than flatter themselves they were royalty or aristocrats.

Behind every argument for being kind to the wealthy there are thousands of wanna be Mrs. Astors just waiting for the day when they too can have their “400″ and cam sink the great mass of the population into squalor. Buffet and gates are exceptional wealthy men. The rule will be more stingy.

Chiaroscuro may look great in baroque paintings but it’s hell on earth.

Posted by paintcan | Report as abusive
 

I agree with your idea of a wealth tax and have been advocating it a couple of years at: http://fairsharetaxes.org. Take a look and tell me what you think.

Warren Buffett, billionaire, pays a total tax rate (federal, state, local & corporate) of 11% of his income and investment gains. A typical single person earning a minimum wage pays taxes amounting to 22% of her wages, a 100-fold higher rate than Mr. Buffett’s. http://fairsharetaxes.org/

The top 1% in the US have gone from owning 22% to 40% of the nation’s wealth in the last thirty years. This is largely due to the tax cuts for the wealthy investor class, started under Reagan. They were supposed to encourage investment and strengthen the economy. Since then, the average annual GDP growth dropped by one-quarter.

The favored tax treatment for investments and the wealth concentration that resulted leads to the demand for investments exceeding the supply of worthy investments … Investment bubbles … Recessions … All but the wealthiest are at risk of losing their jobs, homes, retirement savings.

For more, including a proposal for comprehensive tax-reform, see http://fairsharetaxes.org/

Posted by PeteG23 | Report as abusive
 

I think we should tax all wealth as long as it is government regulated and defended land, shares in government chartered collectives, fungible to government issued currency or an instrument which may require enforcement by the court system. Most wealth entails the use of government services, and that should be paid for. Other types of wealth should remain tax exempt.

Posted by spiffy76 | Report as abusive
 

Although a fun idea, this is unrealistic… Just tax all income and capital gains at the same rate, and have inheritance tax and you cover most of the points raised without the complications of assessing and marking to market wealth, which is difficult.

simplify the tax system, don’t complicate it

Posted by GA_Chris | Report as abusive
 

Wealth tax already exists. It’s called,
“Inflation”. There’s a reason why inflation is running high, despite most people’s wages being low… It’s twofold:
1. Fiscal & trade imbalances,
2. Ultra wealthy people can afford to pay the higher prices. So some people will charge the higher prices, ramp up the profit margins, “go upmarket” and price out the poor…

The only problems with inflation as a wealth tax are that it operates mainly on the working capital of the poor. The long-term rich generally know ways of predicting periods of high inflation and avoiding having their “wealth” wiped out by it…

We’ve gone so far down the wrong road now, under-taxing the rich and under-supporting the disadvantaged; that I think the only way to rebalance the system now and overcome entrenched aristocratic dynasties is to have some sort of Wealth Tax as Mr. Salmon is suggesting. I have no idea about implementation or enforceability (concerns raised by other commenters)… Those questions are still worth answering…

Posted by matthewslyman | Report as abusive
 

Good luck in trying to tax “wealth”.

It’s been tried before, and it has since morphed into what we know today as the Federal Income Tax, which the wealthy very astutely find ways to avoid paying their fair share.

My advice is that, if you want to make a tax like that “stick”, it would require a Constitutional Amendment to do it — and the chances of that happening right now are approaching zero as the wealthy continue to amass power again.

Posted by Gordon2352 | Report as abusive
 

Here’s the problem: Cash may not be available to pay wealth tax which leads to the sale of holdings, which leads to lower wealth, which leads to lower tax.

Posted by calexandre | Report as abusive
 

Wealth tax? We already have a form of that, it’s called “property tax” but only levied on houses, aircraft, boats and cars. So extending it to everything one owns would be simple.

I’m not a proponent of wealth or property taxes though. Both have perverse, unintended consequences like taxing retired seniors out of their homes, or forcing a family owned business to continually liquidate shares to pay annual taxes and eventually eliminate their ownership.

Posted by PapaDisco | Report as abusive
 

Wouldn’t it be easier, politically and logistically, to just close some of the loopholes that let these people dart and dodge throught the tax code unscathed?

