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Originally Posted by Texas Contrarian
History is replete with bad ideas concerning the question of "how to pay for all this shit." But Elizabeth Warren's so-called "Ultra-Millionaire Tax" is one of the most boneheaded of them all.
She's been pontificating on this ridiculously scammy idea for a number of years now, but seems hell-bent on demonstrating that she has no intention of making even the most rudimentary effort to understand the issue. Had she done so, she would have learned that the plan was implemented in France, Germany, and all the Scandinavian countries, but quickly dropped when people found how damaging it was to capital formation and prospects for economic growth, while raising only a fraction of the revenue projected by its supporters. Outside the Piketty/Saez/Zucman camp, it has no supporters.
Were this plan to be implemented, we would be required to submit annual balance sheet information to Treasury, on pain of criminal penalty if their army of enforcers deems any information submitted to be in error. Is anyone really okay with doing that, in addition to all the income data we're required to submit?
From the viewpoint of middle class savers with 401k and other investment accounts, perhaps an even worse feature of her plan would be that it would chase trillions of dollars of investment capital out of the publicly-traded markets and into the private equity space. It shouldn't be difficult to understand that a primary consequence of this is that the "next Nvidia" (whatever that may be) will be much more likely to be financed within the private equity space, robbing non-wealthy investors of opportunities to participate in the capital gains enjoyed by founders of what they deem to be the most promising tech investments and other innovative enterprises. Speaking of Nvidia, don't forget that Jensen Huang only owns about 3.5% of the outstanding shares; most of the equity is owned beneficially by middle-class savers in pension funds, 401(k)s, and the like.
Therefore, middle-class Americans who think they might be big supporters of such "fair-sounding" tax plans would do well to be careful about what they wish for.
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It's ironic. Piketty, Saez and Zucman hail from France. France actually instituted their favored tax policies during the administration of Socialist Francois Hollande. The marginal income tax rate was increased to 75%, and he increased the wealth tax and applied it to net worth above 1.3 million Euros. Hollande had to back off the 75% tax rate after 2 years, because capital and wealthy individuals left France. He backed off the wealth tax as well, although it fell to Emmanuel Macron to eliminate it completely, except for real estate. In other words, the current French "wealth" tax is analogous to our property tax.
Gentlemen, Texas Contrarian knows of what he speaks. I bet he's been around long enough to see first hand what happens when you impose crazy high tax rates on upper income earners. They just don't generate much income. The same would happen with a wealth tax. If you invest in private equity, your accountants and valuers can play with the numbers. You incur significant debt. And presto change o, your net worth falls a lot, compared to when you invested in the stock market. This is not a way to promote economic efficiency.
I also question whether many successful new tech companies would even go public. Those "middle-class savers in pension funds, 401(k)s, and the like" might not have the opportunity to invest in companies like Nvidia. And what's going to be the effect on the successful entrepreneur's business when he has to sell off 2%+ per year of his company to pay the wealth tax and the taxes on the sale? Why doesn't he just go to someplace which values successful businessman and businesses and the jobs they create, instead of demonizing them and taking outsized portions of their income and wealth?
Remember, when these guys spend their lives creating and growing successful businesses, the federal government gets 40% of everything they owned that they don't leave to charity when they die. Isn't that enough?
