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“But this will only be for public stocks owned by the rich!” What do you think will happen to IPOs? Everyone but accredited investors will be shut out, thereby increasing inequality. “We’ll just make a rule saying companies can’t stay private.” Yes, I thought that was coming.
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One nice feature of the realization rule is that you don’t have to sell shingles off the roof of your house to pay taxes when property values go up.
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“Well we’ll just make private companies get annual valuations.” Ah, private, subjective, paid valuations – what could go wrong? “Fine, what do you propose?” We tax assets when they’re sold, or when someone dies. “Isn’t that what we’re doing now?” Yes.
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Rich would overassess and pay more taxes in order to avoid losing valuable appreciating assets. Poorest asset owners would have financial pressure to price low in order to save cash on tax, thereby giving underpriced options to the rich. Tax revenue and inequality go up.
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Bit of an oxymoron – it’s the middle class. You’d be incentivizing middle class to sell below-market dollars to upper class, and taxing upper class 40% on all future above-market appreciation dollars. Upper class and gov’t/poor split middle class spoils ~65/35%.
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Then I think that’s actually fine. I wouldn’t buy your redistribution guesstimates without actual simulation models and experiments, but if you’re right, I think it still works. Just not as well.
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