I love that this subject is continuing to be a part of the public dialogue through tax season. The rich are going to find it harder and harder to whine about class warfare when it’s everyone realizes just how low their rates really are.

Posted by spall78 | Report as abusive
 

If the wealthy can pay their hedge fund managers 2 to 3% plus 20% of profits, then surely they can afford to pay 1 or 2% a year of their wealth in taxes.

This should be administered simply – flat tax on the total net worth. Forget about taxing the net gain – way too complicated. Consider the art dealers, art collectors, commercial real estate – way too hard to have an accurate market price year to year.

Instead, anyone whose worth is over $10 million must submit a net worth statement to the government which is revised every five years. From $10 million to $100 million you pay 1%; over $100 million you pay 2% each year. NO give backs.

And very important: include all entities: persons, corporations, trusts, foundations, offshore accounts, partnerships, etc.

A 2% Wealth tax would probably balance the US budget in 10 years.

Posted by Acetracy | Report as abusive
 

“forcing a family owned business to continually liquidate shares to pay annual taxes and eventually eliminate their ownership”

I’m confused, isn’t that the INTENDED consequence of a wealth tax? Eliminating ownership of the wealth by the wealthy?

Personally, I don’t see why we need so many estate tax loopholes. Tax transfers of wealth as income for the recipient, including inheritances, dividends, and realized capital gains. And yes, that makes it expensive to transfer ownership of a family-owned business to the kiddies. Tough.

Posted by TFF | Report as abusive
 

Traditionally, wealth tax advocates cannot keep from taking from the poor by calling them “rich” and using terms like “fair”. They always, or nearly always, only tax personal monetary wealth while leaving politicized wealth (“power”) to romp around with all the excess of big money. Just look at life in the USSR. There were, of course, many communist rich people and families, but no “wealth” tax could touch their brand of privilege and spending power. Yet their multiple spending power over the average wage was huge as well.

A better decision is to consider whether unruly bad neighbors should be permitted membership in our society. There are many, many forms of bad behavior and they all involve disregard for the welfare of the nation as a whole. We do not have to allow the unruly rich to live here, have citizenship or property owning privileges here. Or to corrupt our political self-rule.

Posted by txgadfly | Report as abusive
 

I agree with speede. And would like to add that with all this “punish the rich” nonsense going on of late, if I was rich I’d simply move my assets and life to another less hostile more wecoming country. It used to be that if you wanted to live in the lap of luxury the USA was the only game in town, but that’s not true anymore. So, go ahead, push the movers and shakers off to other lands and see how that goes for Americans over the long term.

Posted by GLK | Report as abusive
 

Yes, mark to market has done wonders for corporations, let’s have individuals do it as well because, hey, they are rich…too rich, and we deserve some of what they have earned. Right?

I absolutely agree with GLK…if that rule was imposed (and I was rich) I would move to another country and invest there. Simple as that.

Posted by jaham | Report as abusive
 

realist50, also if the wealth tax does have some sort of credit for when the wealth goes down then that will impact whatever government is collecting it whenever there is a downturn – ie at the worst possible time.

Posted by Danny_Black | Report as abusive
 

Strych09, weird because the “blame my problem on someone else” class seem to dominate the internet.

Posted by Danny_Black | Report as abusive
 

Danny_Black as a troll…

Were I a very public gazillionare, I might put someone out there to patrol the web seeking comments on me. I might even have them make some positive ones for me, but primarily on sites that would make it easier to get dates (could be part of the attraction of Clooney maybe?). Actually requiring someone to read Felix… cruel and unusual applies.

But, I find the issue of soak-the-rich silly. The numbers show that the Buffett tax, contrived as it is, will NOT cover the cost of the deficit, even at a low level. Obama has moved to doing nothing but posturing and pandering. Marginal propensity to consume and save is an economic theory. Tax policy is wholly political. Neither have anything to do with morality.

Posted by ARJTurgot2 | Report as abusive
 

An economic system that enables people to get unimaginably rich is fine, but I think that it should be paid for by the people who use that system to get that rich. That said, the question becomes how best for them to pay that bill. I think a wealth tax may be far more aggressive than the author supposes, since it is levied every year, not once. For instance, if it were 2%, then after 50 years at 2% per year, the entire value of a person’s wealth would be wiped out (assuming that he didn’t get any richer, and ignoring any income generated by that wealth along the way). Very delicate fine tuning will be necessary for this kind of tax. An significant estate tax, which is levied once, may be a better approach.

Posted by Richard_P | Report as abusive
 

This is even more absurd than “fairly” taxing the “rich” on their “excessive” incomes. Since when did someone being successful become a crime. How do you define wealth. If a small business owner with a manufacturing facility that includes machinery which is paid off and shows as an asset on his balance sheet now have to pay taxes on this “wealth”, even if his business is not turning a profit? If so, he will either need to leverage up the business, via debt financing, to pay the taxes. Or, he will need to liquidate assets to pay the taxes. Either way, you are negatively impacting the ability of this individual to continue to grow their business. You are punishing “growth” and “success”, the very things this country needs to get us out of the mess we are in economically. Secondly, until you accurately factor in the full tax bill of individuals (of every income level) across local, state and federal taxes, just using the rates published by the IRS are meaningless. I have yet to see a good analysis on this, but rather continue to hear the simplistic, political anecdotes of people with an agenda. I also disagree that having nearly 50% of the people in this country not paying a single dollar in taxes (once all payments, deductions, and tax credits are netted out) is completely absurd. Why doesn’t someone estimate the revenue generated by this group paying a minimum of $1000 per year. If 100M taxpayers, not paying anything today in fed taxes, paid just $1000 per year, it would generate $100B in new tax revenue. I think the solution is to address the tax equity questions comprehensively from the rich to the not so rich. Lastly, it is never reasonable to consider the “fair” tax rate on capital gains and earned income. Cap gains involves risk, and limited ability to offset gains with losses. Earned income doesn’t involve the risk of loss of principal, as you have with investments. Thus to tax them the same makes no sense, if you are looking at it on a risk adjusted basis, and removes the incentive for investors to invest in equities. Rather they are better off clipping munis and collecting dividends from fixed income. Neither of which are the standard vehicle for earlier stage, small cap companies to raise capital.

Posted by VLA | Report as abusive
 

Really??? After a $2B (!) tax bill, you people think Zuckerberg should pay MORE in taxes. Look at that in absolute terms. How can anyone say he’s not paying his “fair share”. This is insane. He’s created thousands of jobs, and each of those employees pays taxes (many will pay millions in tax from their IPO gains). And don’t forget the federal corporate income tax paid on the profits generated by Facebook. All of this, and you are scheming for ways to confiscate more wealth? From what I’ve read and heard, the guy may be a bit of a douche, but he’s certainly made more than his fair share of contributions to the federal government. I wonder how many people posting here fall into the nearly 50% of the population that pay ZERO federal income tax? Get a life, get a job, and go out and create some wealth of your own — then feel free to give as much of it as you want to the Feds.

Posted by CenterRightGuy | Report as abusive
 

So, lets say we generated 20 billion year from the new wealth tax. What would this do for our economy? I’ll tell you. The fat cats in washington would see dollar signs in their eyes and they would foam at the mouth trying to earmark it for unnecessary expenditures. Giving money to the government is tantamount to giving a beer to an alcoholic, or a crack rock to a junkie. They hunger and thirst for more money so that they can spend it. 20 billion would last about 2 minutes in the hands of these people. I say no more money for the government until they go to rehab for their spending addiction. They are like the spend happy wife of the poor frugal man.

Posted by Auktavius | Report as abusive
 

For all of their altrustic goals, how can Congress justify spending more than 20% of every dollar generated? Money collected at gunpoint is not charity. Mr. Zuckerberg, dollar for dollar, does better for the American people than does Congress. Let him keep his pile of money. We don’t need new ways to fund Congress, we need to figure out how to take away their ability to beg, borrow, and steal from us. Congress is the problem, not the Presidents.

Posted by StardustSeeker | Report as abusive
 

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